Essay Example on The Current Supply Chain for Palm Oil

According to Lyons-White & Knight (2018), palm oil has become a lucrative industry among many nations' economies, especially in Malaysia. Malaysia accounts for about 51% of the production of global palm oil and 62% of global exports. Palm oil is one of the most used ingredients throughout the supply chains of industries engaging in food, pharmaceutical products, beauty, personal care, and cosmetics. Obtained from some specific types of rainforest trees like African palm oil, vegetable oil is globally consumed and utilized in different product ranges. It is impossible to confirm that a product contains palm oil from specific plantations unless there is a certification of palm oil at every step within the supply chain. This certification is referred to as an Identity-Preserved. Therefore, any palm oil receiving certifications under a different system other than Identity Preserved is not possible to trace since different palm oils from varying growers are mixed along the path of processing. The palm oil supply chain follows the following pathway, GreenPalm, mass balance, segregated, identity-preserved, and no deforestation.

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GreenPalm. It was initially established as an option of the supply chain to develop sustainable palm oil. It has been endorsed by the RSPO and WWF; consequently, it has been set up by a palm oil corporation known as AAK. It was formulated to enable manufacturers to transition the products to 100% certified sustainable palm oil, abbreviated as CSPO. This was until buyers were in a position to access a steady supply of CSPO. GreenPalm is there to be used by companies temporarily (Thangavelu & Yee, 2017). Unfortunately, since the system enables different brands to make sustainable claims without having to purchase certified palm oil, many have taken advantage of this to use them for their long-term supply hence abusing it. Therefore, GreenPalm is not CSPO.

Mass balance

This is an oil mix applying both uncertified and certified palm oil. It cannot be traced to identify the source. Brands applying mass balance can ascertain that the palm oil incorporated within their products is in favor of certified palm oil production.

Segregated

According to Vlah Jeric & Soric (2010), the segregated supply chain ascertains that Certified products of RSPO that have been delivered to the consumer are derived from the RSPO certified sources. It allows for the combination of RSPO-certified palm oil from different certified sources. This chain is palm oil that is fully certified but still cannot be traced to a plantation.

Identity preserved

This model assures that end-users receive uniquely identifiable palm products. It is physically isolated from the rest of the sources of palm throughout the supply chain. However, it is certified fully and can be traced to the source.

No deforestation policies

This means that the brand is above certification because of extra standards such as no exploitation. Companies without the policy of no deforestation work with a third party in order to track their supply chain with their suppliers. No deforestation policy does not mean that there is no deforestation at all in the supply chain; however, it means that a brand has built on the weaker standards of RSPO to eradicate illegal deforestation within the supply chain (Norhidayu et al., 2017).

Issues and Areas of potential improvement

Despite the benefits associated with palm oil, the world has taken a different dimension of chopping down rainforests to create room for palm oil plantations. These effects are profoundly felt on the ecosystems because they suffer the consequences. Perhaps, the plantations of palm oil are presently the major causes of deforestation both in Malaysia and Indonesia, resulting in biodiversity loss and increased amount of carbon dioxide emissions. The increasingly vulnerable sectors are plants and animals. Also, palm oil itself has benefits such as prolonging the product's shelf life. In addition, it has a higher melting point hence making products such as margarine become smoother and, therefore, easy to spread.

With regard to the highlighted issue, companies should consider improving the situation, ramp up sustainability initiatives, and take dire responsibility for the product's origin. Companies can implement satellite monitoring services to aid them in keeping track of disturbances of forest cover and shifts in relation to the harvesting of palm oil. Companies should ensure all their products are free from deforestation. In order to counter deforestation, there are alternatives to palm oil, such as Algae, which avails around 700,000 oil pounds per acre, while palm produces only 4,465 (Centobelli, Cerchione & Esposito, 2017). This can be an expensive alternative; however, it is much more sustainable and would enable efficient operations of the supply chain. Therefore, companies should consider implementing deforestation-free practices to solve the problem.

Logistics

According to Jorsfeldt, Hvolby & Nguyen (2016), outsourced logistics refers to the application of third parties to perform those activities previously handled by internal employees. Environmental awareness is equally significant to society, industries, and government; therefore, there is a dire need for outsourcing logistics to ensure the development of sustainable practices. The relevance of supply chain management is crucial because of its influence on the product's life cycles. Among the major trends of logistics, outsourcing is critical for increasing supply chain sustainability as providers of third-party logistics (3PLs) focus on improving the utilization of resources and ensuring processes are more efficient (Evangelista, Santoro & Thomas, 2018).

According to McKinnon (2016), the majority of the executives of the supply chain reported that sustainability plays a vital role in the future of the supply chain. The growing demand of consumers and increasing legislation have started to change the sustainable supply chain's perception from nice to have to need to incorporate. There is absolutely no doubt that transportation, warehousing, and production majorly impact the total carbon footprint of a corporation. Due to this, it is very critical for corporations to evaluate their current practices of the supply chain to both identify ways of reducing the impact of the environment and reducing costs through increased efficiency. One of the most appropriate ways corporations can do this is through partnering with the provider of third-party logistics, which is capable of offering expertise on ensuring the supply chain is more suitable. Reducing the environmental impact of a corporate supply chain is critical as it aids in saving them both time and money.

In order to improve the environmental credentials, outsourced logistics perform the following functions:

Measure footprints

This is one of the major ways through which logistic partners can aid corporations in improving their supply chain environmental sustainability. This is facilitated by conducting measures and assessments of the current operations. By comprehending the effect of the current supply chain by using tools like carbon footprint analysis, corporations will be able to manage an efficient supply chain. An experienced outsourced logistics can engage with customers towards developing a credible analysis of carbon impact like the one that observes the protocol of the Greenhouse gas. The impact of the partnership between the world resource institute and world business council is a globally recognized tool that aids in the identification, measuring, and managing of the emissions of greenhouse gases (Jung, 2017). Due to this, corporations are able to conduct proper reports hence meeting the greenhouse gas emissions regulations. Lastly, verification and analysis certification through third parties instills confidence that carriers provide credible numbers. The outsourced logistics experienced with this tool can aid corporations easily through the process and develop an appropriate recommendation on better ways of redesigning, reengineering, and optimizing the current processes hence create a supply chain that is more sustainable.

Manage operations

Another technique used by 3PLs to aid companies towards the creation of a more sustainable supply chain is through aiding in the management of their current supply chain by implementing optimization measures. 3PL enables a corporation to optimize its operations of transport and packaging. In order to remove unnecessary transportation legs, there is a need to incorporate shifting corporation modes, relocate inventory to a different location on the basis of customers' requirements. In managing operations of packaging, 3PLs enable customers to minimize wasteful materials of shipping through the provision of guidance on design and package function (Marchet, Melacini & Perotti, 2014). This entails the identification of the most efficient designs of packaging or applying the packaging of materials gotten from recycled products. Efficient management also entails managing warehouses and centers of distributions in suitable ways. The sustainable warehousing elements include the Energy efficient warehouse and recycling programs.

Mitigate impact

According to Marchet, Melacini & Perotti (2014), the 3PLs are in a position to help customers towards the mitigation of environmental impacts in different ways other than measurement and supply chain management. By accessing different technology ranges as well as solutions of warehousing and transportation, the outsourced logistics can help the customers towards the implementation of sustainable strategies of the supply chain. This entails access to forms of transportation that are not carbon-intensive or working together with the providers of transport in hybrid vehicles. From the standpoint of technology, 3PLs can work alongside customers to utilize paperless solutions for both billing and commercial invoices in order to reduce general paper consumption. One major area where outsourced logistics can be effective in impacting the sustainability of the supply chain is by helping the customers establish operations of efficient reverse logistics. Through the implementation of the recycling process, corporations can reduce their total carbon footprint. The outsourced logistics can avail these services within a centralized warehouse hence making a bigger impact by reducing the distance traveled at the product lifecycle's end. After the implementation of these efficiencies, corporations will still, at some point, be responsible for some carbon impact levels. Corporations that look towards reducing further their impact can work alongside carriers, which provides customers with the ability to offset their shipment's impact by investing in the projects of the environment.

Lean Management

According to Bhutta et al. (2017), lean management refers to an approach to managing a corporation that is in support of the continuous improvement concept. This approach works towards achieving small changes for them to improve both quality and efficiency. It aims at producing customer value by optimizing resources and creating a steady workflow in relation to customer demands. The management eliminates time wastage, effort, and money through the identification of each step within a business process.

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