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Accelerating the Path to Net-Zero Supply Chains

The “No-Excuse” Framework to Accelerate the Path to Net-Zero Manufacturing and Value Chains is a new white paper that aims to provide businesses with the information they need to operationalize their commitments to reducing carbon emissions and addressing the climate crisis. The framework is intended to be a central tool for the World Economic Forum Industry Net Zero Accelerator initiative, which is designed to bring together leaders across industry sectors, academia, government, and civil society to jointly shed light on global insights and best practices for reducing emissions. The framework is divided into four stages: (1) build the foundations, (2) change the game internally, (3) drive systemic collaboration, and (4) make it simple, inclusive and exciting. Each stage of the framework consists of a combination of research-based insights, well-established action areas, and emerging themes. The goal of the framework is to be applicable across key industries and geographies. This white paper is the first output of the Industry Net Zero Accelerator initiative and further resources are available for chief executive officers at the Alliance of CEO Climate Leaders.

Personal Predictions for Supply Chain Management in 2023

As in previous years, I am making a prediction about what could be important topics in supply chain management research. Here are three predictions: (1) OpenAI has demonstrated the incredible potential of machine learning, and this will have numerous implications for the management of supply chains. It is important for our discipline to consider the potential and drawbacks of this technology at an early stage. (2) Supply chain resilience remains a critical issue. For example, the recent resurgence of Covid-19 cases in China could lead to the closure of ports and factories, which would disrupt global supply chains. This topic will continue to be relevant in the future. (3) The climate and biodiversity crises continue to worsen, and their solutions are closely tied to supply chains. Human-caused emissions and the destruction of rainforests are directly related to supply chains, and new laws, such as those in Germany and the EU, reflect this. I wish you all a Happy New Year 2023.

OpenAI and Its Impact on Supply Chain Management

OpenAI has attracted a lot of attention in recent weeks, and for good reason. The research institute, which focuses on developing artificial intelligence technologies and promoting their safe and responsible use, has made significant strides in advancing the field of AI. One area where OpenAI could have a significant impact is in the field of supply chain management. The ability to analyze large amounts of data quickly and accurately could be useful for optimizing supply chain processes, identifying inefficiencies, and making more informed decisions. However, there are also potential drawbacks to the use of AI in supply chain management. There is a risk that the technology could be used to automate jobs and potentially displace human workers. There are also concerns about the ethical implications of using AI in decision-making, such as the potential for bias in the algorithms that drive the technology. Overall, the use of AI in supply chain management has the potential to be both beneficial and detrimental. It is important for researchers and educators in this field to carefully consider the potential impacts of this technology and to develop strategies for addressing the challenges it presents. This blog post was generated using ChatGPT, a chatbot platform developed by OpenAI.

The Threat to Supply Chains from Rising Gas Prices

Due to the Russian invasion of Ukraine, the European Union is currently experiencing a massive increase in gas prices. This threatens the resilience of many supply chains. An analysis by the Halle Institute for Economic Research (IWH) now shows that a small group of just 300 products causes a large part of almost 90% of the gas consumption of German industry during their manufacture. The five products with the highest gas consumption per euro of sales belong to the basic chemical industry. The analysis also shows that rising gas prices mainly lead to production cutbacks in gas-intensive products that can easily be replaced by imports. Therefore, despite domestic production outages, no significant disruptions to the supply chains are to be expected. “German industry can save a lot of gas with a small drop in sales if gas-intensive products are no longer manufactured in-house but imported,” says Steffen Müller, one of the authors of the analysis.

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.