Reputation Risk in the Supply Chain
Recently, Oxford Metrica, an analytics and advisory firm which has been “studying the relationship between reputation and value for nearly two decades”, has issued its Reputation Review 2012, which was sponsored by Aon Corporation. Herein, the major reputation events in 2011 are reviewed and the lessons learned are extracted. Most importantly for us, the report contains some interesting examples of reputation risk in the supply chain. Particularly, the authors examine the 2011 earthquake in Japan and “pursue the earthquake theme through the knock-on reputation effects as the disruption of the earthquake reverberated through the global supply chain in Japan, Korea and further afield”. The report highlights that loss of a key customer or disruption at a key supplier can cause reputation challenges at one’s own firm. I believe that reputation risk inherent in the supply chain, as discussed in the report, is an often overlooked aspect of supply chain risk management.
Outlook on the Logistics & Supply Chain Industry 2012
The World Economic Forum is “an independent international organization committed to improving the state of the world”. That’s ambitious. The Forum’s Global Agenda Council on Logistics & Supply Chains, which meets virtually and at the annual Summit on the Global Agenda in the United Arab Emirates, has just published its second annual report. The report, Outlook on the Logistics & Supply Chain Industry 2012, contains a series of articles on some of the key issues facing the logistics & supply chain industry, e.g., the role of logistics in the facilitation of international trade, the expansion of the Panama Canal, logistics clusters, the container shipping industry, sustainability, skills shortages, and supply chain risk. The Global Agenda Council on Logistics & Supply Chains is currently chaired by Alan C. McKinnon, Kühne Logistics University, Germany. Read more about the report in his recent Forum blog post Can we build better supply chains?.
The Global Supply Chain Agenda
Capgemini has published the results of its annual international supply chain survey. The study is titled The 2012 global supply chain agenda. The authors find that the following topics are the key business drivers for 2012: (1) market/demand volatility, (2) economic downturn, (3) meeting (changing) customer, (4) develop emerging markets, and (5) increased material/service costs. The survey participants were asked about the measures taken to improve the flexibility of supply chains. Improved visibility and control, increased flexibility in operations, and reduced capital exposure are the measures mentioned most often. It also turns out that operational excellence, logistics contract renewal, and supply chain visibility are the top supply chain projects in 2012 and that business prioritization, IT capability, and financial/budget limitations are the main bottlenecks for supply chain strategy implementation. The survey findings mirror an observation by PRTM from 2011 that “[h]igh volatility, huge swings in customer demand, and uncertainty in supply have created a new reality for global supply chain executives”.
CDP Supply Chain Report 2012
Supply chain thinking enables managers to understand that indirect greenhouse gas emissions (i.e., those from the supply chain) often represent the lion’s share of a company’s total emissions. The Carbon Disclosure Project (CDP) has now published its Supply Chain Report 2012. CDP Supply Chain members are about 50 companies who are requesting climate information from their suppliers. The report reveals that a majority of these companies reward “suppliers that employ good carbon-management practices” and that many of these companies will soon begin to deselect suppliers, if they don’t adopt such measures. Moreover, these companies increasingly factor climate change into the evaluation of suppliers. It has been found that many companies have benefited both from own emission reduction activities and from their supplier’s reduction activities. The report warns that suppliers will soon “see their business move to competitors that can provide better information and clearer evidence of change”, if they do not measure, quantify, and manage their greenhouse gas emissions.
The End of SCM in China?
Previous studies about SCM in China have highlighted that uncertainty in the supply chain can be reduced by process flexibility, information sharing, and process integration. However, a new study by Roland Berger Strategy Consultants, titled The end of the China cycle?, warns that “the value proposition for many firms in China is disappearing as the competitive cost advantage is beginning to erode relative to other countries” and that “government policy and social issues are further compounding the complexity of doing business in China”. The authors argue that some industries in China have already passed the tipping point. As China is in transition towards high-value add manufacturing, firms need to rethink the strategy of their manufacturing footprints. Supply chain managers will continue to face volatility and uncertainty, also in China, but the new study demonstrates that managers can seize the opportunity right now. However, the Chinese window is closing quickly.
Supply Chain Resilience 2011
Volatility, demand swings, and supply uncertainty are SCM trends (I recently reported). One of my primary research interests is in the area of supply chain resilience and I was particularly curious when I got the report Supply Chain Resilience 2011 into my hands. It reveals that 85% of the organizations surveyed experienced at least one supply chain disruption in the last twelve months. Among the major sources of disruption are adverse weather, unplanned outage of IT or telecommunication systems, transport network disruption, failure in service provision by an outsourcer, and, not surprisingly, earthquake and/or tsunami. It is also found that the main consequences of disruption are loss of productivity, increased cost of working, loss of revenue, customer complaints, and impaired service outcome. Most importantly, the report reminds us that many disruptions originate below the immediate tier one supplier. Again, a supply chain is not a triad, but a complex and dynamic network and must be managed as such.
Supply Chain Management in China
China has become a major player in the world economy and is one of the most attractive markets for foreign market entry. However, only a few studies have examined the success or failure of these entries. The study Operating Successfully in China by the TU Berlin in cooperation with WHU – Otto Beisheim School of Management highlights two strategies to cope with a dynamic and complex market environment: Process flexibility of companies as well as the level of collaboration with supply chain partners. The results are based on the responses of 248 decision-makers of German manufacturing facilities located in China. On the one side, it is recommended that companies should strengthen process flexibility in order to respond to high dynamics and local-specific requirements. On the other side, the findings imply that a higher level of information sharing and process integration with suppliers, customers, and logistics service providers reduces uncertainty and leads to better performance results.
Excellence in Supply Chain Sustainability
Sustainability is probably the most pressing issue in our research field, as it’s not the product itself, but its supply chain that has an impact on sustainability. The study Excellence in Supply Chain Sustainability by EBS Business School and Logica is aimed at investigating sustainability in today’s companies, determining its degree of implementation, and identifying driving and impeding factors. The authors find that companies who engage in pollution prevention activities in production and in sustainable development have a better economic performance than companies without this engagement. It is also found that sustainability is a high-priority objective in companies – pushed by both the management and customers. However, customers who are not willing to pay for it and a management that is not commited to it are strong barriers to sustainability. The authors also provide recommendations on how to become a sustainable company based on their survey data.
Global Supply Chain Trends 2011
PRTM Management Consultants recently published a report titled Global Supply Chain Trends 2011. The authors observe that “[h]igh volatility, huge swings in customer demand, and uncertainty in supply have created a new reality for global supply chain executives” and they make us aware of the significance of flexibility in the supply chain. This reminds me both in a statement made by Simchi-Levi (“With the increasing level of volatility, the days of static supply chain strategies are over”) and the “era of turbulence” proclaimed by Christopher and Holweg. The PRTM report contains five interesting recommendations to supply chain leaders: (1) They must focus on supply assurance and proactive capacity management for critical resources; (2) they must relentlessly engage in collaborative end-to-end demand and supply planning; (3) they must more tightly integrate their own and their partners’ supply chain architectures; (4) they must tear down the wall between supply chain management and product development/engineering; and (5) they must relentlessly drive superior collaboration maturity.
