Sustainability, Operations and Supply Chain Management in Manufacturing and Service Industries

Tourism is a huge and dynamic industry that is comprised of a wide variety of service businesses that reflect the same dynamics and priorities that a manufacturer would have for operations planning (OP) and supply chain management (SCM). One such service business is the cruise ship sector in which vacationers travel via these types of vessels to various destinations.

While manufacturers produce tangible products and wastes, service companies also produce waste, but their products are intangible. For example, the product that a personal trainer might produce is a healthier client. Operations Managers (OM) in both industries share similar interests in eliminating waste and delivering quality products.

The two main intangible products that the vacationer (end user) buys, and a cruise ship company “manufactures” and delivers, are pleasure and relaxation – the total experience that allows vacationers to “suspend” their everyday reality for a period of time and immerse themselves in pleasurable experiences. The mission of the cruise ship industry is to deliver this experience to them in a way that surpasses their customers’ expectations, and it depends a great deal on the manufacturing industry to make this possible.

Comparable Dynamics and Priorities in Manufacturing and Service

The movement and connection of goods and services from the point of origin, or the original source, to the end user is referred to as “the supply chain”. Supply Chain Management is a part of the Operations Management that involves the effective management of many inter-firm processes such as:

Supplier/Vendor relationship management
Order Processing
Information Systems management
Sourcing and Procurement
Production Scheduling
Inventory Management
Warehousing and Distribution
Customer Services
Environmentally sustainable practices

Just as in the manufacturing industry, in the cruise ship industry it takes the coordination of a variety of resources – financial, material and human – working together to manage these processes in order to achieve organizational goals.

Operations Management involves the management of all the activities that produce an output (a product). In operations management a multitude of processes must be managed in order to produce and distribute products and services. Policies must be formulated; daily operations must be managed, and so must the use of human and material resources. OM also demands the effective utilization of technology and communications systems to allow for timely ordering and delivery of materials and products, and the servicing of customers and stakeholders.

Policies in both the manufacturing and service industry sectors might include social and environmental impact considerations such as the use of resources and the disposal of wastes. Religious, cultural, political and legal issues such as human rights, use of child labor, wage and hours; human resource impact issues such as age, gender and other forms of discrimination must also be considered.

In a manufacturing situation these considerations would impact the goods and services that the cruise industry might use. Some of these goods include foods, linens, toiletries, furnishings, packaging, electronics, fuel, etc. All of these products are outputs of a manufacturing process that a cruise ship might use and all of these products impact the environment from the original source to the end-user.

Organizations in both industries need to develop a sustainability mind-set and identify where waste being generated in their companies and along their supply chains; the reason why and when, at what stage it is being produced.

So, for example, the OM of a cruise line that is socially and environmentally conscious, and who wants to improve their SCM and incorporate a closed-loop method of operation in her organization, might be considerate of the inputs that a manufacturing company utilizes in its production process and in the processes that it utilizes to convert the raw materials into products; the timely deliverance of those products; the quality of customer service after the product is delivered, and the impact that disposal of these products have on the environment.

Likewise, manufacturing companies (whose products the cruise lines use) also wishing to do the same might, in turn, be considerate of the inputs that their suppliers utilize in their operations. As mentioned before, these inputs include – but are not limited to – various impact considerations previously mentioned.

This backward view of the supply chain links the end user of the services of the cruise ship to the beginning of the supply chain – and that includes all the companies that, working backward, might make up the chain to the original source. An original source might be cotton growers and the policies they have in place that might affect the methods that they use to grow, harvest and supply the converters of the cotton.

Questions that an Operations Managers might ask, for example, are:

· Ate the cotton growers using harmful, earth polluting chemicals in growing the cotton?

· Is child labor being used in harvesting?

· Are working conditions safe, and are wage and hours legal and fair?

· Are materials being delivered on time – and if not, what are the reasons that are preventing this?

These questions impact the management of the supply chain and organizations can gain or lose competitive advantage if they do not consider such questions because, in the case of a cruise ship, for example, an enlightened vacationer might hardly be impressed that the soft cotton sheets that she uses on the cruise line were made from cotton picked by children who live in slums and who earn mere pennies a day for back-breaking labor – and are denied an education because of these poor labor practices.

These types of considerations and decisions faced by a cruise line Operations Manager will affect his or her own company’s financial bottom line and will also affect the operations management of their down-line suppliers, as it also would in manufacturing. One can easily see that the considerations and activities of Operations Managers in service industries easily affect supply chain management in their organizations.

Maintaining a Competitive Advantage

Today’s consumers are more sophisticated and keenly aware of the global impact that their actions have on the environment and many consumers already take actions to reduce their “carbon footprint”, that is the contribution to the environmental impact of human beings and their activities upon the planet.

For example, the more waste one leaves behind in one’s daily activities, the larger one’s carbon foot-print. This idea has been capsulized in the term “going green”. Consumers are not only modifying their own habits in order to minimize waste and thus reduce their carbon footprints, but they are also holding corporations accountable for their impacts on the environment. This has put pressure on many corporations to go green by embracing more environmentally friendly processes in their operations.

Cruise ships are like floating cities that can generate as much as “…30,000 gallons of sewage, 250,000 gallons of kitchen, bath and laundry waste water and 10 tons of garbage — each day”. Effectively managing the inputs that create this amount of waste begins with effective management of the supply chain. Effective management of the supply chain begins with effective operations management.

Socially and environmentally conscious organizations that develop a vision and a mission articulating a clear objective to take responsibility for ensuring the sustainability of all inputs that go into their products will have a competitive advantage over those who don’t. So a cruise line, for example, that establishes a culture of “world class supply chain management” into its operational processes can gain significant competitive advantage over its competitors because “supply management directly affects the two factors which control the bottom line: total costs and sales”[2] (Burt, Dobler, Starling. 2003, p. 10).

For example, a cruise ship line that is an early entrant into World Class Supply Management practices will most likely emerge as a leader in the practice and, as such, will stand to hold “40 -60 percent of the market after competition enters the picture” (p. 11). The quality of its offerings will also improve as it utilizes the sustainable goods produced by manufacturers. Since quality usually commands premium prices, this can help firms gain market share. Today, a more informed and enlightened public demand higher quality goods and thus supports organizations that deliver quality.

Additionally, consumers are demanding more and more that corporations go green as much as possible. Building sustainability into the supply chain will improve quality and increase customer satisfaction. Organizations that do not build sustainability into their operations will find that it will cost them more (in the loss of market share) to NOT do so. By building sustainability into their practices early, both manufacturing and service organizations can expect to gain and maintain a competitive advantage.

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