Green supplier development: analytical evaluation using rough set theory

Abstract

Suppliers' development is a critical function within supply chain management. Green supplier development is also necessary for effective green supply chain management. Interestingly, there is a gap in the research on how an organization can effectively manage supplier development programs, and specifically green supplier development. The use of formal models to aid green supplier development management is virtually non-existent. This paper aims to fill this gap by introducing a formal model using rough set theory to investigate the relationships between organizational attributes, supplier development program involvement attributes, and performance outcomes. The performance outcomes focus on environmental and business dimensions. The rough set methodology utilizes an ‘incomplete’ information approach which is more realistic in some data poor environments. A multistage rough set methodology is detailed through an illustrative application. The methodology generates decision rules relating the various attributes to the performance outcomes. Included in the discussion are insights into how these rules for individual and aggregated performance (environmental, business, and joint performance) may be evaluated. Practical and research implications of this work are detailed in the paper.

Introduction

Some of the major issues in environmental sustainability relate to a product's life cycle environmental burdens. For organizations to manage these burdens effectively they need to expand their vision of environmentally sound practices to go beyond their organizational boundaries. The one way they can fully accomplish this task from strategic and operational perspectives is through green supply chain management practices and programs. A critical aspect of this inter-organizational focus is the development of suppliers, many who are small and do not have the necessary resources to address some of the serious environmental issues they face (Seuring and Müller, 2008). Interestingly, even though significant research has been initiated and completed on green supply chain management (Seuring and Müller, 2008, Srivastava, 2007, Ilgin and Gupta, 2010), investigation into sustainability and supplier development programs is virtually non-existent. Even general supplier development literature and research related to business performance is a relatively recent area of investigation. Much of this research is empirically based with a focus on general relationships between supplier development practices and performance (e.g. Krause et al., 1998, Narasimhan et al., 2008, Wagner and Krause, 2008).

The development or application of formal tools and models has been very limited in general supplier development programs. These types of models are recommended by the literature to help in supplier improvement and management (Krause et al., 1998). Formal tools and models for environmental supplier development to aid companies in managing environmental performance of suppliers are even more limited. Thus, in recognition of this fact, we introduce a formal methodology utilizing rough set theory as a modeling tool to aid organizations evaluate the performance of various environmental supplier development practices.

One important purpose of such formal models is to aid organizations prioritize their investments in these programs to address the “locus of investments” for environmental supplier development initiatives (Narasimhan et al., 2008). All organizations have limited resources. Many times, unless there is significant direct economic returns or because of mandated policies, the implementation of green supply chain programs may be disregarded. Thus, the determination of which specific green supplier management programs are most useful may free up resources that may enhance the returns on these programs while meeting environmental goals. Thus, formal models that help to identify specific green supplier programs that influence either or both environmental and economic benefits may provide easier justification for their inclusion by managers. This type of formal modeling tool is valuable for planning, design, implementation or maintenance of green supply chain management programs in organizations.

The formal modeling approach introduced in this paper, using rough set methodology, will go through a number of stages resulting in a general series of ‘rules’ that identify relationships between attributes of green supplier development programs, organizational characteristics and performance outcomes. The technique will involve the development of an ‘information system’ table that includes conditional attributes comprised of various organizational characteristics and green supplier development programs. The information system table will also include decision attributes that will include previous performance on environmental and business dimensions. Suppliers represent the objects that will also be used to form the information system table.

Rough set theory is a non-parametric methodology that completes a series of set theoretic operations and Boolean algebra to help reduce the set of attributes and suppliers to arrive at rules of various relationships between the conditional attributes (supplier characteristics and program involvement) and performance. It is advantageous in providing general relationships and also identifying the most pertinent factors that could contribute to environmental or business performance. Knowing this information will aid organizations to more effectively manage programs. Researchers and practitioners may also find this methodology valuable to help narrow the set of factors that can be utilized in other techniques ranging from multi-attribute decision making to econometric and multivariate statistical tools.

Thus, the goal of this paper is to show how rough set theory can be used to evaluate the results of green supplier development programs' relationship to environmental or economic performance in an organization. To accomplish this goal the paper begins with a discussion and review of green supplier development programs and some previous work on evaluating the relationships of these programs. In addition some background on related tools for analysis of green supplier programs that do exist will help us identify what gaps occur in the literature. We then generally introduce the basic concepts associated with rough set theory including advances related to incomplete information analysis. Then, using an illustrative application example, we detail the methodology in a step-by-step detailed process. The results are presented with some discussion analyzing the results and implications of the technique. We finally conclude the paper with some limitations and future research directions in this emergent field and topic.