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Jan Husdal's Blog

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Not everybody will know exactly what Business Continuity is, but many will have heard about it. Similarly, many will have heard of Supply Chain Risk Management, but Supply Chain Continuity? Well, that is what you get when you match Business Continuity Management and Supply Chain Management, and that is what Betty Kildow did in her newest book: A Supply Chain Management Guide to Business Continuity. To be honest Supply Chain Continuity is never used in the book anywhere, but that’s what it is; instead, she uses Supply Chain Business Continuity. Personally, I consider straightforward supply chain continuity the better terminology.


Semantics aside, this is the first book that I have seen that successfully marries Business Continuity Management with Supply Chain Management, and that looks at supply chains form a business continuity perspective, or rather, looks at business continuity through supply chain glasses.


In its structure, the book more or less follows the same and familiar steps that Steve Cartland used in his book chapter on business continuity in global supply chains:


  • Assess the risk
  • Analyze the business impact
  • Develop business continuity strategies


However, unlike Cartland's book chapter that bases much its ideas from IT continuity, Kildow focuses on supply chains in particular, explaining in detail why and how she thinks that business continuity thinking should be part of supply chain management.


One of the major points that Kildow stresses in her book time and again is that business continuity is NOT business as usual, but business at an acceptable level, where the acceptance level must be defined by the business itself, depending on whether or not an to what degree the loss of certain business functions will


  • Directly result in a loss of revenue and profit
  • Potentially result in a loss of customers
  • Directly result in increased operating costs
  • Result in accounts receivable delays
  • Delay distribution of products or service delivery
  • Delay shipment or receipt of products
  • Delay receipt of materials, parts or components
  • Negatively impact the company's current public image
  • Result in significant liability exposure or other legal ramifications
  • Prevent the company from meeting regulatory requirements
  • Lead to imposition of fines or other penalties for failure to fulfill delivery clauses or meet service level agreements
  • Result in financial penalties for late payment of accounts payable


Consequently, it is important to  assess each supplier based on a number of criteria, e.g.
  • Whether the supplier is a single or sole source for a vital product or service
  • Whether your company is a priority customer or not
  • The proximity of your supplier to your facility; closer may be better, but remember to then also assess
  • Whether you and your supplier can be impacted by the same disaster, i.e.
  • Whether the supplier's operations are geographically dispersed or clustered
  • The length of time required to process  and deliver an order placed with the supplier
  • The suppliers history, financial standing and reputation
  • The expected level of difficulty in finding an alternate supplier
  • Whether the supplier has a continuity plan, in particular
  • Whether the supplier can restore activities in time to meet your requirements



Not only does Kildow go into details about risks and strategies specific to supply chains, her book also includes a detailed appendix on


  • how to assess your own business continuity readiness,
  • what specific hazards a supply chain continuity plan should include,
  • how to deal with pandemic issues,
  • how to set up your continuity team,
  • three continuity plan samples, and
  • a supply chain/business continuity glossary.


This makes it a truly complete book that leavings nothing out.




Reference: Kildow, B. A. (2011) A Supply Chain Management Guide to Business Continuity. New York: AMACOM.

Jan Husdal

Logistics is all around us

Posted by Jan Husdal Aug 28, 2011

Watching Irene hammering down on the US East Coast from a safe distance and the comfort of my couch and my TV tuned to CNN, I became aware of another CNN program: The Gateway.


Hosted by news anchor Becky Anderson, the CNN Gateway is a series that goes behind the scenes of the world's major transport hubs, revealing the logistics that keep goods and people moving. We may not always give it much thought, but supply chains are all around us, and logistics is what makes the world tick. Our global world would not be possible without these hubs, the technology they emply and the people who work there.

Ever wondered how long it takes from the time a rose grower cuts the stem in Kenya to when it hits the stalls at your local florist? Or how cocoa from West Africa ends up in Hamburg's port warehouses, ready for distribution to Europe's chocolate makers? The Gateway reveals all.

While "reveals" may seem like a promotional exaggeration, after watching the videos I cannot stop marvelling at how logistics and supply chains pervade almost every spot in our modern world, and how what we take for granted as we go about our business would not be possible without some fairly advanced background orchestration.


Even if you consider yourself fairly knowledgable in logistics and supply chain management, I bet there are still new things to learn from watching this series, and here are some of the highlights:


The Aalsmeer flower market is the world's largest flower auction and where 60% of the worlds flowers on a daily basis, much of this flown in from Kenya and South America, making Amsterdam Schiphol airport an important hub for flowers coming into Europe.

It's quite impressive to watch the video and to see the sheer size of the premises, let the alone the array of several hundred traders buying their share of flowers with the push of a button.


The Maschen railyard outside Hamburg is Europe's largest rail marshalling yard, and perhaps Europe's most important transport hub for rail containers, processing some 3500 waggons or 150 trains up 700 metres long..each and every day.

Goods containers arrive at Hamburgh port, Europe's second largest container port, are unloaded from the ships and transported 10kms to Maschen, where an army of some 800 people makes sure that every container is loaded onto the right train for its next destination.


Interestingly, Hamburg has changed from being an import hub to being an export hub, with China today being the EU's second biggest export market, usurping the likes of Japan and Russia and biting at the heels of the United States -- for decades Europe's biggest customer. Apparently, Germany -- whose total exports to developing Asia recently overtook those to the U.S. -- has been much more successful at adapting to a world where "there will no longer be a single pole of attraction, but multiple poles."


A couple of reports are centered on Vladivostok, Russia's major Pacific port and gateway to Asia, where Tokyo Bejing and Hong Kong are closer in reach than farway Moscow. For sure, Vladivostok is Russia's commercial capital, situated as it is at the crossroads of international shipping corridors and only a two-hour drive away from China, imports from China are booming. Unsurprisingly there are perhaps more cars with their steering wheel on the right (i.e. Asia-imported cars) than cars with their steering wheel on the left (i.e. Europe-imported cars).


While I cannot present all the videos, I do recommend you to follow the link and to watch every one on the official Gateway site. It's good stuff and full of hands-on knowledge every supply chain professional can and should learn from.



cnn.com: The Gateway

Are bad management theories are destroying good management practice, and are business schools to blame? While reviewing a recent article by Fawcett and Waller (2011) in the Journal of Business Logistics on how a different (better) theory is needed to produce richer explanations and practical applications in supply chain research, I came across another interesting article by the late Sumantra Ghoshal (1948-2004), one of business academia's finest thinkers.


In what was perhaps his last paper before his all too sudden death, he blamed business schools for the demise and corruption of good business ethics, because it is obviously scientifically easier to teach shareholder value maximization at the expense of everything else than to argue for (let alone calculate the value of) corporate social responsibility as a driving force in business and supply chain management.

Obsessed as they are with the "real world" and sceptical as most of them are of all theories, managers are no exception to the intellectual slavery of the "practical man" to which Keynes referred.

According to Fawcett and Waller, "people too often perceive theory (and academic business research) as cryptic, enigmatic, impenetrable, or unfathomable—that is, something beyond the interest and comprehension of the typical decision maker. More often than not, theory is often confused with mere conjecture, hypothesis, presumption, or speculation—perhaps not worthy of serious, thoughtful consideration in the real world".


No wonder then, that managers prefer practice over theory, and this is perhaps also the reason, so Ghoshal, why many business schools are more influenced by pragmatic ideology than actually founded on sound theory:

In courses on corporate governance grounded in agency theory we have taught our students that managers cannot be trusted to do their jobs - which, of course, is to maximize shareholder value - and that to overcome "agency problems", managers' interests and incentives must be aligned with those of the shareholders by, for example, making stock options a significant part of their pay.


In courses on organization design, grounded in transaction cost economics, we have preached the need for tight monitoring and control of people to prevent "opportunistic behavior".


In strategy courses we have presented the "five forces" framework to suggest that companies must compete not only with their competitors, but also with their suppliers, customers, employees and regulators.


MBA students are not alone in having learned, for decades, these theories of management. Thousands of executives who have attended business courses have learned the same lessons, although the actual theories were not presented to them so directly. Even those who never attended a business school have learned to think in these ways, because these theories have been in the air, legitimizing some actions, delegitimizing others, and generally shaping the intellectual and normative order withing which all day-to-day decisions are made.


Indeed, the picture he draws is not very uplifting, because whatever we (managers) think, it is all based on negative assumptions, which in the end, naturally enough, do nothing else but reinforcethemselves and our already tainted view of the world:



Ghoshal puts it quite harshly when he says that

academic research related to the conduct of business has had some very significant and negative influences on the practice of management. These influences have been less at the level of adoption of a particular theory and more at the incorporation, within the worldview of managers, of a set of ideas and assumptions that have come to dominate much of management research [...] By propagating ideologically inspired amoral theories, business schools have actively freed their students from any sense of moral responsibility.

and he is particularly hostile towards Milton Friedman for his postulation that "Few trends could so throughly undermine the very foundation of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money as possible for their stockholders." Infact, Ghoshal questions the very basis for this assertion, and I am inclined to side with Ghoshal on this matter, as this post on corporate social responsibility on my other blog will tell you more about.


Ghoshal contends that we only have ourselves to blame:

Combine agency theory with transactions costs economics, add in standard versions of game theory and and negotiations, and the picture of the manager that emerges is one that is now very familiar in practice: the ruthlessly hard-driving, strictly top-down, command-and-control-focused, shareholder-value-obsessed, win-at-any-cost business leader.

Essentially then, if I follow Ghoshal's train of thought, we have fallen victim to our own theories, perhaps incapable of acknowledging any other reality, i.e. theory, where - in Ghoshal's own words - companies actually survive and prosper when they simultaneously pay attention to the interest of customers, employees, shareholders, and perhaps even the communities in which they operate.


Luckily, and what bodes well for the future, some academics are in fact beginning to see business management in this light. Unfortunately, they are up against the mighty enemy of mainstream economics which is not yet ready to accept such new ideas. Is it going to change? I hope so.


While Ghoshal's article is well written and not difficult to read, it is not easy to fully understand without a solid academic background. That said, it is perhaps the best argument I have come across for sustainable management practices, and I am inspired to include more sustainability related articles on my blog. It really is a loss to the advancement of business that Ghoshal isn't among us anymore, so he cannot continue to sow more of his seeds among researchers. He would have found fertile ground in me for sure.



Ghoshal, S. (2005). Bad Management Theories are Destroying Good Management Practices. Academy of Management Review 4(1):75–91.

Jan Husdal

Diaper wars at home

Posted by Jan Husdal Aug 7, 2011

Sadly, there hasn' been much time to participate in this community recently, but gladly the reason has been my two-month old baby daughter, who every day teaches me the value of supply and demand.


The problem with babies is that they are unable to communicate and voice their demand clearly, and it's impossible for me or my spouse to know which supply that is required to satisfy the demand, that as already mentioned, isn't even clearly articulated. Currently, any discomfort or crying could mean anything. So here we go...Milk? No. Holding? No. Holding while walking? No. Diaper change? No. Stomach pain? No. Eventually, and not necessarily in that order, demand is met and the baby is soothed, at least for the next half hour or so. Luckily, in real life, matching supply with demand is somewhat easier.


Regardless of my current time contraints, and in total disregard of a two-month backlog of unsatisfied sleep demand, I just finished reviewing Designing and managing the Supply Chain by David Simchi-Levi, Philip Kamisky and Edith Simchi-Levi. Despite being 4 years old and in its third edition, with a fourth coming soon, this  500+ page volume seems to contain everything I ever needed to know and perhaps more than I ever wanted to know about how-to everything in supply chains.


One chapter in the book is devoted to the so-called bullwhip effect, a term made popular, among others, by Hau Lee et al. in their 1997 article in the MIT Sloan Management Review, citing the discovery that Procter & Gamble made when analyzing how diaper demand reverberated up the supply chain from the store to their manufacturing units and suppliers.

Not long ago, logistics executives at Procter & Gamble (P&G) examined the order patterns for one of their best-selling products, Pampers. Its sales at retail stores were fluctuating, but the variabilities were certainly not excessive. However, as they examined the distributors’ orders, the executives were surprised by the degree of variability. When they looked at P&G’s orders of materials to their suppliers, such as 3M, they discovered that the swings were even greater. At first glance, the variabilities did not make sense. While the consumers, in this case, the babies, consumed diapers at a steady rate, the demand order variabilities in the supply chain were amplified as they moved up the supply chain. P&G called this phenomenon the “bullwhip” effect.


What puzzles me is the statement that "babies consume diapers at a steady rate". True as that may be, why then is there no standard size for the different diaper size packages? Size #1 has 35 pieces, size #2 has 39 pieces, a jumbo 2-in-1 #2 may have 44 in each package, size #3 has 32 and so on. If I switch brands get another range of package sizes. So even though the consumption may be steady, my inventory level cannot be filled at a steady rate, meaning that as the baby grows older I have to buy diapers at a changing rate, simply because the package sizes vary. Perhaps I should invest in some inventory software?


Adding to the confusion, different stores will have different prices, and different loyalty programs and sales campaigns, buy one get one, or buy three get one, and so on, and since I, the price-conscious parent, like to have a unit price for comparison, I find myself spending to much time in front of the diaper shelves comparing and deciding which brand/package that offers most value for money. Luckily there are only two diaper brands in Norway, Libero and Pampers, besides the no-name generic brands, but still, it takes time. Perhaps I should hire a procurement specialist?


Perhaps it is a result of some sort of "smart pricing" scheme, a topic that is also covered by the above book. Purposely confusing the consumers so they don't know what to buy and hopefully choose the package with the biggest profit margin?


Anyways, this brings to mind another smart pricing issue: Decreasing size and increasing price. You know, you may have noticed how your favorite chocolate bar sheds a few grams now and then, while the price stays the same, or perhaps even increases? In fact, the actual retail price increase that this weight reduction represents, is often much more than the increase in production cost the factory has had, and why is it that bite-size chocolate costs far more per gram than the giant jumbo plates? It can't cost that much more to manufacture the small bags...but that's another story for another post for another day.

This has been a very special week for us here in Norway, to say the least, where the unthinkable has happened, where Anders Behring Breivik, a lone extremist, not only single-handedly designed and detonated a bomb destroying major government buildings in downtown Oslo, but then also went on a shooting rampage at a Labor Party youth camp on Utoya Island, killing 77 people altogether, most of them teenagers. Serendipitously, as details now begin to emerge, logistical miscalculations and delays and disruptions to the delivery chain (i.e. traffic accidents, road closures and diversions, and wrong timing in how long it actually takes to get from A to B to C even in comparatively small-town Oslo) may have averted an even bigger tragedy. A prime example of how a Just-In-Time supply chain can go wrong.


The perpetrator also left behind what he called his Manifesto detailing the reasons for his attacks, including descriptions of people, companies and products whose knowledge and products helped him carry out his mission, by legally and thus unknowingly providing him with the supplies he needed. Many companies (and persons) and now shocked to find their names and products associated with Breivik, asking themselves whether they should have seen or suspected anything beforehand. In all cases the answer is no, as all bomb ingredients were acquired through legal channels, and while for example fertilizer was a main ingredient in building his home-made bomb, you cannot have the police ransack every farmer who buys fertilizer to make sure he actually disperses it on his fields.


Being named as used or useful by a terrorist is not a good thing. Potentially it could be damaging to your reputation, ultimately costing you sales or even putting you out of business. Even though the aforenotmentioned companies had no idea who they sold their goods to, many people will now perhaps think twice before buying from them. The companies themselves may feel compelled to enforce stricter rules and sales policies, thereby losing potential and actually harmless clients that otherwise would have been deemed legal but who are now deemed dubious.


In Breivik's case he also uploaded what some press have called Public Relations photos to his Facebook profile, which almost looks like a media kit, posing among other things in Lacoste sweaters and a Skins wetsuit, both brands highly praised by Breivik for their quality. I would imagine that Lacoste isn't exactly thrilled by this sort of PR and that sales in Norway will dwindle into nothing very soon. Who wants to wear a Lacoste sweater after this?


According to an article on the Norwegian business news website e24.no, citing Swedish resume.se, Arnaud Leblin, Communications Director at Lacoste, declined to comment on the issue, stating simply that "our thoughts are with the victims and their families". That said, every news photo showing Breivik wearing his Lacoste sweater will implant the brand in everybody's mind and undoubtedly hurt the brand value. The Swedish article also advises Lacoste to lay low and refrain from any marketing campaigns for the time being.


Logistics provider DB Schenker was also mentioned as being utterly unreliable when his delivery was delayed and where he infuriated turned up in person at their offices in order to complain. Admittedly, not the usual customer behavior, says Agneta Odhe, traffic manger at DB Schenker, according to Norwegian newspaper Dagbladet, but nothing you would alert the police to. In any case, not the best advertising for DB Schenker.


Not only does Breivik mention his favorite clothes brands, now perhaps forever tainted with the blood of his victims, he also mentions what type of car that is most unsuspicious for parking near bomb targets and what kitchen blender that proved itself to be most useful for mixing the bomb ingredients. Again, not the kind of marketing you may want your brand to have.


The lessons to be learned here are that bad things can happen to good brands (or good people, for that matter). While building a reputation takes time, it can be destroyed in no time, and rebuilding it can be very difficult, if not impossible. Are you prepared?


Have you ever had bad publicity happen to you? What did you do to counter it?


Recommended reading

Honey, G. (2009) A Short Guide to Reputation Risk. Farnham: Gower Publishing

Some of you may remember my posts on he Japanese earthquake and tsunami, where I asked the question Are natural disasters good for the economy? and a few  days latered countered by saying that Natural disasters are NOT good for the economy. Well, as it turns out, Japan is on its way to recovery, perhaps faster than many expected, indeed a sign of economical resilience, a topic I from time to time have covered on my other blog. As Michael Koply writes on softwareadvice.com, perhaps not the first place to look for such news, but nonetheless, "select Japanese manufactures have not only begun to rebuild, but emphatically rally back", he says.

Lean manufacturing – established as the gold standard by Toyota and other Japanese manufacturers – relies on the knowledge that processes and conditions will stay the same day after day. Harnessing this predictability and empirically analyzing results have allowed our global economy to become what it is today. Yet the very nature of our global economy makes “leaning out” difficult. Disasters can halt production for weeks. War and social struggle put business on the back burner. And the default on sovereign debts threatens to rip apart the supply chain one link at a time. However, fast-forward four months after the destruction of the March tsunami began, and select Japanese manufactures have not only begun to rebuild, but emphatically rally back. So, who are these all-stars, and how did they do it?

The article at softwareadvice.com paints an interesting picture of what has happened since the disaster and how the recovery has been made possible, linking to a wide range of online sources for documentation. For what it's worth, Japan's industry has learned and put into practice a number of valuable supply chain lessons:

The “secret sauce” of many supply chains is their connections, relationships, and deals with suppliers. Ironically, the Japanese Big 3 of Toyota, Honda, and Nissan were forced to share these secrets and work together to help assist the auto parts suppliers affected by the earthquake and tsunami. The result? Parts in high demand and short supply have been reduced from 500 to about 30 for Toyota, who is now operating at 90% of its normal capacity. Nissan is reportedly operating at near-normal production levels, while many Honda plants are ramping-up production to pre-earthquake production levels. Given the wide-scale havoc in Japan, these numbers could have been much worse without all three players’ cooperation. Plus, by developing these types of inroads now, Toyota, Honda, and Nissan are laying the foundation for future cooperation in the event of additional disasters.

Not only the automotive industry is doing much better than expected, Canon is another shining example:

Although it was initially expected to take the remainder of the year to recover, Canon is now at pre-disaster production levels. These results even surprised Canon. How did they do it? One of Canon’s overall strategies and focal points has been diversifying its parts production efforts, including focusing on plants in southern Japan and mainland China.


Apple is another manufacturer that seems to have found the right combination of investing in technology manufacturers and negotiating attractive supplier contracts to effectively mass produce its high-quality products:

Apple’s iPad 2 was announced only days before the earthquake and tsunami hit Japan. Many expected the disaster to greatly affect availability of Apple's newest tablet model. In reality, supplies for U.S. markets and other parts of the world were largely unaffected. Apple’s investment in its supply chain has made it seem almost impermeable to disaster.

What is not suprising, if do you look behind the scenes is that Fujitsu recovered faster than other semiconductor suppliers. How come?

Fujitsu was actually ready for a such a disaster before the earthquake. The company had developed an emergency response strategy after an earthquake rocked Iwate three years earlier. Fujitsu quickly weathered the storm by shifting front-end product manufacturing to unaffected plants in central Japan and back-end product manufacturing to southern Japan and China.

For the organizations that are willing to learn there are some great lessons to learn here, and one of my favorite articles - and perhaps the most practical - on how to mitigate supply chain disruptions is Christopher Tang's Robust strategies for mitigating supply chain disruptions, where he lists 9 ways a company can address supply chain disruption risk:

  • Postponement
    • Modular design allows switching to other components in case of supply shortage
  • Strategic stock
    • Planned stockpiling of regular demand at central locations to serve areas in need or shortage
  • Flexible supply base
    • If one supplier goes down, the other can take over, some for basic demand, some for high volume fluctuations
  • Make and buy
    • Always keep some production in-house, outsource basic items, make high-end items in-house
  • Economic supply incentives
    • Commit to buying certain quantities from a certain supplier to keep the (backup) business running
  • Flexible transportation
    • Muliti-modal, multi-carrier, multi-routes transportation, avoid chokepoints
  • Dynamic pricing and promotion
    • Sell what you have, don’t delay or promise to supply what you don’t have
  • Assortment planning
    • For retailers, displaying what’s in stock, influence customer choice and demand
  • Silent product rollover
    • Do not market the introduction of new products or the end of old products

That is exactly what the companies mentioned above have done, and that is perhaps why they have recovered so quickly.


Read more

softwareadvice.com: The Post-Tsunami Supply Chain All-Stars


Related links

husdal.com: How to measure economical resilience?

husdal.com: Nine ways of mitigating supply chain disruptions

With sustainable supply chains being the topic these days, it appears that food supply chains aren't a shining example of sustainable. supply chains. Did you know that 30% of all food in Italy is wasted? That is indeed a lot and I cannot think of any other supply chain where this much of what is produced isn't even consumed or used at all. Can you?


Not only are we wasting perfectly good food, we're also wasting resources by producing, processing and transporting food that is not going to be eaten in any case. What achievement is there, say, in a supermarket chain claiming to have reduced its (logistical) carbon footprint when much of what sits on its food shelves never makes it into anyone's stomach and is simply thrown away?


I remember how surprised I was when I was studying for my MSc in GIS in  the UK some 10 years ago and saw that the food in supermarkets had a  Sell-By date and a Best-Before date (in Norway we then and and now still  only have Best-Before dates). I soon learned that if I went to the  supermarket an hour or so before closing time, today's Sell-By food was  on sale at half price or less...a welcome money-saver for a poor  student.


I came across the food waste issue when zapping through my TV channels the other day, where food supply chains happened to be the main topic of that day's episode of Horizons, a BBC series that looks at what will be the greatest business challenges facing the planet over the next decade, who will solve them, and how?

Horizons will explore the soaring global population, which will have  increased 10% by the year 2020. It will visit areas where population  density influences crucial global issues such as safe living and food  supply. Horizons will address the need for better transport systems, and  it will examine how the need to reduce pollution is encouraging  innovators to reduce the carbon footprint our lifestyle creates. It will  look at food and land security, ranging from some of the world’s driest  places with inadequate water, to countries where rising sea levels  result in excessive water. In each programme Horizons will investigate a country that is not  only experiencing some of the problems highlighted by our experts, but  is also tackling those problems in novel and innovative ways that could  provide a model for other countries to follow.

Episode 10 of Horizons looked at food supply chains and takes place in Italy, home to good food and wine, but apparently also home to food waste. But some Italian companies are tackling this issue head on:


bIt is quite disheartening to think how much food that is simply wasted without being used, but it is good to see thet there are simple solutions, and think this video really shows what how a sustainable supply chain extends from the first producer to the last consumer. Wasting less food is certainly a good thing to do, but shouldn't it perhaps be applied to other consumer goods as well? That is, only produce enough for consumption, not overproduce and then waste?

An interesting newspaper article caught my eyes yesterday, in "Dagens Næringsliv", the Norwegian equivalent to the Wall Street Journal. Asking 400 managers in major companies in all four countries, the article compared the top seven business risks, or rather: business fears, in Scandinavia, i.e. Denmark, Norway, Sweden and Finland. Interestingly, what is most on managers' minds is very different from country to country.


You would think that businesses, albeit they may be different in scope and geographical location, would have more or less the same fears when averaged out across the board, but that is definitively not the case here. Interestingly, supply chain risks do not rank very high. Actually, unless you count them in implicitly, they do not rank at all...almost.


But what do business leaders in Denmark, Norway, Sweden and Finland fear the most?



In Norway, it is loss of key personnel, perhaps like it is described in this cartoon. The loss of key personnel does not seem to matter at all to leaders the other countries.This is difficult to explain. Perhaps it's harder to find qualified employees in Norway, thus making losing them a frightening scenario?


In Denmark it is disasters, terror attacks and political upheaval. In Sweden, same. In the other countries that raises very little concern. Obviously the drama that ensued in Denmark after the publication of the Mohammad cartoons plays a role here, and Sweden has had its share of assasinations and bomb scares, while Norway has peacefully escaped these calamities.


Note that Finland doesn't seem to fear much at all, but if anything, it would be loss of IT, electricity or or telecommunications. Maybe it's their "sisu" making its mark here?


Norway also ranks (presumably bad) media coverage as one of their major fears, along with an economical recession. While the latter also matters to business elsewhere, media coverage is only a concern to Norwegians. Is our press that bad?


Also noteworthy is that problems with partners or suppliers (implicitly: supply chain risks) are on some managers minds in Sweden and Denmark, but not in the other countries.


Well, the picture of what the biggest fears in business are, is muddled at best, at least as far as Scandinavia is concerned. And I hope that it is not the true picture. If all Norwegian managers are worried about is losing their key staff, then that makes me worried.


That said, what would be your biggest fear on the list above? Or are there other items on your agenda, as Bill Dubois asked in his post on What else could go wrong?


A link to the newspaper article (in Norwegian) with background information on the survey can be found in this post on husdal.com.

Cultural differences and clichés always make a good debate and a recent article in the Journal of Business Logistics caught my interest the other day. It's about Germans and Americans and their different attitudes towards business relationships and how loyalty is formed in 3PL outsourcing. Having grown up in Germany myself, although no longer living there, and having spent some years in the US, albeit not in business, I was immediately drawn to it and was quite surprised, because I never thought that business relationships the US and Germany would be that different from each other.


Essentially, so the authors, in the US, loyalty is based on commitment; in Germany it is based on trust.


Although the authors base their model  on  as many as 795 logistics outsourcing relationships in the the US and Germany, which suffices as far as statistical validity goes, they also caution that the  results should by no means be generalized or accepted as facts about cultural  traits and how business operates in these two countries. Nonetheless, the article does paint an  interesting picture of how business relationships are formed in the US versus in  Germany, and which elements that foster loyalty and which elements that  don’t. Well, I must say that life (and business  life) is probably much more complicated than 795 cases can illustrate or establish. Life is life.


The background for the article is something as mundane as third-party logistics outsourcing, or 3PL, and while a large part of the article is spent discussing statistical linkages results and hypotheses, another large part is spent on citing known works on cultural traits and presumed differences, which in the end turn out to be very much true. So there is a difference after all?


Citing several renown academic works and studies of national and cultural differences in their literature review, the authors explore and highlight some of the presumed and empirically tested differences:

Germany displays significantly higher uncertainty avoidance than  the United States. Uncertainty avoidance captures the extent to which a  culture socializes its members into accepting ambiguous situations and  tolerating uncertainty. While individuals from the United States are  viewed to be relatively fearless of change and unknown risks, to embrace  innovations, and exhibit an open attitude, Germans generally are  considered to be uncomfortable with unfamiliar behavior, resistant to  change, desiring of loyalty and stable business relationships, open to  information sharing, consensus seeking, and avoidant of conflict. Also,  an important aspect in Germany is that personal bonding has a greater  importance as a basis for enduring business relationships.
The  United States exhibits higher individualistic traits than Germany.  Hence, managers in the United States have a greater tendency toward  opportunity taking-behavior, perceive business relationships as less  personal, and subscribe to an active self-concept. Germans, on the other  hand, tend to seek consensus, avoid change, establish rules to maintain  a desired state, and ascribe more importance to personal bonds and to  preferential treatment of in-group members, whom they trust and are  loyal to.
Germany and the United States exhibit different time fixations. Germans  are more fixated to the future, generally ‘‘not preoccupied with  immediate results’’, and prefer planning for the long term. Americans,  on the contrary, are more fixated to the present and demand immediate  results. Consequently, Americans tend to favor the realization of  immediate economic benefits, while Germans rather prefer arrangements  that promise rewards in the long term.
Germans tend to be more  territorial than Americans and extend a feeling of territoriality ‘‘to  all possessions’’, which has the following implications on business  relationships: Germans value frankness, honesty, and directness; and  relationships in Germany may go a lot deeper than in the United States.  While on one hand, it is a lot more tedious to form a relationship with  Germans than it is with Americans, on the other hand, according to  establish cultural theory, relationships in the United States are also  more endangered, as ‘‘the American’s first loyalty is still to self,  family, and the career, not the company. […] Being pragmatic, they do  business where they ‘get the best deal’, which usually means the best  price’’.
The United States displays higher individualism than Germany, suggesting that interpersonal relationships are more meaningful to Germans, who also value personal loyalty more highly. In addition, group decision making and consensus are nurtured in Germany. Also, as a culture with more diffuse cultural traits than the United States, personal factors are more important to business relationships in Germany than in the United States, where business conduct is significantly more results oriented. Germans are much less self-determined than Americans, which may make it easier and more important for them to maintain relationships. While both countries accord social status mainly on the grounds of achievement, ascription is still a factor in Germany and, consequently, managers there have to be less focused on short-term and visible results and performance.
Germans demonstrate greater focus on egalitarianism (individuals are seen as moral equals who share basic interests) and intellectual autonomy (individual pursuit of ideas and rights). In contrast, Americans are closer aligned with hierarchy (individuals socialized to comply with their roles) and mastery (individuals seek change to advance personal or group interests).
Americans have a stronger task orientation, while Germans are more employee oriented. Americans and Germans also have different future orientation values. Americans are defined by their flexible and adaptive organizations engaged in long-term planning and investments as compared to Germans. Institutional collectivism and in-group collectivism both assess the extent to which a society prefers affiliations and loyalty toward collectives. Germans demonstrate higher levels of institutional collectivism values as compared to Americans. However, American practices along this dimension are seen as higher. Thus, while Germans desire more collective distribution of resources and action, it is the Americans who demonstrate higher levels in practice. In addition, Americans also exhibit higher levels of in-group collectivism, which is the degree to which individuals express pride, loyalty, and cohesiveness in their organizations. Americans tend to have higher levels of humane orientation practices, which translates into encouragement and reward for individuals being fair, altruistic, friendly, generous, caring, and kind to others. Finally, while Americans’ uncertainty avoidance values are higher than Germany, in practice Germans seek out certainty at higher levels.

In summary, then, the authors conclude that in contrast to US Americans, Germans ...

  • extend trust more readily, especially to in-group members
  • are more accepting of information sharing
  • dread change and innovation
  • adhere to rules and regulations more strictly
  • place higher emphasis on stable relationships
  • are more loyal toward relationships, especially with in-group members
  • seek consensus and try to avoid conflict
  • require personal bonding for maintaining long-term business relationships
  • place lower emphasis on immediate economic benefits
  • are rather long-term oriented

Sort of semi-German in my heart and soul, after living there for 15 years, and having spent a number of years in the US, I would agree to some of the points above, but certainly not all.


Loyalty, so the authors, shows itself in the form of retention and referrals, or in other words: continuing purchases and recommendations to others.



Leading up to loyalty are commitment and trust, and while both both commitment and trust have direct links to retention and referrals, trust also plays a role in forming commitment, in Germany more than in the US, and the results from the authors' 795 surveys show a very diverging formation of loyalty in the US versus Germany:


Commitment  assumes a key role in the United States. While trust has no significant direct effect on retention and referrals, commitment has a strong direct effect on both dimensions of loyalty. In Germany, the effect of commitment on loyalty is substantial, yet significantly weaker than in the United States, while trust in Germany has a strong and significant direct effect on both loyalty dimensions. Interestingly,


Germans seem to focus more on frictionless long-term relationships fostered by trust, because business relationships in Germany often are accompanied by personal relationships and mutual admittance of relationship partners to the respective in-groups. Americans, on the other hand, are comparatively impersonal in the business world and rather calculative. Therefore, trust as an expression of the quality of the interpersonal relationship between buyer and seller is usually able to stimulate loyalty in Germany, while it has no direct effect in the United States. Here, instead, trust has to create commitment before it fosters loyalty behavior.


So now you know what the differences are. Having said that, would you agree?



Wallenburg, C., Cahill, D., Michael Knemeyer, A., & Goldsby, T. (2011). Commitment and Trust as Drivers of Loyalty in Logistics Outsourcing Relationships: Cultural Differences Between the United States and Germany. Journal of Business Logistics, 32 (1), 83-98



You can read my own review of the article in my post on Committed Americans and Trusting Germans on my own blog.

And what currency are they likely to trade in? While chances are that the world's major supply chains will still go to the US, chances are that they won't be trading in US Dollars. Are we prepared for that?


A recent article in the Wall Street Journal Marketwatch claims that the Age of America nears the end, as China's economy is poised to overtake the US by 2016, according to a fresh report by the International Monetary Fund.

For the first time, the international organization has set a date for  the moment when the “Age of America” will end and the U.S. economy will  be overtaken by that of China. According to the latest IMF official forecasts, China’s economy will  surpass that of America in real terms in 2016 — just five years from  now.According to the IMF forecast, whomever is elected U.S. president next  year — Obama? Mitt Romney? Donald Trump? — will be the last to preside  over the world’s largest economy.Most people aren’t prepared for this. They aren’t even aware it’s that close.

The rise of China, and the relative decline of America, is the biggest story of our time. I for one wasn't aware of it being that close. In a post on food supply chain vulnerability I imagined it to be in 15 years or so, not just 5. Well, as it turns out, it's a matter of how you count and compare economies. The IMF in its analysis looks beyond exchange rates to the true, real  terms picture of the economies using “purchasing power parities.” That  compares what people earn and spend in real terms in their domestic  economies:

Under PPP, the Chinese economy will expand from $11.2 trillion this year  to $19 trillion in 2016. Meanwhile the size of the U.S. economy will  rise from $15.2 trillion to $18.8 trillion. That would take America’s  share of the world output down to 17.7%, the lowest in modern times.  China’s would reach 18%, and rising.

We are now witnessing the end of the Age of America, the article says, and I am compelled to agree. Most of us have lived in a world dominated by the U.S. for so long that there is  no longer anyone alive who remembers anything else, but it should be remembered that America overtook  Great Britain as the world’s leading economic power in the 1890s. The Age of China, however, will feel very different, because both countries enjoy very similar rules of constitutional  government, respect for civil liberties and the rights of property.  China has none of those. How will that impact trade relations? I'm just asking...


What the rise of China means for defense, and international affairs, has  barely been touched on, and I'm not sure many stratgegists have even  thought about it, but some are already a bit concerned:

Victor Cha, senior adviser on Asian affairs at Washington’s Center for  Strategic and International Studies, told me China’s neighbors in Asia  are already waking up to the dangers. “The region is overwhelmingly  looking to the U.S. in a way that it hasn’t done in the past,” he said.  “They see the U.S. as a counterweight to China. They also see American  hegemony over the last half-century as fairly benign. In China they see  the rise of an economic power that is not benevolent, that can be  predatory. They don’t see it as a benign hegemony.”

And that is just the start of the worries.


The U.S. Treasury market continues to operate on the assumption that it  will always remain the global benchmark of money. Business schools still  teach students, for example, that the interest rate on the 10-year  Treasury bond is the “risk-free rate” on money. And so it has been for  more than a century. But that’s all based on the Age of America. No wonder so many have been buying gold. If the U.S. dollar ceases to be the world’s sole reserve currency, what will be?

What do you think? Should we fear China's rise to global economic powerhouse?



Wall Street Market Match: IMF Bombshell - Age of America nears end

IMF: World Economic Outlook April 2011

In a previous post I asked the question Are cheap food and cheap energy a thing of the past?, reflecting on the fact that some staple food commodities were trading at prices not seen before, and how that could impact food supply chains. Here comes another worry: food oil, as Bloomberg reports in a recent article on the supply and demand of vegetable oils that are used not only in cooking and food processing, but also as biofuels.


At a time when consumers are focused on food costs that are within about 3 percent of a record, stockpiles of edible oils needed to make everything from noodles to fish sticks are dropping to a three-decade low. [...] The combined stocks of nine oils will plunge 25 percent to 9.39 million metric tons this year, or about 23 days of demand, the fewest since 1974, the U.S. Department of Agriculture estimates. [..] As the global population expanded 85 percent in the past four decades, demand for edible oils rose almost ninefold.[...] Stockpiles of the oils extracted from palm fruit, palm kernel, soy, rapeseed, sunflowers, coconuts, cotton, olives and peanuts are slumping as demand climbs 6.1 percent to a record 146.4 million tons this year, outpacing a 4.2 percent gain in production, according to USDA estimates.


What the article is saying is that basically there isn't enough oil around to meet demand, which may cause prices to soar, hurting the profits of food giants like Unilever, but also other industries, since vegetable oils are used in everything from Hellmann’s mayonnaise to Snickers candy bars, as well as soaps, cosmetics and fuels.On the other hand, it may increase profits of oil producers, e.g. palm oil plantations in Malyasia and Indonesia. In any case, the end consumer will perhaps be the hardest hit.


While higher prices may be hurting food companies and consumers, they’re bolstering income for growers.


That said, farmers will always seek to grow the most profitable crops, thus adding to the crisis by changing what is supplied to the market:


Chinese growers may plant 11 percent fewer acres, seeking greater profit from cotton and corn, as prices for both crops more than doubled in the past year.


Personally,  I'm not much of an advocate for biofuels. Not because I don't believe  in global warming, or because I don't think we should take care of our  planet and pollute less, but because using arable land to produce fuel  rather than food when much of the world's population is starving seems  rather ludicrous to me. However, in the end, money always wins, I guess. As I said on my blog, Is it just the price we have to pay?



bloomberg.com: Palm Oil Advancing 23% Hurting Unilever as Stockpiles Decline to 1974 Low

In my previous post a couple days ago, and referring to the earthquake and tsunami that devastated much of Japan's Northeast coast, I asked the question Are natural disasters good for the economy? While the answer then was a conditional Yes, it will probably be a conditional No when looking at that same question today, especially when considering yesterday's post by Jim Fulcher on how the disaster in Japan has far-reaching implications.


Japan's supply chains are still under pressure, writes Patrick in the Supply Chain Management Review, and he is very right. I usually watch the BBC News World Business Report every morning, and today's reprot focussed specifically on Japan. With the Tokyo Stock Exchange closing some 5% up today, at least the Japanese have regained their confidence, showing that they will be able to pull themselves out from the rubble (pun intended). However, the road to recovery is long and not easily walked.


Japan does play a major role in the world's supply chains and with many ports unable to operate that will hurt exports as well as imports. Japan's Crisis adds new risks to global recovery, as the Wall Street Journal points out. The WSJ article featured two interesting graphics:



The figure indicates that Japan's major market lies in Asia and China. If these exports are hampered that in turn will hamper these countries, and inparticular China, in exporting their goods to Europe and the US.



This figure shows the sectors that are most likely to be hit the worst by the current crisis in Japan: The automotive sector and the electronics sector. Toyota has reportedly shut down and/or reduced production at some of their facilities, and integrated circuits are hopefully available with other manufacturers. If not, we could have a reprise of the fire that severely impacted mobile phone makers Nokia and Ericsson in 2000. Reuters.com aptly named their story on integrated circuit problems as the chips to ships supply chain, and no we're not talking about the export of French fries here...


CNBC reports how the current Japan supply chain risk will reverberate globally, leaving perhaps many economic aftershocks in its wake. And Boeing is likely going to be hit hard, with Japan being a major supplier of parts and components for the 787 Dreamliner. And these are just a few stories that are beginning to emerge as reality hits home.


Considering how global trade and thus supply chains linkages really have become, there are probably very few products and supply chains that will be totally unaffected by the recent events in Japan. While some may profit from this, others may not, making this a Zero-Sum game. However, for the overall world economy, the outcome is still uncertain. Disasters do impact supply chains, as recent research shows.


Good for the economy? Well, what do you think?

In the midst of the Japanese earthquake and tsunami disaster - and my heart goes out to all those in the affected areas - is there a possibility of some good news? If the situation at the Fukushima nuclear power plant remains contained, the long-term effects on the economy may actually be positive, although the initial setback could be potentially quite severe, according to some ecomomists here in Norway.


Obviously, the first priority are the emergency and rescue efforts. Considering the damage to parts of the infrastructure, that will be quite a challenge, since there may no roads, railroads or even ports for bringing in the  aid and resources needed. Disasters do affect supply chains, but the good thing is that Japan is a  technologically highly advanced country, and thus highly capapble of  solving any issues that may arise. That is not always the case in  remoter areas of the globe.


A prerequiste for economic recovery is economic resilience. Japan is used to earthquakes and presumably, has the economic resilience needed to recover from this disaster. A very interesting view on economic resilience is shown the work of Adam Rose at the Multidisciplinary Center for Earthquake Engineering Research (MCEER).


The notion of disasters having a positive feedback into the economy is perhaps a bit out of the order at this very moment, in light of the current destruction and human suffering, but in the long run disasters in developed economies tend to have a positive effect, if you look at the overall picture. Of course, many insurers may suffer heavy losses, and many uninsured firms may go bankrupt, and many households will go through extremely harsh times to get back on their feet, but we must also keep in mind that the recovery effort will demand an enormous amount of resources. These resources must be supplied from somewhere, from local, national or international sources, and rebuilding an entire region will not come cheap.


A friend of mine works in a firm that manufactures shelter tents that are sent worldwide, and their business, probably already doing well after the Christchurch earthquake, will most likely do even better now. Is profiting from disasters a bad thing? I don't think so. One man's loss is another man's gain, as we say in Norway, and in times of disaster, sadly enough, it really holds true.


The recovery efforts may take time but I am sure that Japan will regain its ecomic strength eventually. One good thing about rebuilding is that you can replace the old with the new and better, and discard old, obsolete and inefficient solutions. Affected firms and business should thus have the potential to come out stronger and more competitive.


This may be a disaster on a human scale, on an economic scale it may very well be not. In the long term.

Some time ago I was appraoched by Gower Publishing and invited to review their Short Guides to Business Risk Series, a task I happily agreed to do since most of the topics covered in the series directly or indirectly link up with supply chain risk, which is what I mainly blog about. The series covers topics such as reputation risk, political risk, fraud risk, ethical risk, procurement risk and customs risk, and with more topics on the bedding: operational risk, compliance risk, kidnap and ransom risk, corruption risk, equality risk and how to facilitate risk management. So far I have completed four out of six published out of 13 on the list of books in the series, and I must say that these are indeed fine guides to the world of business risks.


The latest book on my nightstand is A Short Guide to Fraud Risk, a fascinating book, showing how easy it may be for employees, customers, clients and consultants to commit fraud, and how easy it may be to prevent this. While I will not review the whole book in this post, as that is reserved for the Short Guides to Business Risk post series on my regular blog, I will cite from the chapter that deals with detecting fraud.


The two most efficient ways of detecting fraud are:


1) Training employees to recognize and respond to the signal or "red flags" of fraud.

2) Proactively seeking out the red flags as a "preemptive health check".


While one's own employees are the best detectives in spotting signs of fraud, they may also be the worst, as it is human nature that most honest people simply cannot believe that a colleague, manager or third party is intentionally dishonest. That is actually a good thing, because an overly suspicious work enviroment will be detrimental to performance. Nonetheless, it is still possible to discern some typical behavioral patterns that might signal that something is wrong.


These red flags are divided into behavioral, transactional, system and corporate red flags:


The behavioral red flags:

- obvious excessive wealth or gross over-spending

- increasing debts and lack of wealth

- long absences or failure to take leave

- long hours after normal business hours

- repeated override of controls and procedures

- problems with gambling, drug or alcohol abuse

- excessive mood swings and sudden agression

- resistance to audit by agressive answering and deflection of attention

- misleading or ambiguous answers to questions


The authors do make a point that personal behavioral patterns can occur for a number of reasons and in first instance are unlikely to signal that fraud has already happened. However, in the long run, depressions and addictions may in turn lead to people committing fraud to feed their habits. Behavioral red flags are thus more useful in preventing than detecting fraud.


The transactional red flags:

- unusual supplier relationships

- unusual business intermediaries, e.g. companies with no employess or offices, based in tax havens and with PO Box adresses only

- non-transparent counterparts with indications of criminal associations

- payments for goods or services that are only vaguely described

- preferential supplier treatment and/or lack of competitive tendering

- payments to offshore accounts and companies not in the usual customer base

- kickbacks paid to management using a tax haven vehicle

- slush fund payments to and from offshore accounts

- money ostensibly for bribes paid into management or employee accounts

- hiding conflicts of interest using a cascade of offshore compnaies to disguide ownership

- unusual delivery of "urgent" payment instructions, by mail or courier

- photocopied documents rather than originals

- unnecesssary and/or non-standard words or explanations to make it appear more legitimate

- appearance or style not consistent with normal business of the customer

- beneficiary spelt incorrectly or mismatching with account number


In a business setting, where accountants and clerks perform hundreds of transactions per day it's easy to overlook and not think too much of the above. However, a trained employee will spot any anomaly very quickly. That said, it's amzing how many fraud attempts that go unnoticed, e.g. "urgent" processing during the holiday season with only temp staff working in accounting.

The system red flags:

- controls or audit logs being deliberately turned off

- logins by personell verifiably on leave

- a higher number than average of failed login attempts

- logins at unusual times


This is the domain of the IT department, and while no employee likes to be double-checked, communicating widely that these checks are taking place adds a valuable layer of deterrence to the system.


The corporate red flags:

- over-zealous acquisition strategies with little screening and lack of due diligence

- autocratic management decisions concerning business relationships and supplier selection

- losses and declining margins on sales

- artificial barriers put up by directors refusing to answer questions

- overriding of budgetary controls

- incomplete records

- unusual manual transactions, adjustments and amendments to records


Corporate flags are perhaps the most difficult to interpret. While easy to spot, there may be fully legititimate reasons for the occurences above. That said, even if the corporate flags above are not a signal of fraud, I would still be troubled, if I were working there. The difficult part, after discovering some red flags, is how to respond. Whistle-blowing is something that is not appreciated or valued in all companies, and while many businesses say on paper and in their procedures that they are open to it, the reality often is quite different, as many well-known or rather the not-so-well-known whistle-blowers have experienced.


That is why fraud detection must start with building a corporate culture where fraud is not accepted. That is something that takes time, and it is not easily established, particularly in large, multinational corporations, especially if there are offcies or subsidiaries in contries and places where fraud is perhaps the order of the day. Nonetheless, I believe that using this book as guideline can be a small yet signifcant step in the right direction, and in my next post I will take a closer look at the second way of detecting fraud, the so-called preemptive health checks.


If you want to know more about the Gower Short Guides to Business Risk Series you can read my reviews, or visit the publisher's website.

One thing I have noticed since I started working in the supply chain field is that there are so many industry events, conferences and meetings discussing the latest trends and presenting best practice cases. There are simply too many to follow and keep track of. On my regular blog I used to have a section for supply chain conferences, where I had the intention of promoting the very latest, but I gave up on keeping ahead of what's happening a long time ago, and only a few select conferences make it onto my blog. That said, there are some of websites that I have worked with on occasion, and that I have found very useful in keeping track of what's happening in the supply chain world. Today I would like to present some of these.

First up is the the World Trade Group, or WTG for short. They have a website wtgevents.com, which first and formeost presents webinars on subjects like  manufacturing and supply chain, human resources, food and beverage, energy and pharma, but it also boasts a number of events and conferences in manufacturing and supply chain managed by WTG, for example:


The 13th Annual  European Supply Chain & Logistics Summit, Berlin, Germany, 14-16 June 2011

The 7th Annual European Manufacturing Strategies Summit 2011, Düsseldorf, Germany, 17-19 October 2011


Eyefortransport is another interesting event manager. Their events appear more geared towards operations and logistics than WTG, and include conferences like:


The 2nd Horizontal Collaboration in the Supply Chain Summit, Brussels, Belgium, 19-20 May, 2011.

The 9th European 3PL Summit, Antwerp, Belgium, 22-23 November 2011


Finally, a site that I came across only recently, is Supplychainmovement, an initiative of the Supply Chain Magazine in the Netherlands, and giving up-to-date information about international supply chain management  topics, featuring trends, cases, reports, books, events and personal blogs posts by the editor as well as portray articles of the who's who in supply chain and logistics, some of which I've never heard about...until now.


I am sure there are many more sites out there, but those are the sites that I use most in keeping track of what's happening in the supply chain and logistics world. If you know of other sites, please share below, and on a side note I would be more than happy to present and review those suggestions on my regular blog.



World Trade Group



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