FACTORS INFLUENCING SUSTAINABLE PROCUREMENT PRACTICES AMONG MANUFACTURING FIRMS IN CHINA
Course and Code
TOC o “1-3” h z u 1. Introduction PAGEREF _Toc85457947 h 41.1 Background PAGEREF _Toc85457948 h 41.2 Rationale of the research PAGEREF _Toc85457949 h 71.3 Research aim PAGEREF _Toc85457950 h 71.4 Research objectives PAGEREF _Toc85457951 h 71.5 Scope of the research PAGEREF _Toc85457952 h 81.6 Structure of the report PAGEREF _Toc85457953 h 82.0 Literature Review Introduction PAGEREF _Toc85457954 h 92.1 Sustainable Procurement PAGEREF _Toc85457955 h 92.2 Factors Influencing Sustainable Procurement in Supply Chains PAGEREF _Toc85457956 h 102.3 Adapting to Greener Manufacturing and Procurement Practices PAGEREF _Toc85457957 h 112.4 A Shift in Manufacturing Practices PAGEREF _Toc85457958 h 122.5 Procurement Practices in Chinese Manufacturing Firms PAGEREF _Toc85457959 h 132.6 Understanding the Difference between Green and Sustainable Practices PAGEREF _Toc85457960 h 142.7 Future of Procurement for Manufacturing Companies PAGEREF _Toc85457961 h 152.8 Theoretical Framework of the Research PAGEREF _Toc85457962 h 173. Material and Methods PAGEREF _Toc85457963 h 193.1 Process Flow PAGEREF _Toc85457964 h 193.2 Research Design PAGEREF _Toc85457965 h 203.3 Questionnaire PAGEREF _Toc85457966 h 204. Data Analysis and Results PAGEREF _Toc85457967 h 224.1 Chapter Introduction PAGEREF _Toc85457968 h 224.2 Multiple Linear Regression PAGEREF _Toc85457969 h 224.3 Results Interpretation PAGEREF _Toc85457970 h 245. Discussion PAGEREF _Toc85457971 h 265.1 Discussion of Results PAGEREF _Toc85457972 h 265.2 Implications PAGEREF _Toc85457973 h 265.2.1 Manufacturing Industry in China PAGEREF _Toc85457974 h 275.2.2 Sustainable Procurement in the Global Manufacturing Firms PAGEREF _Toc85457975 h 295.2.3 Promotion of Sustainable Procurement PAGEREF _Toc85457976 h 316. Conclusion and Recommendations PAGEREF _Toc85457977 h 346.1 Chapter Introduction PAGEREF _Toc85457978 h 346.1.1 Restatement of Purpose PAGEREF _Toc85457979 h 346.1.2 Summary PAGEREF _Toc85457980 h 346.2 Recommendations PAGEREF _Toc85457981 h 356.3 Future Research PAGEREF _Toc85457982 h 36References PAGEREF _Toc85457983 h 37
1. Introduction1.1 BackgroundManufacturing firms require raw materials in order to make their end products. Therefore, they have to procure these materials from suppliers. As such, procurement is one of the most important supply chain processes for manufacturing firms. As opined by Wallace et al. (2014), effective procurement helps manufacturers manage their supplier engagement across product life cycles, better. In addition, effective procurement enables firms to become the customer of choice to suppliers. In turn, this helps the manufacturers drive innovation and introduce products to the market faster and with higher margins (Tate, 2014). Effective procurement practices have also been noted by Jin & Price (2019) as a way through which manufacturing businesses can maximize profits. This is done by balancing supplier quality, cost reduction, assurance of supply, as well as, increasingly unlocking supplier innovation. Thus, as the manufacturing environment grows more complex, the procurement function is also growing more strategic in manufacturing firms that need to find new ways through which to optimize the supply chain (Van der Valk, 2008). However, following traditional standard procurement practices alone in the current competitive manufacturing environment alone, may not lead to business success. As noted by Gounden (2016), the current trend for achieving business success is through an all-inclusive corporate responsibility idea of sustainability. In a manufacturing organization, sustainability is supported by sustainable procurement.
According to Tiwari et al. (2019), sustainable procurement is also referred to as an environment-friendly purchasing practice, which aims at reducing the sources of waste. It also promotes the reclamation of purchased materials and their recycling, without negatively affecting their performance requirement. Sustainable procurement is different from standard procurement good practices in that it seeks to verify the eco claims of suppliers and maximize consolidate orders in order to minimize unnecessary environmental impact (Tiwari et al., 2019). The concept of sustainable procurement has gain considerable consideration over the past decade in the scholarly world, owing to the call by environmentalists, especially to businesses, to engage in sustainable process as a way or preserving the natural resources that are getting depleted. As such, businesses operating in various industries are now required to play their role in minimizing their negative impacts on the environment. Therefore, the achievement of sustainability, especially in businesses operating in the manufacturing industry is only possible by ensuring that all the elements of the supply chain are sustainable (Venkatesh & Luthra, 2016). As noted by Islam et al., (2017), sustainable procurement practices are not only beneficial to the environment and the public, but also to the organizations that implement them. To the community and the environment, sustainable procurement practices help in cutting waste, lowering fuel and energy consumption, reducing carbon waste, improving health outcomes, and delivering opportunities for small businesses. To the organizations that implement sustainable procurement, the practice can earn them a sustainable reputation. This is important in a business environment characterized by sustainability-conscious consumers. Therefore, in order to realize these benefits, such firms must deal with obstacles such as the lack of coherent systems, procedures, and approaches, which hinder the successful implementation of sustainable procurement.
Owing to the exigency of sustainable practices in organizations, there has been a growth in the number of studies focusing on sustainable practices. Gounden (2016) established a difference between the factors that affect sustainable procurement within the South African private and public sectors. Wu et al. (2018) also explored the influencing factors of sustainable supply chain management in Beijing China. The researchers admitted that China has an outstanding environmental problem, which needs to be addressed through sustainability practices. Nevertheless, the researchers broadly focused on all elements of the supply chain without singling out procurement. While exploring what makes a sustainable procurement system more effective, Stock & Seliger (2016) noted that transparency, accountability, and establishment of standards are the key factors to a better and more sustainable procurement system. In a more related study, Tiwari et al. (2019) looked into the factors influencing sustainable procurement practices in a Malaysian manufacturing firm. Regulatory and customer pressure were found to be the main elements that encourage sustainable procurement practices in the firm, while regulatory pressure was found to have the highest level of impact on sustainable procurement practices. While these studies underline the significance of sustainable procurement in today’s business environment, they also point to the unavailability of adequate research on the matter, especially in Chinese manufacturing firms. This is the motivation behind this research that aims at exploring the factors that influence sustainable procurement practices among Chinese manufacturing firms.
The reason for focusing on manufacturing firms is because they are one of the industries that mainly rely on procurement. Practically, no manufacturing activities can go on without the procurement of raw materials. In addition, the manufacturing industry is important and successful in China’s economy since production efficiency is extremely high. Also as noted by Li (2018), the manufacturing industry is one China’s most beneficial sectors; the country sells more manufactured goods than any other country in the world. At the same time, the manufacturing industry is a major contributor to the environmental degradation in China. This is because of the number of wastes and toxic materials released into the atmosphere during the manufacturing process. Therefore, by focusing on the factors influencing sustainable procurement practices in Chinese manufacturing firms, this research can shed light on what could be done to boost the implementation of sustainable procurement practices as a way of eliminating the environmental problems that plague China. In addition, the research offers a significant contribution to the world of academia, as well as, to industries. Its findings could become the benchmark of the few empirical studies conducted in the context of Chinese manufacturing industries. In addition, researchers can use the research findings as a reference in their studies on sustainable procurement practices among Chinese manufacturing firms. Besides, the research adds value to the limited literatures in sustainable procurement practices in Chinese manufacturing firms.
1.2 Rationale of the researchThe limited number of studies on sustainable procurement practices especially in China’s manufacturing industry is one the reasons for conducting this study. As noted by Wu et al. (2018), China still has an outstanding environmental problem. Therefore, there is the need to create more awareness about sustainable procurement and its benefits as a way of boosting its implementation, especially in manufacturing firms. Besides, the awareness of the benefits of sustainable procurement to firms could be a trigger for their implementation of the practices to garner these advantages and achieve a competitive advantage over competitors.
1.3 Research aimThe aim of the research is to investigate the factors influencing sustainable procurement practices among manufacturing firms in China.
1.4 Research objectivesThe objectives of the research are:
To establish the factors that influence sustainable procurement practices among manufacturing firms in China
To determine the factor that has the highest impact on sustainable procurement practices among manufacturing firms in China
To recommend ways through which to boost the implementation of sustainable procurement practices among manufacturing firms in China
1.5 Scope of the researchThe research only focuses on procurement practices, which are an element of the supply chain process. Therefore, other supply chain practices are not considered in the research scope. In addition, the research focuses on domestic manufacturing firms in China alone. Thus, other manufacturing firms, including the foreign-owned ones, are not considered. This is because the goal is to shed light on the factors influencing sustainable procurement practices in Chinese-owned manufacturing firms.
1.6 Structure of the Thesis
This thesis is structured in five chapters, as follows: the first part of the study introduces the topic. It discusses the general problem, introduces the research topic, provides the relevance of the topic, explains the objectives and sub-objectives, defines the tasks related to the objectives, and provides the research questions. The second chapter provides a technical review of literature relating to the topic and issues surrounding the same. The third chapter focuses on materials and methods used to collect data. The next chapter focuses on results and discussion of findings, including a proper analysis of the selected topic, independent and analytical presentation of results. Finally, the report closes with conclusions and recommendations and provides direction for future research.
2. Review of the literature
2.0 Literature Review IntroductionIn this section, topic-related references are processed and analysed. The section focuses on what extant literature says about the topic, including but not limited to current issues relating to sustainable procurement for Chinese manufacturing firms.
2.1 Sustainable Procurement
According to the United Kingdom government-commissioned Sustainable Procurement Taskforce, sustainable procurement is the act whereby organizations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organization, but also to society and the economy, whilst minimizing damage to the environment (DEFRA, 2006). This definition shows the great depth to which sustainability takes in the interaction of acquisition process of industries’ raw materials, the manufacturing process, the community, the economy in the area and the environment. From the description above, manufacturing process involves a interdependence process capable of causing effects to every part of the system. The procurement process is in direct interaction with the community and the economy of the country involved. All these aspects are then directly connected to the manufacturing industry which interacts directly with the environment. Dubey and Bag (2018) discuss the paradigm shift of policies towards green economy is forcing the companies to consider the green initiatives seriously. There is a need for the companies especially manufacturing companies to take a proactive approach rather than reactive approach in this aspect. In their research Dubey and Bag (2018) reveal the beneficial expectation for the general shift of the manufacturing industries to the green sources of power and other resources. They go far to analyse the possible outcomes, when this is not considered and the effect it would have to the environment. Among the beneficial points attained on green sources of power is attaining of a more sustaining manufacturing model within the industry. The benefits of a sustaining model of manufacturing is prevalent in the future support of the industry growth where the resources are used with necessity satisfaction rather than surplus wastage.
2.2 Factors Influencing Sustainable Procurement in Supply ChainsStudies by Lee (2008), Meehan and Bryde (2015), and Sajjad, Eweje, & Tappin (2015) introduced the factors influencing sustainable procurement practices in the world of manufacturing to include supplier collaboration, pressure from customers, government-led regulations, competitive advantage, and top managerial involvement and support. Wu et al. (2018) reveal in their investigation paper the current situation of the manufacturing industry and the effects it has caused to the surrounding environment. They further explain that the problematic results from operation of the China’s manufacturing industry is a cause of the implementation of the traditional social and economic development mode which lacked the essence and need of including sustainability in their structure. This explanation refers the neglect nature of many manufacturing industries to the environment. The research goes further to unearth the lack of empirical data to understand the factors that influences the sustainable supply chain in China. From the few sources available however, a structural equation model was used to analyse the questionnaire data of 167 enterprises in Beijing, China. The results show that internal management cognition and government participation has a direct effect on the sustainable supply chain management practice, and internal management cognition has a strong positive influence too (Wu et al., 2018). Involvement of government in terms of policy regulation leads as the most positive and effective way in ensuring all the parties involved are adhering to the set standards and core values in the dynamic relationships between the industries, the economy and the community in general. Basically, this relationship is the unit operation of sustainable structure where one entity is conscious of all the other factors in the system.
2.3 Adapting to Greener Manufacturing and Procurement PracticesWith existing research studies showing the urge of adapting to the green methods of public procurement, Liu et al. (2019) run an investigation of the Chinese local government on this matter using the life-cycle model to develop a comparative research framework on the local government and the green public procurement program. After data processing, the results show that, for local governments at green public procurement introduction stage, their adoption of green public procurement is positively associated with officials’ full awareness of green public procurement regulations and official documents, officials’ full awareness of green public procurement guidelines and procurement lists, and wide coverage of green public procurement subsidy policy (Liu et al., 2019). Therefore, from the investigation we can deduce that the lack of knowledge and proper understanding of the green public procurement, the officials and leaders lack the ability to effectively implement the strategy which is hazardous to the environment. To lead a successful implementation of the green public procurement strategy, according to the investigation, requires a deep and wide knowledge and understanding of the strategy in order to take the necessary steps in order for a well-directed and effective transfer to the green public procurement. From Liu et al. (2019) perspective, for local governments at green public procurement growth stage, improving green public procurement performance is positively associated with officials’ full awareness of guidelines and lists, and wide coverage of green public procurement subsidy policy, while it is negatively associated with low administrative level. The argument of the researchers in this paper insists on the strong determinant, that is profound knowledge on the topic, in ensuring green developments strategies are understood from the root of their importance and adopted effectively into the prevailing manufacturing systems and resource acquisition procedures.
Inspired by the work of Brammer and Walker (2011), Delmonico et al. (2018) carried out a research meant to reveal a number of barriers that stand in the way of implementation of the sustainability procurement. This research activity applies the theory of ecological modernisation to test the hypothesis and unravel the barriers working against effective application of the sustainable procurement methods. According to Brammer and Walker (2011), from the results obtained after the survey of programme managers, the researchers categorized all the results obtained into five distinctive categories which represented the five barriers realized in survey. These five barriers include; organisational culture, motivation, economic uncertainty, market, and operations. Considering the results obtained, that is, the five barriers of sustainable procurement, organisational culture comes out as the most prevalent barrier to sustainable public procurement. A study by Brammer and Walker (2011) shows the depth of organisational culture in working against the basic adoption and implementation of the sustainable public procurement strategies. This behaviour from the organisational culture is promoted by the tendency of the organisation employees becoming reluctant in accepting and implementing a new method of performing duties and activities. Instead, they appear deeply rooted to their earlier methods and refrain from adapting any other method in their operation. The survey reveals cost and budget variables to be least factors influencing the implementation of sustainable public procurement initiatives, rather the survey focuses on the cultural change management as the main recommendation to give an effective development of the sustainability management initiatives.
2.4 A Shift in Manufacturing PracticesA survey carried out among a sample of one hundred and fifty industrial senior administrative officials carried out by Bag, Gupta, and Foropon (2019) showed the role of dynamic remanufacturing capability on supply chain resilience in circular economy. A circular economy in general represents a self-sustaining economy in which the natural resources are reused and recycled within the system ensuring very little is lost as waste. The paper presented, aimed to bring out the effect of sustainable manufacturing methods in influencing the supply chain resilience. This survey was carried out under the moderating effect of control orientation and flexible orientation to help arrive to a more reasonable result. The paper reveals the situation of resources in the current world, whereby Bag et al, (2019), argue an increased pressure on the world’s available resources and due to the strain in resource acquisition firms are adapting to the application of remanufacturing principles and other sustainable manufacturing processes. The survey paper goes further to present the findings and results from the survey. From the results obtained the researchers presented three factors that positively influenced the dynamic remanufacturing capabilities which included the market factors, technical factors and the management factors. Market factors were seen to strongly affect the dynamic remanufacturing capability whereas both technical and management factors seemed to weakly influence the capability of dynamic remanufacturing.
2.5 Procurement Practices in Chinese Manufacturing FirmsLi et al. (2019) presents an investigation paper that uses China-based industries to create and test a theoretical model to determine the driving factors of the green development behaviour and performance in the industrial enterprises. By using the industrial enterprises of China as the research object, Li et al. (2019) conduct investigative interviews on 52 employees in the industrial enterprises for further information gathering. With the information collected from the interviews the researchers build the theoretical models by use of the grounded theory method. By including a total of forty initial concepts, ten initial categories, four main categories and three core categories in the model the researchers were able three major conclusions. These three outcomes draw the importance of the theoretical model in integrating the theoretical concepts with the realist experiences to draw a well-structured illustration of the reality that is bound by realistic principles denoted by the model in lower scale. The conclusions made in the paper included; the existence of green development in an industrial enterprise as observed behaviour expressions, such as clean production behaviour and green supply chain management practice, Li et al, (2019). The second conclusion indicated the existence of green development in an industrial enterprise led to the occurrence of green development behaviour and the third outcome showed that the occurrence of industrial enterprise green development behaviour has led to the consequence of green development of industrial enterprises.
2.6 Understanding the Difference between Green and Sustainable PracticesPrevious research activities have been developed to clarify the complexity relationship between green supply chain management (GSCM) and supply chain quality integration (SCQI). Yubing et al. (2019) describes an investigation model, in their research paper, set to investigate and reveal the relationship between the GSCM and SCQI and their effect on green purchasing and customer green cooperation. The researchers rely on empirical testing of the model using data obtained from a sample of 308 manufacturing companies in China. The results obtained reveals, a positive effect on the supplier and customer quality integration and green purchasing and customer green cooperation. Yubing et al. (2019) results go further to reveal the effect of general environmental improvement in performance as a long-fetch result of supplier and customer quality integration. Yu (2017) explains with an example, that a good customer relationship with the manufacturer and general closeness of the customer and manufacturer helps the manufacturer realize and better understand the requirements and preferences of the customer on green management. This knowledge is useful for the manufacturer to design better green purchasing processes.
From the research, sustainable and green practices all point to preserving of the natural resources and environmental awareness. Green strictly deals with the health of the environment. On the other hand, sustainability is somewhat all-rounded to include economic vitality, social benefits, and the health of the environment. Therefore, as used today, going green would mean every aspect of creating or pursuing environmental-friendly practices. Sustainability in the procurement scene would refer to the practice of ensuring that resources should not be depleted for the benefit of the environment and for future generations.
Considering research carried out earlier in an idealistic move to reveal the factors affecting the implementation of sustainability in procurement. Tiwari et al. (2019) used questionnaire approach in data acquisition from 170 manufacturing industries. The data obtained was analysed using the SPSS platform for sorting and interpretation. The findings portrayed the tendency of the manufacturing industries to follow the sustainable route of organizational operation and acquisition processes. Tiwari et al. (2019) explained the results from their research concluding a general tendency of the manufacturing industries in the area to lack awareness of the green development strategies. Tiwari et al. (2019) pointed out that the unsupervised expectations of the industrial manager to keep strategies and responsibilities, to ensure sustainability in their operations was absent. A lack of motivator mediation presence was met by cold repellent behaviour regarding environmental protection. Tiwari et al. (2019) goes further to explain the ineffectiveness of internal factors of the manufacturing industries. The research work shows the assumption of low profits when sustainability is incorporated into the industries management by the industrial managers. However, for effectiveness in ensuring the manufacturing units adhere to the set rules Tiwari et al. (2019) suggest the incorporation of motivators such as; regulatory pressure and general customer pressure towards the industries. Regulatory pressure however, came out as the most effective of enforcing the sustainability role to all the industry management. The report is concluded by the statement of urge and emphasis to all the relevant personnel, to assume the role of green development within their institutions without the need of motivators since the effect to the environment is felt by us.
2.7 Future of Procurement for Manufacturing Companies
Carvalho et al. (2018) describe a conceptual industrial systemic change during the 4th industrial revolution within Europe as one of the systems that in itself, had the best setting and systemic flow to act in the green development within manufacturing industries. Carvalho et al, (2018), in their research work, explains the basic makeup of the industrial system in the 4th era of industrial change and its integration with advanced technology for proper approximations and measurement reducing waste. The main idea presented in this paper is the formation of an industrial system such that it increases the efficiency of operation in the way that minimizes pollution and waste of resources.
Carvalho et al, (2018), argues that the traditional methods of manufacturing brought about an unsustainable model of production mainly caused by the overall disregard for the environmental issues rather, focus on maximizing profits. Carvalho et al, (2018), paper describes the industrial 4.0 in relation to the sustainability by incorporation of scientific work that supports the sustainability of the system involved. The researcher’s lists a number of advantages of the system of industrial 4.0. Among the advantages presented in this paper, includes the improvement of product life cycle and the integration of the manufacturing process with scientific cyber-physical strategies such as decentralization, virtualization and interoperability. These methods, according to Carvalho et al, (2018), argument, gave the manufacturing process more adaptability to natural resources availability and the extent of environmental cost.
The industrial 4.0 system also incorporates an advanced communication strategy that smooths the lines of communication within the industry and the external factors influencing the industry including the customers, other manufacturers, companies, suppliers and the logistic service providers. The paper is concluded with the benefits that are attached to this system. Carvalho et al, (2018), explains how the system of industry 4.0 uses smaller batches of resources it requires and utilizes its efficiency to ensure the small batch used produces more accurate response to the demand curve of the industry cutting down the production waste. This design is highly dependent of the scientific principles that are incorporated in the idea for efficiency. Interoperability of the machine describes the tendency of a machine used to be able to work long hours and longer life time of service. This principle prevents multiple changes of machinery due to breakdown leading to internal waste, Carvalho et al, (2018). Decentralization ensures promotes time management with ability of decentralized decision making without the need of longer communication to foreign areas on local issues. Virtualization helps in proper tracking of the production process with the aim of avoiding waste that may accrue in the process of lowly monitored system. Real-time capabilities enables the system of the industrial 4.0 model enables faster reaction to a real time hiccup noted in the system. Modularity enables flexibility in the system due to the ability to add components in the system or remove components without distraction. Finally, the principle of service orientation according to Carvalho et al, (2018), enables re-usage and recycling advantages in the system.
2.8 Theoretical Framework of the ResearchBy employing previous studies relating to sustainable procurement practices in manufacturing, the theoretical framework for this study was developed. The aim of the theoretical framework is to create a wholesome view on external as well as internal factors influencing the implementation of sustainable procurement practices for Chinese manufacturing firms. The following hypotheses are proposed on the basis of the theoretical framework:
H1. Supplier collaboration has a significant and positive relationship with implementation of sustainable procurement practice.
H2. Customer pressure has a significant and positive relationship with the implementation of sustainable procurement practice
H3. Regulatory pressure has a significant and positive relationship with implementation of sustainable procurement practice
H4. Competitive advantage has a significant and positive relationship with implementation of sustainable procurement practice
H5. Top managerial support has a significant and positive relationship with implementation of sustainable procurement practice
Image 1: Theoretical Framework of the Research Study (Source: Adapted from (Lee, 2008) and (Meehan and Bryde, 2015)
3. Material and MethodsThe research techniques and strategies that are adopted to facilitate the realization of the study’s objectives are described and justified in this research chapter. They include the techniques relied upon for sampling of respondents, collecting data, and analysing it.
3.1 Process Flow
Figure 1 shows the structure and process used for the methodology. The process identifies motivators of sustainable procurement in manufacturing. The literature review was conducted to identify the current trends in sustainable procurement and the relationship this has with man
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