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Supply Chain Resilience 2022

This year Raconteur has once again put together a very readable report entitled Supply Chain Resilience 2022. The authors ask, “As disruption continues to plague international supply chains, what can organisations do to build resilience and ensure efficiency?” And they provide answers: “From reducing waste and cutting costs to onshoring and upgrading systems, our Supply Chain Resilience report explores the strategies making the difference”. The report contains short articles on very interesting topics including Brexit, predictive analytics, striking staff, supply chain tech investments, just-in-time vs. just-in-case, chip crisis, robotics, food waste, air cargo, and sustainable commerce. I particularly enjoyed an article that shows how global supply chains have been rocked by climate change, geopolitical instability and more, and that provides examples of different industries adapting to these challenges. It is not the first time that I am writing about Raconteur’s reports here. I am always amazed at the high quality of their work.

Solar PV Global Supply Chains

The International Energy Agency has just released a new special report entitled Solar PV Global Supply Chains. It examines solar PV (= photovoltaic) supply chains “from raw materials all the way to the finished product, spanning the five main segments of the manufacturing process: polysilicon, ingots, wafers, cells and modules”. The authors argue that “[p]utting the world on a path to reaching net zero emissions requires solar PV to expand globally on an even greater scale, raising concerns about security of manufacturing supply for achieving such rapid growth rates – but also offering new opportunities for diversification”. It becomes clear from the report that China currently dominates such supply chains and that diversification can reduce supply chain vulnerabilities and offer economic and environmental opportunities. According to the authors, policy makers need to aim for (1) diversifying manufacturing and raw material supplies, (2) de-risking investment, (3) ensuring environmental and social sustainability, (4) continuing to foster innovation, and (5) developing and strengthening recycling capabilities.

That’s Interesting! That’s Important! Or Both?

Should academic articles be interesting? At least that is the main message of the famous article That’s Interesting! Towards a Phenomenology of Sociology and a Sociology of Phenomenology by Davis (1971). Generations of Ph.D. students have read it, and those who have not should definitely do so. However, there are also authors who have criticized Davis’s arguments. In an article entitled That’s Interesting! A Flawed Article Has Influenced Generations of Management Researchers, Tsang (2022) recently identified five detrimental outcomes that result from “obsession with interestingness”: (1) promoting an improper way of doing science, (2) encouraging post hoc hypothesis development, (3) discouraging replication studies, (4) ignoring the proper duties of a researcher, and (5) undermining doctoral education. Similarly, Academy of Management Journal’s editor Tihanyi (2020) titled his recently published editorial From “That’s Interesting” to “That’s Important”. As so often, the truth probably lies somewhere in the middle. In order to find it, it is definitely worth looking into these three articles during the summer holidays.

Davis, M.S. (1971). That’s Interesting! Towards a Phenomenology of Sociology and a Sociology of Phenomenology. Philosophy of the Social Sciences, 1(2), 309–344. https://doi.org/10.1177/004839317100100211

How a Disruption in Gas Imports From Russia Could Affect Global Supply Chains

A few days ago, the G7 countries rejected Russian demands to pay for future gas supply in rubles. Robert Habeck, Germany’s Federal Minister for Economic Affairs and Climate Action, therefore activated the early warning stage of the country’s gas emergency plan yesterday. Today, Russian President Putin signed a decree halting gas supplies unless paid for in rubles. It is not yet clear what the consequences of this decree will be, as it also contains loopholes. However, what would happen if Russia really stopped exporting energy to Europe? A study conducted by leading economists, entitled What If? The Economic Effects for Germany of a Stop of Energy Imports From Russia, examines the economic impact on Germany. The authors are cautiously optimistic, but the effect will certainly ripple through numerous industrial supply chains. One can hardly imagine the global supply chain consequences if, for example, the world’s largest chemical company BASF had to stop its processes due to a lack of gas. It is now becoming apparent how dependent Germany has become as a result of its focus on Russia as the single source of supply and how urgent it is to switch to renewable energies even faster in order to minimize this dependency.

A War in the Middle of Europe

The world is shocked by the Putin regime’s war of aggression against Ukraine – a war in the middle of Europe. It almost seems to me that our species has climbed back into the trees. This war already has many impacts on supply chains, and further implications will only become apparent with a time lag. Instead of taking the long necessary step to expand renewable energies, many EU countries have relied on cheap oil and gas supplies from Russia for too many years. This omission is now taking its revenge by restricting the scope for sanctioning the aggressor. High-tech products also depend on raw materials (e.g., palladium and neon) from Russia and Ukraine. This certainly adds to the current shortage of chips. The effects of this war on food supply chains could be particularly dramatic. Russia supplies important potash fertilizers and many countries around the world are urgently dependent on wheat harvests from Ukraine. But the fields will remain fallow this year.

European Commission’s Directive on Corporate Sustainability Due Diligence

Yesterday, the European Commission adopted a long-awaited Proposal for a Directive on Corporate Sustainability Due Diligence. It aims to “set out a horizontal framework to foster the contribution of businesses operating in the single market to the respect of the human rights and environment in their own operations and through their value chains, by identifying, preventing, mitigating and accounting for their adverse human rights, and environmental impacts, and having adequate governance, management systems and measures in place to this end”. Importantly, the proposal covers the company’s own operations, their subsidiaries and their value chains (indirect and direct business relationships). It covers large companies (500 employees, €150 million net turnover worldwide) and additional companies operating in defined high impact sectors. I am sure many supply chain managers, not just in Europe, will have the 70-page document on their nightstand as required reading for the next few days.

Personal Predictions for Supply Chain Management in 2022

The year 2022 has been going on for quite a while. I see the following topics at the top of the agenda in both academia and business: First, the last few months have been characterized by a large number of supply chain hiccups. Missing chips in the automotive industry have become a symbol of this development. Therefore, supply chain resilience is more important than ever. Second, a lot is currently happening in the European Union in terms of supply chain laws. Stricter rules on supply chain liability are expected shortly, and several EU countries have recently pushed their legislation forward. Third, many companies are transforming their linear into circular supply chains, see the new DHL report entitled Delivering on Circularity. Finally, many companies are also concerned with net-zero goals – and more importantly with action plans for these goals. Many of these plans explicitly involve the supply chain. Although I am a bit late, I wish you a good supply chain year 2022.

What the 2021 Nobel Prize Means to SCM Research

This year’s Nobel Memorial Prize in Economics goes to David Card “for his empirical contributions to labour economics” and Joshua D. Angrist and Guido W. Imbens “for their methodological contributions to the analysis of causal relationships”. The Royal Swedish Academy of Sciences writes in a comprehensive article about the scientific background of this prize (PDF): “Taken together, […] the Laureates’ contributions have played a central role in establishing the so-called design-based approach in economics. This approach – aimed at emulating a randomized experiment to answer a causal question using observational data – has transformed applied work and improved researchers’ ability to answer causal questions of great importance for economic and social policy using observational data.” Similar to what is still widespread in SCM research today, the traditional approach to causal inference in economics relied on structural equation models at least until the 1980s, but, based on the laureates’ work on the local average treatment effect, natural experiments have become increasingly popular in economics. Unfortunately, almost no corresponding research exists in our discipline, but a certain number of natural experiments were carried out in related disciplines (e.g.; Lee & Puranam, 2017; Li & Zhu, 2021; Huang et al., 2021). Perhaps this Nobel Prize can serve as an inspiration for more natural experiments also in the SCM discipline?

Supply Chain Resilience 2021

In association with The Times, Raconteur has recently published a very insightful report, entitled Supply Chain Resilience 2021. It covers many interesting stories. For example, the report urges us to rethink just-in-time ordering, because “the global semiconductor shortage has highlighted the pitfalls of procuring parts right at the moment they’re needed”. Another interesting article in the report asks what the supply chain industry can learn from the Greensill Capital collapse: “Greensill Capital, the ill-fated provider of supply chain finance, claimed to be offering vital support for hard-pressed small firms, but is SCF all that good for SMEs?” A third article I would like to highlight is about net-zero logistics: “The decarbonisation of supply chains is as critical to [a country’s] net-zero ambitions as it is difficult to achieve, but innovations are emerging to address the problem areas of air freight, shipping and road haulage.” Much of the report is in line with my own view of resilience.

Webinar: “Supply Chain Transformation for a Sustainable Future”, September 8, 2021

How can innovation and new business models transform global supply chains in the transition to a sustainable economy? On September 8, I look forward to joining Juliane Reinecke (King’s College London), together with our speakers from Anglo American and the World Economic Forum, to discuss this topic in a webinar on Supply Chain Transformation for a Sustainable Future. Please register at: https://cbs.nemtilmeld.dk/300/