Our guest post today comes from Christoph Flöthmann, an expert in strategic and digital procurement, who has recently co-authored a new report.
Digitalization already has a major impact on procurement, as we write in our new report: 21st Century Procurement Skills. Thanks to artificial intelligence (AI) and robotic process automation (RPA), process-mining tools can be used to reshape and analyze all kinds of processes. Dashboards, governed by analytics bots, help to detect and prevent maverick buying in real-time without any human input. This is ultimately driving procurement effectiveness, efficiency and compliance. However, the digital transformation can only succeed if procurement has bright talents with the right skills in place who steer AI and manage the remaining high-value-adding tasks: First, digital fluency is a new meta-competency that enables managers to reach their targets by being in command of digital tools. Second, the ability for complex and collaborative problem-solving will be key to master the challenges posed by both digitalization and uncertain markets. Because AI and RPA take over tasks that are rather simple and require a low level of human collaboration, the procurement professionals’ scope is about to shift to highly complex and highly collaborative tasks such as developing and approving category strategies. Finally, procurement needs transformational leaders that are able to empower their teams to strive for developing and applying their new skill sets.
Dr. Christoph Flöthmann is a consultant in Roland Berger’s Operations Competence Center. In 2018, he and his project team were finalists at the World Procurement Awards in London for developing and implementing a digital procurement strategy platform. Before becoming a consultant, he completed his Ph.D. at Copenhagen Business School and Kühne Logistics University, specializing in research on competencies and careers in supply chain management.
Claviate Analytics have recently published their newest InCites Journal Citation Reports. It is great to see that the 2018 impact factors of all but one journals related to supply chain management have increased again, which highlights the rapidly growing relevance of our discipline. Two journals have an impact factor larger than 7: Journal of Operations Management (7.776; +2.9) and Journal of Supply Chain Management (7.125; +1.0). With an impact factor larger than 5, International Journal of Physical Distribution & Logistics Management (5.212; +1.0) has now arrived in the first league of management journals. Other SCM-related journals with high impact factors are: Supply Chain Management: An International Journal (4.296; +0.5), Management Science (4.219; +0.7), International Journal of Operations & Production Management (4.111; +1.2), Journal of Business Logistics (3.171; +0.3) and Journal of Purchasing & Supply Management (3.089; −0.6). But there are even more SCM journals with an impact factor around 2: Manufacturing & Service Operations Management (2.667; +0.9), Operations Research (2.604; +0.3), International Journal of Logistics Management (2.226; +0.5), Production and Operations Management (2.171; +0.4) and Decision Sciences (1.960; +0.3). Although the impact factor is certainly an imperfect proxy of a journal’s quality, I can only hope that rather conservative qualitative rankings, such as the ABS-AJG list, the UT Dallas list or the FT50 list, will finally be adapted to this new reality. This step is urgently needed!
“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?
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
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.”
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!
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
The Guardian has just published an interesting opinion piece by van der Kolk, titled Business Education Helps Create a Culture where the Profit Justifies the Means. Herein, the author, who is a university teacher of accounting, writes: “We need to see a much stronger integration of ethical considerations into business education. This is how managers make real-life business decisions. This could be achieved through a discussion on the technics and ethics of transfer pricing in one and the same accounting class, using a case that highlights both aspects. Business education should also challenge its own underlying assumptions about human behaviour, and bring in other disciplines such as the humanities to help students think critically about business practices that are taken for granted.” The author makes an excellent case for accounting, but his arguments certainly also apply for other business disciplines, including supply chain and operations management. If that is the case, how should we change our ways of teaching?