The 20th century was dominated by an analog, linear and fossil economy, but we are about to shift to an economy that is digital, circular and post-fossil. It seems obvious that our discipline, to remain relevant, needs to drive this transition rather than clutching at obsolete managerial practices and theoretical perspectives. Those who participate in developing new business models will gain a first-mover advantage, while those trying to keep the 20th-century economy alive will soon be forced out of business.
My personal predictions for 2019 relate to these transitions. First, robotic process automation and process mining are increasingly shaping the way of modern business. This will have a tremendous influence on end-to-end business processes. Great chances are within our reach, as learning machines are taking over increasingly complex tasks from white-collar workers. But we should not overlook the danger of a small number of IT giants using their scripts to centrally control the majority of our global supply chain processes.
Second, we sometimes seem to assume that we can change the laws of nature, just like other laws. This becomes clearer when moving into the anthropocene epoch. But planetary boundaries, including the Earth’s carbon budget, cannot be negotiated or abolished like budgets in business. We simply have to accept that exponential growth and a capped number of planets – and this number is 1 – do not fit well together. One does not need to be good in math to understand that if we cannot change the number of planets, it will have to be our supply chains that will need a radical and ambitious transformation. But how can we achieve degrowth and decarbonization in our supply chains? We could shift from linear supply chains to circular ones, from selling products to selling services (e.g. the right to use instead of owning a phone), from consumer orientation to user orientation. Thus, SCM theory needs to shift away from the “consumer” of things they don’t need towards the “user” of limited resources. This would incentivize producers to keep resources in the loop instead of building products for the scrap yard.
Millennials are not primarily driven by income, but by doing something meaningful. They are scared by the climate crisis. My wish for 2019 is that we all start teaching them that they can be part of an exciting journey that could simultaneously save our planet and create income and wealth. Let us hope the best for 2019 and beyond!
Today I present my personal predictions for supply chain management in 2018. Sustainability and digitization will certainly top the SCM agenda! First, much more action is needed to combat global warming. SCM could play a key role to cope with this challenge, as a “supply chain” rather than “company” perspective helps to understand that upstream greenhouse gas emissions may occur anywhere in the world. Unfortunately, time is slowly running out! New technologies like blockchain, ID systems like bluenumber and standards like ISO 24000 could help us make a breakthrough. Second, we might see increased momentum to move beyond the machine learning hype. Machine learning could soon be integrated in all kinds of value-creating processes. But while IT giants like Google, Amazon and SAP highlight the strengths and opportunities of such technologies, we should also take the weaknesses and threats into consideration: Will robots take our children’s jobs? And what does all this mean for SCM? 2018 will bring some more questions and hopefully even more answers.
Impact of the Fourth Industrial Revolution on Supply Chains (Guest Post by Wolfgang Lehmacher, Forum)
My guest post today comes from Wolfgang Lehmacher, who presents a white paper prepared by the World Economic Forum in collaboration with BVL International.
The report, titled Impact of the Fourth Industrial Revolution on Supply Chains, provides preliminary considerations for Fourth Industrial Revolution-driven supply chains. Based on the impact on supply chains of advanced technologies, in particular the Internet of Things, artificial intelligence, advanced robotics, enterprise wearables and additive manufacturing, the report highlights seven areas of focus for business and government: new roles and responsibilities, supply chain performance, agile organizations, ecosystem for skilling, support for SMEs, leadership and neutral platforms. The Fourth Industrial Revolution changes the way in which we produce and manage the supply chain, and paves the way for the creation of new value chains. The following developments are expected to play a major role in this process going forward: Open innovation, i.e. greater openness of companies towards involving both other companies and their customers in innovation and development processes, distributed manufacturing as an approach to the comprehensive decentralization of production structures and the elimination of classic manufacturing paradigms, and new collaboration models between companies, primarily horizontally, but also vertically.
Wolfgang Lehmacher is Head of Supply Chain and Transport Industries at the World Economic Forum. During his career he was Partner and Managing Director (China and India) at the global strategy firm CVA and President and CEO of GeoPost Intercontinental. He is member of the IATA Air Cargo Innovation Awards Jury and the Logistikweisen, a think tank under the patronage of the German Federal Ministry BMVI. He is FT, Forbes, Fortune, BI contributor and author of books, including The Global Supply Chain – 2017 and How Logistics Shapes Our Lives – 2013 (German).
My guest post today comes from Kai Hoberg from the Kühne Logistics University (KLU) in Hamburg. Together with his co-authors, Alan McKinnon and Christoph Flöthmann, he has just published a new report, which is commissioned by the World Bank and analyzes the shortage of qualified logistics personnel.
Qualified logistics personnel is in short supply worldwide. This is the conclusion of our new report, titled Logistics Competencies, Skills, and Training: A Global Overview. While there are too few well-trained executives in the logistics sector in emerging countries, there is an acute shortage of qualified staff at the operational level in developed economies. We argue that this skills shortage is likely to worsen in the absence of new initiatives. There are two aspects that deserve further elaboration: First, physically, there are too few people available to cover vacant position in the logistics sector. Second, the currently employed workforce is partially lacking the skills demanded for their job. Based on an empirical analysis, we derive multiple recommendations for relevant stakeholders, i.e. companies, governmental institutions and logistics associations. The proposed measures include innovative training methods like logistics-related business games that can be employed without requiring high upfront investments or long implementation lead-times.
Kai Hoberg is Associate Professor of Supply Chain & Operations Strategy at KLU. In his academic career he was a visiting scholar at Cornell University, Israel Institute of Technology, University of Oxford and National University of Singapore. He is on the scientific advisory board of the German Logistics Association (BVL) and has been working with companies like Procter & Gamble, McKinsey & Company, Jungheinrich and Zalando on supply chain innovation projects.
It is among the common research practices in our field to build a statistical model with a limited set of variables in order to take the lens of a theory – often being alien to our field – on a supply chain phenomenon, and to test this model based on maybe 200 datasets. Other researchers collect data from three or four case companies to build or extend a research model that comprises a small set of propositions. So far so good. “So far so outdated”, I should say if I were to be malicious. Why? Researchers in fields like supply chain management might soon (or already?) be competing with “companies like Google, which have grown up in an era of massively abundant data, [that] don’t have to settle for wrong models”, as the editor in chief of Wired put it already back in 2008, proclaiming The End of Theory. So, is the data deluge about to make our research obsolete? If so, how should our community adapt to this new reality?
What are the upcoming SCM trends? Firstly, in our recent research about “hot topics” in SCM, sustainability topped the list. Indeed, 2016 has, most probably, been Earth’s hottest year on record. Ask yourself: “What will be my contribution to revolutionize our business models and create truly sustainable supply chains?” Secondly, 2017 could become the year for supply chain managers, as an increasing number of companies realize that SCM belongs in the C-suite – and that this can make a difference! Another example is Lego, the toy maker, which has recently appointed a supply chain expert to become new CEO. Companies seem to understand that SCM is not just another name for logistics; it rather creates the smile of value creation. Finally, machine learning and artificial intelligence have recently made an astonishing leap forward. Not much imagination is needed to realize that this development is about to “disrupt” decision making in SCM. Why not let machines select your suppliers? Have a good new year!
What are the future dominant research themes in supply chain management? In my new article, Mapping the Landscape of Future Research Themes in Supply Chain Management, co-authored with Robert Handfield and Christian Durach and published in the Journal of Business Logistics, we make an attempt to answer this important question. Our research is based on survey data collected from 141 SCM scholars. Big data ranks 1st on the list of topics that scholars expect will become important in the next years. Interestingly, this topic does not even appear in the top 10 of the list of topics that scholars think should become important. This list is led by sustainability and risk management instead. We calculated the differences between the will-become-important and should-become-important topics. The largest discrepancies can be found for: (1) the “people dimension” of SCM, (2) ethical issues, (3) internal integration, (4) transparency/visibility, and (5) human capital/talent management. These five under-represented topics could thus be good choices for future research projects or special journal issues.
Wieland, A., Handfield, R., & Durach, C. (2016). Mapping the Landscape of Future Research Themes in Supply Chain Management. Journal of Business Logistics, 37 (3), 1-8 https://doi.org/10.1111/jbl.12131
If you don’t have access to the journal, please feel free to request a copy of the paper via ResearchGate (blue button on their page).
Who would have said ten years ago that SCM is an exciting discipline? Not many! But isn’t it exciting what is currently going on? We can observe a number of disruptive innovations that are about to shift the way business is done. If we want to get a taste of what we will experience in SCM in the near future, we can look at how high-tech companies define it already now (see for example Microsoft’s definition of SCM): It will be about true visibility across end-to-end processes – and these processes involve raw material suppliers, component suppliers, …, and ultimately consumers. We might soon need to trash current textbooks that are based on over-simplistic OR models and Excel sheets. Such approaches are often too static to keep pace with current developments. Business schools will have to re-think their SCM curricula: Programming skills and knowledge about artificial intelligence might soon be expected by any SCM graduate.
Supply chain management has certainly become far more strategic in recent years. But does that mean that companies should have a chief supply chain officer (CSCO)? In their new article, titled The Appointment of Chief Supply Chain Officers to Top Management Teams, Roh, Krause & Swink (2016) aim to answer this question. Based on empirical data, they show that “financial leverage, internationalization, and diversification all predict CSCO appointment to the [top management team]” and that these contingencies also “positively moderate the effect of CSCO presence on firm performance”. Most importantly, appointing a CSCO makes sense when financial leverage, internationalization, and diversification levels are high, but it does not make sense when these levels are low. But companies should be fast now: The authors also reveal that “most of the contingency performance effects manifest only for early adopters of the CSCO role”. I am sure that CSCOs will soon be appointed in many companies.
Roh, J., Krause, R., & Swink, M. (2016). The Appointment of Chief Supply Chain Officers to Top Management Teams: A Contingency Model of Firm-level Antecedents and Consequences. Journal of Operations Management https://doi.org/10.1016/j.jom.2016.05.001
Supply chain management is currently undergoing a very interesting transformation. Supply chain management used to be a collection of logistics and procurement processes but it has become far more strategic in recent years. In more and more companies chief supply chain managers report directly to the CEO – or supply chain experts even become CEO, as in the case of Apple’s Tim Cook! But how do future supply chain managers need to be like? An article by Chao (2015) argues that “an understanding of technology and an ability to work in a global environment are increasingly important in the supply chain”. Technological and analytical skills are needed that enable companies to cope with the wealth of data. Another skill that is needed is the ability to construct complex and global supply chains. Companies expect supply chain managers to think strategically and solve problems. That also means that universities worldwide need to adapt their curricula to this changing demand.