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.
Just like OM research, SCM research is dominated by three research methodologies: (1) analytical modelling research (optimization, computational, and simulation models etc.), (2) quantitative empirical research (surveys etc.), and (3) case study research. There has been a recent trend towards multi-methodological research that combines different methodologies. A new article by Choi, Cheng and Zhao, titled Multi-Methodological Research in Operations Management, investigates this trend. The authors “present some multi-methodological approaches germane to the pursuit of rigorous and scientific operations management research” and “discuss the strengths and weaknesses of such multi-methodological approaches”. The authors make clear that multi-methodological approaches can make our research “more scientifically sound, rigorous, and practically relevant” and “permit us to explore the problem in ‘multiple dimensions’”. However, such research can also be “risky as it requires high investments of effort and time but the final results might turn out to be not fruitful”. Anyhow, as the authors conclude: “no pain, no gain”!
Choi, T., Cheng, T., & Zhao, X. (2015). Multi-Methodological Research in Operations Management. Production and Operations Management DOI: 10.1111/poms.12534
I believe that SCM in 2016 will be focused on customers – more than ever before! First, analyzing customer data could become the new core competency. Many companies already got rid of non-core processes. For example, Apple has focused on R&D and marketing but outsourced production to contract manufacturers – a typical smiling curve! Now, companies are increasingly focusing on analyzing customer data and just happen to be making phones or cars. Cars could soon be offered by innovative IT giants from silicon valley who outsource engineering to traditional carmakers. Cars could become “software on wheels”. Second, production will take place closer to consumer markets. While labor costs in China continue to increase (and there is no “new China”!), new technologies make production close to major markets affordable again. For example, Adidas will start production in Germany in 2016 – in its new “Speedfactory”, which is operated largely by robots. This could dramatically speed up delivery to fashion-conscious consumers. Finally, what we will see in 2016 are truly sustainable business models (see my previous blog post). I wish you a good start into 2016!
According to a new DHL white paper, titled Engineering & Manufacturing 2025+ – Building the World, the Engineering & Manufacturing (E&M) sector is on the brink of change. The E&M sector is expected to transform over the next 10 to 15 years by responding to this change with intelligent and sustainable manufacturing as well as new business and collaboration models. These transformations will have substantial implications for our supply chains. While traditional supply chain goals like quality, efficiency, total cost, or delivery performance will remain important, future E&M supply chain models will (1) reflect a global network of regional supply chains, (2) focus on risk management to create resilience and compliance, (3) take care of emissions and resources to make the world sustainable, (4) implement end-to-end connectedness and integration, and (5) be agile and responsive. And I agree: In this era of volatility and due to the need to create CO2-neutral business models, supply chains need to be adapted and redesigned soon.
The United Nations Conference on Climate Change (COP 21) has begun near Paris today. Let us hope it does not fail again – like too many other conferences before. Indeed, time is slipping away and the world will face a bleak future if we do not act now. (A prediction of this future can be found in Stager’s (2015) recent comment.) What we will see are totally new business models or as Unruh (2015) puts it in a nutshell: “A rule-of-thumb I give managers is that if your sustainability performance indicators only improve when customers use your product less often, it means you’re in trouble.” But if business will not be as usual, we cannot afford to manage supply chains the same way as before. Rather we need to revolutionize our supply chain toolset. I expect that a large part of our future research projects will be about how supply chains, as the backbones of business, can make CO2-neutral business models happen.
Update (2015-12-12): A deal to attempt to limit the rise in global temperatures has been agreed. The Paris Agreement is certainly not perfect, but it will provide a hook on which people can hang their demands now. This will have supply chain implications.
The 2015 MHI Annual Industry Report is out now. It was published by MHI, a U.S. material handling, logistics and supply chain association, in collaboration with Deloitte. The authors argue that “companies that continue to rely on traditional supply chain models will likely find it increasingly difficult to stay competitive and meet customer expectations for orders that are complete, accurate and on-time”. Based on survey data, the study, thus, analyzes technologies and innovations that are transforming supply chains around the world. Particularly, the following sets of technologies are covered by the study: (1) maturing technologies (inventory and network optimization, sensors and automatic identification, cloud computing and storage, robotics and automation), (2) growth technologies (predictive analytics, wearable and mobile technology), and (3) emerging technologies (3D printing, driverless vehicles and drones). The authors believe that “the innovations and technologies highlighted in this report have the potential to provide step-change improvements in both cost and service”.
Last week, a well-made special report by Raconteur, titled Supply Chain 2015 (pdf), was distributed in The Times of London. I very much enjoyed reading it. The authors make clear that “contracting has to be far more agile than a traditional long-term sourcing process and relationship” and they discover that “many companies are unprepared for increased complexity”. The report also discusses five megatrends, each having implications for supply chain management: (1) shift in global economic power; (2) demographic and social change; (3) technological breakthroughs; (4) climate change and resource scarcity; and (5) rapid urbanization. Other topics covered by the report are, among others, strategic procurement, top technologies, demand prediction, sustainable supply chains and cross-border delivery. The report also contains an analysis of three selected sectors (retail, construction and pharmaceutical) and additional case studies, including a case study on the 2013 Rana Plaza tragedy in Bangladesh. More information can be found on the homepage of Raconteur’s Supply Chain 2015 report.