DHL has recently released the fifth edition of their Global Connectedness Index, which provides an analysis of globalization, measured by international flows of capital, trade, information and people. In spite of growing anti-globalization tensions in many countries, the report indicates that globalization hits a new record high, as the aforementioned flows all intensified significantly for the first time since 2007. It is also found that the Netherlands, Singapore, Switzerland, Belgium and the United Arab Emirates are the most connected countries. Europe tops the regional ranking, while a group of Southeast Asian countries beats the expectations by the widest margin. “Surprisingly, even after globalization’s recent gains, the world is still less connected than most people think it is,” comments one of the report’s co-authors, Steven A. Altman. “This is important because, when people overestimate international flows, they tend to worry more about them. The facts in our report can help calm such fears and focus attention on real solutions to societal concerns about globalization.”
In his new report, titled Balancing Efficiency and Resilience in Multimodal Supply Chains, McKinnon (2018) writes: “Over the past twenty years, supply chain resilience has become a hot topic in industrial, government and academic circles – for good reason. Business surveys and a mass of anecdotal evidence have revealed that supply chains have become more vulnerable to disruptions and the consequences of these disruptions become more severe. […] Despite this attention and research efforts, many companies are still at an early stage in the development and implementation of supply chain risk management strategies.” The author examines “how efficiency and resilience can be balanced in the management of multi-modal supply chains”. The author further “investigates the trade-off between supply chain resilience and efficiency, the approaches to sustainability in supply chain management, innovation and technological development, collaboration and alliances and risk mitigation”. The report summarizes findings from a Roundtable of the International Transport Forum held in April 2018. A call for papers deals with supply chain resilience.
McKinnon, A. (2018). Balancing Efficiency and Resilience in Multimodal Supply Chains. International Transport Forum Discussion Papers, OECD Publishing, Paris.
The United Kingdom has been one of the key links in EU supply chains for more than 40 years. BBC Newsnight has recently reported on how Brexit could break that chain and what the consequences could be for manufacturers. I like the video and have used it for my Supply Chain Risk Management course to discuss this topic with my students.
Exports can be decomposed into a foreign value added (FVA) and a domestic value added (DVA) component. FVA is a key measure of the importance of global supply chains. It refers to the imported goods and services incorporated in a country’s exports. DVA relates to the contribution of a country’s own (i.e. domestic) factors of production. The 2018 World Investment Report, recently published by UNCTAD, shows that “[f]rom 1990 until 2010, the share of FVA in total exports rose continuously, contributing to the growth in global trade” and, “in the past decade, for the first time in 30 years, the growth […] has come to a halt, with the share of FVA declining to 30 per cent in 2017”. But what are the reasons for a declining importance of the “extended workbench” model? First, the model is based on arbitrage; however, the economic success of emerging countries has led to an increase in labor costs. Second, manufacturing in high-wage countries is becoming increasingly profitable due to recent advances in robotics.
The Guardian has recently published an interesting article with a provoking title: Why We Should Bulldoze the Business School. The author writes: “[In] the business school, both the explicit and hidden curriculums sing the same song. The things taught and the way that they are taught generally mean that the virtues of capitalist market managerialism are told and sold as if there were no other ways of seeing the world.” The author demands “an entirely new way of thinking about management, business and markets” and argues: “If we want those in power to become more responsible, then we must stop teaching students that heroic transformational leaders are the answer to every problem, or that the purpose of learning about taxation laws is to evade taxation, or that creating new desires is the purpose of marketing. In every case, the business school acts as an apologist, selling ideology as if it were science.” To what extent does that also apply for our SCM courses?
The circular economy is gathering momentum: In the future this model could, for example, mean that smartphones will not be sold and consumed anymore, but companies like Apple and Samsung will then keep scarce resources and sell a smartphone service to users instead of a product to consumers. These users will then be required to bring back the phone after a specified amount of time. California Management Review has now published a special issue on the circular economy. Several of the articles of that special issue refer to supply chains and supply chain management; and several of the authors have published in SCM journals before. This indicates that “supply chain thinking” and “circular thinking” are increasingly stimulating each other. I would even go so far to say that the 21st century’s supply chain management has to shift from linear to circular. This also has implications for our research. What we might need to re-think is whether the “chain” in “supply chain management” is still the right expression.
A new research report, provided by Mighty Earth, argues that “[deforestation] is the result of a long supply chain that starts on the South American frontier and ends on European plates”. The report is titled The Avoidable Crisis. It reveals that a small group of companies controls the global agricultural trade: “These companies collectively control the majority of global grain trade […]. In addition to their role in trade, these companies also play a more direct role in driving ecosystem conversion by providing plantation owners with financing, fertilizer, infrastructure, and other incentives for new deforestation to expand their supply base. Given their outsized role, these companies have the power to insist that suppliers protect native ecosystems and land rights. But so far, these companies have prioritized reckless expansion over even easy conservation wins.” The authors argue that “[the] EU must send a strong signal to the market by requiring that companies implement measures for transparency and traceability into their supply chains”.
Are business success and sustainability contradictory? A new white paper by Schmidpeter & Bungard, sponsored by DHL, is rather optimistic and argues that both goals can instead be mutually beneficial. The paper is titled Unlock the True Value of Your Supply Chain: Business Success through Sustainable Supply Chain Management. The authors state: “Sustainable Supply Chain Management (SSCM) can help drive positive business change by helping companies save costs, strengthen ‘license to operate’ and generate additional revenue streams.” But the authors also acknowledge that “[a]lthough there are good tools and best practices available for integrating sustainability into your business, there is no silver bullet that will let you realize the benefits of SSCM overnight”. They also acknowledge that the Sustainability department should not do it alone: “The topic of sustainability should be on the agenda for every leader and employee within a company”. The white paper might partly be quite optimistic, but it provides several good practices from business reality.
Today I present my personal predictions for supply chain management in 2018. Sustainability and digitization will certainly top the SCM agenda! First, much more action is needed to combat global warming. SCM could play a key role to cope with this challenge, as a “supply chain” rather than “company” perspective helps to understand that upstream greenhouse gas emissions may occur anywhere in the world. Unfortunately, time is slowly running out! New technologies like blockchain, ID systems like bluenumber and standards like ISO 24000 could help us make a breakthrough. Second, we might see increased momentum to move beyond the machine learning hype. Machine learning could soon be integrated in all kinds of value-creating processes. But while IT giants like Google, Amazon and SAP highlight the strengths and opportunities of such technologies, we should also take the weaknesses and threats into consideration: Will robots take our children’s jobs? And what does all this mean for SCM? 2018 will bring some more questions and hopefully even more answers.