Exploring operational challenges in the supply driven social innovation sector:

Master thesis Supply Chain Management and Technology & Operations Management

Exploring operational challenges in the

supply driven social innovation sector:

The manager’s perspective.

Ruben Koldeweij (S2463342) r.n.koldeweij@student.rug.nl Supervisor: prof. dr. J. Riezebos Co-assessor: prof. dr. J. de Vries Word count: 13.121

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Table of content

2.1. Operational challenges in the social innovation sector ... 9

2.2. Operational challenges in supply driven organisations ... 12

2.3. Research framework ... 15

3. Methodology ... 19

3.1. Case description ...20

3.1.1. Kringloopwinkel Steenwijk (Thrift Store Steenwijk) ...20

3.1.2. Kringloopwinkel Vollenhove (Thrift Store Vollenhove) ... 21

3.1.3. Textiel Sorteer Centrum Steenwijkerland (Textile Sorting Centre Steenwijkerland) ... 21

3.2. Data collection ... 21

3.3. Data analysis ... 22

4. Results ...24

4.1. Kringloopwinkel Steenwijk (Thrift Store Steenwijk) ...24

4.1.1. Process challenges ...24

4.1.2. Workforce challenges ... 26

4.1.3. Financial challenges ... 27

4.1.4. Contribution to the framework ...28

4.2. Kringloopwinkel Vollenhove (Thrift Store Vollenhove) ...28

4.2.1. Process challenges ...28

4.2.2. Workforce challenges ... 30

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4.2.4. Contribution to the framework ... 31

4.3. Textiel Sorteer Centrum Steenwijkerland (Textile Sorting Centre Steenwijkerland) ... 32

4.3.1. Process challenges ... 32

4.3.2. Workforce challenges ... 33

4.3.3. Financial challenges ... 34

4.3.4. Contribution to the framework ... 35

5. Analysis & Discussion ... 36

5.1. Process challenges ... 36

5.2. Workforce challenges ... 39

5.3. Financial challenges ... 41

6. Conclusions & Implications ... 44

6.1. Managerial implications ... 45

6.2. Limitations... 46

7. References ... 47

8. Appendices ... 54

8.1. Appendix I - Interview question operationalisation ... 54

8.2. Appendix II - Interview protocol ... 61

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Abstract

Purpose – This research aims to investigate the operational challenges that managers

face in supply driven social innovation organisations. The research will look at the theory for the supply driven sector, the theory for the social innovation sector, and in practice at supply driven social innovation organisations.

Design/methodology/approach – The study used the case study methodology to

investigate the operational challenges in a real life setting at three supply driven social innovation organisations. The data from the three cases is compared in order to find generalised operation challenges and coping mechanisms for these organisations.

Findings – Results show that managers in the supply driven social innovation sector

face challenges in their operations and communication, with their workforce, and regarding their financing. Some of these challenges have resulted in inventive coping mechanisms at the organisations, others are yet to be tackled.

Research limitations – The study is limited by the methods used. The situation with

the coronavirus caused that different methods were used than initially proposed, which impacts the validity. Furthermore, the results of the research are hard to generalise due to the exploratory nature of the research.

Practical implications – Findings of this research provide insights for researchers to

further investigate the needs for managers in supply driven social innovation organisations to cope with operational challenges. Furthermore, this research benefits managers of these organisations by discussing operational challenges in their sector, which may help them to interpret their challenges.

Originality/value – Up to now, little is known about operational challenges in the

supply driven social innovation sector. This study is among the first to investigate these operational challenges for managers in this sector and tries to aid the managers by giving insights in the coping mechanisms used for these challenges.

Keywords – Operational challenges, Social Innovation, Social Organisation, Supply

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Preface

This thesis presents my work and contribution to the supply driven social innovation sector and its challenges. I hope that this research will inspire other researchers to take the step into the direction of the social innovation sector. The people I have worked with in this sector welcomed me with open arms and have been cooperative and open beyond my expectations. I believe that with more attention from the research community they will be able to achieve even better philanthropic results with their work.

Of course, I could not have conducted this research on my own. I want to thank my supervisors and the students from my thesis group for all their constructive feedback and sparring sessions during the meetings. They helped me to look critically at my own work and improve upon it. In special I would like to thank my first supervisor who helped me during the times I got stuck by broadening my view on the subject. Furthermore, I want to thank my family and friends for putting up with me during the difficult times and for giving me the support that I needed. At last, but definitely not the least, I want to thank the managers from the textile sorting centre in Steenwijk and the thrift stores in Steenwijk and Vollenhove. Without their hospitability and openness I could have never achieved the results that I can present to you today.

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1. Introduction

The current focus of the research that aids operational managers is mainly beneficial for managers that work for commercial organisations (Dev, Shankar, & Qaiser, 2020; Geismar, Sriskandarajah, & Zhu, 2017; Jajja, Kannan, Brah, & Hassan, 2017; Sotiriadis, 2014). These organisations have only paid labour, regular structures, often a profit motive, and their business performance is measured differently compared to social organisations (Norwich University Online, 2016). Previous research allows managers to consult articles and literature to help them with difficult questions they come across in their work, since the probability of their challenge being covered in existing literature is high. However, for operational managers in organisations that focus on social innovation there is much less material available in research to aid in their functioning (Behl & Dutta, 2019; Johnson & Smilowitz, 2007). Operational management is burdened with attaining the greatest level of efficiency feasible in an organisation (Jacobs & Chase, 2013). Therefore, the operational challenges that are discussed in this research will therefore all relate to achieving this in one way or another. Specifically, this research is investigating what the operational challenges are that managers of social innovation organisations face. This will allow researchers to put more emphasis on the social innovation sector in their research in the future.

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The research will specifically look at supply driven social innovation organisations as many challenges in social innovation organisations are often related to the supply side (Kovács & Spens, 2009). Many of these organisations rely on volunteers and they run into staffing challenges related the supply and deployment of labour (Apinunmahakul, Barham, & Devlin, 2009; Lockstone, 2004). Working with volunteers requires different management techniques than with paid labour (Apinunmahakul et al., 2009). Furthermore, these organisations often rely on donation of goods or money and on subsidies, which heavily impacts their ability to operate (Archambault, 2017). According to Kovács and Spens (2009) these type of challenges are known to exist in humanitarian aid logistics. However, for other supply driven social innovation organisations such research is not available. Therefore, this research is interested in the social organisations that are supply driven, excluding the humanitarian aid organisations.

In order to understand what operational challenges can be expected the research will look into other supply driven chains, such as the supply of fresh milk, in addition to the humanitarian aid logistics chains. It is interesting to see whether the same operational challenges play a role in the social innovation organisations that are supply driven. Possibly, the social innovation organisations could use similar coping mechanisms for their challenges as regular commercial supply driven organisations. Therefore, it is also interesting to see what the current coping mechanisms are in supply driven social innovation organisations.

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more done in the field of humanitarian aid logistics and has only recently shifted towards other organisations in the sector of social innovation operations and supply chain management (Behl & Dutta, 2019). This leads to the following research question:

What are the operational challenges, and how do managers currently cope with these operational challenges, in supply driven social innovation organisations?

This research question is two sided. First of all, the research will look at the operational challenges in the supply driven social innovation organisations. This will give managers and the research community an insight in what sector is struggling with the most. Secondly, the research will elaborate on how managers of these organisations are coping with the operational challenges at hand. This will provide researchers with insights what the current state of the supply driven social innovation industry is regarding their ability to cope with the challenges at hand. Furthermore, it allows them to use this as an starting point for future research in this sector. For the managers in the sector these results allow them to reflect on how well they are coping with their operational challenges themselves.

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2. Theoretical Background

The theoretical background is split into two parts. First, the challenges of the social innovation sector that are well described in literature are covered. Afterwards, the current state of research regarding the challenges of supply driven chains is addressed. In these sections the operational challenges and ways of coping with these challenges are discussed. Coping mechanisms originate from psychology in which they refer to behaviour to protect people from psychological damage by changing conditions to neutralise problems (Pearlin & Schooler, 1978). Adapting that to operational research it would result in methods or ways of working that organisations apply to overcome a problem or challenge. Finally, the theoretical background will lead to a framework in which the operational issues from both sides are combined.

2.1. Operational challenges in the social innovation sector

The social innovation sector consists out of organisations that differ from regular organisations that have a focus on profit rather than focussing on social motives (Larson, 2011; Norwich University Online, 2016). Therefore, it is expected that these social innovation organisation also have different operational challenges than regular organisations, or at least have different coping mechanisms. That is why this part of the theory will shed light on what operational issues are present at organisation in the social innovation sector. However, due to a lack of research in the social innovation sector this section will look into the operational challenges in humanitarian aid logistics, as this specific sector received more research attention in the past. This will serve as an indication and benchmark for the expected challenges in the supply driven social innovation sector.

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organisations since these organisations are often viewed with a high level of economic risk that is related to the existence of the organisations (Defourny & Nyssens, 2010).

The funding of the social innovation organisations is what present that economic risk. Many humanitarian aid organisations cannot exist without external funding (Defourny & Nyssens, 2010). To cope with this, social innovation organisations must consider all different kind of incomes, such as commercial streams, donations, and subsidies (Archambault, 2017; Burkart, Besiou, & Wakolbinger, 2016). Incomes like donations and subsidies are characterised by uncertainty (Aflaki & Pedraza-Martinez, 2016). Therefore, uncertainty is identified as being one of the issues in social innovation organisations.

The uncertainty is not only visible in financing humanitarian aid logistics. Post-disaster situations can also bring high levels of uncertainty for instance in remaining infrastructure (Day, Melnyk, Larson, Davis, & Whybark, 2012). The social innovation sector is therefore facing uncertainty from more expected sides, such as financial stability. However, the sector is also facing uncertainty from less straight forward sources, such as unpredictable supply chains, pikes in demand, changes in supply, and supply that is not always ordered that might not be of any use (Day et al., 2012).

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Furthermore, social innovation organisation must often adhere to certain policy and regulations that are more strict for them than for regular businesses (Buddas, 2014). This can be attributed to the reliance on public funds, which can come with additional requirements to keep recieving these funds (Archambault, 2017). Buddas (2014) concluded that regulations such as tendering have a negative effect on the speed that social innovation organisations can react to their environment.

Another operational challenge that the social innovation sector has to deal with is the fact that many social innovation organisations rely on volunteers as main body of their workforce. Lockstone (2004) concluded in her work that volunteer organisations have an active, more involved group of volunteers and a less active group. Furthermore, Lockstone (2004) said that that the longer a volunteer works for an organisation, the higher the chance is that they assume a certain degree of control and that it is not beneficial for volunteers and employees to perform similar tasks as this is undermining both their legitimacy. This is supported by Derbyshire (2017). Nevertheless, Derbyshire (2017) adds that there is not one policy to manage volunteers to rule them all, but that it must be adjusted to the needs and aspirations of both the organisation and the volunteers.

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All in all, managing volunteers proves to be different than managing regular employees and therefore requires different methods.

Flexibility is also prevalent in research regarding challenges for the social innovation sector. Flexibility is needed in order to overcome supply chain disruptions that these type of organisations, such as humanitarian aid organisation, face (Baharmand, Comes, & Lauras, 2019). Furthermore, flexibility is mentioned in combination with funding. Not only do social innovation organisations need to consider many kinds of incomes (Burkart et al., 2016; Defourny & Nyssens, 2010), but they also need to be flexible in spending as donors regularly have specific requirements (Burkart et al., 2016). Additionally, Burkart, Besiou, and Wakolbinger (2016) add that donors also require some flexibility as social innovation organisations must spend money on reporting of activities to ensure that other funds are spend according to the aforementioned requirements.

2.2. Operational challenges in supply driven organisations

Supply driven organisations need to have their supply push the production flow forwards to the end-market (Xiao, Cai, & Zhang, 2012). According to Xiao, Cai, and Zhang (2012) these supply driven chains are often characterised by certain economic characteristics, product perishability, or administrative complexities. Therefore, these chains are not activated by the demand of the customer but by their supply. Examples of such chains can be found in the milk, agricultural, fishing, postal, energy production, and transportation industry.

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logistical process, the price of energy, and also governmental and regulatory policies (Awudu & Zhang, 2012). Furthermore, in the food processing industry sudden surges in supply can put a large burden on the available capacity of such operation and the decisions made about the capacity (Lehtonen, Holmström, & Slotte, 1999). These three industry specific examples show that uncertainty is present in operational decisions in the supply driven chains, but also extend beyond the context of a single organisation into an entire industry or region.

A coping mechanism that is used in supply driven organisations to overcome some types of uncertainty is the decoupling of supply and demand. Especially in supply chains with perishable products the location of the decoupling point between supply and demand can extend the shelf life of the product and fluctuation in demand can dealt with more accurately (Amorim, Meyr, Almeder, & Almada-Lobo, 2013; van Donk, 2001). For instance, in the milk supply chain where they decouple supply from demand by turning excess milk into milk powder. In this way the milk powder can be used in a later stadium as an ingredient for different products. Additionally, Lehtonen, Holmström and Slotte (1999) say that excess capacity can also be used as a coping mechanism in the battle against uncertainty.

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Additionally, operational challenges in organisations that are characterised by uncertain supply lay in inventory control policy decisions (Riezebos & Zhu, 2020). Decisions have to be made regarding ordering ahead or postpone certain orders to maintain a balance between having enough stock for operations and having excess stock for times that orders cannot be fulfilled by suppliers. However, these decisions do not have to be overcomplicated in a random yield environment, especially if an organisation is able to diversify their order over multiple suppliers in order to reduce the chance of large orders not getting delivered (Erdem & Özekici, 2002). Nevertheless, Erdem and Özekici (2002) stress that it is important to have the multiple vendors in this scenario. This not always a possibility as agricultural farms, for instance, are dependent of the supply of their own field and crops, which are often limited to a single field (Fan & Chan-Kang, 2005). Therefore, there still is relevance to be seen in inventory control policies and the associated decisions, as a challenge and a coping mechanism.

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2.3. Research framework

In the previous two sections the current state of research is addressed regarding the operational challenges in the social innovation sector and in supply driven organisations. In this section the findings and ideas about the operational challenges in these two sector will be combined into a single framework to be able to investigate supply driven organisations in the social innovation sector.

In the process of researching the supply driven social innovation organisations in practice it is expected that operational challenges will be observed. However, to which extend and how they are going to relate to each other is yet unknown. The most important expectations that are most likely to occur relate to volunteers as the supply driven social innovation sector is unlikely to operate without volunteers (Derbyshire, 2017; Russell et al., 2017). Furthermore, it is expected that supply uncertainty is also present in supply driven social innovation organisation as this is one of the key aspects of supply driven organisations in general (Xiao et al., 2012). It will be interesting to see whether supply driven social innovation organisations have coordination throughout the supply chain to cope with uncertainty, since they are characterised by short term relationships (Maghsoudi & Pazirandeh, 2016). However, short term coordination is only observed in humanitarian aid studies (Davis, Samanlioglu, Qu, & Root, 2013) and is yet to be observed in other supply driven social innovation organisations. Another important expectation is the existence of coping mechanisms for under/oversupply since these exist in both regular supply driven organisations and humanitarian aid organisations (Amorim et al., 2013; Day et al., 2012; van Donk, 2001). Therefore, they should exist in other supply driven social innovation organisations as well.

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Table 2.3.1 - Expectations of operational challenges in social innovation organisations

Category Sub-category Expectations in the social innovation organisations

Process challenges

Decoupling supply & demand

- Expecting

under/oversupply coping mechanisms for goods. - Expecting some kind of

safety stock or excess capacity.

Flexibility - Expecting multiple or

changing suppliers. Coordination throughout

the supply chain

- Expecting some

coordination with long lasting partners.

Inventory control policies - Expecting less focus on this in social innovation

organisations.

(External) Relationships - Expecting many short term relationships with buyers, suppliers, and stakeholders. Workforce

challenges

Uncertainty - Expecting

under/oversupply coping mechanisms for staff. Flexibility - Expecting flexibility in job

tasks.

Workforce - Expecting shortage of

highly educated staff. - Expecting operating

difficulties due to

volunteering workforce. Financial

challenges

Uncertainty - Expecting uncertainty due to other types of income than sales.

Flexibility - Expecting multiple types of funding.

Strict rules & regulations - Expecting a lot of

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OPERATIONAL CHALLENGES OF SUPPLY DRIVEN SOCIAL INNOVATION ORGANISATIONS

OPERATIONAL CHALLENGES

Supply driven organisation Social innovation organisation

• Uncertainty o Supply o Capacity • Flexibility

o Mitigating risks

• Decoupling supply & demand • Coordination throughout the

supply chain

• Inventory control policies

• Uncertainty o Economic o Processing • Flexibility o Disruptions o Funding

• Short term relationships

• Strict policies & regulations due to public funds

• Workforce

o Volunteers

o Shortage of highly educated professionals

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3. Methodology

The aim of this paper is to find operational challenges within social innovation organisations that are subject to a supply driven nature. Since there is not such information readily available in existing literature, this study needs to go out and find such information in the field. Therefore, this research is of an exploratory nature and is focussed around answering ‘what’ and ‘why’ questions. Because of this, the most appropriate method for this research is to do an exploratory case study (Yin, 2014). Although, the research has a small sample size and therefore could limit the generalisability of the research, the exploratory multiple case study approach is suitable for this research. The multiple case study approach allows to explore and explain newly found phenomena or to build new theories within operations management (Voss, Tsikriktsis, & Frohlich, 2002). Additionally, a research that aims to build new theories is well facilitated by the use of exploratory case studies (Eisenhardt, 1989; Meredith, 1993). Moreover, the strength of such a case study is that the expected and unexpected can be explored (Hodkinson & Hodkinson, 2001), which is important for this study as the availability of previous research for this specific sector is slim. Therefore, the expectation can be far off from the reality.

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3.1. Case description

The study is consisting out of three case studies that are performed at three supply driven social innovation organisations that fall under the same foundation. The foundation ‘Stichting Kringloopwinkels Steenwijk’ (Thrift Store Steenwijk Foundation) consists out of three organisations that are located in the municipality of Steenwijkerland. All of the organisations have separate management and different characteristics making them truly unique to one each other. Nevertheless, all three organisation share a common goal. It is important to them to have a positive social contribution to their environment. Financial and performance targets are not primary goals as it is believed that they are not relevant as long as workers and volunteers enjoy their work and have the freedom to organise their work as they see fit. However, in the organisations there is an increasing pressure of professionalisation that could be hindered by operational challenges. Therefore, this case study will look at the supply related operations within these organisations to determine the operational challenges.

3.1.1. Kringloopwinkel Steenwijk (Thrift Store Steenwijk)

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3.1.2. Kringloopwinkel Vollenhove (Thrift Store Vollenhove)

The thrift store in Vollenhove is a small scale thrift store with two paid labourers and about 40 volunteers, people placed by social services, or people from reintegration programmes. This thrift store only performs the main functions of a thrift store. So, the thrift store takes in used goods and sells these to give the products an extended lifespan. However, the social function of the thrift store are very similar to those of the thrift store in Steenwijk. The social focus of the thrift store Vollenhove becomes apparent in their collaboration with social services of the municipality, probation services, and other social organisations. They help and provide people to reintegrate in the labour market and develop skills on the job.

3.1.3. Textiel Sorteer Centrum Steenwijkerland (Textile Sorting Centre Steenwijkerland)

The textile sorting centre of the municipality Steenwijkerland is an organisation with three paid labourers and about 30 volunteers, people placed by social services, refugees with temporary residence permit, or people from reintegration programmes. With their view on sustainability they mark the importance of second hand clothing. They recycle clothing for the use in other applications, make it available for second hand purchase, or ultimately scrap the textile that they receive. Of course, they try to minimise the latter. The textile sorting centre works together with municipalities and social services to assist people to develop useful skills. They offer volunteers a degree of responsibility in order to ensure a sense of gratification for the work they do. This also assist them to achieve their social goals and social return on investment, as targets are less important.

3.2. Data collection

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any obstructive restrictions. From these processes and operations notes will be taken. These notes are taken to be able to compare observations in a later stage of the research. Furthermore, the direct observations allow me to prepare the in-depth interviews to get better insights from the interviewees as this allows me to use examples from their own working environment. Secondly, in-depth interviews will be used to get insights from the managers of the social innovation organisation on their view of the operational challenges that they come across in their day to day operations. These interviews will be in a semi-structured manner. In this way, subjects of interest can be explored more intensely with additional questions during the interview. Alternatively, questions can be altered if answers are unclear to the interviewer. Finally, participant observations will also serve as a form of data to get insights about the operations of the social innovation organisation. Additionally, they will also help in validation of statements made in interviews and allow to interact with volunteers of the organisation to further expand the scope of database with information to draw meaningful insights from.

3.3. Data analysis

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by the amount of data available, the application of analytic code is done per general index. Subsequently, the relevant information about the cases is given in the results section of the paper.

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4. Results

In this section the results from the three social innovation organisations are presented separately. Each section is split up in four sub-sections. First of all, the operational challenges to occur from the processing of goods are given. Next up are the challenges that are related to the nature of the workforce. Thereafter, the challenges that occur because of the financial aspects of social enterprises are given. Finally, the contribution to the research framework for each case is given. Furthermore, these social organisations work primarily with people placed by social services and volunteers, which will be referred to as workers. The paid labourers will be referred to as management or manager, as this is their primary role in the operations. The interviews and other communication is available upon request.

4.1. Kringloopwinkel Steenwijk (Thrift Store Steenwijk)

4.1.1. Process challenges

One of the characteristics of the supply to the thrift store is that the amount, the type, and the quality is fluctuating. This varies from different types of furniture such as chairs and couches to cutlery, books, and consumer electronics. The supply is hard to predict as there nothing like seasonality in the supply. In terms of quality, about 90% of the supply can be sold in store directly. The other products need either cleaning, reworks or scrapping all together. There are a few ways that the thrift store in Steenwijk is coping with this irregular supply. The method that is most applied is a pricing mechanism to decrease the price of goods that are high in supply and increase the price of goods that are low in supply. Because second hand goods are given to the thrift store they do not have to account for the cost of purchasing these goods so they can lower the prices without much consequence. Basic supply and demand as stated by the manager. Additionally, the thrift store in Steenwijk has plenty of storage capabilities for periods with high supply or low demand. Their total stockroom is 12oo m2_{, which accounts for a}

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irregular supply the second hand goods can be decomposed so the materials can be sold or recycled. Furthermore, the fluctuating and divers stream of goods also leads to the thrift store not having a digital inventory control system. This has been tried in the past in order to cope with the irregular supply, to see what is in stock, and to see what is sold. However, this has proven to be too time consuming and the throughput of some of the goods was too fast to keep up.

During confirmation further questions were asked about the inventory system. This led to a conversation about missing inventory. The manager directly added that an inventory system would take too much of their time. However, they did notice in the thrift store that about 85% of the missing items were clothing, as they found a lot of price tags of clothing. Therefore, the management of the thrift store introduced security tags and gates of the same kind clothing stores regularly use. Since clothing represent about 30% of the total revenue, the investment in the security upgrades was deemed sensible.

According to the management of Thrift Store Steenwijk the coordination and communication with external parties could improve, especially with the waste recycling companies that pick up their waste. In the past, the thrift store would get a compensation for recycling old paper, for instance. However, nowadays they sometimes have to pay for it to get picked up. As these accounts are settled only once in a while, it would be beneficial for the thrift store if they knew the spot prices before pick-ups happen. The thrift store then can choose to delay a pick-up as they have enough space to postpone and prevent unnecessary losses.

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relatives. So, they are looking for ways to express their social performance with numbers. However, they struggle with quantifying the social impact.

4.1.2. Workforce challenges

The workforce of Thrift Store Steenwijk largely consists out of volunteers and people placed by social services to promote labour market reintegration. This requires different types of management than with regular paid employees. The management says that it requires more time, explanation, and understanding from their side. On their side the knowledge to manage the workers is often self-taught. It is indicated by the management that they think they could benefit from knowledge about social pedagogy and social work. The amount of people having knowledge about these fields in combination with retail is very slim, yet needed in this thrift store.

Another challenge regarding the volunteers of Thrift Store Steenwijk is that they primarily work within one department and therefore are not perceived flexible in changing tasks. For people placed by social services this is different, as long as the change of work contributes to their return to the labour market. Other groups of people who work at the thrift store could come with restrictions as far as tasks they perform or needs that they have. Ex-convicts or people from community service, for instance, are often only placed in the stockroom rather than in the front of the store. Furthermore, (former) addicts require more structure in their work and are therefore placed in the café and kitchen were this can be more enforced. This also helps to prevent relapse. At the same time, people sometimes do come to work with the smell of alcohol. Regular employers would have send these people home. At the thrift store they are given a chance as long as they do not obstruct the work of others and the consumers. Overall, these people require more attention regarding to their management and are causing the workforce of the thrift store to be less flexible.

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to successfully undertake these activities as much as they would like and that they could handle more workers. They expressed that they would like to grow their volunteer base with 99 extra volunteers. With this amount of volunteers they can fulfil every job position all week long and increasing their efforts towards recirculation.

Upon further confirmation the manager states that the growth of staff and operations itself is not the primary goal as they do not strive to increase revenue. The end goal is to reduce waste and promote the recycling while being socially responsible to their environment. Currently, more staff would be beneficial as they could put more effort into attaining these goals. The vision of the manager is that in the future the producers of the goods that end up in the thrift store should become more responsible for the goods and waste they produce instead of the thrift stores taking care of this.

4.1.3. Financial challenges

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Moreover, the thrift store is not able to address the municipality for financial support, unlike the social employment institution in the municipality. The social employment institution is known to receive financial support from the municipality if they cannot make ends meet. Nevertheless, up until this point the thrift store has been able to keep afloat as losses do not occur in their books regularly and some financial reserve is available.

4.1.4. Contribution to the framework

In Thrift Store Steenwijk many of the items in the framework have been discussed. For the process challenges there was enough support for all expectations to either confirm or reject them, except for the flexibility and relationships. Although they did mention this in the interviews the support is minimal. For the workforce challenges there was also enough information. In particular for the expectations regarding flexibility and the workforce. However, for the expectation about uncertainty there was not enough information to imply anything beyond their shortage of volunteers. For the financial challenges there was enough information in the interviews to test one of the expectations. The expectations of uncertainty and flexibility is hardly talked about and therefore cannot be accepted or rejected.

4.2. Kringloopwinkel Vollenhove (Thrift Store Vollenhove)

4.2.1. Process challenges

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the thrift store could upgrade goods, or as the manager says by ‘pimping’ furniture, to make them more attractive for customers. However, at this point in time they do not have enough capacity to structurally upgrade products. As a last resort, the thrift store can refuse goods and products if they know in advance that they cannot sell the product. The refusal of goods happens once every ten times.

The varied stream of goods cause Thrift Store Vollenhove to not have any form of inventory visibility, except from walking around the store and stockroom to notice what is around. The management says it is too time consuming to work with such a system. However, they acknowledge the benefits of such an inventory system. Currently, they do not have a clear view on shoplifting and people exchanging sales tags between products and believe they could therefore benefit from an inventory system. Furthermore, the thrift store in Vollenhove has long lasting relationships with external organisations. For instance with other social organisations that assist people with a low income to furnish a house. Although the relationships are long lasting, the manager of Thrift Store Vollenhove expressed that they are not fully content with the communication with their external partners. This is mainly regarding initiatives that could improve the social activities and income of all involved parties. This could be accounted to the frequent staff changes at the other organisations according to the manager of Thrift Store Vollenhove.

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4.2.2. Workforce challenges

The thrift store in Vollenhove has very little restrictions that relate to the workers that work here. However, for certain people, such as people on community service, cash register operation is not desirable. Although, the manager does want to accentuate that they do believe that everybody is allowed a second chance. Furthermore, the management of the thrift store says that flexibility and changing tasks on the work floor are difficult. As they primarily work with older people, changes require a lot of time and effort to realise, if they are feasible at all. As example a situation is given where the thrift store was shifting to a computerised cash register, which was not received very positive by the workers at first. After a lot of explaining and assistance from the management the workers eventually agreed to working with this new system. However, changes that are imposed upon the management would not be as difficult if they do not involve direct changes for the workers.

The difference in managing the workers as compared to a regular paid workforce is a challenge for the management. The manager says that it requires much more convincing power , time, and patience in order to get instructions across to workers. This eventually boils down to the knowledge that the managers need to possess as well. In their opinion the social knowledge to people management might even be more important than management experience in commercial organisations. They also ascertain that extra-curricular learning material in this field is not readily available to them. Another educational aspect to their workforce is their lack of knowledge to sometimes identify problems or improvement opportunities. However, the management would like to add that everything that they do not know is also not missed during operations. Nevertheless, they acknowledge that progress could be made in this direction.

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or recycle them. It is expressed by the manager that they would like to have about 15 additional volunteers to initiate more activities to improve the recycling of goods and one paid worker to coordinate these activities.

4.2.3. Financial challenges

The thrift store in Vollenhove is receiving compensation when taking in goods. In order to receive the compensation the thrift store has an information obligation towards the Rova and municipality. This requires an extra step in their operations as all goods both received and sold need to weighted. However, the management does comment that they would probably weigh all goods anyway to get an estimation of their performance.

Furthermore, the thrift store does not have any other types of substantial income besides the compensation for taking in goods and the actual sales of goods. Previously, there was more flexibility in the types of income as they also had income from services they provided. For instance, the thrift store would rent out a small cabinets in the store where local creators could showcase their offering and sell it through the thrift store. Besides the occasional theft of products, the thrift store grew and needed the physical space that the cabinets used. Therefore it was decided to discontinue this project. According to the management there is not enough physical space and workers capacity to sustain or develop other types of income at the thrift store. This makes the thrift store vulnerable if their main stream of income would fall away, as they do not have much flexibility in their revenue streams.

4.2.4. Contribution to the framework

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4.3. Textiel Sorteer Centrum Steenwijkerland (Textile Sorting

Centre Steenwijkerland)

4.3.1. Process challenges

At the textile sorting centre textile arrives by truck once a week. This textile is being collected in large containers at local supermarkets and other collection points. The sorting centre has no choice in their supply is only receiving what is given to them via this method. In order to deal with this type of supply the textile sorting centre has two practices in place. In the first place they have large storage capacity for received goods and for finished goods. The total capacity for incoming unsorted goods is 100 cubic metre boxes in which the unsorted goods are stored. This equals to four weeks of unsorted textile supply. If the storage capacity is not sufficient enough, then they can redirect the stream of textile to another textile sorting centre. For this redirection they have an agreement in place with Rova, who are the organisation that takes care of the transportation and initial collection of the textile. However, in the past this has not happened before. If the textile sorting centre is dealing with an oversupply they cannot sell the sorted textile cheap, as they have to pay Rova a fee for collecting and transporting the textile. Therefore, the textile sorting cannot sell the textile for under their cost price.

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Additionally, the operations of Textile Sorting Centre Steenwijkerland are too small to use other ways of recycling, such as bringing the textile back to raw material like cotton. A test has started with an external organisation for materials like down feather, but many other materials are not recyclable in this way. Furthermore, the sorting centre has had difficulties finding reliable partners to sell the sorted textile to. This is due to the requirements that partners need to have in order to be able to buy the sorted textile. These requirements prevent that the textile will end up as waste and assures that the textile is handled according to TÜV certification by the buyer of the sorted textile. Governmental institutions are enforcing this, however the management of the sorting centre does agree with these regulations as one of their main goals is to promote recirculation of textile.

At last, the textile sorting centre also suffers from waste in their processing. Some materials they receive are not textile or are no longer reusable as second hand textile. This can be a single shoe, but goes as far as household waste. This puts a strain on the organisation as they need to go out of their way in order to separate this from their textile stream and they need to make costs in order to recycle the waste properly. In 2019 the total percentage of waste from incoming goods was 30%. According to the manager, this is almost double the amount of 2018 and is explained by a period in 2019 where the sorting centre did not have a reliable purchaser of sorted textile. Therefore, some of the sorted textile was disregarded as waste. For other types of waste that is not textile the sorting centre assumes that this is the result of people not adhering to the guidelines of textile collection in the bins at supermarkets.

4.3.2. Workforce challenges

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operations there is some flexibility available from workers. The sorting centre used to sort the second choice textile in a single stream. Now they separate that between winter and summer clothing. At first they were hesitant if this would work, however this did not result in any operational problems. Workers who could not directly adapt would be moved onto activities that did not directly harm the separation process.

The people who work at the textile sorting centre often are refugees or people placed by social services. Therefore, planning has to be done in conjunction with the social services which limits the flexibility of the sorting centre. It does not result in large issues that harm operations as they cope with this by having a large pool of workers and making workers aware of their responsibilities. However, it would be easier to cope with this if they have more workers available to them. This would also allow the management to aim for more activities regarding additional ways in processing textile to increase the recycling. The manager of the textile sorting centre would like to have an increase of at least 25% of the current capacity of volunteers. It is believed that this would be sufficient to sustain the sorting of textile, simultaneously work on additional activities to increase the amount of recycling, and lower the percentage of waste from textile.

Other difficulties with staff are related to privacy laws and patient-doctor confidentiality. Some workers have a psychiatric history and because of these privacy laws not much background information can be given to the sorting centre. It can be very difficult to manage them as most people working in the sorting centre are vulnerable as well. This ties in with the need for education from the management. Besides running the organisation with its economic aspects you need knowledge about the psychological side in managing people, with and without mental challenges. To date this is not readily available for managers in social innovation organisations.

4.3.3. Financial challenges

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sorting centre is found in transfer prices set for internal partners within the foundation of the thrift stores. All clothing that is sorted and is found to be good enough to resell within the Netherlands gets sold on to the thrift stores. In order to prevent losses, the sorting centre would increase the internal prices in order to turn a break-even result. Instead of profit 100% recycling is the ultimate goal. Therefore, such measures can be taken at foundation level. However, prices for finished goods cannot fall endlessly as the operations of the textile sorting centre should not harm the overall financial performance of the foundation. Additionally, this is the only measure that can be viably taken. Unfortunately, the management could not give an indication of how much the selling price of finished goods can drop before this measure is no longer viable to the organisation as it is dependent on how well the other thrift stores perform, the fee that the sorting centre pays to receive the textile, and the selling price of sorted textile. Other initiatives to diversify revenue streams or increase the revenue of current stream would require the sorting centre to increase the capacity, mainly by acquiring more workers. Also, the Textile Sorting Centre Steenwijkerland is not receiving any subsidies from governmental institutions and does not want to rely on any either, making these fluctuating internal transfer prices a good coping mechanism for now. However, the management is aware of the risks of relying on this single method.

4.3.4. Contribution to the framework

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5. Analysis & Discussion

In the beginning of this paper it became apparent that previous research in the sector of social innovation mainly focused on the disaster relieve organisations. In practice, a lot of the social innovation organisations are established organisations that operate more like regular organisations than disaster relieve organisations do. Therefore, the aim of this paper is to investigate what the operational challenges are for managers in the social innovation sector and how they cope with these challenges. In order to make sure that the research did not drift into the depths of entire social innovation sector it was chosen to focus on supply driven social innovation organisations. With these considerations in mind the research question became: What are the operational challenges, and how do

managers currently cope with these operational challenges, in supply driven social innovation organisations?

5.1. Process challenges

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way, trying to retain the value of the product as much as possible (Amorim et al., 2013). Such decoupling points are found in the supply driven social innovation organisations as well. However, these decoupling points are often storing products in stockrooms. This especially stands out for the sorting centre and less for the thrift stores when looking at the coding. The higher reliance on the stockroom for the sorting centre can be explained by the costs that they have to make in order to acquire the supply of unsorted textile whereas the thrift stores receive their supply for free. Furthermore, initiatives are taken to introduce other ways to cope with oversupply, such as repurposing products or dissemble products and selling the raw materials. Currently, there is enough evidence to imply that capacity at the organisations to undertake these activities is too low to sustain them. Also, comparing the two thrift stores, there is an indication that the larger the thrift store the better they are able to undertake these additional activities. So, it is most likely to be explained by the shortage in the volunteering workforce and the size of the workforce. Subsequently, coding confirms that all organisations would like to expand their workforce. Therefore, these methods of coping with oversupply are noted as an process challenge as well as the shortage in the workforce.

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Therefore, they can develop more lasting relationships as they do not have to move operations around to locations that require disaster relief. Consequently, supply driven social innovation organisations have more time to develop such long term relationships with partners if they work with permanent locations.

Coordination throughout the supply chain is expected at social innovation organisations with long lasting partners (John et al., 2012; Keren, 2009). At the thrift stores and the sorting centre there was enough evidence from coding to confirm this expectation. For instance, all the organisations have contacts with social services who place workers at the organisations to gain working experience and learn new skills to re-enter the labour market. However, the communication with external partners could improve. The majority of the coding regarding communication indicates that there is a believe that it is not used to its fullest extent. Examples show that initiatives often strand at external partners and unnecessary costs are sometimes made due to the lack of communication. This can be explained by the level of professionalisation, which is generally lower in social innovation organisations compared to regular businesses (Larson, 2011; Norwich University Online, 2016). Furthermore, the communication of social performance is also difficult for the social innovation organisations. From coding this extends into two challenges. First of all, the organisations struggle with quantifying this performance. This is needed because of privacy concerns that are raised when expressing their social performance as stories of individuals. Secondly, the communication of social performance is important as governmental institution demand such information. A consequence of not providing the social performance information could be that social innovation organisations lose their governmental support. Therefore, the communication with partners and that of the social performance are noted as process challenges.

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All the evidence from the organisations is indicating that none of the managers currently use any form of inventory control system. However, the two thrift store admittedly have tried using a stock keeping system. Reasoning for why the thrift stores stopped with inventory control systems is barely accounted for in the coding. Nonetheless, there are signals that such a system is too time consuming. Deductively it can be addressed to the diverse stream of goods making stock keeping more difficult compared to the clearing of ordered goods in regular organisations. The previous use of an inventory control system is only found in the thrift stores and not in the sorting centre. A few statements suggest that the sorting centre does not need any inventory control policies as their inventory is well visible to the manager, unlike the thrift stores that struggle with this visibility. Therefore, not all supply driven social innovation organisations should disregard inventory control systems based on this evidence.

5.2. Workforce challenges

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material that would assist them in learning these skills. There is no indication found in coding what would explain the current lack of educational material, but it may be addressed to the lack of research effort into the social innovation sector all together (Behl & Dutta, 2019; Johnson & Smilowitz, 2007). Therefore, the lack of educational material for managers in supply driven social innovation organisations is noted.

Another expectation was that supply driven social innovation organisations have a shortage of highly educated staff, as social innovation organisations in disaster relief management deal with the same challenge (Majewski et al., 2010). Yet, none of the interviewed organisations recognise themselves in challenge regarding highly educated staff besides the aforementioned lack of knowledge in social pedagogy. There is support to be found that highly educated staff is needed, but in the supply driven social innovation organisations a shortage is not experienced. Unfortunately, the reasoning why they do not experience a shortage is not found coding. The only indication is a statement made by a manager who said that they cannot miss out on knowledge if they do not know it is available. However, the managers of all organisations provided support that there is a shortage of volunteers in general. The consequence of this is that the organisations only perform necessary steps in the process to cope with the shortage. There is enough evidence to confirm that this shortage leads to the organisations being less able work towards their goals of increasing recycling. Therefore, undersupply of workers is an operational challenge for the organisations that influences the way they operate.

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being more one-sided than in the thrift stores. Furthermore, coding indicates that workers can have job restrictions or need to do certain tasks for reintegration. This has as effect that there is a loss of flexibility in planning and in the utilisation of the workforce. Consequently, it results in relatively inflexible operations which can be challenging at times. Therefore, it has to be taken into account when developing other solutions or initiatives. However, it is interesting to note that the smaller the organisation the less difficulties they experience from a lack of flexibility. Though, the evidence on this matter is not enough to confirm this observation it is interesting nevertheless. It could mean that smaller social innovation organisations spend less attention to the stable environment or they simply do not have the ability to do so. On the other hand, it could suggest that the larger social innovation organisations see the inflexibility of job tasks as something they need to provide for a stable work environment, but in hindsight it might not be that important.

5.3. Financial challenges

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The operational challenges for them lay more in fluctuating market prices for instance. Although, the support is meagre as there has only been one case where market prices influence the organisation, namely the textile sorting centre. This could be addressed to the nature of the customers of the sorting centre, which are businesses, and to the single product that they offer. The thrift stores have private individuals who are customers and have a larger variety of products. This can even out fluctuations in market pricing for organisations like thrift stores but not for organisations that compare to the textile sorting centre. Therefore, it is still viable to consider fluctuating world prices to be a challenge for supply driven social innovation organisations.

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To close off the discussion section an overview is given in table 5.1. This table gives an overview of all the operational challenges that the observed supply driven social innovation organisations are currently facing.

Table 5.1 - Overview of operational challenges in social innovation organisations

Category Sub-category Challenges in the social innovation organisations Process challenges Decoupling supply & demand

- Organisations have some

under/oversupply coping mechanisms in place.

- Difficulties developing new coping mechanisms.

Flexibility - High flexibility is not needed to cope with changing supply.

Coordination throughout the supply chain

- Difficulties developing initiatives with partners.

- Challenging communication regarding social performance.

Inventory control policies

- No inventory control systems in place and low inventory visibility.

(External) Relationships

- Barely any short term relationship. Workforce

challenges

Uncertainty - Only coping with undersupply by doing just necessary tasks.

Flexibility - Low task flexibility for workers due to restrictions or calming work

environment.

Workforce - No shortage in highly educated staff, however shortage in staff in general. - Volunteers require more time, effort,

and patience.

- Lack of knowledge from managers on psychology and social work.

Financial challenges

Uncertainty - No challenges in terms of funding via private and public funds. More related to world pricing.

Flexibility Strict rules & regulations

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6. Conclusions & Implications

The challenges that the supply driven social innovation organisations are dealing with can be categorised in four overarching challenges. First of all, the organisations are suffering from a low workforce capacity. This increases the difficulty to cope with the undersupply and oversupply. The organisations notice that there is not much room to develop new coping mechanisms as they only perform necessary tasks. However, other possible coping mechanisms are labour intensive. Furthermore, the organisations want to create a calming work environment which decreases task flexibility of the workforce and further increases the need for additional workers.

Secondly, the supply driven social innovation organisation that have been observed are challenged by their communication and stakeholder management. Although, the organisations do not have many short term relationships, they do experience difficulties when developing new (social) initiatives with partners. Additionally, communication with partners is lacking sometimes leading to unnecessary costs for the social innovation organisations. Furthermore, they have difficulties communicating their social performance as quantification is difficult and privacy concerns prevent other means of communicating the social performance.

Thirdly, the managerial knowledge at the social innovation organisation would benefit from more education in field of social work and psychology. This would help the managers overcome the challenges that relate to their workforce as they often deal with a vulnerable group of people concerning their mental health. Furthermore, it could help the managers getting tasks across more easily as they currently require a lot of time, effort, and patience. As of today, such knowledge is not readily available to managers, especially regarding the combination of social work and operation management.

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as this is one of the requirements to keep receiving these compensations. Though, the social innovation organisations are not fully dependent on these compensations it is important for them to uphold the relations with the government and public organisations as these relationships are vital to their business.

Therefore, future research should aid the supply driven social innovation sector by addressing these challenges. Some are arguably easier to address as existing research from other sectors may very well translate to this specific sector, such as stakeholder management. Although, the differences between regular industry and social innovation organisations is large enough to justify research in the applicability of the findings from existing research. Other challenges might require more attention in future research. Research in the workforce capacity for social innovation organisations could possibly lead to more capacity. The same could be achieved by researching ways to increase the productivity of the current capacity instead of expanding it. Another challenge that needs to be addressed in future research is the communication of social performance in a way that retains privacy of the individual. This becomes increasingly important as the professionalisation of the social innovation sector continues. At last, research that addresses the educational needs for the manager in the sector is recommended as well. This would help the managers tremendously to improve their management of the workforce and to further professionalise their operations.

6.1. Managerial implications

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6.2. Limitations

One of the causes of limitations for the study has been the coronavirus (SARS-CoV-2) outbreak. This severely changed the way the research was conducted. Instead of the proposed method of data collection everything had to be done without meeting the interviewees face to face and without making observations on location. The observed organisations decided that the risks were too high considering the vulnerability of their workforce. Therefore, all interviews were conducted through videocalls and the audio was recorded. Furthermore, the interviews had to be conducted without any initial observations. This made the interviews longer as clarification of answers was often necessary and some questions had to be rephrased during the interview. Also, certain questions were found to be irrelevant or too repetitive. This could have been prevented by initial observations of the organisations in person. Another consequence of the changes in data collection is that the validation techniques, direct observation and participant observation, were no longer possible. To ensure validity they have been replaced by follow-up questions to the interviewees to confirm statements made by themselves and the other interviewees. Also, the interviewees were asked to read over their transcript to ensure that the interpretation of the statements made was correct. Though, it can be argued that the new validation methods are less thorough in assuring the validity than the initial methods that were proposed. Overall, the situation has affected the research and therefore it is believed that on some points the research could have had more depth in the analysis when the initial proposed methods of data collection were used.

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