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Social Network Analysis in Supply Chain Management

It is time to take a closer look at Borgatti & Li’s (2009) important article: On Social Network Analysis in a Supply Chain Context. The article has become part of the canon of SCM literature since its publication and it is now a mandatory reading in many SCM master programs across the globe. In simple language, the article offers a very good introduction to the subject of social networks and relates social network concepts (e.g., ego network, node centrality, structural hole, structural equivalence) to the supply chain context. Even ten years after its publication, the article has not lost its relevance for our discipline. Last year, it was one of the ten most downloaded articles from the Journal of Supply Chain Management. The authors argue “that the network perspective has the potential to be a unifying force that can bring together many different streams of management research, including SCM, into a coherent management science perspective”. I agree.

Borgatti, S.P. & Li, X. (2009). On Social Network Analysis in a Supply Chain Context. Journal of Supply Chain Management, 45 (2), 5-22. https://doi.org/10.1111/j.1745-493X.2009.03166.x

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!

What’s a Smartphone Made Of?

In this TED-Ed video, Kim Preshoff investigates the smartphone production: “As of 2018, there are around 2.5 billion smartphone users in the world. If we broke open all the newest phones and split them into their component parts, that would produce around 85,000 kg of gold, 875,000 of silver, and 40,000,000 of copper.” I really like the video, as it takes a supply chain perspective, and I can imagine to use it in my future SCM courses.

The Supply Chain of a Computer

The Supply Chain of a ComputerSometimes a picture is worth a thousand words. A map of our globe enables us to reflect upon key issues in SCM: Who is actually producing our computers? Where does value creation take place? What are the core competencies of the brand company? Who is governing the computer supply chain? What is the role of contract manufacturers? Why is final assembly being done in China and not in the EU or Canada? Why is packaging being done in Eastern Europe or Mexico and not in China; and why not in Northern Europe or Canada, where the consumers are located? What modes of transport should be used? How long does it take to move a container from Hong Kong to Hamburg? What is the size of a container? What are typical container shipping rates? What can be problematic about sourcing raw materials from the Congo? How would you calculate the CO2 emissions of a computer? How could a linear supply chain become circular? What role will machine learning play? How will the supply chain change in the age of automation? What is the potential role of 3D printing? Is a “supply” chain about “supply” or is “demand” actually the factor that we should be looking? Is a supply “chain” actually a “chain”?

Will “Robo-graders” Soon Take Our Academic Jobs?

All successful business models provide a solution for a problem. Let us identify such a “problem” in academia: As university teachers we all know that grading students’ essays can be a tedious and time-consuming endeavor. If that is the problem, a solution could be to let software grade the essays. Five years ago, my immediate reaction would have been that this could never work. However, now, in the era of artificial intelligence and machine learning, it increasingly does work. If we acknowledge that AI is able to drive cars, predict court decisions better than experts and automatically schedules our meetings, we should also acknowledge that AI will very soon support and soon replace us when it comes to grading students’ essays. Pioneers of so-called “robo-graders” believe that “the time is right and it’s really starting to be used now”. Robo-graders learn what is considered good writing by analyzing essays graded by humans. The automated programs then score essays themselves by scanning for the same features.

Should We “Bulldoze” the Business School?

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?

Apple & Foxconn: Financialization across the Pacific

It is always inspirational to find articles that, at first glance, fall out of our discipline, but, at second glance, change the way we think about supply chain phenomena. One of these articles is Froud et al. (2014): Financialization across the Pacific: Manufacturing Cost Ratios, Supply Chains and Power. This article argues “that thirty years ago favourable cost conditions helped build productive power in Asia, whereas now US financial power drives and benefits from low labour costs in China, using the very different supply chain positions of Apple Inc. and Foxconn International Holdings (FIH) as examples”. The article concludes by “observing that the rise of the post-national corporate player changes the alignment between large corporate interests and the US economy where Apple hoards its cash surplus and the success for the stockholders does not align with the broader needs of the US economy and society”. The perspective taken by the authors could be a very interesting complement to contemporary SCM courses.

Froud, J., Johal, S., Leaver, A., & William, K. (2014). Financialization across the Pacific: Manufacturing Cost Ratios, Supply Chains and Power. Critical Perspectives on Accounting, 25 (1), 46-57 https://doi.org/10.1016/j.cpa.2012.07.007

Teaching Case – Everything Is Connected: A New Era of Sustainability at Li & Fung

The Case Centre has recently announced the winners of their 2018 global awards and competitions. Already last year, the winning case in the Production and Operations Management category was closely related to supply chain management (see my previous post, Zara: The World’s Largest Fashion Retailer). This is also the case for the 2018 category winner, which is titled Everything Is Connected: A New Era of Sustainability at Li & Fung. It was written by Hau L. Lee and Sheila Melvin. The case deals with the way how Li & Fung, a Hong-Kong-based trading company, reacted to the Rana Plaza disaster and other such events to ensure sustainable supply chain management. Li & Fung’s Head of Learning and Development is right when saying: “The hard part is to make sustainability part of our DNA, to get 27,000 people to understand that this is now as fundamental to us as the fact that we source globally.” Therefore, this case could be a great building block for future SCM courses!

Supply Chain Coordination with Contracts

Today I would like to talk about Supply Chain Coordination with Contracts, a chapter written by Cachon (2003). It has become the standard reference when it comes to teaching some key supply chain models. Coordination between the members of a supply chain is certainly very relevant but also challenging. Because the members of a supply chain are typically concerned with optimizing their own objectives, their actions might not lead to optimal supply chain performance. Therefore, contracts need to be carefully designed. The author “reviews and extends the supply chain literature on the management of incentive conflicts with contracts”. For example, Cachon presents key supply chain models, hereby extending the newsvendor model “by allowing the retailer to choose the retail price in addition to the stocking quantity” and “by allowing the retailer to exert costly effort to increase demand”. Teaching such models can help students to gain the required problem-solving competencies and abstraction capabilities that are needed in today’s business world.

Cachon, G.P. (2003). Supply Chain Coordination with Contracts. Handbooks in Operations Research and Management Science, 11 (Supply Chain Management: Design, Coordination and Operation), 227-339 https://doi.org/10.1016/S0927-0507(03)11006-7

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.