The Ellen MacArthur Foundation, in collaboration with the Circular Supply Chain Network, recently published a white paper entitled Building a Circular Supply Chain. This publication addresses the transition from traditional, linear supply chains to circular ones, emphasizing the increased resilience they offer. Circular supply chains, characterized by distributed networks, multidirectional flows, and maximization of product and material use, provide a solution to the vulnerabilities of linear models. These supply chains not only help reduce greenhouse gas emissions and costs, but also minimize dependence on natural resource extraction. The white paper also highlights the key role of supply chain professionals in this transformation. They are responsible for managing the vast quantities of materials in the global economy and can influence the wider adoption of circular economy principles. The paper and an accompanying fact sheet highlight nine focus areas for supply chain leaders to facilitate this crucial transition, providing a comprehensive guide to redefining supply chains in today’s economic landscape.
As in previous years, I am making a prediction about what could be important topics in supply chain management research. Here are three predictions: (1) OpenAI has demonstrated the incredible potential of machine learning, and this will have numerous implications for the management of supply chains. It is important for our discipline to consider the potential and drawbacks of this technology at an early stage. (2) Supply chain resilience remains a critical issue. For example, the recent resurgence of Covid-19 cases in China could lead to the closure of ports and factories, which would disrupt global supply chains. This topic will continue to be relevant in the future. (3) The climate and biodiversity crises continue to worsen, and their solutions are closely tied to supply chains. Human-caused emissions and the destruction of rainforests are directly related to supply chains, and new laws, such as those in Germany and the EU, reflect this. I wish you all a Happy New Year 2023.
Due to the Russian invasion of Ukraine, the European Union is currently experiencing a massive increase in gas prices. This threatens the resilience of many supply chains. An analysis by the Halle Institute for Economic Research (IWH) now shows that a small group of just 300 products causes a large part of almost 90% of the gas consumption of German industry during their manufacture. The five products with the highest gas consumption per euro of sales belong to the basic chemical industry. The analysis also shows that rising gas prices mainly lead to production cutbacks in gas-intensive products that can easily be replaced by imports. Therefore, despite domestic production outages, no significant disruptions to the supply chains are to be expected. “German industry can save a lot of gas with a small drop in sales if gas-intensive products are no longer manufactured in-house but imported,” says Steffen Müller, one of the authors of the analysis.
This year Raconteur has once again put together a very readable report entitled Supply Chain Resilience 2022. The authors ask, “As disruption continues to plague international supply chains, what can organisations do to build resilience and ensure efficiency?” And they provide answers: “From reducing waste and cutting costs to onshoring and upgrading systems, our Supply Chain Resilience report explores the strategies making the difference”. The report contains short articles on very interesting topics including Brexit, predictive analytics, striking staff, supply chain tech investments, just-in-time vs. just-in-case, chip crisis, robotics, food waste, air cargo, and sustainable commerce. I particularly enjoyed an article that shows how global supply chains have been rocked by climate change, geopolitical instability and more, and that provides examples of different industries adapting to these challenges. It is not the first time that I am writing about Raconteur’s reports here. I am always amazed at the high quality of their work.
The International Energy Agency has just released a new special report entitled Solar PV Global Supply Chains. It examines solar PV (= photovoltaic) supply chains “from raw materials all the way to the finished product, spanning the five main segments of the manufacturing process: polysilicon, ingots, wafers, cells and modules”. The authors argue that “[p]utting the world on a path to reaching net zero emissions requires solar PV to expand globally on an even greater scale, raising concerns about security of manufacturing supply for achieving such rapid growth rates – but also offering new opportunities for diversification”. It becomes clear from the report that China currently dominates such supply chains and that diversification can reduce supply chain vulnerabilities and offer economic and environmental opportunities. According to the authors, policy makers need to aim for (1) diversifying manufacturing and raw material supplies, (2) de-risking investment, (3) ensuring environmental and social sustainability, (4) continuing to foster innovation, and (5) developing and strengthening recycling capabilities.
In our new article, Two Perspectives on Supply Chain Resilience (Wieland & Durach, 2021, p. 316), we provide a new definition of supply chain resilience:
Supply chain resilience is the capacity of a supply chain to persist, adapt, or transform in the face of change.
Based on our observation that SCM scholars have often taken an engineer’s perspective to interpret supply chain resilience, we argue that it needs to be complemented with a social–ecological perspective. Our discipline is surprisingly isolated from the ongoing resilience debates in other fields, such as ecology and urban science. Supply chain resilience is not just about “bouncing back” and persistence, as the engineer’s view implies. Supply chain resilience promises to be about “bouncing forth”, adaptation, and transformation. It is time to study the assumptions we make about the supply chain more explicitly. The supply chain is not only an engineered system that needs to be stabilized, as it may be the case with a subway system. It is a fluid system that contains social actors and is anchored in our complex world.
Wieland, A., & Durach, C. F. (2021). Two Perspectives on Supply Chain Resilience. Journal of Business Logistics, 42 (3), 315–322. https://doi.org/10.1111/jbl.12271
JSCM talked to me about my new paper, entitled Dancing the Supply Chain: Toward Transformative Supply Chain Management:
The McKinsey Global Institute (MGI) has recently published a new report: Risk, Resilience, and Rebalancing in Global Value Chains. The authors show that becoming more resilient does not have to mean sacrificing efficiency. Their research highlights the many options for strengthening resilience. They argue that “[companies] have an opportunity to emerge from the current crisis more agile and innovative.” They also write: “Intricate supplier networks that span the globe can deliver with great efficiency, but they may contain hidden vulnerabilities. Even before the COVID‑19 pandemic, a multitude of events in recent years temporarily disrupted production at many companies. Focusing on value chains that produce manufactured goods, this research explores their exposure to shocks, their vulnerabilities, and their expected financial losses. We also assess prospects for value chains to change their physical footprint in response to risk and evaluate strategies to minimize the growing cost of disruptions.” I found this report to be very insightful.
Norrman & Jansson’s (2004) case study on Ericsson’s supply chain risk management (SCRM) practices is definitely part of the canon of SCM literature. After 15 years, it was time for an update. Together with Andreas Norrman, I visited Ericsson in Stockholm to investigate their SCRM practices. The results can now be found in our new article, The Development of Supply Chain Risk Management over Time: Revisiting Ericsson. Our article demonstrates how Ericsson’s SCRM practices have developed, indicating that improved functional capabilities are increasingly combined across silos and leveraged by formalized learning processes. Important enablers are IT capabilities, a fine-grained and cross-functional organization, and a focus on monitoring and compliance. Major developments in SCRM are often triggered by incidents, but also by requirements from external stakeholders and new corporate leaders actively focusing on SCRM and related activities. Although our article did not focus on SCM in the era of COVID-19, decision-makers can learn about many practices and tools that might also be useful to cope with the current situation.
Norrman, A. & Wieland, A. (2020). The Development of Supply Chain Risk Management over Time: Revisiting Ericsson. International Journal of Physical Distribution & Logistics Management, 50 (6), 641-666. https://doi.org/10.1108/IJPDLM-07-2019-0219