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.
Supply chain management has certainly become far more strategic in recent years. But does that mean that companies should have a chief supply chain officer (CSCO)? In their new article, titled The Appointment of Chief Supply Chain Officers to Top Management Teams, Roh, Krause & Swink (2016) aim to answer this question. Based on empirical data, they show that “financial leverage, internationalization, and diversification all predict CSCO appointment to the [top management team]” and that these contingencies also “positively moderate the effect of CSCO presence on firm performance”. Most importantly, appointing a CSCO makes sense when financial leverage, internationalization, and diversification levels are high, but it does not make sense when these levels are low. But companies should be fast now: The authors also reveal that “most of the contingency performance effects manifest only for early adopters of the CSCO role”. I am sure that CSCOs will soon be appointed in many companies.
Roh, J., Krause, R., & Swink, M. (2016). The Appointment of Chief Supply Chain Officers to Top Management Teams: A Contingency Model of Firm-level Antecedents and Consequences. Journal of Operations Management https://doi.org/10.1016/j.jom.2016.05.001
Today, John McNamara, SVP Sourcing, Adidas Group, visited me and my SCM students at Copenhagen Business School. He presented a case study about the supply chain processes for t-shirts. It was very insightful and also a lot of fun for my students (and me). Thanks, John, for a great case study and an insightful discussion!
Journal rankings, h indices and citation counts have become the currencies of SCM scholars. But is this really what we should focus on? What about taking part in public debates? Indeed, SCM scholars have a lot of knowledge about the context of global business, including knowledge about social practices in low-cost countries, the pros and cons of outsourcing, and CO2 emissions in end-to-end networks. So, we have a lot to say that matters beyond academia! In their evocative comment, Prof, No One is Reading You, Biswas & Kirchherr (2015) argue: “An average academic journal article is read in its entirety by about 10 people. To shape policy, professors should start penning commentaries in popular media.” In a similar vein, Kristof (2014) in his comment Professors, We Need You! argues: “[Some] of the smartest thinkers […] are university professors, but most of them just don’t matter in today’s great debates.” We should wake up and make an impact!
The global not-for-profit organization CDP (formerly the Carbon Disclosure Project) has published a report: Supply Chain Sustainability Revealed: A Country Comparison. The report was written by Accenture Strategy. “While climate and water risks are apparent, the implications for businesses and economies reliant on complex supply chain models are less understood”, says Paul Simpson, CEO, CDP. “The good news is that as companies transform their supply chains into digital supply networks they will gain greater end-to-end visibility, traceability and access to information to report on their compliance progress and mitigate climate risks”, adds Gary Hanifan, managing director, Accenture Strategy. The report reveals that suppliers in France, the UK, Spain and Germany are identified as the most sustainable ones, whereas suppliers in China, Italy and the U.S. turn out to be particularly vulnerable. The report also shows that Brazil, Canada and India must do more to encourage suppliers to report emission reduction initiatives.
Mudambi (2008) notes that “value-added is becoming increasingly concentrated at the upstream and downstream ends of the value chain” and that “activities at both ends of the value chain are intensive in their application of knowledge and creativity”. Value-added along the value chain is, thus, represented by a “smiling curve”.
Mudambi, R. (2008). Location, Control and Innovation in Knowledge-intensive Industries. Journal of Economic Geography, 8 (5), 699-725 DOI: 10.1093/jeg/lbn024