Perspectives on Various Issues of Interest

The mutual causality between supply chain disruption and innovation in low-income markets

In a recently published article, my co-author and I argue that low-income markets have unique constraints that trigger the co-evolution of innovation and disruption in such markets. When disruptions occur in global supply chains, and in particular, in low-income markets, they spur innovations that may be necessary to address both existing and potential future disruptions. However, such innovations in turn create disruptions to existing supply chains, and they may also create new supply chains. We highlight the unique opportunities and constraints that exist in the low-income market contexts that result in interesting and unique dynamics between innovation and disruption. Further, we identify the mechanisms through which innovation-disruption mutual causality occurs—as well as the boundary conditions for these mechanisms.

Using several case examples including Chotukool, Lagos, Nigeria Apapa port, MPesa, Momo, E-Choupal, Zipline drone technology, Dabbawallah, Danone South Africa, Kobo 360, Nestlé’s miniaturized “pure water” sachets, Barefoot College, Diagnostics for all, and Haul247 we discuss how disruption and innovation reinforce each other. Our study presents an integrated framework that considers the underlying characteristics of supply chain disruption and innovation. Supply chain disruption is characterized by impact (which can be low or high), probability (which is high), and level of control (which is low). We characterize innovation by considering whether it is affordable, available, accessible, has high level of awareness/relevance, and has low resource requirement. The mutual causality between supply chain disruption and innovation is strengthened by human and social capital that organizations in low-income markets are able to develop and creative resourcing that needs to move from autonomous to directed over time. Our study also emphasizes that weak institutions can paradoxically strengthen the force with which disruption and innovation reinforce each other. In addition to these moderating factors that strengthen the relationship between disruption and innovation, we also discuss the motivations, cognitive and social mechanisms that link supply chain disruptions to innovation, as well as information availability, structural changes and social equity that link innovation to supply chain disruption. The integrated framework presented in the paper is as follows:

This study offers directions for policy makers and managers regarding the macro-level and micro-level factors that influence innovation and disruption, as well as how to navigate the interplay between disruption and innovation in LIMs. It is noteworthy that this interplay can act as both a deterrent and an opportunity. An understanding of how LIM micro-level and macro-level factors influence disruption and innovation should help in decision-making and policy formulation. In addition, this study provides guidance to policy makers to work closely with organizations, as new innovations within these companies help to manage disruptions emanating from LIM constraints, thereby requiring innovative thinking on the policy front as well. Public-private partnerships can ensure that resource-constrained innovations at the organizational level are optimized and strengthened through policy innovations at the macro level.

Source: Goke, A., Nair, A. 2023. From Chaos to Creation: The mutual causality between supply chain disruption and innovation in low-income markets. Journal of Supply Chain Management, Vol. 59, Iss. 3, 20-41.

 

Innovation and supply chain management for uplifting underprivileged communities

Last month (July 2022) I spent time in an Indian village working with an organization that connects rural communities to solar, water, education, professions and advocacy to help communities and individuals take control of their lives and the well being of their communities. As part of its mission, Barefoot College International (BCI) aspires to increase economic mobility by making vocational and educational opportunities accessible to women and girls from the most marginalized communities around the world. The organization seeks to ensure that every woman and girl has the skills and knowledge she needs to be a catalyst for change to the benefit of herself, her family and her entire community. The organization is involved in four programs - Solar, Enriche, Water, Livelihoods.

The Solar program seeks to ensure that every woman and girl has the skills and knowledge she needs to be a catalyst for change to the benefit of herself, her family and her entire community. BCI achieves this by making vocational and educational opportunities accessible to women and girls from the most marginalized communities around the world. By training women to become Solar Engineers, even if they are illiterate or have no formal education, rural resilience is forged by each village at a time.

The Enriche program supports women’s aspiration to transform themselves and their communities. It provides them with the opportunity to embark on an empowerment journey; a journey to gain the confidence, skills and knowledge they need to reach their full potential as agents of sustainable change and to support their entrepreneurial aspirations.

As part of the Water program, the organization aims to harness every drop of fresh water that falls from the sky rather than relying on hand pumps, wells, and unpredictable groundwater levels. By combining traditional harvesting practices with new technologies, BCI make water accessible, clean and safe to drink for millions of people in need.

The Livelihoods program plans to address the challenges of climate change by envisioning soil-based livelihoods that generate resilience and dignified wages for small landholding farmers using Regenerative Agriculture, Permaculture Principles and Agroecology built systems to sustain life and care for land.

I primarily worked with the team that manages the supply chain for the Solar program. 

Notwithstanding the lack of formal education (in the case of many team members), I observed a strong desire to learn and improve operations and supply chain. I shared some thoughts on improving supply management, inventory management, and quality management practices with the team and also learnt from them.

My work with the organization gave me an opportunity to understand how best practices that are widely used in developed (and for-profit) contexts need to be tailored in light of the underlying contingencies.

I also learnt about the innovative ways in which educational programs are being developed for women.

Overall, an enlightening experience and I hope to continue my efforts to contribute to strengthening grassroots innovation, operations and supply chain management practices that are aimed at uplifting underprivileged communities.

The Role of Social Media in Linking Corporate Social Irresponsibility with Abnormal Returns

Interest in the topic of corporate social irresponsibility (CSI) has burgeoned in recent years. CSI covers organizational activities that have an adverse impact on investors, employees, customers, suppliers, or the local communities. This set of organizations and individuals represent the stakeholders of a firm whose expectations of a certain behavioral standard are not met when firms cause harm through their actions and do not take steps to rectify the situation. Information about firm actions that may have compromised sustainability objectives can have a multifaceted outcome. Given that negative news receives more attention and deliberation, CSI can not only shape the sentiments of customers and media but also affect firm performance from the reaction of customers and stakeholders. At the same time, as stakeholders may be more focused on other performance measures such as cost and quality, instances of CSI may also end up receiving low to moderate attention, thereby reducing their negative effects. If this is indeed the case, firms can misbehave on the sustainability front with little consequences. As such, undertaking further research investigation is important to discern the impact of CSI on sentiment formation and financial outcome. Drawing on stakeholder theory and attribution theory, in this study we investigate the association of firms’ environmentally irresponsible actions with social media sentiments and abnormal stock returns.

In our research we examine how corporations’ environmental impact influences social media sentiment and firm value. To address this important question, we analyze a large-scale dataset collected from five sources (Trucost, Infegy Atlas, Center for Research in Security Prices, COMPUSTAT, and Harris Interactive). We find that environmental impact results in less favorable social media sentiment toward the firm. Natural resource usage and land, water, and air pollution have the most profound effect on social media sentiment of the various types of environmental impacts. However, brand equity helps insulate the negative effect of environmental impact and simultaneously strengthens the positive relationship between social media sentiment and the firm’s long-term abnormal returns; by contrast, market competition weakens this relationship. The results further show that social media sentiment mediates the link between environmental impact and firm value.

The research findings provide useful implications to aid firms in managing their environmental impact so as to avoid negative social media response and, in turn, enhance firm value. Ultimately, this study calls for the careful management of investments in activities detrimental to the environment, because consequent negative comments on social media can negatively affect firm value. Furthermore, firms lacking brand equity and facing intense market competition need to be especially vigilant with their activities that can be construed as socially irresponsible.

Source: Nair, A., Nguyen, H. Environmental Impact, Social Media, and Abnormal Returns: The Moderating Role of Brand Equity and Competition. Working paper.

COVID-19 and Implications for Manufacturing, Reshoring, and considering Total Cost of Disruption

• Organizations have considered offshoring as an attractive option based on their  “total landed cost” and “total cost of ownership” calculations. However, in recent years organizations have started looking at reshoring as a viable competitive option after factoring in the roles of reduced transportations costs and faster inventory turns in offsetting higher labor costs. In a survey conducted in 2019 by the Reshoring Institute, 97% of the respondents indicated that they would consider a domestic source for parts if the price and quality were competitive to foreign suppliers. In addition to the growing attractiveness of U.S. markets, the unpredictability of tariffs and trade regulations leave companies conducting international business wary of unexpected cost increases. The survey found that from 2017 to 2018, the number of companies operating in multiple global locations decreased by 10%.  
•  Covid-19 has brought to the fore the ability of reshoring to not only offer these advantages but also help in mitigating supply chain risk. According to a study conducted by the Coalition for a Prosperous America, during 2000-2019 imports of medical supplies related to the managing the Covid-19 crisis has increased by 368%, which was more than three times the increase during the same time-period experienced for all the goods that are imported by the United States (105%). 
• The pandemic exposed United States’ vulnerability with regards to the supplies of personal protective equipment (PPEs). Almost 60% of the disposable rubber gloves came from Malaysia, where these Malaysian manufacturers were unable to produce the required quantities due to their own supply shortages. An investigation by the Associated Press found a 40% reduction in the shipments from China of hand sanitizer, swabs, and N95 facial masks from early to mid-March as compared to the shipments during the same period during 2019. This was attributed to the fact that the Chinese government had instructed its domestic producers to meet China’s demand before exporting products.  In the wake of the pandemic other countries also took such measures. During April – May, some of the products such as thermometers were being sold on Amazon at almost four times their price during normal times. 
• Such experiences call attention to consider the “total cost of disruption” while using traditional cost calculations for making decisions on the location of supply sources. In addition, reshoring can also help with alleviating some of the unemployment crisis created by Covid-19. According to a research publishd on MarketWatch, extensive reshoring of pharmaceuticals and medical supplies alone could potentially create more than one million new jobs and inject more than $250 billion into the GDP. 
• Organizations and policy makers need to take appropriate steps to do reshoring and multishoring right.  

GUIDELINES FOR POLICY MAKERS 

• It might be the right time to determine manufacturing sectors that are critical for public health, economic welfare and national security. These sectors should be categorized as critical manufacturing infrastructure by the Department of Homeland Security and could be candidates for onshoring. 
• Policy makers need to determine the changes to tax, legislative or foreign policy that will be necessary to move manufacturing of pharmaceutical and medical device and consumables back to the United States. For instance, The federal government can make changes to national foreign policy to mandate onshoring of a portion of pharmaceutical or other critical manufacturing sectors as a matter of national security.  
• Tariffs and corporate tax incentives by themselves may not be sufficient in promoting onshoring since companies will consider other countries in the low cost region before onshoring manufacturing capacity to the U.S. It might be necessary to provide opportunities for organizations to make reasonable profits from their investments. As an example, mandating that Veterans hospitals procure their medical supplies in the United States could be a good place to start as it can help in increasing American manufacturing capacity. 
•  The US International Development Finance Corp (DFC), which was created in 2018 by combining the former Overseas Private Investment Corp (OPIC) and part of the U.S. Agency for International Development, can take an active role in spearheading the reshoring efforts for products that are critical for national security (including essential pharmaceuticals and medical supplies). The DFC and the defense department are jointly administering $100 million in supply-chain reshoring funds from the $2.3 billion coronavirus legislation passed in March. There has been some recommendation of leveraging this money into loans equating to billions of dollars by using it as a pool of capital similar to the U.S. Treasury’s backing of Federal Reserve loan facilities.  
• It is important to recognize that concentrating all the supply from one place can be risky. Hence, reshoring should be approach in conjunction with a well thought out diversification strategy that can help in offering resilience against disruptions. In this regard organizations need to consider alternative sources as a backup for the supplies that are essential for national security and public health.  
• If economics prevent reshoring, opportunities for multishoring should be explored such that portions of supply chains related to critical supplies can be relocated to the North American trading partners of the U.S.  
• The reshored capacity can be the source for accumulating inventories of critical supplies similar to the thinking behind the Strategic Petroleum Reserve. 
• From a policy standpoint it is important that the reshoring initiatives are implemented in a genuinely strategic manner that accommodates national security rationale but doesn’t get swayed in terms of promoting the goal of protectionism for some select business lobbies. 

GUIDELINES FOR ORGANIZATIONS 

• Due diligence need to be taken when choosing a supplier (within the U.S. or offshore) such that a comprehensive set of factors are considered. These factors include quality, cost, service level, technology, talent, innovation, infrastructure, automation, QMS/standards, engineering, vertical integration, market proximity, stability, ease of doing business, and risk of disruption. 
• Organizations need to synthesize the existing prior knowledge, say in the pharmaceuticals and medical supplies sectors, to identify gaps, which will constitute new knowledge, that hinder the efficient development and manufacturing of generic drug products within U.S. 
• Instead of seeking low-cost labor, organizations need to investigate if the needs can be served by adopting advanced and innovative manufacturing tools (e.g. 3-D printing, robotics, automation) that are served by a highly skilled and highly productive workforce. Once again the total cost of ownership after a comprehensive consideration of various factors mentioned above would help in getting a better understanding of the relative merit of alternatives. 
• The reshored manufacturing capability could be spearheaded in such a way that organizations build manufacturing facilities in more flexible ways so that they can be repurposed if need be.  
• Organizations can use the Assess Costs Everywhere (ACE) Tool developed by the U.S. Department of Commerce tool in partnership with the NIST-MEP and with support from various agencies within the U.S. Department of Commerce to assess total costs by identifying and considering 10 cost and risk factors. These include: labor wage fluctuations; travel and oversight; shipping time; product quality; inputs such as energy costs; intellectual property protection; regulatory compliance; political and security risks; and trade financing costs.  
• Organizations can utilize the National Excess Manufacturing Capacity Catalog (NEXCAP), a resource developed by the University of Michigan to get an understanding of vacant manufacturing facilities as well as critical data on skilled workforce supply, community assets and other information pertinent to making location decisions. 

An enlightening and inspiring experience visiting the underprivileged communities in Panama

It was an enlightening and inspiring experience visiting and witnessing success stories of student-led consulting projects in underprivileged communities (villages) in Panama. These projects are facilitated by Global Brigades, an international non-profit that uniquely implements a holistic model to meet a community’s health and economic goals. The projects include establishment of internationally recognized community-owned banks in some of the country’s most under resourced, rural communities, micro-financing ventures created and run by indigenous tribes, helping these ventures succeed by offering hands-on business solutions, and providing healthcare to underprivileged communities.

 

Keeping children safe at school

“We owe it to children to keep them safe at school. We cannot ask our children to both look to the future while simultaneously ducking for cover.” @unicefchief #ENDviolence #Blagoveshchensk #SantaClarita https://t.co/qDVTz9hjeK

— UNICEF (@UNICEF) November 16, 2019

Strengthening land rights and supply chain for farmers

@FeedtheFuture's Land Market Development Activity is strengthening #LandRights for farmers & establishing a market where farmers can buy, sell, & lease their #agricultural land in a transparent and fair process: https://t.co/USCOsKJEaj@USAIDCtrAsia @USAIDAsiaHQ pic.twitter.com/xHHxo6NVHD

— USAID (@USAID) November 16, 2019

Five ways education can end poverty

An interesting infographic by Global Partnership for Education that highlights five ways that education can end poverty:

Women in Humanitarian Supply Chain - Dasaria

Dasaria loves being happy 💙

And as a logistics officer with @WFP_Tanzania, her work contributes to making others happy, too. Every year, Tanzania’s supply chain services transport live-saving food for millions of people across 6 countries.#WomenHumanitarians #WFPvoices pic.twitter.com/9VZ4HB0HB9

— World Food Programme (@WFP) August 16, 2019

Recent trend in hunger and food security - 2019

A report by the United Nations present the following key messages pertaining to the recent trends in hunger and food security:

1) After decades of steady decline, the trend in world hunger – as measured by the prevalence of undernourishment – reverted in 2015, remaining virtually unchanged in the past three years at a level slightly below 11 percent. Meanwhile, the number of people who suffer from hunger has slowly increased. As a result, more than 820 million people in the world are still hungry today, underscoring the immense challenge of achieving the Zero Hunger target by 2030.

2) This recent trend is confirmed by estimates of severe food insecurity in the world based on the Food Insecurity Experience Scale (FIES), which is another way to monitor hunger.

3) Hunger is on the rise in almost all subregions of Africa, the region with the highest prevalence of undernourishment, at almost 20 percent. It is also rising slowly in Latin America and the Caribbean, although the prevalence there is still below 7 percent. In Asia, where undernourishment affects 11 percent of the population, Southern Asia saw great progress in the last five years but is still the subregion with the highest prevalence of undernourishment, at almost 15 percent, followed by Western Asia at over 12 percent, where the situation is worsening.

4) Estimates of SDG Indicator 2.1.1. “Prevalence of undernourishment (PoU)," which monitors progress towards the target of ensuring access to food for all, reveal that a total of about 2 billion people in the world experience some level of food insecurity, including moderate. People who are moderately food insecure may not necessarily suffer from hunger, but they lack regular access to nutritious and sufficient food, putting them at greater risk of various forms of malnutrition and poor health.

5) This new indicator also reveals that even in high-income countries, sizeable portions of the population lack regular access to nutritious and sufficient food; 8 percent of the population in Northern America and Europe is estimated to be food insecure, mainly at moderate levels.

6) In every continent, the prevalence of food insecurity is slightly higher among women than men, with the largest differences found in Latin America.

The main indicator for monitoring progress on the eradication of hunger in the world reported in the report is the prevalence of undernourishment, or PoU (SDG Indicator 2.1.1). Beginning in 2017, the prevalence of severe food insecurity based on the Food Insecurity Experience Scale (FIES) was also included in the report as another, complementary indicator of hunger using a different approach. This year's report now takes a step forward by also reporting, for the first time, estimates of the prevalence of moderate or severe food insecurity based on the FIES (SDG Indicator 2.1.2). This indicator provides a perspective on global food insecurity relevant for all countries of the world: one that looks beyond hunger towards the goal of ensuring access to nutritious and sufficient food for all.

Source: The State of Food Security and Nutrition in the World: Safeguarding against economic slowdowns and downturns. Food and Agricultural Organization of the United Nations. Rome 2019.