Many observers are currently talking about how we could go back to normal as quickly as possible. But what is “normality” and is it desirable? Should we really turn to cost reduction and just-in-time processes again? Wasn’t that the reason to put all medical supply eggs in the China basket? Didn’t that make our supply chains extremely vulnerable? We should accept the corona crisis as a warning sign, as an opportunity to fundamentally question the structure of our global supply chains. The corona crisis has fortunately led to effective political measures worldwide. Based on scientific knowledge, political decision-makers seem to be able to anticipate the catastrophic consequences of not taking such measures. These measures certainly hurt, but they are necessary. Unfortunately, effective measures to flatten the curve of the climate and biodiversity crises have so far largely failed to materialize. The corona crisis has shown us that we cannot look at global supply chains in isolation, but can only understand them in a larger context, and we have understood that they require reformation. Hopefully we will be able to transfer this understanding to other crises. Instead of going back to normal, we should anticipate the catastrophic consequences of the old model and reimagine our global supply chains accordingly, thereby having the larger picture in mind. If we can do that, then there is at least something good about the corona crisis, however tragic it is overall. This transformation of our economic system should also guide our academic work in the months to come. Stay healthy!
I am currently listening to Containers, an 8-part audio documentary about how global trade has transformed ourselves and the economy. Herein, journalist Alexis Madrigal leads us “through the world of ships and sailors, technology and tugboats, warehouses and cranes”. I am sure this documentary will be interesting also for many of the readers of this blog.
The European car industry has supply chains that criss-cross the English Channel. Therefore, 23 automotive business associations across Europe have now joined forces to caution against a no-deal Brexit. “The UK’s departure from the EU without a deal would trigger a seismic shift in trading conditions, with billions of euros of tariffs threatening to impact consumer choice and affordability on both sides of the Channel,” their joint statement says. However, pan-European supply chains are not a new idea. A research team has now uncovered the geographic origin of archaeological tin artifacts from the Mediterranean. They could demonstrate that tin from Israel, Turkey and Greece originated from tin deposits in Europe. These findings show that even in the Bronze Age, i.e. around 4000 years ago, far-reaching and complex trade routes must have existed between the Eastern Mediterranean and Europe. It is interesting to observe that millenia-old truths have been forgotten by those promoting a no-deal Brexit these days.
Berger, D. et al. (2015). Isotope Systematics and Chemical Composition of Tin Ingots from Mochlos (Crete) and other Late Bronze Age Sites in the Eastern Mediterranean Sea: An Ultimate Key to Tin Provenance? PLoS ONE 14 (6), e0218326. https://doi.org/10.1371/journal.pone.0218326
Today, I would like to call attention to a highly-cited article by Baldwin & Lopez-Gonzalez, titled Supply-chain Trade: A Portrait of Global Patterns and Several Testable Hypotheses, which was published in The World Economy in 2015. The journal’s perspective – trade policy and other open economy issues – differs from the supply chain management perspective I normally talk about here, which gives this article an interesting complementary perspective. The authors use the term “supply-chain trade” to characterize “complex cross-border flows of goods, know-how, investment, services and people”. They compare two positions: “According to policymakers [supply-chain trade] is transformative; among economists, however, it is typically viewed as trade in goods that happens to be concentrated in parts and components”. Based on two rich datasets, they argue “that the facts are on the side of the policymakers”, as “[f]lourishing supply-chain trade has revolutionised global economic relations and the revolution is still in full swing”. Definitely a good read!
Baldwin, R. & Lopez-Gonzalez, J. (2015). Supply-chain Trade: A Portrait of Global Patterns and Several Testable Hypotheses. The World Economy, 29 (1), 65-83. https://doi.org/10.1111/twec.12189
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.”
Sometimes 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”?
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.