I recently discovered an interesting overview, Supply Chain Perspectives and Issues: A Literature Review by Park, Nayyar & Low (2013), which has been published by the World Trade Organization. It explicitly distinguishes between the economic and business perspectives on supply chains. Indeed, many supply chain phenomena take place somewhere between these two worlds, as the “supply chain” system is broader than the “organization” system and also different from the “market” and “economy” systems. As the authors write, “[t]he economics perspective attempts to understand [supply chains] through trade theory, along with the motivations for specialisation and production location decisions. […] The focus in the business literature is more concerned with a firm-level perspective.” My impression is that SCM research has often covered the latter perspective but neglected the former one. The authors also link the supply chain management and global value chain literatures, which is a promising path to go, as I have also highlighted in a previous post.
The Case Centre has recently selected the winners of their 2017 Awards and Competitions. This year’s winning case in the Production and Operations Management category is closely related to supply chain management: Zara: The World’s Largest Fashion Retailer, written by Kasra Ferdows, Jose A.D. Machuca & Michael Lewis. This case is an updated version of the 15th in the ranking of top 40 overall best selling Zara case. The new case “presents a detailed and updated description of Zara’s unique operating model and many of its best practices: its retailing, design, order administration, production, and distribution systems” and “also includes new sections about Zara’s on-line business and Inditex’ increased attention to ethical and sustainability issues in its extended supply chain”. The learning objectives cover several important aspects of global supply chain management, including the design and operations of global supply networks, making this teaching case particularly relevant for courses related to our discipline.
Shifting from “company thinking” to “supply chain thinking” has successfully replaced the system, managers had in mind when making their decisions. This shift has put some of the parts of what has formerly been considered the company’s unmanageable environment into their unit of analysis. A supply chain, however, is per definition linear. In the age of sustainability, we might thus need to go one step further and shift from “linear thinking” towards “circular thinking”. The circular economy (or closed-loop supply chain) could replace the linear system by a circular system in the minds of decision makers. This is illustrated in a video released by the European Commission.
The volume, variety and velocity of business and supply chain data are increasing dramatically. At the same time, improved technologies, such as artificial intelligence and machine learning, are already on the horizon. Ernst & Young has recently published an interesting report, titled Digital Supply Chain: It’s All About That Data. The authors make one thing very clear: “Companies must act now to focus, simplify and standardize big data through an enterprise data management strategy.” If companies fail to do so, the authors argue, “technology will drive increasing data cost, complexity and inefficiency; companies will be unable to benefit from advanced analytics like machine learning; and they will be unprepared for the next wave of data growth triggered by new technologies like IoT and blockchain.” In other words, companies fail to be successful unless they become masters of their supply chain data. Maybe business schools should increase the proportion of IT knowledge in their SCM curricula?
The following Google Ngram Viewer graph shows the frequency of the terms “supply chain”, “logistics” and “procurement” in books published between 1975 and 2008. It turns out that the use of the term “supply chain” accelerated in the late 1990s and overtook “logistics” in 2007. We can only speculate about the current use, as Google’s database ends in 2008.
We certainly all agree: Trust between supply chain partners has a lot of benefits. However, in their forthcoming study of trust in the buyer–supplier relationship, Villena and her co-authors argue that there is a “duality of trust”: Trust has benefits but it can also become dysfunctional if it is excessive. The results of their study show “that trust follows an inverted-U shape with performance”, i.e., at a certain point the negative effects offset the benefits of trust and performance declines. The authors also show that “[t]rust’s negative effects are more severe for those buyers that are highly dependent and operate in stable markets”. But why could trust ever be harmful? Well, trust might create “blind faith” into a supplier when the buyer is too optimistic. Another explanation could be that buyers might avoid tensions with suppliers that they otherwise trust – even if they observe declining performance. Trust can also increase reliance and unnecessary obligations that constrain the buyer.
Villena, V.H., Choi, T.Y., & Revilla, E. (in press). Revisiting Interorganizational Trust: Is More Always Better or Could More Be Worse? Journal of Management