Archive by Author | Andreas Wieland

The UNICEF Supply Chain

Unicef Supply Division, Copenhagen

Last week, I visited UNICEF’s Supply and Logistics headquarters in Copenhagen, together with my International Logistics Management students from Copenhagen Business School. I was very impressed by interesting presentations about UNICEF’s supply chain and the processes of their almost fully automated warehouse. Keep on doing your important work that is essential to fulfill children’s rights to health, education and protection.

Discriminant Validity – An Update

The AVE–SV comparison (Fornell & Larcker, 1981) is certainly the most common technique for detecting discriminant validity violations on the construct level. An alternative technique, proposed by Henseler et al. (2015), is the heterotrait–monotrait (HTMT) ratio of correlations (see the video below). Based on simulation data, these authors show for variance-based structural equation modeling (SEM), e.g. PLS, that AVE–SV does not reliably detect discriminant validity violations, whereas HTMT identifies a lack of discriminant validity effectively. Results of a related study conducted by Voorhees et al. (2015) suggest that both AVE–SV and HTMT are recommended for detecting discriminant validity violations if covariance-based SEM, e.g. AMOS, is used. They show that the HTMT technique with a cutoff value of 0.85 – abbreviated as HTMT.85 – performs best overall. In other words, HTMT should be used in both variance-based and covariance-based SEM, AVE–SV should be used only in covariance-based SEM. One might be tempted to prefer inferential tests over such heuristics. However, the constrained ϕ approach did not perform well in Voorhees et al.’s study.

Fornell, C., & Larcker, D. (1981). Evaluating Structural Equation Models with Unobservable Variables and Measurement Error. Journal of Marketing Research, 18 (1) DOI: 10.2307/3151312

Henseler, J., Ringle, C., & Sarstedt, M. (2015). A New Criterion for Assessing Discriminant Validity in Variance-based Structural Equation Modeling. Journal of the Academy of Marketing Science, 43 (1), 115-135 DOI: 10.1007/s11747-014-0403-8

Voorhees, C., Brady, M., Calantone, R., & Ramirez, E. (2015). Discriminant Validity Testing in Marketing: An Analysis, Causes for Concern, and Proposed Remedies. Journal of the Academy of Marketing Science DOI: 10.1007/s11747-015-0455-4

Empowering Responsible Value Chains

The Rana Plaza factory collapse in Bangladesh in 2013 has opened the eyes of many supply chain managers: Implementing a socially responsible supply chain has, indeed, become an imperative for global corporations and the supply chain management discipline might be in the middle of a paradigm shift. A World Economic Forum report, Beyond Supply Chains: Empowering Responsible Value Chains (pdf; prepared in collaboration with Accenture), examines how companies strive for what the authors call “the triple supply chain advantage” – realizing societal, environmental and business benefits at the same time – and looks at how they intend to achieve it. The authors present a comprehensive set of 31 practices “that provide guidance for companies looking to codify their own specific portfolio of triple advantage improvement measures”. For each of these practices a detailed value assessment and good practices from companies are provided. This report is a good start when implementing a socially responsible supply chain.

Contract Manufacturing

How does contract manufacturing work? The following figure illustrates this.

Contract Manufacturing

Sustainable Supply Chains: A Country Comparison

The global not-for-profit organization CDP (formerly the Carbon Disclosure Project) has published a report: Supply Chain Sustainability Revealed: A Country Comparison. The report was written by Accenture Strategy. “While climate and water risks are apparent, the implications for businesses and economies reliant on complex supply chain models are less understood”, says Paul Simpson, CEO, CDP. “The good news is that as companies transform their supply chains into digital supply networks they will gain greater end-to-end visibility, traceability and access to information to report on their compliance progress and mitigate climate risks”, adds Gary Hanifan, managing director, Accenture Strategy. The report reveals that suppliers in France, the UK, Spain and Germany are identified as the most sustainable ones, whereas suppliers in China, Italy and the U.S. turn out to be particularly vulnerable. The report also shows that Brazil, Canada and India must do more to encourage suppliers to report emission reduction initiatives.

The Ethical Shopper: A Myth?

It has often been assumed that one of the characteristics of SCM philosophy is “a customer focus to create unique and individualized sources of customer value, leading to customer satisfaction” (Mentzer et al., 2001). This assumption has led to business models like Primark, which aim to satisfy customer needs for fashion by making incredibly cheap garments available – so cheap that many teenagers nowadays are used to throw them away after just two weeks. Part of the truth is that such customer needs are not only satisfied by these businesses, but also created by the marketing experts that are part of the system. But to what extend can we expect that customers critically reflect the way they consume? A very interesting article by Michael Hobbes argues: “We’re still trying to eliminate sweatshops and child labor by buying right. But that’s not how the world works in 2015.” Hobbes’ article is titled The Myth of the Ethical Shopper. See also: Supply Chain Management and Corporate Social Responsibility.

Redefining Some Methodological Criteria for Empirical Research

In their new editorial, the editors of the Journal of Operations Management highlight five important issues, “many of which continue to be reasons for rejections in the manuscript review process”. First, “it is time to take causality seriously”. Particularly, authors have to take steps toward correcting for endogeneity or demonstrating exogeneity. Second, “know which rules are worth following”. For example, the yes–no rule that a measure is reliable if Cronbach’s α exceeds 0.7 is no longer recommended. Third, “always understand the tools you use”. Here, authors of PLS-based manuscripts routinely fail to discuss the weaknesses of the estimator. Fourth, “be cautious with claims about common method bias”. Particularly, ex-post techniques (e.g., Harman, 1967) do not have much practical value (see, however, my post about the CFA marker technique). Finally, “stay current on methodological developments”. For example, Baron & Kenny (1986) are widely used, although updated approaches have been published. It seems that the JOM editors no longer send manuscripts to the review process that ignore these issues.

Guide, V., & Ketokivi, M. (2015). Notes from the Editors: Redefining Some Methodological Criteria for the Journal. Journal of Operations Management, 37 DOI: 10.1016/S0272-6963(15)00056-X


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