The Journal of Business Logistics (JBL), published by the Council of Supply Chain Management Professionals (CSCMP), is recognized as one of the world's leading academic supply chain journals. But sometimes it may be hard for practitioners to see how the research presented in its pages applies to what they do on a day-to-day basis. To help bridge that gap, CSCMP's Supply Chain Quarterly challenges the authors of selected JBL articles to explain the real-world applications of their academic work.
THE ARTICLE
"Reconceptualizing Intuition in Supply Chain Management" by Craig R. Carter and Lutz Kaufmann of Arizona State University and Claudia M. Wagner of WHU—Otto Beisheim School of Management. This article received CSCMP's Bernard J. La Londe Best Paper Award for the most valuable paper published in the Journal of Business Logistics in 2018.
THE UPSHOT
As managers, it can be tempting to believe that all of our decisions are fact-based and rational. But this is not always the case, especially when we have to operate in uncertain and time-constrained environments. For example, in pressured situations like negotiations with suppliers, supply chain managers might not have the luxury of putting the process on pause and running what-if analyses. In these circumstances, managers often make decisions based on a "hunch" or "gut feel."
In spite of this reality, there is limited research on the role intuition plays in supply chain management. In fact, there is not even a clear, consistent definition of intuition. Instead, different studies define intuition in different ways, some equating it to "experience-based" decision making, some addressing the emotional aspect of intuition, while others focus on the automatic-processing dimension. In this paper, researchers from Arizona State University and WHU—Otto Beisheim School of Management develop a more comprehensive definition of intuition that unites all three of these dimensions. They write, "we tentatively define intuition as a three-dimensional information retrieval process in which the decision maker establishes 1) connections between the current and past situations, 2) positive and negative gut feelings are evoked, 3) and a decision is made rapidly, automatically, and without much awareness." This definition was based on a review of previous researchon intuition that appeared in management, supply chain management, and psychology journals as well as in-depth interviews with supply chain experts.
The researchers used that definition to create a measurement tool for intuition that could be applied to the supplier selection process (and possibly adaptedto other supply chain management contexts as well). The measurement tool consists of a 12-question survey that measures theamount and kind of intuition used in a decision. Survey takers are asked to rate how strongly they agree with statements such as, "I made a connection between the situation at hand and similar situations in the past and decided accordingly," and "Several suppliers fulfilled the needed requirements, so I based my final decision on my gut feeling."
The article's corresponding author, Craig Carter explained to Supply Chain Quarterly Executive Editor Susan K. Lacefield what he and the rest of the research team discovered about intuition and how companies can apply their findings.
Q: What was the impetus for this research?
So, there were two broad reasons why we were interested in looking at intuition: one professional and one personal. On the professional level, my coauthor Lutz Kaufmann and I have been delving into behavioral supply chain management since 2007. Behavioral supply chain management basically involves studying the human decision making done by supply chain managers that is subject to potential heuristics (or practical methods that are not guaranteed to be optimal). There is a preponderance of research based on the idea that in economic situations, decision makers will act rationally. However, we know that this is not how decision makers actually work in the real world. This article is the latest in a series looking at supply chain decision making in the real world, which started with a paper about biases in making logistics decisions and ways to overcome them.
More specifically on a personal level, one day I decided to go backcountry skiing at one of my favorite places in the Sierra Mountains in California. I had checked the avalanche safety warnings beforehand, and they indicated that everything was okay. These warnings are based on a number of factors such as wind, amount of snow, and temperature changes. But as I was climbing up with my skis along what was my normal, standard route, I got a queasy feeling in my stomach. Now I have 40 years of experience climbing and skiing in the backcountry, and that day I decided to abandon my original plan and not go skiing there. Instead I went to the other side of the valley, to an inbounds ski resort. As I was riding up the ski lift, I looked over at the spot where I had originally intended to ski and saw that there had been a massive avalanche that would really have not been survivable. In that case, intuition definitely worked for me.
Lutz had also had similar kinds of experiences, and this motivated us to look at intuition as part of our ongoing study of behavioral supply chain management. Is intuition real, or is it just a false perception that we think existed when looking back? And if it is real, how can it be used effectively?
Q: How big a role does intuition play in supply chain decision making today?
I think it depends on the timing, whether it's a fast-thinking decision or a slow-thinking decision. Intuition is going to play a much more important role in adecision that needs to be made in the next few seconds during a negotiation. It's also important to realize that it may not be an "either/or" scenario. Key decisions are often not made either based on intuition or based on a rational, fact-based response, but instead using a combination of the two.
Q: Do you feel managers have a good sense of how much they use intuition when making decisions?
I think it plays a bigger role than most managers admit. If you take the example of a site-location decision, people often quip, "Well how many golf courses are in the area?" But there is some truth in that statement. Those types of soft factors often do come into play in making these decisions. I recently read an article about a company that was in the process of looking at a particular city for a new headquarters location. They had senior managers go to the city for a weekend to visit there. After the visit, it was decided that the city was out of contention. That was not part of any software algorithm. But the overall feeling of the place, the reality of what it would be like to live there, definitely played a role in the decision.
Q: Why did you feel there was a need for a better definition of intuition?
When you think about intuition or talk about it, the words you use are pretty fuzzy. They are synonyms like "gut feel" and "hunch." We thought those definitions are not very scientific. When we were talking to a manager, we needed to be more precise about what we were prescribing. When we dug into it, we found—as is often the case—that intuition is multidimensional. There is the gut-based dimension to it, but there is also an emotional element too, and a part that happens almost automatically or immediately. This allowed us to begin exploring what might be being used or not being used when you are following your intuition to make a decision. Was it based on experience and pattern recognition or something else?
When you are sitting in the board room, you can take the time to diagnose what the problem is and what decision to make. But you often don't have that luxury when you are in the middle of a negotiation with a supplier or a customer and multiple issues are arising at once. There's a lot going on at the same time: You have to digest the data being presented, read the emotions of your counterparts, and interpret why they are saying what they are saying and what they are not saying. In these situations, you often have to go with your gut. But it's real important to know when to hit the pause button and allow yourself to take a break and conduct further analysis. We tell managers that intuition does have a role in decision making. You should be listening to it, but not following it blindly. On the flip side, you can't always hit pause, so you need to be able to develop your skills of effectively using intuition.
Q: How should the intuition measurement scale that you developed be used?
The scale can mostly by used to identify the extent that various dimensions of intuition played a role in a supply management decision. It can be used for training purposes or after a negotiation as part of a post mortem to identify what part intuition played in the process.
Q: How do you think practitioners could apply your research?
The sky's the limit! We're making decisions every day. Even in the cases where machines are making decisions, they are not going to be making all the decisions. And even for those decisions that machines do make, humans are the ones developing the algorithms that drive those decisions and are the ones that monitor those algorithms.
Q: What do you see as the key takeaway message from your research?
I think it can be boiled down to: Don't discount the role of intuition in decision making, but don't blindly trust it either.
A hefty 42% of procurement leaders say the biggest threat to their future success is supply disruptions—such as natural disasters and transportation issues—a Gartner survey shows.
The survey, conducted from June through July 2024 among 258 sourcing and procurement leaders, was designed to help chief procurement officers (CPOs) understand and prioritize the most significant risks that could impede procurement operations, and what actions can be taken to manage them effectively.
"CPOs’ concerns about supply disruptions reflect the often unpredictable nature and potentially existential impacts of these events," Andrea Greenwald, Senior Director Analyst in Gartner’s Supply Chain practice, said in a release. "They are coming to understand that the reactive measures they have employed to manage risks over the past four years will not be sufficient for the next four.”
Following supply disruptions at #1, the survey showed that the second biggest threat to procurement is seen as macroeconomic factors, which include economic downturns, inflation, and other economic factors. While more predictable, those variables can substantially influence long-term procurement strategies.
And the third-most serious perceived risk was geopolitical issues, including tariffs and regulatory changes, and compliance issues, including regulatory and contractual risks.
In addition, the survey also revealed that “leading organizations” are 2.2 times more likely to view energy availability and cost as a top risk; indicating a focus on future emerging risks. As electrification drives demand for power, brittle grid infrastructure raises concern about whether the energy supply can keep pace. Therefore, leading organizations recognize that access to energy will become a significant future risk.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
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Peter Weill of MIT tells the audience at the IFS Unleashed user conference about the benefits of being a "real-time business."
These "real-time businesses," according to Weill, use trusted, real-time data to enable people and systems to make real-time decisions. By adopting that strategy, these companies gain three major capabilities:
Increased business agility without needing a change management program to implement it;
Seamless digital customer journeys via self-service, automated, or assisted multiproduct, multichannel experiences; and
Thoughtful employee experiences enabled by technology empowered teams.
The benefits of this real-time focus are significant, according to Weill. In a study with Insight Partners, he found that those companies that were best-in-class at implementing automated processes and real-time decision-making had more than 50% higher revenue growth and net margins than their peers.
Nor is adopting a real-time data stance restricted to just digital or tech-native businesses. Rather, Weill said that it can produce successful results for any companies that can apply the approach better than their immediate competitors.
Weill's remarks came today during a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI" at at the “IFS Unleashed” show in Orlando, Florida.
For example, millions of residents and workers in the Tampa region have now left their homes and jobs, heeding increasingly dire evacuation warnings from state officials. They’re fleeing the estimated 10 to 20 feet of storm surge that is forecast to swamp the area, due to Hurricane Milton’s status as the strongest hurricane in the Gulf since Rita in 2005, the fifth-strongest Atlantic hurricane based on pressure, and the sixth-strongest Atlantic hurricane based on its peak winds, according to market data provider Industrial Info Resources.
Between that mass migration and the storm’s effect on buildings and infrastructure, supply chain impacts could hit the energy logistics and agriculture sectors particularly hard, according to a report from Everstream Analytics.
The Tampa Bay metro area is the most vulnerable area, with the potential for storm surge to halt port operations, roads, rails, air travel, and business operations – possibly for an extended period of time. In contrast to those “severe to potentially catastrophic” effects, key supply chain hubs outside of the core zone of impact—including the Miami metro area along with Jacksonville, FL and Savannah, GA—could also be impacted but to a more moderate level, such as slowdowns in port operations and air cargo, Everstream Analytics’ Chief Meteorologist Jon Davis said in a report.
Although it was recently downgraded from a Category 5 to Category 4 storm, Milton is anticipated to have major disruptions for transportation, in large part because it will strike an “already fragile supply chain environment” that is still reeling from the fury of Hurricane Helene less than two weeks ago and the ILA port strike that ended just five days ago and crippled ports along the East and Gulf Coasts, a report from Project44 said.
The storm will also affect supply chain operations at sea, since approximately 74 container vessels are located near the storm and may experience delays as they await safe entry into major ports. Vessels already at the ports may face delays departing as they wait for storm conditions to clear, Project44 said.
On land, Florida will likely also face impacts in the Last Mile delivery industry as roads become difficult to navigate and workers evacuate for safety.
Likewise, freight rail networks are also shifting engines, cars, and shipments out of the path of the storm as the industry continues “adapting to a world shaped by climate change,” the Association of American Railroads (AAR) said. Before floods arrive, railroads may relocate locomotives, elevate track infrastructure, and remove sensitive electronic equipment such as sensors, signals and switches. However, forceful water can move a bridge from its support beams or destabilize it by unearthing the supporting soil, so in certain conditions, railroads may park rail cars full of heavy materials — like rocks and ballast — on a bridge before a flood to weigh it down, AAR said.
Imports at the nation’s major container ports should continue at elevated levels this month despite the strike, the groups said in their Global Port Tracker report.
To be sure, the strike wasn’t without impacts. NRF found that retailers who brought in cargo early or shifted delivery to the West Coast face added warehousing and transportation costs. But the overall effect of the three-day work stoppage on national economic trends will be fairly muted.
“It was a huge relief for retailers, their customers and the nation’s economy that the strike was short lived,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a release. “It will take the affected ports a couple of weeks to recover, but we can rest assured that all ports across the country will be working hard to meet demand, and no impact on the holiday shopping season is expected.”
Looking at next steps, NRF said the focus now is on bringing the International Longshoremen’s Association (ILA)—the union representing some 45,000 workers—and the United States Maritime Alliance Ltd. (USMX) back to the bargaining table. “The priority now is for both parties to negotiate in good faith and reach a long-term contract before the short-term extension ends in mid-January. We don’t want to face a disruption like this all over again,” Gold said.
By the numbers, the report forecasts that U.S. ports covered by Global Port Tracker will handle 2.12 million twenty-foot equivalent units (TEU) for October, which would be an increase of 3.1% year over year. That is slightly higher than the 2.08 million TEU forecast for October a month ago, and the strike did not appear to affect national totals.
In comparison, the August number was 2.34 million TEU, up 19.3% year over year. The September forecast 2.29 million TEU, up 12.9% year over year, November is forecast at 1.91 million TEU, up 0.9% year over year, and December at 1.88 million TEU, up 0.2%. For the year, that would bring 2024 to 24.9 million TEU, up 12.1% from 2023. The import numbers come as NRF is forecasting that 2024 retail sales – excluding automobile dealers, gasoline stations and restaurants to focus on core retail – will grow between 2.5% and 3.5% over 2023.
Global Port Tracker, which is produced for NRF by Hackett Associates, provides historical data and forecasts for the U.S. ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Port of Virginia, Charleston, Savannah, Port Everglades, Miami and Jacksonville on the East Coast, and Houston on the Gulf Coast.