Tag Archive | Procurement

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

Citations of Excellence Awards 2014

Like every year (see my previous post), Emerald rewards authors of exceptional papers covered in its extensive Emerald Management Reviews database with a Citation of Excellence Award (full list). I went through the latest list of the Citations of Excellence Top 50 papers. This time, the list contains at least two papers from related disciplines that could be useful to influence the way we are conducting research in our field. The first paper by Kim, Ferrin & Rao (2008) presents a trust-based consumer decision-making model in electronic commerce. The results of the study show “that Internet consumers’ trust and perceived risk have strong impacts on their purchasing decisions”. The second paper by Locke, Qin & Brause (2007) asks: “Does monitoring improve labor standards?” The authors find that monitoring alone “appears to have produced only limited results”, but, when “monitoring efforts were combined with other interventions […], working conditions seem to have improved considerably”.

Kim, D., Ferrin, D., & Rao, H. (2008). A Trust-based Consumer Decision-making Model in Electronic Commerce: The Role of Trust, Perceived Risk, and Their Antecedents. Decision Support Systems, 44 (2), 544-564 DOI: 10.1016/j.dss.2007.07.001

Locke, R., Qin, F., & Brause, A. (2007). Does Monitoring Improve Labor Standards? Lessons from Nike. Industrial and Labor Relations Review, 61 (1), 3-31 digitalcommons.ilr.cornell.edu/ilrreview/vol61/iss1/1/

Are Apple’s Promises to Protect Workers Routinely Broken?

“Poor treatment of workers in Chinese factories which make Apple products has been discovered”, as BBC Panorama reports in an article. Is this just another example of the underside of global supply chains? Watch the video from the article.

Are your Supply Chains Tiger and Orang-Utan Friendly?

Accounting for roughly 40% of vegetable oil production, palm oil is the most important vegetable oil worldwide. As a key commodity, it is an ingredient of a large range of products, including processed food, cosmetics, shampoo, and soap. A recent Greenpeace report reveals how palm oil supply chains are pushing Sumatran tigers and orang-utans closer to extinction (pdf). It becomes evident “that the palm oil sector is currently the greatest single driver of deforestation in Indonesia, accounting for about a quarter of all forest loss”. The report demonstrates that palm oil supply chains “are aiding and abetting the clearance of the Bornean orang-utan’s rainforest habitat and that of the even scarcer, critically endangered Sumatran tiger” and that “[t]hey have also been complicit in peatland destruction and depriving communities of their land and livelihoods”. How can research in the field of supply chain management help to recognize the true costs of palm oil production?

Vanilla Sourcing in Madagascar

In a previous post, I demonstrated how Symrise creates added value beyond corporate boundaries by closely collaborating with vanilla farmers in Madagascar. Watch the following video, which highlights this approach from the perspective of Unilever, a buyer of Symrise’s aromatic compounds. The case is also included in an article I have written for Supply Chain Management Review about the interface between SCM and CSR.

Rethinking Corporate Social Compliance in the Supply Chain

Managers are increasingly under pressure to ensure that their products bear attributes like “fair”, “ethical”, “green”, or “social”. Hereby, it becomes clear that solutions cannot just be found in the manager’s company, but in the company’s end-to-end supply chain. This has led companies to audit every company along their global supply chains against the own standards, which resulted in a large volume of auditing. The Rana Plaza building collapse, however, tragically showed that this top-down approach seems to fail. Departing from this observation, a new EY report, Human Rights and Professional Wrongs (pdf), provides an excellent summary of the problem and a set of recommendations for improvement. For example, the authors recommend to use third-party certifiers and auditors more strategically, to prevent orders from factories that have not had their status assessed, and to maintain longer relationships with a smaller number of suppliers. These recommendations could help to sharpen a blunt sword.

The Story of a Fair Mouse

If you believe that today’s post is about little rodents that behave equitably, then you have most probably not heard about NagerIT’s project to build fair computer mice. (Although the German term “nager” translates literally as “rodent”.) NagerIT took supply chain transparency to an extreme, disclosing the entire supply chain of their Fair Mouse (pdf) on their website, thereby highlighting suppliers with unknown details on working conditions. The Fair Mouse project reveals how difficult it can be to produce a product that is 100% fair: NagerIT admit that they stay with “the problem of the mining of the metals (except solder tin) and the assembly of the remaining components, which [they] still can not obtain from alternative (fair) suppliers”. However, a good start has already been made. The story of the Fair Mouse is, of course, a little like the story of the Fairphone, recently presented here by its founder.

Reputational Dependencies in the Supply Chain

A Munich court is currently hearing a case that involves several members of a supply chain: (1) Alfred Ritter, a manufacturer of chocolate (“Ritter Sport”), (2) Symrise, Ritter’s supplier of piperonal, an aromatic compound, (3) Stiftung Warentest, an influential consumer organization, whose verdicts frequently lead to an increase or decrease in sales in Germany, and (4) the end consumers. Stiftung Warentest conducted tests on Ritter’s hazelnut chocolate. They argue that piperonal, a vanilla flavoring, cannot be gained in a natural way and is, thus, falsely labelled by Ritter as a “natural flavor”. According to Symrise, “[t]he piperonal contained in this flavor is not ‘chemically’ manufactured, contrary to the statements made by Stiftung Warentest”. The court’s decision will be announced on January 13th. The case has confused consumers and influenced their shopping behaviors in the important winter season. It demonstrates that reputation is a strategic asset and reputational dependencies exist in the supply chain.

Update (2014-01-13): Alfred Ritter won the dispute against Stiftung Warentest.

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.

A Moral Revision of Electronic Supply Chains (Guest Post by Bas van Abel, Fairphone)

To make the supply chain more transparent, Fairphone opens up the entire system to understand what shapes our economy. I am happy to share the following guest post by Bas van Abel, CEO and founder of Fairphone. Thank you for contributing to my blog.

Business practices in the supply chains of the electronics industry are in urgent need of moral revision. What do we know about the production of complex electronic devices and the people who make them? By making a phone, Fairphone wants to uncover and expose each link in the supply chain and step-by-step make interventions to improve the way things are made. Instead of hiding behind the complexity of the supply chain, Fairphone wants to unveil the problems associated with the smartphone production like poor labor conditions, the use of conflict minerals and the rise in electronic waste. To do so, we are searching for solutions by engaging in partnerships to come with alternatives to current models. In the first Fairphone that will be released in December 2013, conflict-free tin and tantalum from the Democratic Republic of the Congo has been integrated in the manufacturing of the phone, but that’s only a first step. By growing a movement of people who can share best practices and by creating a platform for discussion, Fairphone aims to raise the bar for the industry meanwhile giving people a choice for fairer electronics.

Bas has a background in interaction design and is an active member of the Maker Movement. He supports open design principles. He has set up projects such as the Waag Society’s Fablab and the Instructables restaurant (an open source restaurant). He is co-editor of the book “Open Design Now”.