Teaching Case – Zara: The World’s Largest Fashion Retailer

The Case Centre has recently selected the winners of their 2017 Awards and Competitions. This year’s winning case in the Production and Operations Management category is closely related to supply chain management: Zara: The World’s Largest Fashion Retailer, written by Kasra Ferdows, Jose A.D. Machuca & Michael Lewis. This case is an updated version of the 15th in the ranking of top 40 overall best selling Zara case. The new case “presents a detailed and updated description of Zara’s unique operating model and many of its best practices: its retailing, design, order administration, production, and distribution systems” and “also includes new sections about Zara’s on-line business and Inditex’ increased attention to ethical and sustainability issues in its extended supply chain”. The learning objectives cover several important aspects of global supply chain management, including the design and operations of global supply networks, making this teaching case particularly relevant for courses related to our discipline.

Implications from the Rana Plaza Disaster (Guest Post by Brian Jacobs and Vinod Singhal)

Today’s guest post comes from Brian Jacobs and Vinod Singhal, who present the results of their recent research on social issues in global textile supply chains.

Rana Plaza, an eight-story building in Bangladesh that housed garment factories employing approximately 5000 workers, collapsed on April 24, 2013. The resulting fatalities (over 1100) and injuries (over 2400) made it one of the worst industrial accidents in history. The scale of this tragedy increased awareness of the risks and costs of sourcing from low-cost countries. Such risks and costs are often assumed to be sufficient to motivate firms to source production in developed, high-cost countries rather than developing, low-cost countries. To examine this assumption, we studied the stock market reaction to 39 global apparel retailers with significant sourcing in Bangladesh. We found that although stock market reaction to retailers on the day of the Rana Plaza disaster was negative, its magnitude and significance dissipated by the following day. Our research shows that capital market forces alone are insufficient to prevent tragedies such as the Rana Plaza disaster, or to motivate large scale changes in sourcing patterns. In fact, garment exports from Bangladesh have increased since 2013 even though substandard working conditions persist. While managers should weigh ethics and their moral obligation in addition to financial considerations, it is doubtful that firms can affect the needed changes without participation by non-market forces such as NGOs and policymakers. For full details of our research, please see our article The Effect of the Rana Plaza Disaster on Shareholder Wealth of Retailers: Implications for Sourcing Strategies and Supply Chain Governance, forthcoming in Journal of Operations Management.

Vinod Singhal is a Professor of Operations Management and holds the Charles W. Brady Chair at the Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia. Brian Jacobs is an Associate Professor of Supply Chain Management at the Eli Broad College of Business, Michigan State University, East Lansing, Michigan.

Jacobs, B., & Singhal, V. (2017). The Effect of the Rana Plaza Disaster on Shareholder Wealth of Retailers: Implications for Sourcing Strategies and Supply Chain Governance. Journal of Operations Management DOI: 10.1016/j.jom.2017.01.002

Value of Air Cargo: Air Transport and Global Value Chains

I recently found an interesting report: Value of Air Cargo: Air Transport and Global Value Chains, published by Developing Trade Consultants. The authors write: “Global Value Chains (GVCs) represent a new trade and development paradigm. They enable countries to specialize in narrowly defined tasks, such as component production, research and development, or assembly. Tasks originating in a variety of countries are then combined through a complex network of trade and investment links, to produce finished goods […].” The report analyzes data to investigate the linkages between GVC trade and air cargo. It shows that countries engage in more trade in value terms if they have better air cargo connectivity – which is measured by an “Air Connectivity Index”. A strong association is found between a higher ACI score (i.e. stronger air connections to more countries) and a higher total trade value: “[O]ne percent increase in air cargo connectivity is associated with a 6.3% increase in total exports and imports.”

The Pen Is Mightier than the Keyboard

My students tend to use their laptops in classes. I have forwarded this very interesting article by Mueller & Oppenheimer (2014) to them. It was published in one of the most influential journals in psychology and contains good arguments to stop this practice. First, the authors summarize existing research that finds that laptops serve as distractions. Students typically self-report a belief that laptops in class are beneficial. Even when they admit that laptops distract them, they believe the benefits outweigh the costs. Research finds that students using laptops are not on task, show lower academic performance, and are less satisfied with their education than students who do not use laptops. Second, the authors’ own results suggest that “even when laptops are used solely to take notes, they may still be impairing learning because their use results in shallower processing”. They found that “students who took notes on laptops performed worse on conceptual questions than students who took notes longhand”.

Mueller, P., & Oppenheimer, D. (2014). The Pen Is Mightier Than the Keyboard. Psychological Science, 25 (6), 1159-1168 DOI: 10.1177/0956797614524581

Global Supply Chain Report 2017 (Guest Post by Dexter Galvin)

I am happy to share the following guest post by Dexter Galvin, Head of Supply Chain, CDP. Thank you for contributing to my blog.

Our latest Global Supply Chain Report 2017, written in partnership with BSR and the Carbon Trust, revealed emissions savings of 434 million tonnes disclosed by suppliers in 2016. That’s more than the annual emissions of France, and it shows that the supply chain is a critical component – the missing link – in securing our sustainable, low-carbon future. Our data showed that supply chain action isn’t just about reducing emissions; it’s also good for the bottom line. Companies with emissions reduction projects disclosed cost savings of $12.4 billion as a result of their carbon-cutting measures – double what was reported in 2015. Almost half of the top 100 projects by savings were related to energy efficiency, and with a payback period of three years or less, the majority of projects had an attractive investment profile too. While the savings achieved by suppliers were certainly impressive, around half of the 4,300 companies we surveyed didn’t report any emissions reduction activities at all. So think what the impact could be – on costs and carbon levels – if they all took action?

Dexter runs the Supply Chain program at the global climate change NGO, CDP, from their London Headquarters. He has launched a number of important global initiatives to drive climate action in private and public sector supply chains, including CDP’s Action Exchange initiative. You can follow him on Twitter: @GalvinDex

Shifting from “Linear Thinking” towards “Circular Thinking”

Shifting from “company thinking” to “supply chain thinking” has successfully replaced the system, managers had in mind when making their decisions. This shift has put some of the parts of what has formerly been considered the company’s unmanageable environment into their unit of analysis. A supply chain, however, is per definition linear. In the age of sustainability, we might thus need to go one step further and shift from “linear thinking” towards “circular thinking”. The circular economy (or closed-loop supply chain) could replace the linear system by a circular system in the minds of decision makers. This is illustrated in a video released by the European Commission.

SCM – It’s All About Data

The volume, variety and velocity of business and supply chain data are increasing dramatically. At the same time, improved technologies, such as artificial intelligence and machine learning, are already on the horizon. Ernst & Young has recently published an interesting report, titled Digital Supply Chain: It’s All About That Data. The authors make one thing very clear: “Companies must act now to focus, simplify and standardize big data through an enterprise data management strategy.” If companies fail to do so, the authors argue, “technology will drive increasing data cost, complexity and inefficiency; companies will be unable to benefit from advanced analytics like machine learning; and they will be unprepared for the next wave of data growth triggered by new technologies like IoT and blockchain.” In other words, companies fail to be successful unless they become masters of their supply chain data. Maybe business schools should increase the proportion of IT knowledge in their SCM curricula?

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