The Carbon Disclosure Project (CDP) “is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information”. Written by Accenture, the CDP Supply Chain Report 2014 has now been published. Its subtitle, Collaborative Action on Climate Risk, indicates the direction of the report’s journey. Indeed, the report, which is based on data collected from 2,868 companies responding to a supplier information request in 2013, builds on “a wealth of data on how suppliers and their customers are collaborating to drive down carbon emissions, mitigating water risk, seizing opportunities, and building revenue and brand along the way”. It turns out that “[s]uppliers report that both climate risk and opportunity are at high levels” and that “consumers are becoming more receptive to low-carbon products and services”. Moreover, suppliers “realized savings of US$11.5 billion from emissions reduction investments […], down from US$13.7 billion in 2012”.
In a previous post, I presented a discussion about the relationship between transaction cost economics (TCE) and supply chain management (SCM), which was started by Williamson (2008) and continued by Zipkin (2012). This discussion called attention to several theoretical gaps at the TCE/SCM interface. In their 2012 article, Supply Chain-Wide Consequences of Transaction Risks and Their Contractual Solutions, Wever et al. argue that “a shift [is needed] within the TCE literature from a focus on bilateral transactions, to examining transactions within a supply chain context”. They present five models which “(1) provide justification for moving the TCE framework beyond the dyad; and (2) explain the implications of the shift toward an extended TCE framework for the (optimal) use of supply chain contracts”. It turns out that supply chain members need to take into account both transactions on the supply side and transactions on the demand side, as only this can reduce exposure to transaction risks.
Wever, M., Wognum, P.M., Trienekens, J.H., & Omta, S.W.F. (2012). Supply Chain-Wide Consequences of Transaction Risks and Their Contractual Solutions: Towards an Extended Transaction Cost Economics Framework. Journal of Supply Chain Management, 48 (1), 73-91 DOI: 10.1111/j.1745-493X.2011.03253.x
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.
In their seminal publication, The External Control of Organizations, Pfeffer and Salancik (1978) have postulated resource dependence theory. Basically, it argues “that organizations are constrained and affected by their environments and that they act to attempt to manage resource dependencies” by setting up different forms of interorganizational arrangements. However, the original theory has sometimes been criticized for empirical and conceptual shortcomings, e.g., for combining the dimensions of power imbalance and mutual dependence in the single construct of interdependence, making theory testing challenging. In their article, Synthesizing and Extending Resource Dependence Theory: A Meta-Analysis, recently published in the Journal of Management, Drees and Heugens (2013) “consolidate 157 tests of [resource dependence theory] and corroborate its main predictions”. They show that the theory is, indeed, “a premier perspective for understanding organizational–environmental relations”. Given that a supply chain is a hybrid of one’s own organization and its environment, this result might encourage new research in our field.
Drees, J.M., & Heugens, P.P.M.A.R. (2013). Synthesizing and Extending Resource Dependence Theory: A Meta-Analysis. Journal of Management, 39 (6), 1666-1698 DOI: 10.1177/0149206312471391
We have to admit that there is still no such thing as a “theory of supply chain management”. A new article by Mena et al. (2013), titled Toward a Theory of Multi-Tier Supply Chain Management, might bring us one step closer to such a theory by taking into account that supply chains have become more complex, more fragmented and longer. This piece of research, which is based on an inductive case study research design, hands theory-testing researchers interesting propositions on a silver platter: First, depending on the supply chain position, the members of the supply chain draw power from different sources. Second, the buyer needs to connect directly with the supplier’s supplier (“closed supply chain”) to influence product characteristics. Third, with a growing degree of such a direct connection, power is increasingly replaced by trust. Finally, closed supply chains are more stable, but require more management resources.
Mena, C., Humphries, A., & Choi, T.Y. (2013). Toward a Theory of Multi-Tier Supply Chain Management. Journal of Supply Chain Management, 49 (2), 58-77 DOI: 10.1111/jscm.12003
Logistics clusters play an increasingly important part in logistics & supply chain management. I am happy to share the following guest post by Professor Yossi Sheffi, a distinguished expert in logistics clusters. Thank you for contributing to my blog.
Logistics clusters are agglomerations of firms that come together to share logistics expertise and know-how. As I argue in my new book Logistics Clusters: Delivering Value and Driving Growth (MIT Press, October 2012), these entities have a number of unique, and generally underestimated, attributes. First, they are self-reinforcing in that logistics clusters use the high volumes of freight they generate to capture economies of scope and scale and reduce costs while improving service quality. These benefits attract more companies, which in turn bring further efficiencies within reach. Second, resident companies use the cluster to pool expertise and equipment, which buffers them against fluctuations in demand. Third, logistics clusters are major creators of employment opportunities that tend not to be “offshorable” and not tied to the fortunes of any one industry. Finally, these entities are building considerable expertise in environmental sustainability. These are some of the reasons why I believe that the private and public sectors need to invest more in logistics clusters.
Yossi Sheffi is a professor at the Massachusetts Institute of Technology, where he serves as Director of the MIT Center for Transportation & Logistics.