Sustainable supply chain models for base of the pyramid

doi:10.1016/j.jclepro.2016.11.001

Journal of Cleaner Production

Volume 162, Supplement, 20 September 2017, Pages S107-S120

https://doi.org/10.1016/j.jclepro.2016.11.001 Get rights and content

Highlights

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Sustainable supply chain management for Base of the Pyramid markets demands the incorporation of social aspects.
•
BOP supply chains in developing countries are characterized by localization and simplification approaches.
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The localization and simplification approaches are enabled by the integration of locals in the value chain.
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The involvement of locals and simplified supply chain models support overcoming institutional barriers in BOP markets.

Abstract

Institutional barriers and constraints in developing countries require new supply chain models where economic, social and ecological aspects are integrated. Sustainable supply chain management discourse has focused on ecological aspects and neglected social issues, while Base of the Pyramid studies have neglected ecological considerations. This study links the sustainable supply chain management discourse with insights from Base of the Pyramid studies in order to suggest an integrated sustainability perspective. This work adopts a multiple case study design based on secondary data analysis in order to investigate supply chain concepts of 18 successful products and develop sustainable supply chain models in the areas of sourcing, making and delivering. Findings suggest that by employing localized and simplified approaches, companies targeting low-income markets can overcome existing local institutional barriers. We conclude that employing simplified and localized approaches to supply chains and simultaneously integrating local communities in the value creation activities can serve as success factors. Therefore, by linking sustainable supply chain with the Base of the Pyramid strategies discourse, we fill an important research gap in the literature. From a practitioner's perspective, the derived supply chain models serve as best practices for managers of multi-national companies, local entrepreneurs, non-governmental organizations and political institutions designing, operating and regulating supply chains for low-income markets.

Introduction

Several important economic developments at the beginning of the new millennium forced Multi-National Corporations (MNC) to reconsider their strategies and market orientations. The economic slowdown and over-saturation of developed markets on one hand and the fast growing developing markets on the other hand compelled management executives to turn their attention to the largest target market in the economic pyramid - the Base of the Pyramid (BOP) markets estimated between 2.7 and 4 billion people (Karnani, 2007, Prahalad and Hart, 2002). Although there are several success stories of MNC serving the BOP markets, expansion into the BOP markets poses several challenges, especially related to supply chains (Parmigiani and Rivera-Santos, 2015, Karamchandani et al., 2011). Yet, the literature is sparse on supply chain models and best practices for BOP markets (Raja Usman Khalid et al., 2015). Most related studies focus on difficulties of product development (Ray and Ray, 2011), business models (Yunus et al., 2010, Seelos and Mair, 2007), partnerships (Hahn and Gold, 2014, Dahan et al., 2010), marketing and distribution (Vachani and Smith, 2008, London and Hart, 2004), but an integrated supply chain perspective for BOP projects is missing. This is important since numerous scholars suggest that supply chains and business models at the BOP in developing countries require entirely different approaches mainly due to numerous existing constraints and institutional barriers (London and Hart, 2004).

Since the BOP literature shifted from a consumer-oriented perspective to co-creation and inclusion of BOP communities into the value chain activities (Simanis and Hart, 2008), there is need for cross-fertilization between the BOP and sustainable supply chain management (SSCM) literature streams. The cross-fertilization of the two disciplines seems suitable mainly because SSCM literature has been focusing mostly on environmental aspects and neglected social issues from the intellectual discourse (Sancha et al., 2015), while BOP has focused on socially and economically viable business models while neglecting the ecological dimension (Gold et al., 2013, Kolk et al., 2014). Therefore, by integrating the two perspectives, social issues could be joined into SSCM discourse and BOP literature can be complemented with insightful supply chain models and ecological aspects for BOP markets. Therefore, this study aims to fill this gap and investigates sustainable supply chain practices at the BOP markets and attempts to develop models for sustainable supply chain activities in the areas of sourcing, making and delivering. To accomplish this, a sample of 18 cases of BOP products and their supply chains are investigated based on secondary data analysis. The BOP supply chain models aim to reveal best practices on how MNC can design their supply chains in developing countries for BOP markets while accounting for local societal development. In this manner, the developed BOP supply chain models serve as the basis for a comparison with traditional supply chains in industrialized markets and are evaluated in regard to their potential to overcome institutional barriers and constraints at the BOP.

This paper is structured as follows: section two provides a comprehensive literature review of the relevant streams of research aiming to identity research gaps and research questions. Section three details the research design including the case selection, data collection and analysis techniques. Section four reports the findings by presenting the BOP supply chain models. The discussion, theoretical and practical implications are contained in section five, six and seven, respectively.

Section snippets

Literature review and research gap

In this section, several research streams are reviewed in order to highlight the existing research gaps. Firstly, the BOP discourse is presented with the overview of main strategies and constraints encountered by MNC targeting the BOP. Secondly, the SSCM stream is explored in order to identify potential cross-fertilization points with the BOP discourse. Thirdly, SSCM issues in BOP research are presented. Fourthly, the research gap is highlighted and the objectives of this study derived.

Research design

In order to fulfil the research objectives a multiple case study design is employed. A multiple case study design allows for investigation across different contexts (Gibbert et al., 2008) and analytical generalizations (Eisenhardt, 1989). The selection of cases is based on theoretical sampling, which means that cases are selected purposefully for theoretical reasons in order to “replicate and extend the emerging theory” (Eisenhardt, 1989). In order to use this approach, an extensive knowledge

Findings: sustainable supply chain operations at the BOP

The BOP supply chain models, derived from the 18 cases, are described in this section (see Fig. 3 for an overview) with specific patterns and examples. The first level of categorization is based on the three adjusted SCOR categories, plan and source, make and deliver. There are several supply chain models (in bold) for each SCOR category. These models can be operationalized differently and therefore Fig. 3 illustrates models, patterns and examples, where applicable. For example, low initial

Traditional supply chains compared to models of sustainable supply chain at the BOP

The comparison of the approaches often found in supply chains of industrialized countries, or Top of the Pyramid (TOP), and BOP supply chain approaches aims to uncover the specifics of BOP supply chains and illustrate that traditional approaches used in industrialized countries cannot be simply transferred to BOP in developing countries. On a local level, MNC face challenges that traditional supply chain concepts common in industrialized countries are not able to deal with. The BOP supply chain

Inclusion of the local low-income actors into value chains

The investigated sample reveals that in practice the roles BOP are playing in the value chain are still limited. Indeed, they could theoretically be involved at different stages in the value chains. Yet, in practice there are only very few cases in which the BOP actors are involved at all stages of the value chain. For example, the low-income actors are employed as co-designers, co-inventors or partners in the case of Chotukool and TATA Swach. However, their involvement as co-designers and

Implications, limitations and further research

This paper brings together two separate fields of research, BOP and SSCM, and aims to fill a research gap in the SSCM literature with aspects of great interest from the BOP perspective. It derives supply chain models from the investigation of 18 BOP products and their supply chain operations in developing countries. In this manner, our research has several important contributions for research and practice. Firstly, from a theoretical perspective this research closes the gap of SSCM for BOP

Conclusion

This research develops sustainable supply chain models for BOP markets in developing countries. The supply chain models are of high relevance for both theory and practice. From a theoretical perspective, it extends the sustainable supply chain perspective with regard to BOP markets and the poverty alleviation aspects of sustainability. In this sense, this study fills in an important research gap on the cross-fertilization between BOP and SSCM literature and extends the work of Hall and Matos

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Sustainable supply chain models for base of the pyramid

Highlights

Abstract

Introduction

Section snippets

Literature review and research gap

Research design

Findings: sustainable supply chain operations at the BOP

Traditional supply chains compared to models of sustainable supply chain at the BOP

Inclusion of the local low-income actors into value chains

Implications, limitations and further research

Conclusion

J. Clean. Prod.

J. Bus. Res.

Int. J. Prod. Econ.

J. Clean. Prod.

J. Clean. Prod.

Eur. J. Oper. Res.

Long. Range Plan.

Int. Bus. Rev.

J. Bus. Res.

Int. J. Prod. Econ.

J. Oper. Manag.

J. Bus. Res.

J. Clean. Prod.

J. Clean. Prod.

J. Clean. Prod.

J. Oper. Manag.

Int. J. Prod. Econ.

Technovation

Int. Bus. Rev.

Int. Bus. Rev.

J. Clean. Prod

J. Clean. Prod.

Ind. Mark. Manag.

Soc. Econ. Plan. Sci.

J. Oper. Manag.

Long. Range Plan.

Expanding opportunity at the base of the pyramid

People Strat.

Serving the world's poor: innovation at the base of the economic pyramid

J. Bus. Strat.

Performance-oriented Integration of Combined Transport into Supply Chain Concepts

What does a goat have to do with development? Diasporas, IT, and the case of Thamel.com

Inf. Technol. Int. Dev.

A framework of sustainable supply chain management: moving toward new theory

Int. J. Phys. Distrib. Logist. Manag.

Overcoming entrepreneurship development constraints: the case of Bangladesh

J. Enterp. Commun. People Places Glob. Econ.

A taxonomy for selecting global supply chain strategies

Int. J. Logist. Manag.

The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else

Lipstick evangelism: Avon trading circles and gender empowerment in South Africa

Gend. Dev.

Success factors of new product development for emerging markets

Beyond the business case for corporate sustainability

Bus. Strat. Environ.

The roots of sustainability

MIT Sloan Manag. Rev.

Building theories from case study research

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