(Pictured, middle, is Prof. Gray, co-author Skowronski to his right. Image courtesy @ORMS_Elsevier)
Two professors in the home department of The Ohio State Center for Operational Excellence have taken home a top academic award for their research.
Fisher College of Business Profs. John Gray and Johnny Rungtusanatham received the Jack Meredith Best Paper Award at the 2018 Academy of Management Conference in Chicago this summer. The paper, “Why in the World Did They Reshore? Examining Small to Medium-Sized Manufacturer Decisions,” appeared in the March 2017 edition of the Journal of Operations Management. Co-authors include former Fisher professor Gökçe Esenduran, who teaches at Purdue University, and Keith Skowronski, who earned his PhD at Fisher and is now at the University of South Carolina.
In their work, Prof. Gray and his co-authors explored the decision making of small and medium-sized businesses who were moving operations previously “offshored” to low-cost countries back to the United States. Increasing costs overseas couldn’t fully explain these moves.
Ultimately, the authors determined that reshoring decisions often served as corrections to earlier offshoring moves that overly relied on easily quantifiable measures such as piece price, transportation cost, and tax rate. Companies could find themselves better suited to make the right decision the first time around by using decision-making frameworks that factor in less-quantifiable considerations such as labor force skill, disruption risk, and cultural differences.
“Offshoring and reshoring decisions potentially affect many important and hard-to-measure factors,” said Prof Gray, who serves as an associate director for COE. “We hope our findings help shine the light on the need for better decision-making processes to be developed and widely adopted .”
Gray also received the Distinguished Service to the Operations and Supply Chain Management (OSCM) Division award, recognizing his exemplary performance in leadership roles for the OCSM Division during the past five years.
Today’s fast-paced business world is a constant balancing act of tackling short-term challenges and positioning our organizations for future ones. For those beyond the five, 10, even 20-year horizon, two provocative questions linger: What are they, and what, if anything, can we do about them now?
Center for Operational Excellence Associate Director Tom Goldsby is the co-author of a newly released book that addresses both of those. Global Macrotrends and Their Impact on Supply Chain Management: Strategies for Gaining Competitive Advantage offers an extensive look into the changes organizations could be facing a generation from now, the seeds of which have already been sown. These so-called macrotrends include: Explosive population growth in countries these days perceived as underdeveloped; a rising middle class across the globe; accelerating climate change; and the alarming scarcity of precious natural resources.
These trends might sound like the makings of a globe-trotting disaster epic – albeit a very long, didactic one written by Thomas Friedman – but Goldsby recently spoke with COE about their implications and why companies shouldn’t view them exclusively as a “doomsday prophecy.”
COE: What inspired you and your co-authors to tackle this topic?
TG: The macrotrends we chose to focus on are maybe a little more in the distance, but we really wanted to encourage companies and managers to be on the lookout for things. We find that many people are very firefighting-oriented, focused on immediate-term crises that face them, and things that already have struck the business. It’s fine to be a good firefighter, but every now and then we need to rise above and see things that are coming. We think the benefit to being a first-mover on a lot of these macrotrends is that for every doomsday scenario there are strategies companies can employ to get ahead of it.
For companies not aware of their vulnerabilities, though, they’re going to be blindsided. If you don’t take opportunities presented to you now and simply think a looming problem is something your tier-four suppliers should be worried about, ultimately it’s going to hit your shores.
COE: One of the more intriguing aspects of your research is your assertion that a “global” company will look entirely different in the future. How so?
TG: We’ve been talking about globalization for several decades now, and really, the more appropriate term is “selective globalization.” If a company has good coverage in 15 to 20 countries, they call themselves global – but they often leave out Africa, the Middle East, Central America, most of Latin America and Asia. These areas are really rising in population and rising in wealth, and consumer goods companies, in particular, are starting to take notice and figure out how they can serve a place where a burgeoning middle class is a taking shape.
Meanwhile, in today’s “global” market, competition is incredibly intense and companies are duking out for fractions of a percent of market share when there’s still very much an open market in some of these burgeoning nations. Those companies and brands that can establish a foothold in these markets could enjoy the first-mover advantage for several years or even generations if they can embrace the local culture and adapt to the needs of themarket.
COE: For some of these countries, though, doesn’t this huge potential reward come with a huge risk?
TG: Absolutely, you have to look before you leap. Yes, some of these nations are marked by civil unrest, corruption reigns supreme in many – you have to understand the environment, and if you’re looking at some of the rising nations in Africa, for example, you might have to be a little more reserved.
On the other hand, in Peru, the economy has been growing at 6 to 10 percent per annum the past several years, with no recession. They’re a peaceful country wanting to be a global player as a source of supply and as a consumer market. A company that does business in Brazil and says “We’ve got South America covered” is overlooking a great opportunity. If you’re so-called “global” and don’t do business in Peru, Chile or Colombia, you have to ask why.
COE: How has technology changed the game for supply chain leaders?
TG: Supply chain managers are being held more accountable today than ever before. Before, when something bad happened the world just shrugged it off and said “Bad things happen to all of us.” Today, there’s research showing how dramatic an impact disruptions in the supply chain can have on a company’s stock price. Today, the world learns your bad news sooner, they react much more violently than ever before, and with blogs and lots of eyes and ears on the street, people are eager to share bad news. So, technology has increased the volume and speed of information flow that raises the stakes for supply chain leaders.
COE: How do you see your research aligning with operational excellence?
TG: Operational excellence allows a company to understand the value it creates in the market and the processes upon which it relies to deliver that value. These are two critical factors in leveraging opportunities and minimizing risks. Whereas many companies remain in that reactive, fire-fighting mode, companies employing OpEx to understand outcomes at their root cause. They are going to come up with remedies faster and take advantage of the conditions found in the environment, as opposed to being consumed by the challenges. OpEx also speaks to a high level of coordination across the supply chain that allows a company to lean on supply chain partners for insights and resources. These companies are going to be in a better position to be on offense rather than defense.