Critical success factors for implementing external
sustainability: a case study exploring the effects
of contingencies
Master Thesis, Msc Supply Chain Management
University of Groningen, Faculty of Economic and Business
Nur Puji Lestari
Student number: S3143635
E-mail: n.lestari@student.rug.nl
Supervisor:
dr. Ir. Stefania Boscari
Co-Assessor:
X. Bruce Tong
AKNOWLEDGEMENTS
2 ABSTRACT
Purpose - The purpose of this thesis is to identify critical success factors (CSFs) for supplier-focal company relationship within sustainable supply chain management (SSCM) implementation – called external sustainability implementation in this thesis - and to investigate how various factors of contingencies (i.e. types of industry, sizes of company, organizational cultures) influence each CSFs.
Design/ Methodology/ Approach - This thesis selected multiple-case study method and analyzes four different types of company that have implemented external sustainability. Based on inductive case study approach, within-case analyses and developed coding metrics in cross-case analyses are used to investigate important CSFs for each company and to understand the way contingencies affect CSFs.
Findings - There are two main findings of this thesis. Firstly, a list of CSFs for external sustainability implementation for each case that vary among companies is developed and extra CSFs are added, which are not in prior researches. Secondly, propositions that explain the effects of contingencies toward CSFs for external sustainability implementation are established. Lastly, the CSFs give a confirmation to the previous literature on classification CSFs toward three dimensions of sustainability and two approaches of external sustainability implementation. Practical Implication - This thesis is beneficial for managers who look for a guideline to successfully implement external sustainability in their companies. They can do an analysis on the contingencies that exist in their business so that they are able to determine what are the important CSFs that can support the success of their activities and undertake more effective and efficient actions align with companies’ strategies.
Originality/Value – Literature on CSFs for external sustainability is at an early stage, even the literature that is related to the effects of contingencies on that topic does not exist. Unlike previous contribution in this field that only identify CSFs, this thesis also investigates the effects of contingencies that make companies have different CSFs along with feasible explanations. In addition, it develops extra factors and the nine most essential factors that could be considered for succeeding external sustainability implementation.
3 TABLE OF CONTENTS
1. INTRODUCTION ... 4
2. THEORETICAL BACKGROUND ... 6
2.1 Sustainable Supply Chain Management (SSCM)... 6
2.1.1 Supplier Assessment/Monitoring for Sustainability ... 7
2.1.2 Supplier Collaboration/ Mentoring for Sustainability ... 7
2.2 Critical Success Factors (CSFs) ... 8
2.3 Critical Success Factors for External Sustainability Implementation ... 8
2.4 Contingencies ... 10 3. RESEARCH METHOD ... 13 3.1 Case Selection ... 13 3.1.1 Theoretical Sampling ... 13 3.1.2 Limitations ... 13 3.2 Data Collection ... 14 3.3 Data Analyses ... 14 3.3.1 Data Reduction ... 14 3.3.2 Within-case Analyses ... 15 3.3.3 Cross-case Analyses ... 15
4. ANALYSES AND RESULTS ... 17
4.1 Data Reduction ... 17
4.2 Within-case Analyses ... 17
4.2.1 List of Critical Success Factors (CSFs) ... 19
4.3 Cross-case Analyses ... 27
5. DISCUSSION ... 33
5.1 Theoretical Implication ... 33
5.2 Managerial Implication ... 36
6. CONCLUSION ... 37
6.1 Limitations and Future Research ... 37
4 1. INTRODUCTION
The importance of sustainability concept has emerged and been growing rapidly for over a decade (Chen & Paulraj, 2004). At the same time, companies are required to not only obtain economic viability but should also apply environmental management system and ascertain equitable treatment for all employees (Krause, Vachon, & Klassen, 2009; Luthra, Garg, & Haleem, 2015). It means that a company should create a balance between three dimensions of sustainability implementation (economic, social, and environmental) that are known as “triple bottom line” or TBL. Extending the sustainability to supplier is today’s challenge, which is significantly crucial because a supplier plays a role in successfully implementing sustainability (Gimenez & Tachizawa, 2012), moving the context to sustainable supply chain management (SSCM). The supplier’s action can truly impact a focal company’s performance such as an increased efficiency (Krause et al., 2009).
However, it is difficult to gain a successful sustainability in all dimensions; companies either fail in achieving one of them or only interest to fulfill one/two dimensions. This happens because there are various factors that play a role in the implementation of strategies and operational performance in sustainability (Grimm, Hofstetter, & Sarkis, 2014). Some of these factors can have a powerful impact on successful realization and can urge competitive advantages for a company. These factors are well-known as critical success factors (CSFs), which have been proposed by researchers and consultants to aid companies in avoiding costly failures in implementing sustainability (Panjehfouladgar & Bahiraie, 2014). Nevertheless, one thing that is usually ignored is that whether CSFs for sustainability implementation are dependent on contingencies or the same for all companies. Contingency theory states that the best solution to lead a company or a process is contingent on certain situation. Since contingency is the characteristic of a specific context, which makes every situation different from another, it can be concluded that CSFs might vary among companies depending on the situation belongs to (Netland, 2016).
5 Furthermore, literature about the effect of contingencies on sustainability is limited (e.g.. Wilhelm, Blome, Wieck, & Xiao, 2016; Maletič, Maletič, & Gomišček, 2018). The extensively prior researches of contingency were in supply chain integration (SCI) context (Sousa & Voss, 2008) and quality management (Sousa & Voss, 2001). Besides, the effects of contingencies toward CSFs for external sustainability implementation have not been investigated, whereas contingencies might make a company has different kind of CSFs from others as Netland’s research (2016) about the effects of contingencies on CSFs for lean implementation. Thereby, this thesis seeks to address these gaps.
To address the gaps, following research questions are investigated by applying three contingency factors (i.e. types of industry, sizes of company, and organizational cultures), which have an effect in prior researches:
(1) What are the CSFs for external sustainability implementation?
(2) How do the CSFs vary among supply chains because of the effects of contingencies? To provide an answer, this thesis employed multiple-case study method by considering different types of industry, sizes and cultures of four companies that have certainly implemented external sustainability. Few coding metrics are developed to know similarities and differentiations among cases and to reveal the pattern of how contingencies effect CSFs.
This thesis contributes to knowledge in a number of ways. Firstly, a list of CSFs for external sustainability implementation for each company is created along with additional CSFs of previous literature. Secondly, it builds new knowledge about the effects of contingencies toward CSFs that make the list of CSFs vary among companies. Finally, it confirms the recent knowledge about classification CSFs toward three dimension of sustainability and two approaches of external sustainability (i.e. assessment/monitoring and collaboration/mentoring). From managerial perspective, this thesis is completely beneficial for managers as a guideline to figure out which CSFs should be concerned in order to support external sustainability implementation, which is in line with companies’ characteristics. By adapting this, managers can establish more effective and efficient actions and tactics.
6 2. THEORETICAL BACKGROUND
2.1 Sustainable Supply Chain Management (SSCM)
There are many definitions of sustainability coming from researchers, but the most common one is from Brundtland and Commission Report (1987), which defined it as “development that meets
the needs of the present without compromising the ability of future generations to meet their needs”. Sustainability is operationalized within three bottom lines (economic, environmental, and
social issue) in order to aid companies in applying the concept (Hollos, Blome, & Foerstl, 2012). The triple bottom line (TBL) was first coined by Elkington (1998) who stated that companies should have a balance between TBL on their manufacture and operation to develop sustainability and to enhance organization’s performance (Goel, 2010).
The social line hints to fruitful and fair business practices to the labor, human capital, and the community (Elkington, 1997), such as education, health care, employment, transportation, access to goods and services and housing, community involvement, employee relations, and fair wages (Goel, 2010). Meanwhile, environmental line refers to the efficient use of energy recourses, reducing greenhouse gas emissions, minimizing the ecological footprint, etc. (Goel, 2010). An analysis from Kearney (2009) revealed that an organization that protects environment and improves the social well-being of the stakeholders while adding value to the shareholders has outperformed their industry peers financially.
One of the most common challenges nowadays is that extending the responsibility boundary not only focuses on focal company but also on relationship with supplier (Gimenez & Tachizawa, 2012) since Krause et al (2009) stated that “a company is no more sustainable than the suppliers
that are selected and retained by the company”. The pressure of stakeholders encourages focal
companies to be aware of the importance of demanding their supplier to do sustainability (Sharma & Henriques, 2005). Supplier, as a part of stakeholders, is one aspect of SSCM besides focal company and other stakeholders (government, customer, NGO) that needs to be taken into account in SSCM implementation. Seuring and Muller (2008) defined SSCM as “the management of
material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all 3 dimensions of sustainable development, i.e. economic, environmental and social, into account which are derived from customer and stakeholder requirements”.
7 research on that dyadic whereas supplier’s poor environmental and social management might result in awful performance of focal company (Faruk, Lamming, Cousins, & Bowen, 2002). Otherwise, it will result in operational efficiency, positive environmental impacts, cost reduction, flexibility in adapting to ever changing demands, technological innovations, energy efficiency and reduction in carbon emissions (Simpson & Power, 2005). In SSCM literature, the extension of sustainability to supplier is classified into two approaches: assessment/monitoring and collaboration/mentoring (Vachon, 2007; Vachon & Klassen, 2006). The term supplier-focal company within SSCM implementation is referred as external sustainability implementation in this thesis.
2.1.1 Supplier Assessment/Monitoring for Sustainability
The urgency of supplier assessment is highlighted in sustainability perspective (Johnsen, Howard, & Miemczyk, 2014). As an example, when a supplier does not comply with a company's sustainability standards, such as using dangerous chemical liquid to grow tea plant, and suddenly there is consumer who is poisoned, then this news will be exposed to the media, putting the blame on supplier. Assessment includes any activity related to evaluating suppliers, such as giving out questionnaires about detail activities related to sustainability that have been done or doing suppliers’ visits to assess suppliers’ environmental performance (Noci, 1997), auditing company’s compliance toward material standard and accreditation, and getting performance report (Johnsen et al., 2014).
2.1.2 Supplier Collaboration/ Mentoring for Sustainability
Supplier assessment results are used to determine the areas of a supplier that needs improvement through development programs in mentoring approach. The mentoring approach aims to develop suppliers’ capability in terms of sustainability (Ciliberti, Pontrandolfo, & Scozzi, 2008). Supplier development is concerned with improving the suppliers’ capabilities, providing them with training, support or other activities, in which the training or improvement can stem from supplier assessment result. According to Meqdadi, Johnsen, and Joh (2012) the mentoring approach consists of:
• Educating and training supplier’s personnel;
• Involving suppliers in product design to consider environmental requirements;
• Providing financial assistance for suppliers to improve the environmental performance of their processes, equipment and materials;
8 Through those activities, focal company can ensure that their suppliers have deep understanding about sustainability and will apply it in their operation and management. The mentoring approach is considered as more useful than monitoring approach to confirm suppliers’ actual sustainability performance (Vachon & Klassen, 2006; Seuring & Müller, 2008) however big expenditure is needed to encourage real improvement in supplier practice and performance (Rao & Holt, 2005). 2.2 Critical Success Factors (CSFs)
Despite there are few definitions of critical success factors in literature, the first idea comes from D. Ronald Daniel (1961) in management literature: “The limited number of areas in which results,
if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organization’s efforts for the period will be less than desired”. For
the common definition, CSFs are defined as those few things that must go well to ensure success (Boynton & Zmud, 1984). When a company desires to achieve a certain goal, CSFs theory can help it to identify the most crucial factors that are needed to be considered, which lead to the successful goal (Bai & Sarkis, 2013) including goal of sustainability implementation (Grimm et al., 2014; Luthra et al., 2015).
2.3 Critical Success Factors for External Sustainability Implementation
To identify comprehensive CSFs for external sustainability implementation, a literature search was conducted. To ensure a transparent and robust process similar to Rajeev, Pati, Padhi, and Govindan (2017), the few steps in Figure 2.1 were done with further explanation in Appendix A. The “Scopus” searching system was adopted to search for potential related articles. To ensure quality of result, the search was limited to top ten high quality journal (Appendix A).
First Stage Second Stage Third Stage Fourth Stage Fifth Stage
655 articles Period from 1999-2018 Ms-excel database created 303 articles 3 articles Abstract analysis 2 articles
Did second search Ms-excel database created
Classification of CSFs from 5 articles Figure 2.1: A literature search steps
9 From three appropriate literature reviews and two empirical studies (fifth stage), a total of 130 CSFs for external sustainability implementation were obtained. The brief description of those literature can be seen in Table 2.1. Then CSFs were classified into two type approaches of external sustainability (assessment/monitoring and collaboration/mentoring) based on the definition from each author. For example Kannan (2018) stated “select CSFs to measure the suppliers’
sustainability performance”, it means that the CSFs belong to monitoring/assessment. Meanwhile,
Grimm et al (2014) defined “many firms struggle to engage in SSCM due to high costs and a lack
of financial resources. SSCM practices such as conducting audits or running supplier development programs”, it means that this CSF belongs to assessment and collaboration.
To reduce double CSFs with different words but have the same meaning, CSFs were classified into 16 distinct categories. For instance, a word ‘availability of fund’ in Ansari et al (2017) is defined as ‘financial resource’ in Kannan (2018) so these words in this thesis were categorized as CSF of availability of fund. In Table 2.2, 16 categories of CSFs can be seen with two approaches from different authors while the detail of sub-category of each CSF is in Appendix B.
Furthermore, Appendix B shows classification of 130 CSFs in three dimensions of sustainability, where this classification are based on list of CSFs in journal of Kannan (2018). The classification of CSFs to be three dimensions of sustainability and two type approaches of external sustainability was conducted to fill gap of limitation from prior researches (see Table 2.1). This classification will truly deliver new insight for top-management to easily select appropriate CSFs.
Authors Description Clarifications about CSFs and Limitations
Anshari and Kant
(2017)
Reviewed the literature of 286 SSCM papers over the span of 15 years (2002-2016)
Used term ‘enablers’ instead of CSFs.
The CSFs were not distinguished which one belongs
to dyadic company-consumers, supplier-focal
company and to other stakeholders so it is difficult to be adapted by others companies.
The CSFs were not classified into three dimensions of sustainability and two approaches of external sustainability.
No contingency effects investigation.
Hassini et al (2012) Reviewed the literature of SSCM
during 2000–2010 and analyzed from different perspectives. Then provided frameworks for SSCM and performance measures
Used term ‘performance indicators/measures’ instead of CSFs which is too detail.
The CSFs were not distinguished which one belongs
to dyadic company-consumers, supplier-focal
company and to other stakeholders so it is difficult to be adapted by others companies.
The CSFs were not classified into three dimensions of sustainability and two approaches of external sustainability.
No contingency effects investigation.
10 Authors Description Clarifications about CSFs and Limitations
Mejias et al (2016) Reviewed the literature of SSCM
during 1990-2010 and analyzed the best way to implement sustainable focusing on Logistics Social Responsibility field
Use term ‘best practices’ instead of CSFs. Sustainable BPs for SCM and purchasing.
The CSFs were not distinguished which one belongs
to dyadic company-consumers, supplier-focal
company and to other stakeholders so it is difficult to be adapted by others companies.
The CSFs were not classified into three dimensions of sustainability and two approaches of external sustainability.
No contingency effects investigation.
Grimm et al (2014) Empirical study of investigating
CSFs for sub-supplier
management to ensure alignment with focal company sustainability
Not include these CSFs: top management support, fund, and personnel commitment.
Only investigated one type of industry (food), the result cannot be generalized.
The CSFs were not classified into three dimensions of sustainability.
No contingency effects investigation.
Kannan (2018) Empirical study of revealing CSFs
for measuring supplier
sustainability
Only focused on supplier assessment/monitoring approach.
Utilized short list of CSFs (five social and one environmental).
Only investigated textile company, the result cannot be generalized.
No contingency effects investigation.
Table 2.1: Description of literature reviews and relevant articles (cont)
2.4 Contingencies
The universal applicability of CSFs is questionable, the factors can be influenced by a company’s environment or not (Netland, 2016). Donaldson (2001) stated that based on contingency theory, CSFs will be most effective if they are adjusted to various contexts of company since different companies most likely demand distinct approaches. Contingency theory itself stems from Chandler’s (1962) who proposed that structure of organization should follow its strategy. Accordingly, it is very essential to reveal how and under which circumstances organization can achieve competitive advantage and performance improvement (Burns & Stalker, 1961; Govindarajan, 1986; Wasserman, 2008; Volberda, van der Weerdt, Verwaal, Stienstra, & Verdu, 2012).
11 Category Ansari & Kant (2017) Kannan (2018) Grimm et al (2014) Hassini et al (2012) Mejías et al (2016) C A A C A C A C A 1. Availability of fund X X X 2. Transparency X X X X X X 3. Strategic planning X X 4. Supplier integration X X X 5. Supplier management X X 6. Organizational structure X X 7. Supplier selection X X X 8. Product specification X X X X
9. Audit and evaluation X X X
10. Supplier development X X X 11. Supplier production reliability X 12. Distance location X X X X 13. Supplier competence X X X X 14. Supplier employment X
15. Supplier social equity X
16. Power X X
*C = collaboration *A = assessment
Table 2.2: CSFs list for external sustainability implementation
Prior studies have extensively investigated the impact of contingency factors on other fields while studies on sustainability are still scarce (e.g. Wilhelm et al., 2016; Wu, Wu, Chen, & Goh, 2014). Therefore, to fill the gap, this thesis analyzes how factors of contingencies affect CSFs for sustainability implementation. Contingency factors that will be applied are: types of industry, sizes of company, and organizational cultures.
1. Types of industry
12 from Netland (2016) showed that type of corporation influences a CSF of education of top-management, for instance, vehicle company valued education more than chemical company. This influence is expected to occur as well in this thesis.
2. The sizes of company
Size of company is one of the most interesting topics of contingency in many studies (Shah & Ward, 2003). Wood (2005) operationalized size as sales revenue and number of employees, but this thesis only uses number of employees to define the size. Several authors (e.g.. Chandler, 1962; Child, 1972) confirmed that activities in large companies tend to be more complicated and they are lack of financial and resource. This means that a small company will encounter more challenge in the implementation of sustainability since this improvement approach contains complex activities and needs a lot of investment (Shah & Ward, 2003). Therefore, it is expected that size will influence CSFs, such as availability of fund and competence of resource as shown by Netland (2016).
3. Organizational cultures
13 3. RESEARCH METHOD
The purpose of this thesis is to identify CSFs for external sustainability implementation and to investigate the effects of contingencies on each CSFs. In this thesis, case study was chosen as a suitable method as Yin (1989) and Eisenhardt and Graebner (2007) suggested to use it when prior research was not enough to obtain answer with deeper understanding. This is supported by the fact that research about the effects of contingencies of CSF for external sustainability implementation has not been investigated yet and research about CSFs on extending sustainability to supplier is still limited. Case study also fits exploratory investigation (Karlsson, 2016) since one aim of this thesis is to explore the effects of contingency factors. The unit of analysis of this thesis is dyadic focal company-supplier. Manufacturing industry was chosen, which was extensively investigated in SSCM concept (Ansari & Kant, 2017).
3.1 Case Selection
3.1.1 Theoretical Sampling
This thesis selected five manufacturing companies located in Netherlands, Indonesia and China. Before investigation, all companies were ensured that they have implemented external sustainability through their official website and annual report. The selected companies have different types of industry, company sizes, and organizational cultures that act as contingencies. Organization sizes are defined by the number of employees. A small company has less than 50 employees, while a medium and large company has 50 – 250 and more than 250 employees respectively (Zorzini, Hendry, Stevenson, & Pozzetti, 2008). The contingencies can be defined by looking at companies’ website, such as sizes and industry types, while interview is essential especially for knowing cultures that have many aspects that should be confirmed by respondents. Table 3.1. provides the final theoretical sampling selection criteria of cases with overview of respondents and external sustainability practices.
3.1.2 Limitations
14 3.2 Data Collection
To increase validity, this thesis applied data triangulation by combining interviews and other sources such as information from website and annual report (Voss, Johnson, & Godsell, 2002). Firstly, semi-structure interviews were used as a main investigation tool. A semi-structured interview has advantages in this thesis; it gives direction during interview, enriches the data through open questions, and does not limit the answer from respondent because new questions can appear based on respondent’s answer (Karlsson, 2016). Open question function here is fully useful to investigate additional CSFs based on respondents think. Before doing interview, thesis instrument or protocol (Appendix C) was created that consists of four sections;
• General information of company, • External sustainability implementation, • CSFs list, and
• Contingency effect
The interviews were conducted in two times. Section one to three were conducted in first interview and the last section in second interview. This was done because transcribing and summarizing answers first to determine subsequent questions in the last section were needed. Interviews schedule, protocol, and the aim of the thesis were sent and informed beforehand to assure respondents were ready and were not hesitating in giving information. The first interview was conducted for 45 minutes each and the second interview for 20 minutes. The interviews were recorded with the permission of respondents. In order to validate what respondent said, second respondent was asked to give confirmation whether all the information declared by first respondent was true or something needed clarifying.
Secondly, a company’s documents such as sustainability report, mission and vision, and supplier performance report have been obtained from the official websites of companies. These documents are useful for knowing the result of external sustainability implementation, supplier assessment execution, and supplier development programs.
Lastly, after achieving a confirmation from second respondent, all obtained data were coded in Appendix D.
3.3 Data Analyses 3.3.1 Data Reduction
15 that unclear information could be clarified in the second or additional interview, thus filling the gap in the previously obtained answers. After getting all raw data, these were grouped, labelled, made into summary and database (Karlsson, 2016).
3.3.2 Within-case Analyses
First step of analyses was analyzing each case separately to know the characteristic and condition of each company as a stand-alone entity and potential unique pattern (Eisenhardt, 1998). It was started with making an array or data display. All answers from transcript of interview, recording and notes were taken into account in the analyses. From respondents’ statement in data display, it was begun by looking for explanation and causality. Then, it could be known which CSFs from the list that a company emphasized on and how each company defined it. Furthermore, it was continued by suggestion on additional important factors excluded in list of CSFs that the companies also highlighted. At the end, it tried to investigate of what CSFs ignored by the companies and what was the reason behind this.
3.3.3 Cross-case Analyses
16 Criterion Types of industry Company sizes Organization al culture
Location Sustainability program/ practice
Respondent and years experience Company I (Yishengchaye) Agrifood Medium (lower than 150 of employees)
Collectivism China No supplier development
program. Only regular audit and evaluation.
1st: Chief Marketing Officer (2 years) 2nd: Production Manager (2 years)
Company II (Biobizz) Agriculture Medium (lower than 150 of employees) Collectivism The Netherlands No supplier development
program. Only regular audit and evaluation.
1st: Purchasing Manager (6 years) 2nd: Director of operations (7 years)
Company III (Honda Prospect Motor) Automobile Large (7500 employees)
Collectivism Indonesia Program: measure own CO2
emission (2008), CO2 emissions reduction (2014), increase supplier awareness of the CO2 of emissions survey sheet (2012), milk run (2012).
1st: Manager of Production Planning and Inventory Control Manager (4 years)
2nd: Stakeholder Engagement Managers (4 years) Company IV (Merck Sharp Dohme Pharma) Pharmacy Large (350 employees)
Collectivism Indonesia Mutual problem solving of
environmental, social and
financial performance (2005).
1st: Product Development System Manager (5 years)
2nd: Supply Chain Manager (7 years)
Company V (Dexa Medical)
Pharmacy Large (500
employees)
Individualism Indonesia Program: use eco-friendly
packaging (2016), design
product delivery system
(2017).
1st: Executive Purchasing Manager (4 years)
2nd: Organizational Change Management
Manager (5 years)
17 4. ANALYSES AND RESULTS
4.1 Data Reduction
A data reduction process was accomplished to filter the large amount of information from interviews. This will describe set of variables – CSFs, contingencies – to precise rules (Table 4.1). The rules were a core of cross cases data comparison. To classify size of company, Zorzini et al (2008) reference was used, while to measure organizational culture Chatman et al (1998)’s definition and dimensions were adopted. Regarding grouping of CSFs, this thesis divided factors depending on who has the control in a company, in this case it is top management. This resulted in three groups of CSFs that were group I, II, and III. Although previous researches (e.g. Grimm et al., 2016; Gimenez & Tachizawa, 2012) only had two groups, which were internal and external. The rational reason is that from interview, three situations were obtained: 1) factors controlled by the internal focal company 2) factors controlled by supplier 3) factors that cannot be controlled by both focal company and supplier so this factor then was separated. It is important to distinguish these three situations in order to know which factors are within-focal-firm-factor and need to be prioritized, and which are beyond border and require supplier collaboration.
4.2 Within-case Analyses
This section presents an assessment of the CSFs for succeeding external sustainability implementation of each company investigated along with general definition from the companies. Tables were used to display detail of CSFs and to identify whether the information comes from interview or supporting documents. It tried to get in-depth exploration of each case as stand-alone entities and reveal patterns if possible.
From the interviews, it was revealed that the companies did not divide factors in dimension of sustainability (economic, social, environmental) because each company recognizes that all factors have an influence in all dimensions or even create domino effect to other dimensions. For instance, fund factor was basically an economic aspect (Ansari & Kant, 2017) but when fund was not available it will surely influence social and environmental sustainability programs.
18 achieve success for both approaches (e.g. Ansari & Kant, 2017). These explanations can be recapped as a framework in Figure 4.1.
Variable Characterization Rating
Contingencies Types of Industry Agriculture: agricultural business (upstream, downstream) Agrifood: produce food from agricultural sector
Automobile: produce car, motorcycle Pharmacy: produce medicine
Sizes of company Small: number of employees <50 Medium: number of employees 50-250 Large: number of employees >250
(This classification based on Zorzini et al, 2008) Organizational
Cultures
Individualism: tend to focus on reward achievement that can be linked to an individual person rather than to a collective group. It does not concern on what is contribution of each person but its culture causes people pay much attention on what differentiates them from others regarding to abilities and characteristics (Chatman et al., 1998).
Collectivism: more focus on shared objectives, interchangeable interests and commonalties that makes members agree on right action, behave according to the norms, and give critic for violation (Chatman et al., 1998) Critical Success
Factors
Group I CSFs controlled by internal focal company: availability of fund, strategic planning, supplier integration, organizational structure, supplier selection, product specification, audit and evaluation, supplier development, power
Group II CSFs controlled by supplier: transparency, supplier management, supplier production reliability, competence of supplier, supplier employment, supplier social equity Group III CSFs cannot be controlled by focal company and supplier:
distance location Table 4.1: Data reduction
Figure 4.1: A framework of extending sustainability to suppliers
19
4.2.1 List of Critical Success Factors (CSFs) Company I (Yishengchaye)
Yishengchaye is an agrifood company, which produces organic-healthy tea whose main suppliers are tea grower. As a medium company, Yishengchaye had been implementing external sustainability in terms of only supplier assessment/monitoring approach. Thereby, all CSFs that will be explained below belong to assessment/monitoring approach since supplier collaboration/mentoring does not exist. The interview was held with a Chief Marketing Officer because this person has much work experience than others so he knows about the sustainability strategy of company well.Through interview and reading company’s website CSFs in Table 4.2 were obtained and summarized in Figure 4.2.
CSFs Explanation
Group 1
Availability of fund Allocating money to do regular audit and supplier evaluation, give reward to own employees for improvement creativity.
Strategic planning Asking tea growers to plant tea in sustainable to get tea in high quality.
Supplier integration Trusting tea growers can comply all requirements, build long-term relationship, and try to help kid’s education in a supplier family. Organizational
structure
Support from top management and employees.
Supplier selection Certification: ECOCERT (organic qualified), USDA, and Euro-leaf. [website_information]
Product specification Fresh leaves, fertilizer is from sheep manure and fallen leaves (no chemical). [website_information]
Audit and evaluation Regular evaluation of delivery time and quality of delivered tea, and regular audit. Contract termination for bad performance. Power Controlling tea grower to do sustainability on planting such as
killing pest by traditional way: rely on birds and chick, no chemical and no GMO (genetically modified organism), and picking fresh leaves not using machine.
Group II
Transparency Encouraging suppliers to share any important information especially that will impact on tea quality.
Supplier competence Suppliers have sufficient competence to fulfill the firm’s requirements that more focus on how to obtain quality tea.
20 In addition to abovementioned factors in Table 4.2, the respondent suggests a new factor, which is development of new technology in supplier to support improvement of tea output quality. This would be a critical factor to continuously meet and satisfy customer demands.
Figure 4.2: Explanation and causality of company I (Yishengchaye)
Company II (Biobizz)
Biobizz is an agriculture company that creates biological fertilizer with the main suppliers are supplying components of fertilizer such as substrate enhancer. Similar to Yishengchaye, Biobizz is a medium company that has implemented external sustainability only on supplier assessment/monitoring approach. Though having a same reason of not generating supplier program, there is a different kind of CSF in group I and II. Manager of Purchasing was selected as the right respondent as his job correlates with suppliers. Through interview and reading company’s website, Table 4.3 below shows the obtained CSFs that all belong to supplier assessment/monitoring approach. They are compiled in Figure 4.3.
CSFs Explanation
Group 1
Availability of fund Allocating money to do regular audit and suppliers evaluation Strategic planning Integrating goal of company that is achieving the organic arise in
all of stage of growing with sustainability purposes.
Supplier integration Collaborating with many suppliers and trust them can meet the requirements. Maintaining and build long-term relationship. Supplier selection Certification: envirorganic, OMRI (Organic Materials Review
Institute), and point vert for packaging supplier. [website_information]
Product specification Raw material should be avoiding harmful material, hormones, antibiotics (unless for medicinal purposes), and synthetic fertilizers or pesticides. [website_information]
Audit and evaluation Regular evaluation by certification and audit for very near suppliers.
21
CSFs Explanation
Group 1
Power Only choose suppliers that meet requirement of quality and do sustainability especially using safe materials in order to not leave environmental effect behind.
Group II
Transparency Suppliers should share any information especially related to production change.
Supplier competence Suppliers have sufficient competence to fulfill the firm’s requirements from first selection step.
Supplier social equity Suppliers concern of local community, looking at the use sustainable materials of supplier is safe.
Table 4.3: CSFs of Company II (Biobizz) (cont)
In addition to factors explained in Table 4.3, the manager proposes additional factor which is arrangement of transfer knowledge of education to employees about the vision of the company related external sustainability implementation in order to have align actions of all employee levels.
Figure 4.3: Explanation and causality of company II (Biobizz)
Company III (Honda Prospect Motor)
Honda Prospect Motor (HPM) is an automobile company that produces car, motorcycle, and power product, which has main suppliers that supply raw materials and spare parts. As a large company, it has implemented external sustainability not only in supplier assessment/monitoring but also in collaboration/mentoring approach. There are some supplier development programs that have been running: i.e. measuring CO2 emission, CO2 reduction control, and an increase awareness of emission check sheet. Accordingly, all described CSFs below point out both monitoring and mentoring. Manager of PPIC was opted as the right choice since this position communicate with suppliers on a day to day basis and is involved in supplier selection. Through interview and reading documents, CSFs in Table 4.4 were acquired and outlined in Figure 4.4.
22
CSFs Explanation
Group 1
Availability of fund Assigning a particular investment for regular audit and evaluation suppliers, and supplier development programs.
Strategic planning External sustainability implementation has been integrated with Honda environmental and safety vision. Routine meeting to discuss about progress and make new challenge after first goal successful. Supplier integration Cooperating with more less 85 supplies. Trusting suppliers will
obey demands to maintain long-term relationship. Involving suppliers in every step of sustainability challenge
Organizational structure
Support form top management, creating a particular department which specialize managing supplier development programs. Supplier selection Follows rules of Honda (Japan) such as certification of ISO 14001,
agree to do joint development such as an increase of scrap usage, etc (confidential).
Product specification Doing green purchasing with certain guideline which adds an E (for Environment) to QCDD (Quality, Cost, Delivery and Development): energy use, substances of concern, packaging waste, and CO2 emissions [environmental_annual_report_2014].. Audit and evaluation Utilizing check-sheet for delivery time and part condition reported
every 6 months. From the performance measurement will be determine the period of audit
Supplier development Development programs: measure own CO2 emission, CO2 emissions reduction, increase supplier awareness of the CO2
emissions survey sheet, milk run
[environmental_annual_report_2014].
Power Pushing every supplier to produce part with low carbon emission and measure their performance after regular coaching. The company will stop contract a supplier who does not align with the vision and cannot follow the challenge.
Group II
Transparency The company will cross-check everything related to sustainability directly during gemba visit(one of the best way to see directly what processes work and what does not without intermediaries).
Supplier management Internal supplier support external sustainability program through building awareness and commitment on employees.
Supplier production reliability
Asking suppliers to have environmentally friendly technology to process dangerous waste before pouring to nature and to reduce energy consumption.
23
CSFs Explanation
Group II
Supplier competence Suppliers have sufficient competence to fulfill requests. Teaching small companies with low competences.
Supplier employment Ensuring suppliers concern on employees’ welfare, do not push employees to work beyond maximum limit.
Supplier social equity Suppliers deem local community, some of them involve community around as worker such as catering worker, etc.
Group III
Distance location Having various suppliers with different locations. Allocating more cost and time to do audit and gemba for far suppliers.
Table 4.4: CSFs of Company III (Honda Prospect Motor) (cont)
Figure 4.4: Explanation and causality of company III (Honda Prospect Motor)
Company IV (Merck Sharp Dohme Pharma)
Merck Sharp Dohme Pharma (MSD) is a global healthcare company that produces medicines, vaccines, and animal health products, which has around 50 suppliers who supply active and additional ingredients. It has implemented external sustainability in both supplier assessment/monitoring and collaboration/mentoring. The mentoring activity is mutual problem solving of environmental, social and financial performance. Thus, all explained CSFs below belong to both assessment/monitoring and collaboration/mentoring. Selected respondent is a PDS Manager since this position not only massively connects with suppliers but also determines specification of new product. The interview, website, and documents point out that the company has used all CSFs in group to achieve success of external sustainability implementation. Table 4.5 and Figure 4.5 sum up the CSFs used.
24
CSFs Explanation
Group 1
Availability of fund To achieve quality product and high performance of supplier the company make great investment in evaluation, audit, and supplier sustainability programs.
Strategic planning Top management has scheduled regular meeting to integrate corporate’s goals and external sustainability vision that involve low-level employees.
Supplier integration Cooperating with more less 50 suppliers and try to builds a strong and long-term relationship with trust.
Organizational structure
Support and commitment from top management to external sustainability programs.
Supplier selection Certification: ISO 14001, GMP and internal supplier quality management systems. [supplier_performance_expectation]
Product specification No harmful material because products will be consumed by people. Suppliers should show their compliance toward company’s standard
Audit and evaluation Audit and evaluation are conducted by Global MSD (top management) directly. Evaluation is about delivery times, delivery quantity, percentage of rejected product, etc. Audit is done with several indicator: labor and human rights, anti-bribery and corruption, privacy and data protection, environmental, health and safety issues, quality, responsible sourcing of minerals, animal welfare, information technology, financial solvency.
[website_information]
Supplier development Development programs: Mutual problem solving of environmental, social and financial performance (2005). [website_information] Power Having big power to ask suppliers doing sustainability if the
suppliers want to stay in supplier list. A supplier in critical category is possible to be end up their contract or not continuing the contract in the next year.
Group II
Transparency Applying rules from first engagement that suppliers to discuss and inform any changing information to the company.
Supplier management Only looking for suppliers that agree and support with its requirements including sustainability development programs. Supplier production
reliability
Demanding suppliers to impose green technology or getting help from vendor to process their waste.
Supplier competence Ascertaining all suppliers that selected have sufficient competence to comply requirements and support external sustainability implementation.
25
CSFs Explanation
Group 1I
Supplier employment Requiring suppliers to treat workforce with dignity and respect, do not include any forces laborers or child laborers and provide workers with a safe and healthy working environment. [transparency_in_supply_chain_act]
Supplier social equity In regular supplier assessment, the company take into account suppliers to take care and empower surrounding community such as holding charity and recruit community as laborer [transparency_in_supply_chain_act].
Group III
Distance location Realizing the value of distance location that can raise cost of audit especially, but still audit far distance suppliers regularly.
Table 4.5: CSFs of Company IV (Merck Sharp Dohme Pharma) (cont)
Figure 4.5: Explanation and causality of company IV (Merck Sharp Dohme Pharma)
Company V (Dexa Medica)
Dexa Medica (DM) is a pharmacy company that manufactures and markets pharmaceutical products such as immune system products, natural detox supplements, and multivitamins. It has suppliers who supply active and additional ingredients. As a large company, it has implemented external sustainability not only in supplier assessment/monitoring but also in collaboration/mentoring approach. This mentoring is about transferring knowledge of use eco-friendly packaging and designing product delivery system, in which suppliers invited to come in workshop. Thereby, all CSFs explained below belong to both monitoring and mentoring. Interview was carried out with an Executive Purchasing Manager, as this position actively interacts with suppliers. The CSFs result for DM is shown in Table 4.6 and summarized in Figure 4.6.
26
CSFs Explanation
Group 1
Availability of fund Fund is not a problem again for the company, which the company has allocated money to audit and evaluation, and supplier development programs
Strategic planning High-level management has integrated sustainability program with company’s strategies but the meeting did not conducted regularly. Supplier integration Cooperating with approximately 300 suppliers, most of them are
local. Developing relationship with trust that suppliers can fulfill all requests and it evolves to be long-term relationship.
Organizational structure
Support and commitment from top management but not yet involved much lower level employees.
Supplier selection Certification: GMP (for main ingredients), ISO 14001 (for additional ingredients). Others requirements: cleaning method validation, pest control, clearness of packaging label, filling questionnaire (yes no questions) to measure percentage of quality and competence of suppliers.
Product specification Using safe material because products want to be consumed by human. Starting to require suppliers to use reuse and recycle materials.
Audit and evaluation Evaluation in every 6 months seen through delivery time, percentage of material reject. Audit will be executed in every once a year for poor, twice a year for average, and three times a year for excellent performance. Audit mechanism for far suppliers will be altered by CAPA (Corrective Action, Preventive Action) report. Supplier development Development programs: use eco-friendly packaging, design
product delivery system. Otherwise a few big suppliers give training to the company. [website_information]
Power Having big power to control suppliers doing sustainability in economic environmental sustainability but still struggling for social aspect.
Group II
Transparency Major information: product changing including synthesis method changing, production site moving, production discontinuity. Minor information: production tools changing, product packaging changing, and company name changing.
Supplier management Big suppliers are flexible but few small suppliers are not flexible. They do not want to invest on money, time and think for the improvement.
Supplier competence Big suppliers have sufficient competence to deliver quality product in appointed time. Negotiation with small companies that lack of resources.
27
CSFs Explanation
Group III
Distance location Understanding much that a distance location is important that determine the easiness to control what supplier do.
Table 4.6: CSFs of Company V (Dexa Medica) (cont)
In addition to the aforementioned CSFs in Table 4.6, the manager reccommends a new factor, which is doing regular meeting among top management and employees about external sustainability vision. Accordingly, not only top management will have deep understanding but also all employees will know the strategies.
Figure 4.6:. Explanation and causality of company V (Dexa Medica)
4.3 Cross-case Analyses
This section presents comparison among five companies with their CSFs list and contingencies. It mobilizes knowledge from within-case to identify what is the similarities and differences. By accumulating knowledge from individual case, compare, and contrast, it will produce new knowledge about possible reasons or patterns of why these happen and what is the role of contingencies. Table 4.7, Figure 4.7 and 4.8 are used as comparison displays especially to reveal paramount differences and similarities that appear regarding the length of CSFs list and kind of CSFs.
It can be seen from Table 4.7 and Figure 4.7, the length of CSFs for Yishengchaye and Biobizz are identically same, 10. Meanwhile the other 3 companies – HPM, MSD, DM – have longer list of CSFs, which are 16, 16, 13 respectively. It can be noticed in a clear pattern that a large company will have longer list of CSFs than a smaller company. The similarities are the CSFs that Yishengchaye and Biobizz are concerned with mostly belong to group I of CSFs and only two CSFs of group II (see Figure 4.8). A possible explanation is that usually smaller companies focus more on how to survive with their resources and capabilities, which is compatible with group I of CSFs. Thereby, they ignore group II of CSFs that demand them to control things outside. The smaller companies also tend to have little power to ask suppliers to do sustainability particularly
28 in environmental and social dimension. Regarding economic aspect, it has been in the list of selection requirements to avoid discontinue supply, “however, we ensure the supplier can supply
materials continuously through the questionnaire they fill in the initial selection that is about the production capacity” [A2.2].
List of CSFs Short Long Or ga niza ti ona l cult ure s coll ec ti vism Biobizz, Yishengchaye HPM, MSD indi vidualis m DM Medium Large Company sizes
Figure 4.7: Metrics of CSFs list comparison
La rge HPM (9), MSD (9), DM (9) HPM (6), MSD (6), DM (3) HPM (1), MSD (1), DM (1) C ompany size s Me dium Biobizz (8) Yishengchaye (7) Biobizz (2) Yishengchaye (3)
Group I (9) Group II (6) Group III (1)
29
Yishengchaye Biobizz HPM MSD DM
Types of Industry Agrifood Agriculture Automobile Pharmacy Pharmacy
Sizes of company Medium Medium Large Large Large
Organizational Cultures
Collectivism Collectivism Collectivism Collectivism Individualism
Critical Success Factors (CSFs)
1. Availability of fund 1. Availability of fund 1. Availability of fund 1. Availability of fund 1. Availability of fund
2. Transparency 2. Transparency 2. Transparency 2. Transparency 2. Transparency
3. Strategic planning 3. Strategic planning 3. Strategic planning 3. Strategic planning 3. Strategic planning
4. Supplier integration 4. Supplier integration 4. Supplier integration 4. Supplier integration 4. Supplier integration
5. Organizational structure 5. Supplier selection 5. Supplier management 5. Supplier management 5. Supplier management
6. Supplier selection 6. Product specification 6. Organizational structure 6. Organizational structure 6. Organizational structure
7. Product specification 7. Audit and evaluation 7. Supplier selection 7. Supplier selection 7. Supplier selection
8. Audit or evaluation 8. Supplier competence 8. Product qualification 8. Product specification 8. Product specification
9. Supplier competence 9. Supplier social equity 9. Audit and evaluation 9. Audit and evaluation 9. Audit and evaluation
10. Power 10. Power
10. Supplier development 10. Supplier development 10. Supplier development
11. Supplier production
reliability
11. Supplier Production
reliability 11. Distance location
12. Distance location 12. Distance location 12. Supplier competence
13. Supplier competence 13. Supplier competence 13. Power
14. Supplier employment 14. Supplier employment
15. Supplier social equity 15. Supplier social equity
16. Power 16. Power
30 The following propositions summarize the findings from cross-case analysis:
P1. Company sizes affect the length of CSFs list for external sustainability implementation. P1a. Large companies tend to have a longer list of CSFs for external sustainability
implementation compared to medium to small companies.
Yishengchaye and Biobizz also are not aware about the importance of distance location (group III) for external sustainability implementation since their suppliers location are close, they said
“distance location is not a problem, actually our suppliers are really close to us”[A6.5].
Meanwhile, the latter three companies have taken account all factors in group I and are aware of the prominence of distance location as they have many suppliers whose locations are more diverse (see Figure 4.8). The distance will greatly affect the cost and time that should be allocated in terms of audit and supplier development program that these companies already do. For instance, as a solution of lack of fund and time, DM replaces audit of far distance suppliers by asking CAPA (Corrective Action, Preventive Action) report.
P2. Medium to small companies with close distance suppliers tend to not see distance location as an important factor.
As a medium company, Yishengchaye and Biobizz only pay attention on assessment/monitoring approach without developing supplier program. It is not enough to encourage supplier to do sustainability since suppliers need their help to improve performance. Moreover, small suppliers tend to not have enough sustainability knowledge. In fact, both companies do nothing after evaluating and knowing the performance of suppliers. They should do aid through transfer knowledge or training to upgrade the performance of suppliers.
P3. All CSFs of medium companies support only supplier assessment/monitoring, which is not enough to get sustainability implementation on suppliers
In costrast with HPM and MSD that can handle group II of CSFs, DM still cannot hold back some of those factors – supplier production reliability, employment, social equity (see Figure 4.8). Since Yishengchaye and Biobizz are also struggling on those factors, it can be stated that sizes of company do not guarantee a company can control group II especially if those factors are not written in first supplier contract or regular assessment. It is vastly problematic to know how supplier treat their employees and surrounding community as they conveyed, “we do not know
31 has been made there is still a probability for it to be broken. For example, when DM applied transparency regulation, there was a supplier that moved to new site location without notification. MSD also cannot restrain suppliers to have their own waste management as long as the suppliers desire to use service of related company/vendor to process its waste. “If they do not have capability
to take care of waste, they can deliver it to a particular company such as in Bogor”[A4.14].
P4. Medium and large companies focus more on group I of CSFs and struggle to cope with group II of CSFs.
With respect to types of industry and organizational cultures effects that are not obviously visible in Table 4.7, Figure 4.7 and 4.8, further interviews were conducted. All respondents agree that supplier selection and product specification factors differ among industries. MSD and DM said that, “pharmacy company has more complicated and tight regulation of supplier and material
since the drug will be consumed by human such as ‘halal’ issue which will be a regulation from government for all drugs in 2020”[A6.1] and Yishengchaye added, “..our product will be eaten by people” [A6.2]. There is no tolerance for rules and requirements of product that will be
consumed by people, as compared to automobile and agriculture industry that are still negotiable.
P5. Supplier selection and product specification of pharmacy and agrifood industry are more complicated and tight.
Meanwhile for organizational cultures, Yishengchaye thinks that there is no effect for various CSFs since these factors should be influenced by organization vision. However, other 3 companies have different thoughts. They ensure that cultures will have impact on transparency factor and trust as part of supplier integration factor. DM with individualistic culture feel that it impedes the flow information from supplier to its company. Any information from supplier is just kept as individual database information (purchasing staff), never shared with others as each staff is responsible for some suppliers. Whereas collectivism that is defined as team-work including work with suppliers by HPM, MSD and Biobizz results in developing trust and strong bond to suppliers, so that suppliers feel supported and encouraged to comply with all requests and deliver quality products, which will evolve into mutually beneficial long-term relationship. “The trust to
32 P6. Organizational cultures have an effect on CSFs concerning with trust and transparency. P6a Collectivist culture creates stronger trust of supplier and evolves into mutually beneficial
long-term relationship
P6b. Collectivist culture increases transparency of supplier to focal company.
From Table 4.7, it also can be revealed that the five companies have some same factors as their concern regardless of industry types, sizes and cultures. The feasible reason is that those factors are the most significant factors to make external sustainability implementation succeed.
P7 The most crucial factors to implement external sustainability are availability of fund, strategic planning, supplier integration, supplier selection, product specification, audit and evaluation, power, transparency, and supplier competence (not in rank).
Finally, as explained in within-case analyses, Yishengchaye and Biobizz suggest two factors that are potential to be additional important factors that aid the success of external sustainability implementation.
33 5. DISCUSSION
5.1 Theoretical Implication
Critical success factors (CSFs) for external sustainability implementation
The first contribution of this thesis is creating list of CSFs for succeeding external sustainability implementation along with confirmation of some crucial CSFs that have been mentioned in prior researches (e.g. Ansari & Kant, 2017; Hassini et al., 2012; Mejias et al., 2016; Grimm et al., 2014; Kannan, 2018) which are availability of fund, strategic planning, supplier integration, supplier selection, product specification, audit and evaluation, power, transparency, and supplier competence (proposition 7). In addition, as compared to those prior researches, this thesis contributes on classifying each CSF into three dimension of sustainability (Appendix B) and two approaches of external sustainability implementation (Table 2.2) even though none of this concepts are adopted by a company in the cases. These concepts are created as a framework in Figure 4.1.
Secondly, this thesis adds new CSFs to previous studies (e.g. Ansari & Kant, 2017; Hassini et al., 2012; Mejias et al., 2016; Grimm et al., 2014; Kannan, 2018) regarding external sustainability implementation, which are giving education to employees about external sustainability vision, and having periodic meeting among management and lower-level employees to align sustainability perception and actions (proposition 8). These factors can go into a part of CSF of organizational structure since these are about the support of top management to have smooth execution of external sustainability and creating involvement of employees in all levels.
Although prior researches (e.g. Gimenez & Tachizawa, 2012; Grimm et al., 2014) divided CSFs for external sustainability into two groups (internal and external), this thesis classified CSFs into three groups (group I, II, III). This happened because it was found through interviews that external CSFs can be separated into two different groups: 1) CSFs can be controlled by supplier and 2) CSFs cannot be controlled by both focal company and supplier. Meanwhile, previous researches defined external CSFs as only factors outside a company’s border.
Effects of contingencies
34 thesis found no unique CSFs list for each company that is influenced by contingency factors, as Donaldson (2001), Sousa and Voss (2001) conveyed that there is no best way for every situation. Incidentally, company sizes influence the scope of the factors used as the focus. Smaller companies with lack of resources and capabilities likely limit their activities and is more concerned about how to survive by optimizing these. Therefore, they will give priority to the internal things that they assure they can control (group I) and set aside other factors beyond (group II & III). This is a feasible reason of why list of CSFs of smaller companies tends to be shorter compared to larger companies (proposition 1). As Chandler (1962) stated in his research, large companies tend to have more complex and complicated activities and small companies usually have lack of resources and bargaining power (Ciliberti, Pontrandolfo, & Scozzi, 2010). Larger companies also obtained more pressure from stakeholders for many issues, especially social issues (Moore, 2001) that push them to care about what suppliers did as well – how suppliers treat employees, environment, and society (group II). However, it does not mean that all large companies can control group II of CSFs whenever they want. In this thesis, it is discovered that small and large companies still struggle to cope with group II of CSFs (proposition 4). Companies should include these factors in suppliers contract so companies have power to terminate it when suppliers do not show commitment and compliance (Provan & Gassenheimer, 1994).
The fact that mostly smaller companies collaborate with close distance suppliers makes them tend to not see distance location (group III) as an important factor (proposition 2). They would not experience negative influences of increasing distance location related to data gathering, assessment, collaboration (Awaysheh & Klassen, 2010), and audit implementation (Sarkis, 2012) that are usually encountered by larger companies with various supplier distance locations. In this case, DM (large company) faced it and decided to not audit a far distance supplier as a solution to minimize cost and time. Although the two smaller companies are not aware on that, they gain benefits such as getting cheaper transportation cost and flexible time to do supplier assessment. Previous researches (e.g. Kannan, 2018; Grimm et al., 2014) did not investigate the importance of distance location against different sizes of company, they just defined that significant distance will inhibit the way to know what supplier is doing, although it still needs great effort and resources. Furthermore, this thesis confirms the most recently researches (e.g. Gimenez & Tachizawa, 2012; Carsten, Foerstl, Hartmann, & Blome, 2010; Jiang, 2009) that “assessment approach alone is not
enough to have positive impact on supplier’s sustainability implementation. Companies need to adopt collaboration approach”. This thesis proves that for Yishengchaye and Biobizz company,
35 CSFs will only support one approach, so these factors are not enough to make their suppliers succeed to do sustainability (proposition 3). The reasonable reason is that the focal company does not give any help, such as knowledge transfer regarding problems that have been revealed in evaluation and audit. In fact, the suppliers really need aid to tackle the problems in order to align with focal companies’ sustainability strategies.
Related to industry types, it is seen that factors of supplier selection and product specification of pharmacy and agrifood industry are more complicated and tight (proposition 5). The is no prior studies about this to compare, as they usually highlight on price, quality of raw material, and service (Khorasani & Bafruei, 2011). The feasible reason is that because the products will be consumed by humans and have a direct impact on their lives. In other words, it is related to the life and death of humans. If there is one condition that is not fulfilled by the suppliers related to a specific certification, it will potentially endanger the lives of consumers. In contrast, automobile companies can negotiate with suppliers vis-à-vis the maximum limit of emissions of products because it does not directly impact to human life. Hence, pharmacy and agrifood company must select suppliers and raw materials carefully.
36 5.2 Managerial Implication
