Developing a framework for sustainable supply chain innovation in the South African FMCG industry

Abstract

The competitive advantage of a fast-moving consumer goods (FMCG) business is underscored by the strength of its supply chain in comparison to that of competitors. As a result, competition within the South African FMCG industry is extremely fierce and exacerbated by technological advancements, changing customer preferences, low profit margins, high inflation rates, and an increase in the demand for more environmentally sustainable products. Consequently, businesses within the industry have opted to use innovation within their supply chain to differentiate themselves from their competition. However, a focus on innovation alone is not sustainable. As such, the primary objective of this study was to develop a framework for sustainable supply chain innovation (SSCI) within the South African FMCG industry, by identifying and evaluating the importance of critical factors necessary for the attainment of sustainable supply chain innovation. A quantitative research strategy was used with a combination of exploratory and descriptive (cross-sectional) research designs that were implemented in this study. The target population consisted of supply chain managers at FMCG businesses in South Africa. A non-probability sampling method with a convenience sampling technique was used to draw the sample, and 526 usable responses were obtained. A structured questionnaire was used to collect the primary data of the study by means of a survey that was made available to an online panel of a specific market research agency. The Statistical Consultation Services of the North-West University analysed the empirical data and included assessing the Cronbach’s alpha coefficient values for establishing reliability, conducting confirmatory factor analysis to establish validity, calculating descriptive statistics, and conducting structural equation modelling (SEM) to test the conceptual model. The descriptive results indicated that risk management received the lowest score among all relational practices, environmental performance received the lowest score among all performance indicators, and network structure received the lowest score in terms of the supply chain innovation elements. Furthermore, results from the SEM indicated an acceptable model fit, with statistically significant structural paths supporting all the hypotheses except for H2. Based on the results, it is advised that FMCG businesses should focus on enhancing their risk management practices by exploring and implementing alternative sourcing arrangements and ensuring that effective and frequent communication with supply chain partners is maintained. In terms of performance indicators, a focus on adopting sustainable practices such as developing rigorous environmental objectives, pursuing recycling initiatives, and reducing air emissions are proposed. Furthermore, the use of innovation in business processes is recommended whereby Abstract vi advanced manufacturing technologies can be used as well as collaboration between FMCG businesses and universities. It is also advised that FMCG businesses develop and foster a culture of transparency, mutual concern, and shared governance between the business and its supply chain partners, as well as engaging in partnerships that advance the attainment of sustainable supply chain innovation. Several theoretical as well as managerial contributions were made. This study’s theoretical contribution is also highlighted by the fact that relational practices, performance indicators, and supply chain innovation elements have not been investigated in the global or South African FMCG industry. Consequently, the research findings make a significant theoretical contribution to existing business management literature, which may also serve as a direction for future studies. The conceptual framework posited in this study confirmed the effect and interrelationships between the constructs, and the study was the first to test these constructs as a multi-dimensional construct. As such, the study also provided more insight pertaining to the antecedents of SSCI (including relational practices, performance indicators, and SCI elements). In addition, the study was also the first to empirically test the effect of the performance indicators on SCI elements. In terms of managerial contributions, the findings of this study can assist managers and employees of FMCG businesses in enhancing their understanding of SSCI and the identified antecedents. In addition, a framework for sustainable supply chain innovation was developed and proposed from the literature, as well as empirical results. The framework highlighted that internal commitment (from the business) as well as external commitment (from supply chain partners) are important for the attainment of sustainable supply chain innovation. The framework comprises five steps that can be used by businesses in the South African FMCG industry to identify the scope of transitions needed for the attainment of SSCI. This study also proposes various conclusions and recommendations to FMCG businesses regarding SSCI. Recommendations for future research include using a qualitative research strategy to gain an in-depth understanding of the challenges hindering sustainable supply chain innovation in the FMCG industry.