3 Elements of Supply Chain Sustainability:

1.Financial Responsibility - This is an element of sustainability that

addresses the financial needs of the shareholders, employees, customers,
business partners, financial institutions, and other entities that supplies the
capital for the production of products or relies on the firm for wages or
reimbursements.
2.Environmental Responsibility - This is an element of sustainability that
addresses the ecological needs of the planet and the firm's stewardship of the
natural resources used in production. With this element, emphasis is placed
on protecting the environment and preventing short- and long-term
damages.
3.Social Responsibility - This element of sustainability addresses the moral,
ethical, and philanthropic expectations that society has on an organization. It
incorporates the idea of sustainable development that focuses on social
development while protecting the environment.
Strategies For a Sustainable Supply Chain

1.Remove Waste - Ensure that all of your resources and materials are
used at peak efficiency through end-to-end visibility. Poor planning
can lead to having excess materials and waste that has to be discarded.
2.Reduce Packaging Materials - Re-designing your packaging to use
less material can lower the costs associated with packaging and
transport as the total weight of the product is reduced. In addition,
designing packaging that can be recycled or returned can further
reduce the costs associated with packaging.
3.Maintain Compliance - Ensure that your supply chain meets
environmental regulations for sourcing, clean air, and emissions. 
1.Source From Sustainable Suppliers - Collaborate with all levels of
the company to find suppliers that have long-term sustainability goals
that are in line with your company's goals. This can involve choosing
local suppliers and micro-suppliers. 
2.Reduce Inventory - Eliminate costly stock-outs and wasteful
overstocks by precise prediction and balancing your supply and
demand. Excess inventory can be costly to maintain and may become
obsolete if products are not sold.
3.Cut Carbon Emissions - By identifying the most efficient route and
delivery options, you can reduce the carbon footprint of the company.
In addition, shortening the supply chain by sourcing raw materials
closer to the end customer can further reduce carbon emissions
associated with transportation.
Advanced Planning and Scheduling (APS) Software
• Advanced Planning and Scheduling Software's have become a must
for modern-day manufacturing operations as customer demand for
increased product assortment, fast delivery, and downward cost
pressures become prevalent. These systems help planners save time
while providing greater agility in updating ever-changing priorities,
production schedules, and inventory plans. APS Systems can be
quickly integrated with an ERP/MRP software to fill the gaps where
these systems lack planning and scheduling flexibility, accuracy, and
efficiency.
• Create optimized schedules that balance production efficiency and
delivery performance

• Maximize throughput on bottleneck resources to increase revenue

• Synchronize supply with demand to reduce inventories

• Provide company-wide visibility to resource capacity

• Enable scenario data-driven decision making

Top 8 Competitive Dimensions of Operations Management
• Cost or price
• Quality
• Delivery speed
• Delivery reliability
• Coping with changes in demand
• Flexibility and new product introduction speed
• Other product specific criteria
• Time
• A trade-off exists when an organization cannot perform
simultaneously on two performance dimensions: in order to increase
performance on one performance dimension it has to decrease
performance on the other dimension. For some operation managers,
this was a clear message that strategic trade-offs did not exist.

• Order winners-One or more specific marketing oriented dimensions

that clearly differentiated a product from competing products

• Order qualifier-Dimensions used to screen a product or service as a

candidate for purchase
 IKEA Strategy
• To start off, IKEA has a clear vision – to provide well designed,
functional home furnishings at prices so low that as many people as
possible will be able to afford them. Its various functions (supply
chain operations and inventory management included) work together
to support its distinctive value proposition.

• IKEA Supply Chain: How It Works

• Before we dive into the gritty details, let’s give a brief overview
of how the supply chain of IKEA works.
• It goes roughly like this: 
1.The company identifies the production requirements of each
item, and determines the necessary logistics and related costs.
2.IKEA representatives order the required raw materials from
suppliers.
3.The company distributes the resources for manufacturing and
starts the production process while adhering to its quality
requirements.
4.The manufactured products are delivered to storage facilities
and distributed to stores, and eventually, customers.
5.If the customers are not satisfied with the quality, they can
return products according to the warranty that they get with the
purchase
IKEA Supply Chain Features
• These features allow the company to optimize its supply chain management processes.
• Costs saved on manufacturing and shipment
• IKEA manufacturing and shipment costs are quite low because its furniture and home accessories are made of recycled
and sustainable materials. In such a way the company uses fewer materials and requires fewer resources to produce and
ship new parts.

• DIY assembly
• The most remarkable feature of IKEA furniture is that customers assemble it themselves. The furniture is sold in pieces,
which are placed into convenient, flat packages. As a result, IKEA saves on transportation and fulfillment because the
pieces take up less room in trucks. IKEA can ship more items at a lower cost. The DIY principle also allows the company
to use the storage space more economically and thus save IKEA money on inventory management. Finally, many products
are shipped directly from suppliers to the stores, a strategy that also significantly reduces warehousing and storage costs.

• Long-term relationships with IKEA suppliers

• More than 1,800 suppliers in 50 countries sell raw materials to IKEA. The company uses 42 trading service offices around
the world to manage relationships with suppliers. It signs long-term contracts with the most trusted suppliers and thus
gets materials at the lowest possible prices. Besides, IKEA encourages its wholesale partners to be environmentally
conscious by giving them rules and guidelines called the IKEA Way of Purchasing Home Furnishing Products (IWAY). Such
an approach helps to improve quality standards and reduce prices. This is what makes the furniture more affordable for
• In-store IKEA logistics and warehouse management
• Unlike other stores, IKEA hires in-store logistics managers who are responsible for all
inventory-related processes, such as monitoring deliveries, sorting and separating goods, and
directing them to the correct locations. Each IKEA store has a showroom on the upper floor
and a warehouse on the ground floor, with more than 9,500 products in stock. In the
showroom, shoppers can see and feel the products. Each item has its own article number as
well as an aisle and bin number. Customers can use these numbers to locate items in the
warehouse. However, shoppers cannot access one-third of the warehouse because this zone
is designated for bulky items, which cannot be collected without help from the staff.
• Customer-centric approach
• IKEA values its customers above all and strives to deliver the best service possible. Constant
monitoring of customer satisfaction is an integral part of IKEA’s business strategy. They
analyze the number of complaints, returned products, demand for certain products and
customer suggestions. Company representatives even visit the homes of their customers to
gain feedback and ideas on products that customers might be looking for. The collected ideas
are then used as the starting point of a new design process. Finally, IKEA stores provide the
visitors with additional facilities, such as play areas for kids as well as food courts and mini
shops with traditional Swedish food. This encourages the customers to visit physical stores
even in the era of ecommerce and online shopping.
• Cost per touch IKEA inventory management strategies
• Cost per touch means that the more times somebody touches the product during the
shipment, the more costs the company carries, because it needs to pay the procurement and
delivery staff. However, IKEA customers collect the most of the items themselves, so fewer
“touches,” and fewer costs, are involved.
• Dedicated warehouse areas for fast movers and slow movers
• IKEA warehouses are divided into automated facilities for fast-selling items and manual
facilities for slow-selling items. This allows the company to reduce handling costs for low-
demand products and ensure the smooth flow of high demand products within the IKEA
supply chain.
• Reorder point and order quantity management
• With the IKEA inventory tracking system, the staff can set up both the minimum number of
products available before reordering, and maximum number of a specific product to order at
one time. These settings help the company nail down the perfect reorder point, and prevent
understocking and overstocking issues. It keeps logistics managers aware of what is sold,
and how much inventory enters the store through direct shipping and from distribution
centers. They use this information to forecast sales for the next couple of days and order
products to meet the forecast demand. If the sales data does not match the expected number
of items that should have been sold that day, the logistics manager does a manual stock take.
Production and Productivity in Operation Management

• Production is concerned with conversion of input to operating under system (production system).
A management tool called "Productivity" measure the efficiency of this conversion. Productivity
is the relationship between the "output" generated by a production system and the "input".
• Productivity = Output/Input 
• Some times higher production is assumed as the higher productivity and other are used
synonymously. However this does not always become true The productivity improvements can be
observed from the following:
• Increase output / Decrease Input
• Increase output/constant input
• Constant output/ Decrease input
• Increase output more/ Decrease input less
• Decrease output less/Decrease input more
Description Production Productivity

It is the conversion of inputs to desired It is the ratio of outputs of the system to

Definition output. inputs employed in the system.

Unit It is expressed in MKS unit or CGS unit or in It is a dimension less number

numbers

Utility The production is done to fulfill the It is the management technique to measure
and improve the efficiency and Utility
consumer requirement. effectiveness of production system
• Productivity Measurement
• Productivity measurement is derived from the ratio between output
and input. Productivity is usually defined as follows: 
• Productivity = Output/ Input
• Symbolically, P = O/I
• Where;
• P = Productivity
• O = Output
• I = Input
• Measurement of Output
• Output can be measured in three ways. It can be measured in:
• Production quantity
• Production value
• Value added
• Production Quantity
• This requires expressing output in physical volume. These however can
be done only if the output is homogeneous. If not then weighing system
must be adopted to include all types of products.
• Production value
• In case of several different type of product, expressing them in money
terms would be appropriate. This comprises the sales value of the units
of finished products during a specified period of time. It can be
calculated by multiplying the physical output by its sales price.
• Value added
• Value added is the wealth created by an enterprise through its
production or service process. Value added is generally regarded as the
best output measurement when dealing with heterogeneous output.
The more productive an organization is, the more is the value added.
Value added is shown in diagram below. Value addition can be derived
in two different methods getting the same results. They are:
• Subtraction method
• Addition method
• Subtraction method: Value addition in this case is derived by
deducting purchase made from outside such as materials, energy and
others from net sales and by adding change in inventory of work in
process and finished goods. Purchase of materials from outside
includes raw materials used in operation process.

• Energy refers to energy and utilities power, light and water. Other
purchase includes office supplies, repairs and maintenance, insurance,
advertising, consultants etc. This method shows how value add is
created.
• Value addition = Net sales - Value of purchase from outside + Change in Value addition
inventory. Addition Method: As the name implies value addition is calculate this case by
adding all the expenses items such as personnel e financial cost, rents, depreciation, taxes, net
profit before tax non operating expenses.  
• Value added = Personnel expenses + financial cost + rent + taxes + net profit before tax
+non operating expenses. 
• Further illustration of these expenses could be done as follows:
• Personnel expenses: A  This includes expenses like salaries bonuses, allowances etc.
• Financial cost: This includes interest from loans.
• Rent: This include rent fee charged for use of land, building machinery, equipment and other
fixed assets.
• Depreciation: This includes reductions in the original value machinery and equipment over
time.
• Taxes: This includes import taxes, tariffs, duties, excise taxes (excluding income tax)
• Net profit: Net income before income tax
• Other non operating expenses: Expenses not directly related to operation such as
donation/charitable contributions, bad debts, losses etc.
• Measurement of Input
• Input refers to resources both tangible and intangible necessary to
produce goods or services. Inputs can be classified into labor, capital
and intermediate input. One of the important inputs is the labor
calculated in three ways:
• Number of Employees  
• Personnel Expenses
• Total man hour worked
• Capital input can be measured either in physical volume terms hour
used for machinery or equipment) or in money (machinery and
equipment, fixed assets, total assets) value terms intermediate impart
consist of purchases of materials, energy and services in physical
volume terms or in money value terms (value of and services
purchase, material purchase etc).
• What Is Risk Management Framework (RMF)?
• All companies face risk; without risk, rewards are less likely. The flip
side of this is that too much risk can lead to business failure. Risk
management allows a balance to be struck between taking risks and
reducing them.

• Effective risk management plays a crucial role in any company's

pursuit of financial stability and superior performance. The adoption
of a risk management framework that embeds best practices into the
firm's risk culture can be the cornerstone of an organizations' financial
future.
• Risk Identification
• The first step in identifying the risks a company faces is to define the risk universe. The risk
universe is simply a list of all possible risks. Examples include IT risk, operational risk, regulatory
risk, legal risk, political risk, strategic risk, and credit risk.
• After listing all possible risks, the company can then select the risks to which it is exposed and
categorize them into core and non-core risks. Core risks are those that the company must take in
order to drive performance and long-term growth. Non-core risks are often not essential and can be
minimized or eliminated completely.

• Risk Measurement
• Risk measurement provides information on the quantum of either a specific risk exposure or an
aggregate risk exposure and the probability of a loss occurring due to those exposures. When
measuring specific risk exposure it is important to consider the effect of that risk on the overall risk
profile of the organization.
• Some risks may provide diversification benefits while others may not. Another important
consideration is the ability to measure an exposure. Some risks may be easier to measure than
others. For example, market risk can be measured using observed market prices, but measuring
operational risk is considered both an art and a science.
• Risk Mitigation
• Having categorized and measured its risks, a company can then decide on which risks to
eliminate or minimize, and how much of its core risks to retain. Risk mitigation can be
achieved through an outright sale of assets or liabilities, buying insurance, hedging with
derivatives, or diversification.
• Risk Reporting and Monitoring
• It is important to report regularly on specific and aggregate risk measures in order to
ensure that risk levels remain at an optimal level. Financial institutions that trade daily will
produce daily risk reports. Other institutions may require less frequent reporting. Risk
reports must be sent to risk personnel who have the authority to adjust (or instruct others to
adjust) risk exposures.
• Risk Governance
• Risk governance is the process that ensures all company employees perform their duties in
accordance with the risk management framework. Risk governance involves defining the
roles of all employees, segregating duties, and assigning authority to individuals,
committees, and the board for approval of core risks, risk limits, exceptions to limits, and
risk reports, and also for general oversight.
References
• Strategies for a Sustainable Supply Chain (planettogether.com)