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The Digital Supply Chain Transformation

“Accelerating technology and automation are resulting in wholesale transformation of the supply chain profession.” This is the key message of EY’s new report, titled Supply Chain: Skills for the Digital Era. It is not long, but definitely a good read. The report states that “[p]rocesses with repeatable elements such as planning, monitoring and forecasting can all be automated and enhanced by robotics, artificial intelligence and advanced analytics”. The authors observe that this leads to a transformation of supply chain management: “Where performance improvement in the past may have focused on the optimisation of individual operational areas, it now needs to harness a broader view that understands, for example, how supply chain impacts on profitability.” The report ends by identifying four future personas for the supply chain, based on their mindset (data-driven vs. vision-led) and style (investigative vs. collaborative): There are technologists, orchestrators, analysts and innovators. Does our research and teaching cover all of them?

The Supply Chain of Tomorrow

It is time for a new video! Future Insights Network’s CEO and Co-Founder, Maria P. Villablanca, recently talked to me about the supply chain of tomorrow. Enjoy watching the video…

Justice as Fairness in the Supply Chain

Among the most interesting SCM articles I have recently read is Jack et al.’s (2018) recent study, titled Accounting, Performance Measurement and Fairness in UK Fresh Produce Supply Networks. Why I highlight this study here is because this is one of the rare interpretive studies related to SCM and it could therefore serve as a blueprint for those of us who struggle with the dominance of positivist studies in our discipline. The authors build on John Rawls’ theories of justice as fairness and apply it to the supply chain relationships between suppliers and supermarkets. They then ask three questions: First, “how performance measurement, risk management and communication of accounting information are used by intermediaries in an allegedly unfair commercial environment”. Second, “the extent to which the accounting and control practices observed support perceptions that suppliers in supermarket-dominated supply networks are treated unfairly”. And third, “what accounting and control practices would be indicative of fair commercial relationships?” I wish I could see more studies like this.

Jack, L., Florez-Lopez, R., & Ramon-Jeronimo, J.M. (2018). Accounting, Performance Measurement and Fairness in UK Fresh Produce Supply Networks. Accounting, Organizations and Society, 64, 17-30 https://doi.org/10.1016/j.aos.2017.12.005

Personal Predictions for Supply Chain Management in 2019

The 20th century was dominated by an analog, linear and fossil economy, but we are about to shift to an economy that is digital, circular and post-fossil. It seems obvious that our discipline, to remain relevant, needs to drive this transition rather than clutching at obsolete managerial practices and theoretical perspectives. Those who participate in developing new business models will gain a first-mover advantage, while those trying to keep the 20th-century economy alive will soon be forced out of business.

My personal predictions for 2019 relate to these transitions. First, robotic process automation and process mining are increasingly shaping the way of modern business. This will have a tremendous influence on end-to-end business processes. Great chances are within our reach, as learning machines are taking over increasingly complex tasks from white-collar workers. But we should not overlook the danger of a small number of IT giants using their scripts to centrally control the majority of our global supply chain processes.

Second, we sometimes seem to assume that we can change the laws of nature, just like other laws. This becomes clearer when moving into the anthropocene epoch. But planetary boundaries, including the Earth’s carbon budget, cannot be negotiated or abolished like budgets in business. We simply have to accept that exponential growth and a capped number of planets – and this number is 1 – do not fit well together. One does not need to be good in math to understand that if we cannot change the number of planets, it will have to be our supply chains that will need a radical and ambitious transformation. But how can we achieve degrowth and decarbonization in our supply chains? We could shift from linear supply chains to circular ones, from selling products to selling services (e.g. the right to use instead of owning a phone), from consumer orientation to user orientation. Thus, SCM theory needs to shift away from the “consumer” of things they don’t need towards the “user” of limited resources. This would incentivize producers to keep resources in the loop instead of building products for the scrap yard.

Millennials are not primarily driven by income, but by doing something meaningful. They are scared by the climate crisis. My wish for 2019 is that we all start teaching them that they can be part of an exciting journey that could simultaneously save our planet and create income and wealth. Let us hope the best for 2019 and beyond!

Ecosystems vs. Supply Chains

There has recently been surge of interest in ecosystems as a distinct solution to the problem of inter‐firm coordination. Ecosystems play a particular role in sectors such as IT, telecommunications, video games, among others. In their recent SMJ article, Jacobides et al. (2018) define an ecosystem as “a set of actors with varying degrees of multilateral, nongeneric complementarities that are not fully hierarchically controlled”. From their research it becomes apparent why and when ecosystems emerge, and what makes them distinct from other governance forms, including markets, alliances, or hierarchically managed supply chains. An important difference between ecosystems and supply chains is that in supply chains “the hub (OEM, or buying firm) has hierarchical control—not by owning its suppliers, but by fully determining what is supplied and at what cost”, whereas ecosystems tend to be rather modular. The authors also reflect on “when we might expect to see ecosystems displace traditional market‐based arrangements or vertically integrated supply chains”.

Jacobides, M.G., Cennamo, C., & Gawer, A. (2018). Towards a theory of ecosystems. Strategic Management Journal, 39 (8), 2255-2276 https://doi.org/10.1002/smj.2904

Balancing Efficiency and Resilience in Multimodal Supply Chains

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.

CfP: 2019 CSCMP European Research Seminar

The 14th CSCMP European Research Seminar will be held in Warsaw on May 16th and 17th, 2019. Please find the call for papers on the webpage of the 2019 CSCMP European Research Seminar.

Assessing Tobacco’s Global Environmental Footprint

“Cigarette production and consumption have seen dramatic growth in recent decades and although the health effects of smoking are widely recognized, its impacts on the environment are largely overlooked”, the authors of a new World Health Organization report argue, which is titled Cigarette Smoking: An Assessment of Tobacco’s Global Environmental Footprint Across Its Entire Supply Chain (pdf). The report explicitly takes a supply chain perspective: “From tobacco cultivation and curing, to cigarette manufacturing, distribution, consumption and discarding, every stage in the global tobacco supply chain involves considerable resource inputs, and results in the production of wastes and emissions. Consequently, tobacco puts pressure on the planet’s already stressed natural resources and its fragile ecosystems, threatening the livelihoods and future development of communities around the world.” What I learned from the report is that “tobacco’s total environmental footprint is comparable to that of entire countries and its production is often more environmentally damaging than that of essential commodities such as food crops”.

Land Use in Food Supply Chains

New research published in Science (Poore & Nemecek, 2018) analyzes land use in food supply chains. An astounding 3.1 billion ha reduction in land use could be possible by excluding animal products from current diets. That is an area equivalent to Australia + China + European Union + United States. The author also shows that animal products use about 83% of the world’s farmland and contribute about 57% of food’s different emissions, despite providing only 18% of our calories. These findings demonstrate that we need to shift from “company thinking” to “supply chain thinking” if we want to see the full picture.Moving from current diets to a diet that excludes animal products has transformative potential, reducing food’s landuse by 3.1 billion ha (a 76% reduction) – an area equivalent to Australia, China, the European Union and the United States.

Poore, J. & Nemecek, T. (2018). Reducing Food’s Environmental Impacts through Producers and Consumers. Science, 360 (6392), 987–992. https://doi.org/10.1126/science.aaq0216 (free download)

The Beginning of the End of the “Extended Workbench”?

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.