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How the Term “Supply Chain Management” Was Coined

It is widely known that the term “supply chain management” was popularized by Keith Oliver, among others, in the early 1980s. Interestingly, in a 2003 strategy+business article, Oliver has revealed that, looking for a catchy phrase, his consulting team originally proposed the term “integrated inventory management” (I2M). While, in our modern understanding, SCM is focused not only on intra- but also inter-organizational coordination and typically takes a more strategic perspective, “I2M” already focused on “tearing down the functional silos that separated production, marketing, distribution, sales, and finance to generate a step-function reduction in inventory and a simultaneous improvement in customer service”. Later, at a key steering committee meeting, Oliver’s team introduced “I2M” but “the phrase failed to resonate with participants”. One of the managers, a Mr. Van ’t Hoff, challenged Oliver to explain what he meant by “I2M”. I am not sure whether Mr. Van ’t Hoff is aware of it, but this moment marked the birth of the term “supply chain management”:
We are talking about the management of a chain of supply as though it were a single entity, Mr. Oliver replied, not a group of disparate functions. Then why dont you call it that? Mr. Van t Hoff said. Call it what? Mr. Oliver asked. Total supply chain management.

The Avocado Supply Chain

Among the best ways to teach supply chain management is by discussing different types of real-world supply chains. In their interesting report, Enabling Trade: From Valuation to Action, the World Economic Forum (in collaboration with Bain & Company) present several supply chains that could be discussed. The introdution makes one point clear: “The overall benefits to nations, producers and consumers are clear. However, making it happen is not as simple – particularly because supply chains cut across multiple stakeholders, requiring collaboration and leadership that goes beyond local constituents and borders.” This is where the report delves deeper into examples of practical application. Among the examples presented in the report is the avocado supply chain. This example demonstrated how “a number of supply chain improvements have enabled Kenyan avocados to be profitably exported to high-value markets in the European Union”. It illustrates that supply chains “must be able to react to changes in market dynamics in order to maintain a virtuous cycle”.

The Evolution of Trust

Trust plays an important role in supplier–buyer relationships. One way to approach this important concept is game theory. If you have ever wondered how game theory could be taught in a supply chain management course, I can recommend Nick Case’s The Evolution of Trust – an interactive guide to the game theory of why and how we trust each other. The guide starts by explaining the game of trust (= the prisoner’s dilemma). Then it illustrates what happens if multiple games and multiple tournaments are played with different players. We can learn from this guide that “the game defines the players” but also that “the players define the game”. We can learn that, in order for trust to evolve, we need the knowledge of possible future repeat interactions, we need a win–win situation, and we need a low level of miscommunication. I will definitely use The Evolution of Trust in my future supply chain management courses.

Fisher’s Supply Chain–Product Match/Mismatch Framework

I have used Fisher’s (1997) supply chain–product match/mismatch framework (What Is the Right Supply Chain for Your Product?) in my teaching for years! Herein, the author argues that functional products require a physically efficient supply chain strategy, whereas innovative products require a market-responsive supply chain strategy. Fisher’s framework finds empirical support: Wagner et al. (2012) demonstrate that “the higher the supply chain fit, the higher the Return on Assets (ROA) of the firm”. Interestingly, a majority of the firms from their sample achieve a negative misfit, i.e. they target high responsiveness for their supply chain although their products are functional. Extensions of the framework exist, for example by Lee (2002), who adds a “supply” dimension, and more recently Gligor (2017), who argues that “benefits generated by perfect supply chain fit might be offset by the resources deployed to achieve that fit”. Research presented by Perez-Franco et al. (2016) helps to “capture, evaluate and re-formulate the supply chain strategy of a business unit”.

Fisher, M.L. (1997). What Is the Right Supply Chain for Your Product? Harvard Business Review, 75 (2), 105-116.

Showing Creativity in SCM Research

A colleague recently recommended the following article to me: Mansfield (2003): Spatializing Globalization: A “Geography of Quality” in the Seafood Industry. Herein, the author takes a look at the quality of products in that industry. She challenges “recent perspectives that define quality as an alternative to global, industrial forms of production” and “finds that quality is also important for industrial food production and for the global geography of the surimi [a fish paste] seafood industry”. In general, the author takes an interpretive approach – an approach that is almost absent in SCM research, and that might be inspirational for our otherwise empiricist discipline. Particularly, she employs actor–network theory, which proposes that reality does not exist by nature but is rather constructed through socio-material networks. SCM researchers could learn from such a type of research that (1) theory could be mobilized in many different creative ways; (2) technical supply chain issues are embedded in larger social-political arrangements; (3) geography might inform SCM (theoretically as well as materially); and (4) “quality”, or other concepts, do not exist by nature but are stabilized through networks.

The End of Supply Chain Theory?

It is among the common research practices in our field to build a statistical model with a limited set of variables in order to take the lens of a theory – often being alien to our field – on a supply chain phenomenon, and to test this model based on maybe 200 datasets. Other researchers collect data from three or four case companies to build or extend a research model that comprises a small set of propositions. So far so good. “So far so outdated”, I should say if I were to be malicious. Why? Researchers in fields like supply chain management might soon (or already?) be competing with “companies like Google, which have grown up in an era of massively abundant data, [that] don’t have to settle for wrong models”, as the editor in chief of Wired put it already back in 2008, proclaiming The End of Theory. So, is the data deluge about to make our research obsolete? If so, how should our community adapt to this new reality?

Purchasing & Supply Management: What We Should Teach (Guest Post by Lydia Bals)

Today’s guest post comes from Lydia Bals, who presents project PERFECT’s recent insights on competences in purchasing & supply management.

Project Perfect Logo

Professional purchasing & supply management (PSM) forms the link between a complex network of internal and external stakeholders with increasing international dependencies and performance requirements. As part of the PERFECT project (Purchasing Education and Research for European Competence Transfer) a group of researchers conducted case study research to identify individual buyer competences, knowledge and skills that are required to cope with such current requirements and prepare for future trends. In total, 46 interviews were conducted with representatives from 16 companies, standing for various industries in the European Union, and differing in their sizes and business models. The practitioners emphasized that PSM employees should possess both operational and basic PSM knowledge as well as competences related to communication and relationship management. In terms of specific future competences, “sustainability” and “digitization” stood out. Digitization is expected to particularly impact PSM operational tasks with regards to automation: Sub functions, especially taking care of the purchase-to-pay process, are expected to disappear. As a result, companies are advised to qualify personnel accordingly to facilitate their transfer to other, more strategic roles. Regarding the strategic PSM tasks, looking at the source-to-contract process, the critical question for the future is how technology will enable different ways of working, e.g. by application of big data analytics. As these are newer competence areas, the practitioners indicated that a breakdown of knowledge and competences for “sustainability” and “digitization” is needed to prepare employees as well as students adequately for such future developments. For more information, see the full Project PERFECT Intellectual Output 2 White Paper.

Lydia Bals is Professor of Supply Chain & Operations Management at the University of Applied Sciences Mainz and affiliated with the Department of Strategic Management & Globalization, Copenhagen Business School. She was the project lead for the PERFECT case study data collection and analysis.

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