9th IFAC

Control
9th IFAC Conference on Manufacturing Modelling, Management and
9th IFAC Conference
Control Conference on
on Manufacturing
Manufacturing Modelling,
Modelling, Management
Management and
and
Berlin,
Control
9th IFACGermany, August
Conference on 28-30, 2019
Manufacturing Modelling, Management and
Control
Berlin, Germany, August 28-30, 2019 Available online at www.sciencedirect.com
Berlin,
9th IFAC
Control
Berlin, Germany,
Germany, August
Conference 28-30, 2019
on Manufacturing
August 28-30, 2019 Modelling, Management and
Control
Berlin, Germany, August 28-30, 2019
Berlin, Germany, August 28-30, 2019 ScienceDirect
CSR implementation for the sustainable
IFAC PapersOnLine supply chain performance:
52-13 (2019) 1949–1954
CSR
CSR implementation
implementation for
for the
the sustainable
sustainable supply
supply chain performance:
CSR implementationA for the
system sustainable
dynamic supply chain
approach chain performance:
performance:
CSR implementationA
A for the
system
system sustainable
dynamic
dynamic supply
approach
approach chain performance:
CSR implementationA for
system dynamic approach
the sustainable supply chain performance:
A system Thidynamic approach
Lan Anh NGUYEN*.
A system Thi
Thi dynamic
Lan
Lan Anh approach
Anh NGUYEN*.
NGUYEN*.
lananh.tcef@gmail.com Thi Lan Anh NGUYEN*.
lananh.tcef@gmail.com
Thi Lan Anh NGUYEN*.
lananh.tcef@gmail.com
lananh.tcef@gmail.com
Thi LanHoaAnh Le
lananh.tcef@gmail.com
Thi NGUYEN*.
VO.*
Thi
Thi Hoa
lananh.tcef@gmail.com
Hoa
thi-le-hoa.vo@univ-rennes1.fr Le
Le VO.*
VO.*
Thi Hoa Le VO.*
thi-le-hoa.vo@univ-rennes1.fr
Thi Hoa
thi-le-hoa.vo@univ-rennes1.fr
thi-le-hoa.vo@univ-rennes1.fr Le VO.*
* ** Univ Rennes, CNRS, CREM Thi Hoa
- UMR
thi-le-hoa.vo@univ-rennes1.fr Le VO.*6211, F-35000 Rennes, France

** *** Univ
Univ 11Rennes,
Rennes,
Rue JeanCNRS,
CNRS,
Macé, CREM
CS 70803,-- UMR
thi-le-hoa.vo@univ-rennes1.fr
CREM UMR 35708
 6211,
6211,
Rennes F-35000
Cedex 7,Rennes,
F-35000 France.France
Rennes, France
* * Univ11Rennes,Rue JeanCNRS,
Macé, CREM
CS 70803, - UMR 35708 6211,
Rennes F-35000
Cedex Rennes,
7, France. France
* * Univ11 11Rennes,
Rue
Rue Jean
JeanCNRS,
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Macé, CREM
CS
CS 70803,
70803, - UMR 
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Cedex Rennes,
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* Univ11Rennes, Rue Jean CNRS,
Macé, CREM CS 70803, - UMR 357086211, Rennes F-35000
Cedex 7,Rennes,France.France
Abstract: Corporate 11 Rue responsibility
social Jean Macé, CS(CSR) 70803,seems 35708ever Rennesmore Cedex 7, France.
important in the current context of
Abstract: Corporate
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social responsibility
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Abstract:
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SC. Copyright
Copyright © and
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© 2019, Therefore,
Keywords:
model.
reinforce IFAC (International
theSupply chain;
our
consideration proposed Federation
Sustainability;
of CSR model ofmight
engagement Automatic
Corporate
provide
in the Control)
social Hosting by
responsibility;
a theoretical
SC. Copyright andElsevier
© 2019 System Ltd.dynamics;
managerial
IFAC All rights reserved.
foundation Textile
that andcan
Keywords:
Keywords:
apparel
reinforce Supply
Supply
industry
theSupply chain;
chain;
consideration Sustainability;
Sustainability;
of CSR engagement Corporate
Corporatein thesocial social
social responsibility;
responsibility;
SC. Copyright © 2019 System
System dynamics;
IFACdynamics; Textile
dynamics; Textile and and
Keywords:
apparel industry
industry chain; Sustainability; Corporate responsibility; System Textile and
Keywords:
apparel
apparel Supply chain; Sustainability; Corporate social responsibility; System dynamics; Textile and
industry
Keywords:
apparel industry Supply chain; Sustainability; Corporate  social responsibility; System dynamics; Textile and
 well as environmental pollution (Emmelhainz and Adams,
apparel industry1. INTRODUCTION 
1. INTRODUCTION  well
well as
1999; environmental
asPulse of Fashionpollution
environmental industry (Emmelhainz
pollution report, 2017).and
(Emmelhainz and Adams,
Adams,
Moreover,
1. INTRODUCTION well as environmental pollution (Emmelhainz and Adams,
In the context of 1. INTRODUCTION
globalization
1. INTRODUCTION and integration, CSR is 1999;
well
1999;
large
1999; asPulse
Pulse
corporations
Pulse
of
environmental
of Fashion
Fashion
have
of Fashion
industry
pollution
industry
gradually report,
(Emmelhainz
report,
transferred
industry (Emmelhainz
report,
2017).
2017).
2017). andMoreover,
Adams,
Moreover,
production
Moreover, to
In the context
one ofof the1.globalization inand integration, CSR is large
well corporations have gradually transferred production to
In
In the
becoming
the context
context of
of globalization
conditions
INTRODUCTION
globalization and
trade,
and integration,
the “passport”
integration, CSR
CSR foris
is large as
1999;
large
environmental
Pulse
corporations
developing of Fashion
countries
corporations have
haveandpollution
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gradually
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gradually report,
transferred
it as the
transferred 2017). and
production
global
production
Adams,
Moreover,
hub for to
to
becoming
In the
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context
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enter of
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by “passport”
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for
from is developing
1999;
large Pulse countries
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report, as
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2017). production hub
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to
becoming one of developing
low cost countries
apparel and
manufacturingconsidered and it as the
outsourcing. global Shown hub for
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inand
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countries more
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2019 IFAC MIM
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1950
activity. However, most of these studies aim to find optimal
solutions and only show the short term performance of the
chain, but they have failed to help managers consider the
long-term policies or indicate under which conditions it
would be more beneficial for firms when engaging in CSR.
There has been almost no research that fully incorporates all
three aspects of CSR into one comprehensive model.
SD is an approach that allows studying the behaviour of a
complex system over time to show how policies, decisions,
structure and delays are interrelated to influence growth and
stability of the system. A fundamental principle of this
method is to examine issues from multiple perspectives and
expand the boundaries of our mental models to consider the
long-term consequences (Meadows et al., 1982). It also
enables modellers to incorporate and simulate various socio-
economic and environmental dimensions into one
comprehensive model (Mafakheri and Nasiri, 2013). Besides
that, many of the tools of SD are designed to help modellers
develop useful, reliable, and effective models to serve as
virtual worlds, and simulation software makes it possible for
anyone to engage in the modelling process (Sterman, 2000).
Moreover, any proposed changes can be tried in the model
and the best of them used as a recommendation to better
management (Forrester, 1961). On the other hand, a review
of previous literature on CSR system dynamics models
reveals that none of the literature considers the three
dimensions of CSR as well as the CSR implementation in the
garment industry SC (Vlachos et al, 2007; Qingli et al, 2008;
Georgiadis and Besiou, 2010; Das and Dutta, 2013;
Sundarakani et al, 2014; Golroudbary and Zahraee, 2015).
Therefore, our study will fill this gap.
The purpose of our study is to develop a CSR system
dynamics model that includes the initiatives of product
collection, recycling, donation and training. In this regard, the
paper will investigate the impacts of CSR implementation on
performance of individual members as well as the whole
chain. In particular, the following research questions (RQs)
are addressed:
RQ1. Under which conditions would it be more profitable to
engage in CSR activities?
RQ2. How do the variables - consumer sensitivity to the CSR
effort level, CSR-related costs - influence the CSR
implementation?
Therefore, our study bridges the gap by proposing a SD
model with the integration of three CSR dimensions -
economic, social and environmental. Moreover, we will point
out the conditions at which a firm would be more profitable
when engaging in CSR and the factors affecting the
implementation of CSR in the SC.
2. METHODOLOGY AND MODEL DESCRIPTION
2.1 Methodology description
SD modelling was developed to study and capture the
behaviour of complex systems over time by using stocks,
1980
flows, internal feedback loops, table functions and time
delays (Sterman, 2000).
Fig 1. Components of a system dynamics model
A SD model includes three main components: stocks
(integrals or state), flows (derivatives or rates) and converters
(auxiliaries) (Fig 1). The stocks variables (e.g. inventories;
accumulated profits) are represented by rectangles telling
decision-makers where they are, providing them with the
information needed to act. They are the accumulations over
time and change through inflows and outflows. Flows (e.g.
production rate; retail sales rate) are represented by a pipe
pointing into/out of the stocks. Auxiliaries (e.g. inventory
adjustment; desired inventory) comprise functions of stocks.
They may be constants or exogenous inputs (Sterman, 2000).
The structural equation of relationships between stocks and
flows is described under the integral form:
(1)
Where t0 is the initial time and t is the current time. Inflow(s)
and Outflow(s) represents the values of the inflow and the
outflow at any time s between t0 and t. Stock(t0) is the initial
value of the stock.
Each arrow represents the causal relationships between two
variables. The loops will be formulated from the causal chain
that links the variable to itself. There are two types of
feedback loops: positive (or self-reinforcing) and negative (or
self-correcting) loops. These loops represent the dynamic
hypotheses explaining the identified research problem.
The SD modelling process often consists of five iterative
steps: Problem definition, dynamic hypothesis, simulation
model, testing and policy design. The first step in any SD
modelling project is identifying the problem, the relevant
relationships thought to be of importance to the problem, the
system boundary, and choosing the time horizon of interest.
Then, the modeller can formulate the dynamic hypotheses to
account for the problematic behaviour by using causal loop
diagrams or stock and flow maps. After writing the equations
and giving the initial values for variables, the modeller will
test the model to identify flaws in proposed formulations and
improve one’s understanding of the system. Finally the
modeller can design and evaluate policies for improvement.
2.2 Model description
Reference data in the garment industry is unavailable for our
model; therefore our SD proposed model of the supply chain
CSR is mainly based on the basic Forrester industrial model
(1958) and the manufacturing SC model by Sterman (2000).
In addition, reference to related industry and academic
 2019 IFAC MIM
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literature as well as consultation of industry experts are also
employed in the construction of the model. We use Ithink
software 9.0.3 as a tool to simulate the model. We develop a
CSR decision-making model for the garment industry SCs
including a single manufacturer–retailer with the following
features: Customers buy the clothes from the retailer (R).
Based on the expected demand and inventory adjustment, R
places the orders to the manufacturer (M). R is assumed to
forecast demand using first-order exponential smoothing of
the actual demand rate and the same for M with the order
forecasting. M determines the production rate given the
inventory adjustment and his forecasted order. M’s
requirement for raw materials (fabric) is satisfied with a mix
of recovery and procurement. The rates of shipment and retail
sales are constrained by the on-hand inventory.
In order to augment the market demand, both firms engage in
CSR activities. M takes charges of implementing the
responsibility to employees through technical skill training
activity and recycling. R is responsible for collecting the
unwanted clothes, then transferring them to M to sort, donate
partly to charitable organizations and mostly recycle for
material recovery. This structure of model is referred to by
Mafakheri and Nasiri (2013), Das and Dutta (2013) and
Modak et al (2018). In this study, for the sake of simplicity,
we only take a single garment product closed-loop SC into
consideration.
Our SD proposed model has the following assumptions: (1)
the recycling process can convert the waste clothes into
materials ready for garment production; (2) the costs of
sorting and transporting garment waste from the collection
points to M are negligible. (3) After two years (104 weeks),
demand for CSR products begins to increase.
Fig 2. Causal loop diagrams of the supply chain
Based upon the main variables of the model, we develop a
high level model of the system to illustrate the interactions
and cause-effect relationships among variables (Fig 2). The
principal feedback loops in the proposed model are presented
in Table 1. Loops 1a, 2 and 5a explain the effect of the
market demand on firms’ CSR implementation. Loops 1b and
5b describe the economic benefits of M when engaging in
training and recycling activities. Loop 3, 4 and 5c are self-
correcting loops imply the economic barriers for SC actors
when implementing CSR.
The variables are then categorized into stocks and flows.
Along with the feedback, we construct the stock and flow
model for simulation. Due to the limitation of the number of
paper’s pages, we could not present it here, but we are able to
provide the detailed model as well as the equations upon
request. In order to investigate the performance of CSR
1981
implementation in the garment industry, we focus on the data
relating to garment products.
Table 1: Main loops of the model
Apart from the parameters found in annual reports of some
firms and of the industry reports and previous studies (Pulse
of Fashion industry report, 2017; the carbon footprint of
textiles _ Sustain consulting, 2010; Yan et al, 2016), the
remainder is hypothetical data. The base case is created from
these values.
The model is simulated with a weekly time step over time
horizon T = 260 weeks (5 years is long enough to capture the
effect of CSR performance).
4. RESULTS ANALYSIS AND DISCUSSIONS
With the initial values of the parameters in the base case, we
first run the model in two cases with and without CSR and
draw some results to examine the performance of these two
cases.
Figure 3 shows the simulation results of SC actors’ profits
with and without CSR in the base case. It is seen that the
profit of R in the presence of CSR slightly increases, while
that of M goes down compared to the case where CSR is
absent. Due to the huge investment costs of recycling and
training activities, the increase by 10% of actual demand (the
base case) cannot cover the fixed costs. It results in the
decrease of M’s profitability. In contrast, R only performs the
collection of unwanted clothes from consumers, with costs
mainly generated from installing the collection bins.
Therefore, at a supposed investment cost of 3000 USD/bin,
and the 10% increase of actual demand, it can offset all the
investment costs and make profits in the long term.
From the above result analysis we note that with the
conditions in the base case, the implementation of CSR is
more profitable for R than for M. Therefore, in terms of
profitability, M has no incentives to engage in CSR activities.
Besides that, the biggest difference between the two cases is
the efficiency of CSR. From a CSR viewpoint, the chain’s
actors can obtain the environmental and social objectives
through the reduced CO2 emissions and improved number of
trained workers. To have the answers to the questions
addressed, hereinafter, in the next section, we will investigate
the impacts of factors on the CSR implementation of SC
actors. Specifically, we will delve into the individual
member’s profit and CSR performance.
2019 IFAC MIM
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1952
Fig 3. SC actors’ profits with and without CSR in base case
4.1 Effects of factors on CSR performance of SC actors
Effect of consumer sensitivity to CSR effort level
In order to realize the effect of the CSR coefficient on the
performance of the chain, we in turn change the fluctuation
rate of the CSR coefficient (model input) at three levels
including low, medium and high and observe the changes in
some internal variables (model output) as shown in Table 1.
Table 2. Effect of CSR coefficients on SC performance
Table 2 indicates that M’s profit is considerably sensitive to
the CSR coefficient while R’s profit changes less. Thus, M is
most motivated to adopt CSR. The other variables, which
represent the CSR performance of the chain - saved CO2
emissions, collected products, recycled raw materials and
number of installed collection bins - change proportionally
with the change of actual demand.
In addition, observing the simulation results, we find that if
the CSR coefficient drops below 2%, in terms of the
profitability, both M and R have no incentive to implement
CSR because their profits after CSR engagement are smaller
than that of the case without CSR. With regard to M, if the
goal of M is profit-seeking, the actual demand should
increase to a minimum of 80%. In this scenario, profits of
both actors and of the whole chain are greater than those
where CSR is absent. In short, the higher the CSR
coefficient, the higher the CSR performance. Namely,
looking again at Table 1, an increase in consumer’s demand
leads to an increase in collected products, recycled raw
materials and the amount of saved CO2 emissions. Moreover,
the time necessary in order for M to complete the training for
total workers is shorter. It is apparent that the CSR coefficient
is the decisive parameter for CSR implementation by firms in
the proposed model. The variation in actual demand results in
1982
fluctuation of the SC performance. That also means that the
enhancement of consumer awareness about the importance of
firms’ CSR engagement is critical and crucial. In practice,
when the CSR coefficient has not been high, and firms want
to obtain the environmental and societal objectives, they
might in certain cases encounter lower economic benefits in
the short-term in the expectation of long-term sustainability.
Effect of unit training cost
Figure 4 shows the behaviour of M’s profit with the changes
of the unit training cost. M’s profit is inversely proportional
to the unit training cost. Therefore, in order to increase M’s
profit, decreasing the unit training cost is necessary.
However, if this cost is exogenous, the cost reduction
depends on the ability of M to negotiate with the training
service supplier.
Fig 4. Effect of unit training cost on M’s profit
It is worth noting that with the increase of demand as in the
base case, it is impossible to find a reduction in unit training
cost in order for M to be more profitable than in the case
without CSR due to huge investment costs in recycling.
In terms of CSR performance, we observe that changing the
unit training cost has an impact on the behaviour of the
number of trained workers. The smaller the unit training cost,
the higher the number of trained workers, in that same time
period (Table 3).
Table 3. Effect of unit training cost on M’s CSR
performance
We realized that since the unit training cost affects the
number of trained workers, it also has an indirect effect on
the rate of defective products as well as the cost of repairing
these products. Figure 5 shows the differences between M’s
rework cost in cases with and without CSR. We see that in
the case with CSR, as the number of trained workers
increases, the percentage of defective products drops, and the
costs of reworking these products decline as a result. This
also means that the implementation of CSR in this regard is
more effective than without CSR.
 2019 IFAC MIM
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Fig 5. Rework cost of M with and without CSR
This also pushes M to carry out the training activity of
technical skills for workers. M can save production costs by
reducing the rework cost of defective products. Islam et al
(2013) suggested that minimizing the reworks is not only a
must in quality but also productivity improvement. On the
other hand, showing attention to workers is one of the social
norms in CSR implementation by firms.
Effect of unit collection cost
Figure 6 illustrates the results of the unit collection cost
change simulations. The blue line represents the base run,
showing the model behaviour when no parameter changes
have been made. The base run is compared to the model
behaviour when the unit collection cost increases up to 7000
USD/bin. It is shown that the smaller the unit collection cost,
the greater the number of installed bins in the same time
period. Since the number of installed collection bins is more
than or equal to the number of expected ones, it remains
unchanged. Note that in terms of profitability, the unit
collection bin cannot exceed 7000 USD/bin, because at that
threshold, the increase in demand is not enough to offset R's
investment cost, consequently R’s profit is lesser than that of
the case where there’s no CSR involvement.
Fig 6. Effect of the unit collection cost on number of installed
collection bins
Clearly, in the proposed model, R itself is profitable despite
not adopting CSR. However, for the purpose of increasing
demand to gain additional profits, R can engage in CSR
activity. With regard to M, an increase in the recycling rate
leads to an augmentation in saved material costs and the
amount of carbon savings. For that reason, M has incentives
to hold CSR initiatives and support R to promote the
collection of products. Similarly, the unit cost of collection
bins in the proposed model is an exogenous variable;
therefore R should select the unit that supplies installation of
the collection bins at the most reasonable prices to try to
maximize the efficiency of the collecting activity.
Effect of fixed recycling cost
1983
To carry out the recycling activity, we suppose that M has to
invest in a technology to recycle old clothes into fabrics.
An observation of the simulation results reveals that the
greater the fixed cost of recycling, the lower the profitability
of M. However, if the values of other parameters are fixed as
in the base case, and the recycling fixed cost allocated
periodically is less than or equal to 8000 USD, after 5 years,
M will start being profitable (Fig 7). Therefore, M will have
the motivation to invest in this recycling technology.
Fig 7: M’s profit in cases with and without CSR
The fact has proved that the fixed recycling cost has a
decisive effect on the recycling of old clothes in the garment
industry and that almost no firm has been able to possess its
own recycling facility. It means that the fixed cost linked
with recycling activity reduces the chances of the garment SC
actors to carry out this activity. In this regard, it can be
considered as a prohibitive factor. In return, when firms
invest in recycling activity, they might reach the three
objectives in terms of CSR as indicated by Cuc and Vidovic
(2011). Regarding the economic aspect, firms might save the
material procurement cost by priorly using recycled raw
materials.
More remarkably, as this cost depends on the advancement of
science and technology, it might currently be a difficult
investing decision for firms, but in the future when the cost is
lower, the investment will be possible.
6. CONCLUSIONS
Under the SD approach, we incorporate all three dimensions
of CSR in the proposed model including economic (profit),
environmental (saved CO2 emissions amount) and social
dimensions (responsibility to employees) to investigate the
decision of CSR engagement in the garment SC. Through the
evaluation of influencing levels of each factor, we indicate
the thresholds at which it would be more profitable for firms
to engage in CSR. Specifically, the CSR coefficient must be
high enough to cover the CSR investment costs, and the
smaller the CSR-related costs, the higher the CSR
performance. However, the unit training cost and the unit
collection cost in our proposed model are exogenous
variables; therefore, the reduction of these two costs depends
on the ability of SC actors to negotiate with their suppliers.
The fixed recycling cost seems to be a prohibitive factor for
SC actors. However, the implementation of this activity is
feasible as this cost is lowered by the advancement of
technology.
Our study might be helpful to decision-makers in the garment
industry SC when confronting the decisions of holding CSR,
especially for the garment firms in developing countries
2019 IFAC MIM
Berlin, Germany, August 28-30, 2019 Thi Lan Anh Nguyen et al. / IFAC PapersOnLine 52-13 (2019) 1949–1954
1954
where the implementation of CSR policies has recently been
a requirement from European importers. Applying the
proposed model in a real business environment will be a good
direction for future research.
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