The Smile of Value Creation
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
Do We Really Need a New Smart Phone Every Two Years?
We all know about natural resource scarcity. However, as brand companies make consumers believe they need a new smart phone every two years, today’s global supply chains are responsible for incredibly large amounts of electronic waste. A new United Nations University report, titled The Global E-waste Monitor – 2014, details e-waste generation by region. The total amount of e-waste generated in 2014 is 41.8 million metric tonnes (Mt) and it is forecasted to increase to 50 Mt in 2018. This e-waste comprises 12.8 Mt of small equipment (e.g., toasters, video cameras), 11.8 Mt of large equipment (e.g., washing machines, photovoltaic panels), 7.0 Mt of cooling and freezing equipment, 6.3 Mt of screens, 3.0 Mt of small IT (e.g., mobile phones, computers), and 1.0 Mt of lamps. With 32% of the world’s total, the United States (7.1 Mt) and China (6.0 Mt) are responsible for most of the e-waste overall. The top per capita producers, however, are Norway (28.3 kg), Switzerland, Iceland, Denmark, and the United Kingdom.
Baldé, C.P., Wang, F., Kuehr, R., Huisman, J. (2015). The Global E-waste Monitor – 2014. United Nations University, IAS – SCYCLE, Bonn, Germany
More Complexity = More Disruptions?
Trends in management towards a concentration on core competencies and outsourcing of non-core activities have created complex networks, i.e., global supply chains. At the same time, it has been discussed that this increased complexity has also made companies more vulnerable. An interesting paper, Structural Drivers of Upstream Supply Chain Complexity and the Frequency of Supply Chain Disruptions, co-authored by Bode and Wagner, is currently forthcoming in the Journal of Operations Management. Herein, the authors distinguish between three drivers of upstream supply chain complexity: (1) horizontal complexity (= the number of direct suppliers in a firm’s supply base), (2) vertical complexity (= the number of tiers in the supply chain), and (3) spatial complexity (= the geographical spread of the supply base). Based on survey data, the authors find that all of these three drivers increase the frequency of supply chain disruptions. It is further found that these three variables even amplify each other’s effects in a synergistic fashion.
Bode, C., & Wagner, S. (2015). Structural Drivers of Upstream Supply Chain Complexity and the Frequency of Supply Chain Disruptions. Journal of Operations Management, 36, 215–228 https://doi.org/10.1016/j.jom.2014.12.004
Logistics Performance Index 2014
Today, the World Bank has released its Logistics Performance Index 2014. The report is titled “Connecting to Compete 2014: Trade Logistics in the Global Economy”. The index, which is based on survey data collected from more than 1,000 logistics managers, allows a comparison of 160 countries in terms of trade dimensions, such as infrastructure quality, customs performance and timeliness of shipments. It is a valuable resource for researchers, business executives and politicians to analyze the current state of logistics in the world. The results of the new report “point to Germany as the best performing country with an LPI score of 4.12 […] (on a scale of 1 to 5)”. Moreover, “15 of 28 European Union (EU) member states and 23 of 34 Organisation for Economic Co-operation and Development (OECD) members were among the top 30 countries”. The report highlights that “[s]upply chains—only as strong as their weakest links—are becoming more and more complex, often spanning many countries while remaining critical to national competitiveness”.
Angora Wool
Last week, a shocking video, created by People for the Ethical Treatment of Animals (PETA), was published. The images cast a dark shadow over global garment supply chains. In response, brands like H&M and C&A halted manufacturing of items containing Angora wool. This case, again, demonstrates the importance of ethical aspects in supply chain management.
Logistics and Supply Chain Management in Africa
Supply Chain Management and Corporate Social Responsibility
Two recent disasters in the garment industry, the Tazreen Fashions fire (2012) and the Rana Plaza building collapse (2013), have caused outrage over the lack of social responsibility across global supply chains. In our new article, The Socially Responsible Supply Chain: An Imperative for Global Corporations, Robert Handfield and I discuss three core principles that are essential for ensuring socially responsible business practices and successfully managing the extended global supply chain: First, a program to audit both products and suppliers needs to be implemented; this program must go beyond direct relationships with tier-one suppliers. Second, visibility is important for those categories of supply that cannot be directly controlled; hereby, electronic and smart technologies promise new opportunities. Finally, collaboration is needed to successfully managing a socially responsible supply chain; this includes collaboration across the industry, with local partners, and with universities. It is time to become serious about socially responsible supply chain management.
Wieland, A., & Handfield, R.B. (2013). The Socially Responsible Supply Chain: An Imperative for Global Corporations. Supply Chain Management Review, 17 (5), 22-29
Bangladesh Clothes Factory Fire
At the end of last month, a garment factory fire in Bangladesh killed more than 100 people and injured many more. Let us view this tragedy from a supply chain perspective. Supply chains are typically customer-focused. The incident suggests that customers expect cheap prices, but are not willing to pay for social standards. The lowest possible labor costs seem to be the single criterion for Western retailers when selecting suppliers. In Bangladesh, mostly women and often children are exposed to risks from lacking fire safety standards in factories. Who is to blame? Brands whose marketing experts create new consumer needs? Consumers who do not know a product’s supply chain? Retailers who are forced to select the cheapest suppliers to survive competition? Suppliers who do not invest in fire safety? Human rights groups urge Western governments to press retailers and apparel brands to join the Bangladesh Fire and Building Safety Agreement.
The Localization of Supply Chains
References made to the “increasing globalization” seem to be the icing on the cake for a good introduction. But can this mantra be trusted? Firstly, the fall of the Berlin wall led to sudden opportunities for Western companies to exploit pay differentials. During the last years, however, wage growth was substantially lower in advanced countries than in Eastern Europe and Asia. Hence, wages are getting closer to each other! Secondly, globally dispersed supply chains are enabled by low transportation costs. But will transportation costs rise in a peak oil world? And will new regulations aimed at mitigating climate change or enhancing supply chain security push up transportation prices? Thirdly, managers realize that global supply chains are vulnerable, if even an earthquake in Japan can impact manufacturing in Europe. They might increasingly prefer local rather than global suppliers. Is there an “increasing localization”? How can your SCM research contribute, if the answer is “yes”?
