Sustainable supply chain management in automotive

industry- Supplier company relationship and Integration

management challenge

Masoud Zafarzadeh, Master student of production and Logistics, Malardalen

University Sweden, School of Innovation Design and Technology,

mzh10001@student.mdh.se,+46-760604659

Hariram Vedapatti Ranganathan, Master of Science in production and Logistics,

Malardalen University Sweden, School of Innovation Design and Technology,

hvi10001@student.mdh.se,+91-9597000846

Martin Kurdve, PhD student, Malardalen university Sweden, School of Innovation

Design and Technology, martin.kurdve@Swerea.se, +46-31706 6132

Abstract

Growing competition in automotive industry has forced companies to have serious

attention towards the sustainability concept. Obviously environmental, social and

economic challenges do not only happen inside companies, but rather involves the

whole supply chain process. Most of the practical efforts are focusing on

manufacturing phase and less attention has been paid to supply and distribution areas.

However, it is not possible to achieve a sustainable supply chain unless the current

situation is accurately mapped and long term policies toward a sustainable future state

are defined. In this respect, the authors consider two major challenges, first supplier

coordination with sustainability requirements and second investigating the alliance of

current managerial policies. In theory, the paper aim is to represent sustainable

supply chain management by focusing on supplier company relations. Integration as a

vital element to meet sustainable supply chain is discussed by exploring the

coherence of lean and green with sustainability. In practice, three leading automotive

companies‟ Sustainable Supply Chain Management (SSCM) systems (TOYOTA,

VOLVO and Volkswagen) are investigated in order to figure out their

perspective toward SSCM.

Key words: Sustainability, Supply chain management, Automotive Industry, Supplier,

Integration, Environment, Lean

1. Introduction Economy, ecology and socio-policy are three main elements in field of global

challenges; air pollution, recent financial crisis and social movements are examples

for these challenges. Developing countries like China and India with about 40% of

world population tend to become more industrialized and due to that the pressure on

world resources, ecosystem and societies culture and economy is increasing (Seliger

et al., 2008). In such situation, companies‟ sustainability depends on how they face

with barriers and enablers in their supply chain process (Walker and Jones, 2012).

Additionally, sustainability and social responsibility count as competitive assets and

according to Wagner and Svensson (2010) “A study revealed that 60% of firms have

adopted sustainable practices that strengthen brand names or differentiate their

products” (Wagner and Svensson, 2010, p.177)

Research shows that during 1998-2008, manufacturing activities price had a dramatic

raise 43 % worldwide which is an ignorable example of these motivations. (UN

Statistics divisions). On the other hand most of opportunities and risks in the holistic

point of view of production and consumption lie in the supply chain phase and the

consumption phase but most of practical efforts are focusing on manufacturing phase

and less attention is paid to supply and distribution areas.

Because of the automotive production nature which deals with sustainability

challenges across their chains, it would be crucial to study leading automotive

companies in order to have clear picture of sustainable supply chain management in

automotive industries (Seliger et al., 2008).

Sustainable development is often defined according to the Brundtland definition from

1987: "Development which meets the needs of current generations without

compromising the ability of future generations to meet their own needs" (UNECE,

Sustainable development). When it comes to environmental considerations it

concerns the protection of natural resources from pollution or over exploitment of

resources. One common way to measure the impact on the natural resource base (or

simply on the environment) is by the use of life cycle assessment. This is common

practice and most automotive companies have performed life cycle assessment of

their products. It is clear that the main impact of automotive business comes from the

use phase, mainly from their fuel use, and thus it is important to design the vehicles

for low fuel consumption. How the supply chain impact on the design is thus crucial.

However with lighter products and cleaner and more renewable fuels the impact of

the production and end-of-use phases are increasing, thus the life cycle phases

including extraction of material and all of the processes in manufacturing components

and finally assembly to a vehicle are important. Clearly this involves all the suppliers

in the supply-chain companies. This leads us to evaluating two main issues:

1. For suppliers who take part in the design phase – how are the requirements of

the design stated

2. For all suppliers – how are requirements of sustainability included in the

SCM

In addition to the above it can be concluded that certain sub processes such as process

chemicals (for metalworking and cleaning), paint processes and energy and waste

management carries a large share of the total environmental impact from production

and thus suppliers of these processes or services could have special requirements.

To formulate what mentioned, following research questions are addressed in this

paper:

How do leading automotive companies handle their relationships with

suppliers in a sustainability context?

How do leading automotive companies integrate current managerial policies

(e.g. lean philosophy and green supply chain management) with

sustainability requirements?

To answer the research question, in advance to do literature review it is needed to

investigate leading automotive companies approach toward SSCM.

2. Materials and Methods

2.1 Methodology

This paper will follow an abductive approach which start point of research is prior

theoretical knowledge and then goes to investigate what happen in reality. The aim of

an abductive approach is to develop new understanding in order to suggest direction

for future. Considering previous knowledge in Sustainable SCM, this study explores

the practices of leading automotive companies in sustainable SCM through studying

sustainability reports and companies official websites.

2.1.1 Case companies

Three companies have been used as examples to show their view of integrating

sustainability in their supply chain management;

-Toyota is one of world‟s leading automotive companies are renowned for their lean

production philosophy integrated into their supply chain. It is one of the most

researched companies in the automotive industry by technological and economical

academic fields.

-Volkswagen is chosen as they are known as the largest automaker in Europe in 2011.

Volkswagen is one of only three automobile companies listed in the Dow Jones

Sustainability World Index. Due to wide variety of brands and companies which are

known as Volkswagen group, this case is chosen to figure out how a company can

achieve sustainability while trying to maintain unity and individual identities.

-Volvo Group is a manufacturer of heavy vehicles (not cars) and has been chosen for

their known commitment to safety and environmental issues, also two of the authors

have worked closely with Volvo in previous studies.

The three companies own statements of how they work with sustainability in their

supply chain are assessed, compared and discussed on the basis of the theories in

literature.

3. Supplier-company relationship in SSCM

Previous research reveals that automakers have various approaches into cooperation

structure with their suppliers. According to Aláez-Aller and Longás-García, (2010,

p315); “The realization by automakers of just how much mutual dependence there is

in their relations with their suppliers” affect companies‟ strategy toward their

suppliers. In such a situation the level and depth of relationship is a strategic decision.

(Simpson et al.,2007) Nawrocka et al., (2009, p1441) designed a survey which

concluded “a closer relationship with suppliers is beneficial both for environmental

outcomes of projects and as a facilitator for environmental work”. A sustainability

model for closer relations where the business is based on function rather than volume

of sales is Product-Service-Systems(Mont et al 1998) where economical incentives

are aligned. (figure 1). This is particularly common for supply of chemical process

material and paint to the automotive industry. However as shown in Kurdve (2010)

the gain is not automatic, the business model and responsibility allocation has to be

aligned with the products and services supplied.

Change in the supplier compensation model: the source of environment and economical gains

Material (cost, volume)

Wants to decrease

Wants to Increase

CustomerService

provider

Traditional modelConflicting Incentives

Wants to decrease

Service provider

New approachAligned Incentives

Life cycle costs

(material, labor, waste management)

Wants to decrease

Customer

Figure 1customer supplier relationship model adopted from Kurdve(2010) model

In Sustainable supply chains, firms‟ tendency is to have long term relationship with

suppliers to yield their services for multiple functions or evolve close service with

consumers (Tseng and Chiu, 2010). In contrast Lee et al.(2009) argue that firms

should avoid close relation with their suppliers in uncertain environments in order to

be able to switch to other partners when necessary. Gunasekaran et al., (2008)

developed a model to characterize the responsive supply chain concept as an

important element to succeed with sustainable improvement along the supply chain.

Model consists following elements:

-Strategic planning: Corporate and Business Strategies, Global Outsourcing,

Strategic alliances, technology, and Continuous Improvement

-Knowledge and information technology management: Partnership based on Core

competencies, Distributed network of partners, Integration by IT, Learning

organization, Strategic alliances

-Virtual enterprise: Automation and IT including E-commerce , Strategy

formulation and Tactical management, Training and education, Learning

organization, Information technology, Flexible workforce considering continuous

changing customer demand.

Sometimes customer should be responsible to develop its suppliers. “Supplier

development refers to any activity undertaken by a buying firm to improve supplier

performance, supplier capabilities, or both, so as to meet the buying firm‟s short and

long-term supply needs”. (lee et al.,2009, p195)

4. Integrating management systems requirements upstream in

the supply chain

Automotive firms with multiple suppliers and customers and stakeholders often have

separate groups of experts focusing on three bottom lines of sustainability, but it is

crucial that these groups work coherently considering mutual understanding of the

practicalities. Based on Jørgensen et al., (2006) integration of quality, environmental

and occupasional health and safety management systems should be considered on

strategic, management and subsystems levels. The integration level is highly

dependent on the current management system complexity and integration

motivations. In automotive industry there is often an extraordinary attention on

quality issues. However regarding product and process quality, environment and

safety features may be seen as required features, consequently it is possible to

consider quality management as a basic need in all management systems.

While ISO 9001 stipulates to, e.g. evaluate suppliers and manage core processes like

product development and communication, ISO 14001 only makes this mandatory if

the company´s analysis shows that these processes are environmentally significant.

Thus, it is almost impossible to implement a quality management system according to

ISO 9001 and not integrate it in the company´s core processes.

4.1 Lean, green - efficient and sustainable production processes

Lean supply arrangements demand high levels of information sharing, rapid

performance improvements with suppliers and minimal transaction costs (Dyer, 1997)

(Lamming & Hampson, 1996). This type of relationship may provide the incentive

firms need to bridge the lean and environmental supply chain practices of their

suppliers. Improvements in manufacturing systems can lead to direct and indirect

benefits for environmental management, usually in the form of waste reduction

(Simpson & Power, 2005).

Lean and green practices are becoming essentials practices / activities in the supply

chain to sustain the market by responding to demand, meeting the regulations etc.

Lean which tries to give satisfy the customer and the green which makes it

environmental responsible when combined together makes more sustainable chain of

supplies.

Bergmiller and McCright (2009), in research on Parallel Models for Lean and Green

Operations, compare Lean manufacturing systems models with Green systems models

to determine the degree of similarity that exists between the two sets of models and

conclude, by suggesting a model that integrates the two into one comprehensive

program focused on reduction of all wastes (those targeted by Lean systems and those

targeted by Green systems), that can be an effective and efficient path to long-term

organizational sustainability as shown in Figure 2.

Lean/Green

Management systems

Leadership

Empowerments

Environmental

Management system

Years

ISO14001

Certified

Lean and Green Waste reduction techniques

Vision and strategy-Innovation

Partnerships-Alliances

Support functions

Process and product design

Disassembly-Substitution

Reduce-Recycling-Remanufacturing

Consume Internally-Prolong use

Returnable packaging

Spreading risks

Creating markets

Waste segregation

Lean / Green Business

results

Quality-Cost deliveryCust. Satisfaction

ProfitabilityLead time

Market positionReputation

Product designProcess waste

Equipment benefitsInt’l Sales

Figure 2 Comprehensive Lean and Green Model (Bergmiller and McCright, 2009)

According to Bergmiller and McCright (2009), many leading companies have

implemented Lean Manufacturing Programs which yield increased efficiency,

reduced costs, improved customer response time, and more. Others have adopted

“Green” Programs resulting in reduced energy consumption, waste generation, and

hazardous materials usage. Models for both Lean and Green systems all include

management systems, waste identification, and implementation of waste reducing

techniques (WRT) to achieve desired business results. Studying known Lean

companies, we confirmed that strength of management system correlates with WRT

implementation which correlates with business results for both Lean and Green

Programs. Our results indicate that Lean and Green Programs lead to improved

business results.

Wal-Mart has recognized that aligning green and lean practices across the supply

chain drives the financial performance of the firm and earns respect from customers

(Friedman, 2008). As a bottom line, integrated lean and green practices make a better

chain of supplies and flows with good and balanced Environmental Performance

(Environment Friendly), Financial Performance (Financial Stability) and Social

Performance(Social responsibility).

5. Case studies

Toyota, Volkswagen and Volvos official statements as published in requirements,

policies and yearly reports have been analyzed.

Table 1 represents the three companies‟ specification considering production

capacity, sale, financial result and employee number. All cases are famous in

automotive industry by producing cars and heavy vehicles like buss and construction

equipment.

Comp

any

1. Production

(Units)

2.Vehicle sale

(Units)

3. Employee

(Nos)

Facility Financial highlight Reputation

TO

YO

TA

a) 7,308,000

b) 7,169,000

c) 69,125

(Consolidated:

317,716)

50 overseas

manufacturing

companies in

26 countries

and regions

Net Revenues:

18,584 Billion Yen

Operating Income:

356 Billion Yen

The largest

automakers

in the

world

(2011)

Vo

lks-

wa

gen

Gro

up

a) 8,494,280

b) 8,361,294

c) 501,956

44 production

sites in 19

countries

Sales Revenue:

159,337 Billion €

Operating Income:

11,271 Billion €

The largest

automaker

in Europe

(2011)

VO

LV

O G

rou

p a) 238,000

trucks,

84,000

Construction

machines

b) NA

c) 98,162

65 production

facilities in 20

countries.

Net sales:

310,367 Million SEK

Operating Income:

26,899 Million SEK

One of the

largest

heavy

automaker

in the

world

Table 1 case studies information in year 2011

5.1 VOLKSWAGEN

Volkswagen developed a model for sustainable development in 2002. This is a long

term cooperation policy based on three core values:

lasting balance of economic, ecological and social systems and the aim for a

long-term balance of divergent interests

responsibility for own actions at the regional, national and global level

Transparent communication and fair cooperation

VW established a CSR office, responsible for sustainability management. The CSR

office work is based on a structure defined by the VW-group, top management shown

in figure 3.

Group ManagementGroup Management

Group environmental committee

management: Research

Group environmental committee

management: Research

Sustainability

workshop

Sustainability

workshop

Sustainability committee

Management: External

Relations

Sustainability committee

Management: External

Relations

Research, General secretary,

investor relations,

communication, human

resources, environment, works

council

Research, General secretary,

investor relations,

communication, human

resources, environment, works

council

Sustained

financial

markets work

group

Sustained

financial

markets work

group

Brand group

Volkswagen

Brand group

environment

committee

Brand group

Volkswagen

Brand group

environment

committee

Brand groupAudi

Ecology committee

Brand groupAudi

Ecology committee

Volkswagen

commercial

vehicles

Volkswagen

commercial

vehicles

Regions

North

America,

South

America,

Africa, Asia

pacefic

Regions

North

America,

South

America,

Africa, Asia

pacefic

Figure 3 Sustainability organizational structure at VW

Source: Sustainability in Supplier Relations at Volkswagen Group Research,

Environment, October 2006

The main activities are within the sustainable supply chain concept, which is

presented as follows:

Close relationship with suppliers regarding supplier relations, VW has established the

"Sustainability in Supplier Relations" concept. The concept consists of six main

modules, presented below.

Supplier Requirements for

Sustainability

Environmental protection (consist of five

elements),following employees‟ rights, providing

ISO14001certificate or the European Eco

Management and Audit System (EMAS)

Early Detection to minimize

Risks

A second step is the installation of an internal and

external early detection system for risks. This allows

the identification and avoidance of future

environment-related

Contact Point for

Sustainability

With the aid of an explanation in the form of a

questionnaire, suppliers can carry out a self-check to

determine their current status with regard to fulfilling

sustainability requirements.

Monitoring and supplier

development

Permanent checking of supplier alliance with

principles and helping supplier to overcome

sustainability difficulties in form of direct contact or

training

Communication via B2B-

Supplier Platform

In order to have efficient relation with suppliers VW

established B2B platform.

Supplier Programme

“Priority A”

Extra training for suppliers to raise the level of

environmental and sustainability kowledge through

holding workshops and seminars

Table 2 supplier relationship modules at VW

Source: Sustainability in Supplier Relations at Volkswagen Group Research,

Environment, October 2006

Figure 4 represents the conceptual framework of integrating sustainability into supply

management

Early Detection

International Issue-Screening

Reporting Liability of Business units

Analysis of Problematic cases

Normative Requirements

Setting Purchasing requirements for sustainability in Business partners relations

Monitoring + supplier development

Case by case revisions

Duty for suppliers qualifications

Information/Technical Support

Supplier Process

Self disclosure via supplier website

Plausibility check Environmental/Social evaluation

Figure 4 conceptual framework of integrating sustainability into supply management

Source: Sustainability in Supplier Relations at Volkswagen Group Research,

Environment, October 2006

Volkswagen practice waste elimination and continuous improvement under the title

of Volkswagen way which aim is to have comprehensive optimization of all company

process. The main focus is on process optimization. So in advance to quality, stability

is a matter of concern.

5.2 TOYOTA

Sustainability issues have forced Toyota to establish the CSR (Corporate Social

Responsibility) Committee as the body responsible for sustainable development.

Toyotas overview of sustainability is based on sustainability bottom lines and

represented in form of a model which contains environment, safety, resource/ energy

sources, comfort and convenience sections.

The main elements in Toyotas concerning supplier relationship are defined in their

Supplier CSR Guidelines. Based on these Toyota explains their basic management

philosophy to achieve sustainability in following way:

Monozukuri based on Genchi-Genbutsu: (focusing all corporate activity on

the actual needs in the marketplace and on conditions in the workplace.

Toyota practice Genchi Genbutsu, go to the source to find the facts to make

correct decisions, build consensus, and achieve goals at our best speed)

Relentless Kaizen Efforts explain Kaizen (~continuous improvement)

Two-way Communication

Creation of Work environment based on Respect for our Employees

Toyota expects its suppliers providing”Products and Services” to undertake five main

expectations as safety, quality, delivery and production, cost, technological

capabilities.

Further Toyota's Expectations of Suppliers in the Process of Developing "Products

and Services”: Legal Compliance, Human Right/Labor, and Local/Global Community

Waste elimination (lean philosophy) as main issue in Toyota production system has

influence on sustainability activities. Toyota lunched the guideline to manage waste

and conducted training sessions for suppliers. Facilitating energy saving activities for

interested suppliers to help them identify ways to reduce energy is what Toyota does

for waste elimination. Toyota‟s parent company in Japan has challenged plants

worldwide to send zero waste to landfill. Toyota set a target to achieve near-zero

waste to landfill. Zero landfill metric is driven by the Toyota Production System,

where the elimination of waste, in all aspects of business is a main objective.

Continuous Improvement as one of the pillars of Lean philosophy is considered by

Toyota group to develop environmental action plan. In North America, Toyota

Implements different kinds of Kaizens to reduce energy use at manufacturing plants

and logistics sites. There are regular meetings to share Kaizens and ideas and review

current waste regulations.

Toyota established green purchasing guidelines in order to clarify its approach toward

sustainability, and expects Toyota business partners to follow it.

On the other hand Toyota established Toyota's Green Supplier Guidelines “emphasize

that Toyota expects its suppliers to be in compliance with applicable laws, regulations

and social norms. Suppliers are also asked to go beyond legal and social requirements

and to undertake activities that support Toyota's environmental goals.” (Toyota,

Environmental Report, 2008)

5.3 Volvo Group

Volvo are, in its value chain practices, trying to be more responsible of what they

produce, how they produce it and how they act, than competitors in the market. Volvo

aims at obtaining sustainable value chains and present a belief that this approach is

essential for building lasting relations with customers, employees, suppliers and other

stakeholders.

Focusing on the Sourcing process, Volvo practices responsible sourcing by deploying

the same requirements on suppliers when it comes to environmental standards,

business ethics and social performance as they place on own operations.

The Volvo Group‟s vision is to become the world leader in sustainable transport

solutions.

The Volvo Group believes there is no contradiction in running a financially viable

business while contributing to sustainable development. A strategic CSR (Corporate

Social Responsibility) approach is increasingly important for the Volvo Group‟s

competitiveness by e.g. improving brand image, reducing cost, creating new business

opportunities and building stakeholder relationships.

A detailed framework of sustainability is provided below in table 3.

Managing risks and promoting responsible behavior in long-term relationships, in

order to continuously evolve and sustain.

- Integrating expectations in formal agreements with suppliers (For instance,

quality, environmental, work ethic expectations)

- Development in close cooperation by exchanging knowledge, Joint programs,

aiding suppliers during hardships.

- Strategic sourcing program which integrates key suppliers in the product

development process.

- Local sourcing and risk assessments - to ensure efficient flow into the

production.

- Avoiding usage of black list materials and limiting grey list materials.

Set

sustainability

objectives

To Reduce energy consumption and departure from energy from

fossil fuels in production processes

To develop alternative drivelines and vehicles operating on

renewable fuels

To decrease carbon dioxide emissions from internal transports.

To reduce the total amount of carbon dioxide emitted by trucks,

construction equipment and buses manufactured in the Group

through 2014 by more than 30 million tons, compared with

vehicles manufactured in 2008.

Cut the emissions by half from a typical Swedish long-haul

transport operation by 2020 compared with 2005.

Employee

welfare &

Safety

Global policy for health, workplace safety and wellbeing (medical

examinations, rehabilitation support, ergonomics, different health

promotion programs)

Define

important

Challenges

& addressing

them

Identify the potential challenges in order to keep the pace.

Population growth, urbanization and megacities

Climate change, oil resources and alternative fuels

Shortage of natural resources and raw

Safety and security

Skilled employees

CSR and

Sustainable

Development

Strong and visible leadership in this area

Accountability and responsibility within our sphere of influence

Performance is measured and followed up

Resource efficiency

Transparency; reporting shall be conducted transparently based on

the international standard Global Reporting Initiative (GRI)

To engage stakeholders and take their expectations into account

Work proactively and focus on potential risks

Partnerships and cooperation.

Table3 Volvo Group CSR and Sustainability report 2011

Evaluating Performance

Suppliers performance are evaluated against requirements in order to verify that the

assessment process yields the expected results which are used to enhance guidelines

on assessment, development of the process and training material.

LCA – Life cycle analysis:

Life Cycle Analysis (LCA) to map a product‟s environmental impact in order

to make informed decisions in the development process. LCA broadens the

perspective and provides insights which show approximately 90% of the

environmental impact results from the use of the products.

Figure 5 Creating Value Chains for Sustainability

Source: Volvo Group CSR and Sustainability Report, 2011

Environmental Product Declaration (EDP)

Volvo for many of its products gives EPD, based on the results from the LCA. This

helps the customer to understand the environmental impact of the product which

helps them to make better choices when choosing a vehicle.

Production It provides information about energy consumption, emissions and waste

during the production of products

Use This presents fuel consumption, emissions and spare parts utilization

during the use phase of our products

End of

Life It deals with the scrapping and recycling of our products

Table 4 Three components of Environmental Product Declaration

Source: Volvo Group CSR and Sustainability Report, 2011

6. Analysis and Discussion

Sustainable development applied on production should be „the creation of goods and

services using processes and systems that are non-polluting; conserving of energy and

natural resources; economically viable; safe and healthful for employees,

communities and consumers; and society and creatively rewarding for all working

people‟ according to Massachusets University.

The reported results and indicators used in the research companies reflect the general

trend toward sustainable development. TOYOTA and VOLVO have used lean type

waste elimination integrated with green activities to meet sustainability. VW focus on

waste elimination in context of VW way. Also continuous improvement is seen as

effective way in TOYOTA, VW and VOLVO to meet sustainability targets. These

policies are integrated with sustainability policies through guidelines and clear

organizational structure and process.

In more details, environmental indicators reveal that TOYOTA and VOLVO reports

constant in absolute measurements and improvement in absolute numbers.

Volkswagen has had growth in production volume and environmental indicators only

shows positive improvement when calculated per vehicle. Economical indicators for

VW represent positive growth and shows more profit in 2011 compare with last year.

VOLVO also shows growth in net sale and operating income. TOYOTA, highly

affected by Japan earth quake does not show this trend instead net revenues and

operating income decreased in 2012 compared with 2011. Considering social

activities all companies have various projects toward society, but no comparable

measurement was revealed in this study.

Regarding integration of the sustainability along the supply chain the companies

approach may be further discussed. In order to meet sustainability throughout the

supply chain, all abovementioned elements of sustainable production should be fit

into the supply chain from raw material to end customer. The three companies state a

„long term relationship based on mutual benefits‟ attitude towards suppliers. This is

highlighted in the companies‟ sustainability reports. Based on table 5 all cases have

tried to form clear policies to their suppliers regarding sustainability and mentioned

specific requirements. This is reflected in their guidelines and modules. Suppliers in

all part of chains are asked to follow International standards like ISO 14001 and

special requirements regarding chemical management and waste management are

highlighted.

VW Toyota Volvo

Supplier-

company

relationship

-Sustainability based

relationship

-“Sustainability in

Supplier Relations"

concept

- CSR based

supplier relations

-Clear supplier

guidelines

- Sustainability based

long term relations

- Aids suppliers during

hardships

- Involving key

suppliers in product

development

Supplier

training

Sustainability

training

Supplier waste

management

training

Knowledge Exchange

and joint development

programs

Supplier

monitoring

Digital mandatory

monitoring

Periodical audits

based on two main

elements, quality

and delivery

Monitoring based on

code of conduct

Virtual

connection Supplier Portal Supplier Portal Supplier Portal

Supplier

Environmental

requirements

ISO 14001 or EMAS

certificate

- Develop an early

warning system for

risk minimizing

ISO 14001 or a

similar

certification

ISO 14001 or EMAS

certificate

Requirements

on supplier

designs

-

- Life cycle

assessment

consideration

- Life cycle assessment

- Insights to reduce

environmental impacts.

Lean and

efficient

sustainable

production

- Waste elimination

-Continuous

improvement (KVP)

- Lean Waste

reduction

-kaizen in supply

process

- Lean waste reduction

processes

Green and

efficient

sustainable

production

processes

-Water

recycling/reduce soil

erosion in supply

and upstream

process

-Resource efficiency

- Green

purchasing

guidelines

- Suppliers

promotion to use

eco friendly

materials by

adopting

Ecological

material

-Reduction in use

of substance of

concerns

- Self sustainable in

water resource (through

water recycling and rain

water harvesting)

- Reduce energy

consumption and stop

using energy from fossil

fuels.

Special

requirements

on Suppliers

of chemicals

energy or

waste

management

-Specific

environmental

standards regarding

chemical suppliers

-Waste and

recycling

management

-Special

requirements

regarding

substances of

concerns

-Considering

chemical ban list

- Special Chemical

requirements

- Green energy at

several countries,

- Avoids usage of

materials in black list

and limits materials in

grey list.

Table 5. Companies approach toward sustainability in supply chain and upstream

management

VOLVO and TOYOTA clearly requested their suppliers to consider chemical

management and waste reduction from their suppliers and VW has released a series of

internal standards regarding substances of concerns and mentioned these standards

include all VW group and business partners. TOYOTA and VOVLO that have

specified requirements in design phase from developing suppliers through training is

emphasized by TOYOTA and VW. VOVLO focus on Knowledge exchange to meet

supplier development. All cases consider Internet as an effective tool to enhance

relationship with suppliers through launching specific. It is not clear how much

support for knowledge and information sharing the companies give in reality. The

situation can depend on strategic concerns of risk of leaking inter organizational

information or lack of effort to define a clear supplier information sharing strategy.

7. Conclusions

Two main challenges are addressed in this paper regarding supplier company

relationship and integration in current managerial policies like Lean and green with

sustainability requirements. Case investigation shows that:

The three companies stated the importance of the sustainability issues in the

supply chain management

They have incorporated sustainability into the brand image of their

companies and use sustainability as added value for the customer

The companies focus on long term relationships with suppliers, practicing

support like training and IT support

Requirements and guidelines for cooperation with business partners address

sustainability

Supplier development is a matter that companies have almost different

approaches. VW has a specific program for training. It seems VOLVO is the only

case cooperates with Supplier in product development. In practice TOYOTA has

so many examples of supplier training and information and experience

transferring. VOLVO also mentioned about Knowledge exchange with suppliers.

Regarding supplier requirements, it seems depends on case specification,

companies focus on special issue. For instance VOLVO has clear demand on

chemical management; TOYOTA focuses on quality as a highest priority. VW

ask supplier for early risk detection systems to avoid further difficulties.

Practically all companies are using the benefits of lean, green activities to meet

sustainability but tin theory none of the companies publish guidelines or strategies to

integrate their lean and green activities with sustainability requirements for suppliers.

Authors believe that investigating the effect of supplier involvement in initial phases

on sustainability is an interesting area for further research. Additionally integrating

lean green activities with sustainability requirements in form of theoretical frame

would be an interesting issue for future research.

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