-75%
Impact of supply chain management on corporate performance
Solution
While quoting EvoDavis (2022), in the CIPS Module Notes, sustainable sourcing entail integrating social, ethical and environment performance factors in selection of suppliers. Further, CIPS (2021) identify sustainability as a holistic consideration of organisation governance in lenses of environment, social, economic viability for ensuring long-term organisation visibility with needs of present met with zero compromise on future generation’s needs. Hence, from the different definitions available, ESG (Economy, Social and Governance) are the components of sustainable which can be integrated in sustainable sourcing. Similarly, for ADNOC, their operations in supply chain are sustainable and anchored on what ADNOC (2023a) identify as pillars of People, Profitability and Sustainability (see figure below);
Figure 5:Components of Responsible Procurement
Source: CIPS Module Notes
Factors considered in Sustainable Global Sourcing Decisions
Sustainable global sourcing decisions are intended to identify and select suppliers with commitment to sustainability and evidencing meeting specific standards associated with environment performance, labour and social (Jiang et al., 2020). Further, CIPS (2020) identified the Triple Bottom-line which represent factors to be considered in sustainable global sourcing decisions as illustrated below;
Figure 6:3P’s Triple Bottom Line
Source: HBR (2022)
The factors of consideration include;
ESG (Environment, Social, Governance)– According to CIPS (2021a), by considering on these three factors, the decision leads to long-term resilience of their supply chain. As a best practice, this entail sourcing goods and services of minimising negative implication on society, economy and environment. In ADNOC, they implement ESG policy which is identified in ADNOC (2023) as carbon management, energy efficiency and methane reduction to achieve 25% reduced greenhouse gasses by 2030 and achieving their goal of operationally net zero by 2045.
Corporate Social Responsibility– This factor entail embedding CSR in the overall entity inclusive of their subsidiaries locally, regionally and internationally and offshore suppliers. As evidenced in Andersen and Skjoett‐Larsen (2019), this include capacity development, experiences sharing, positive incentives for suppliers and regularly auditing of performance of suppliers. For ADNOC, they adopt a robust CSR strategy where they champion community engagement and implement infrastructural projects with a potential of maintaining community thriving culture (ADNOC, 2024).
Responsible Procurement– This factor entail a PS&M strategy which prioritise on aspects of social, environment and economy in supporting sustainable development. For example, Ma et al. (2022) note that this include engaging suppliers who promote fair wages and safe working conditions to their employees. This is achieved in ADNOC by implementing In-Country Value (ICV) program which enhance private sector partnership, socio-economy development, knowledge transfer and job creation. There is nevertheless a need to invest in collaboration, networking and technology for sustainable supply chain which is evidently lacking in ADNOC sustainable global sourcing decision making.
Making Sustainable Global Sourcing Decisions
As defined in earlier section of this report, sustainable global sourcing decision identify and select suppliers with a commitment to sustainability and demonstrating meeting specific standards. According to Jia and Jiang (2018) this is in areas of environment, labour practices and social-based responsibilities. Hence, as a best practice, involving all stakeholders is essential for effective decision making. The analysis of stakeholders is as illustrated in Mendelow Matrix Model (CIPS Module Notes);
Figure 7:ADNOC Stakeholders Analysis
Source: Summarised from ADNOC Website
In making of decisions, finance department and IT have low interest and influence. Their responsibility is to align resources and technology for achieving sustainable supply chain. Their priorities do not conflict hence a seamless decision making is enhanced in ADNOC. Further, senior organisation and management possess high influence but low interest. Their priorities would be conflicting hence need to involve all stakeholders from the start to appraise them of their expectations. The PS&M and procurement team and heads have a significant responsibility in making the decision. They make sure that all the other stakeholders are engaged to influence making of decisions. This is with their review and monitoring of the process success evident. The end-users, employees and legal department despite of having high interest influence less. This is since they are involved at policies levels with their interests conflicting with other suppliers managed by integrating innovation.
Considering the different engaged stakeholders, the scope of sustainability can be measured by the techniques in figure below with improvement techniques similarly recommended;
Figure 8:Supply Chain Sustainability Performance Measurement
Source: CIPS Module Notes
For example, in ADNOC, they adopt the Value Chain Analysis. Through this, they drive achievement of competitive advantage and sustainability results. Similar to Soosay et al. (2012) findings, the ESG relationships success and how the different stakeholders buy-in ADNOC practices are used as indicators of success in their decisions.
Global Supply Chain Risks Analysis
Risks identification, assessment and management are core in the supply chain management strategy as there are varying risks with distinct intensity in terms of their implication to organisation (Chu et al., 2020). To achieve this, CIPS Module Notes have demonstrated on the use of Risks Resilience Model made up of the following aspects;
Figure 9:CIPS Risks Resilience Model Components
Source: CIPS Module Notes
Considering the requirement of ADNOC sourcing for IT systems, risks analysis of their global supply chain can involve the Risk register. The risk register summary is illustrated in table below;
Source: Summarised from ADNOC Desk Research
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