Output & Impact: Supply Chain and Operations
In the nearly 100 years of the Carlson School's existence, its faculty has produced an unending stream of groundbreaking research, pushing against boundaries in both academia and in the business world at large. Discover notable examples from the Supply Chain and Operations Department.
Fostering online platforms to reduce, reuse, and recycle
Over the last decade, state- and county-run online waste exchanges have kept reusable goods in circulation and prevented several tons of waste from crowding landfills. The Internet seems like an ideal venue to connect companies looking to get rid of surplus materials—lumber, cement, and the like—with buyers in need of the items.
“Seventy percent of everything in landfills are low-value residual items like these, so to the extent that we can get rid of these low-value items—we can repurpose them and recycle them—it will mitigate negative effects on the environment,” says Professor Kevin Linderman.
But the exchanges tend to function better in theory than in practice. And that prompted Linderman and Associate Professor Karen Donohue, along with their PhD student Suvrat Dhanorkar, to explore the factors that cause them to fail—and how they could be improved.
According to Donohue, visibility emerged as a big factor.
“The listings typically don't have pictures, so buyers can be uncertain over what they're getting,” she says. “And even if there are detailed descriptions, buyers still might not be clear about the quality of the items.”
As Linderman explains, that leads to lack of buyer interest—and seller disengagement. “If there’s no interest, a seller might think: Why not just dump the items in a landfill?” he says. “You can see how that would be easier than holding onto excess inventory.” Their research also found this result: In countries with a wide range of reuse options, sellers had better luck on the exchanges. According to Donohue, that was one of the most surprising findings. “You might see them as competition for the exchanges,” she says. “But it appears that those competitors can create more of a market—and even a culture of wanting to reuse and recycle.”
And that can have policy implications for municipalities looking to kick-start their exchanges. “If you can create a community in which buyers are used to buying recycled items, it can help sellers ride out their listing a little longer on an exchange,” she says.
Wach the researchers further describe their findings:
The financial consequences of medical device recalls—not much
Medical devices are an indispensable and often lifesaving component in health care delivery. However, they also can be sources of significant risk to patients, because like other products, they are prone to quality failures such as manufacturing defects, functional defects, packaging errors, and software glitches. Statistics show that companies have been recalling medical devices from the market with increasing frequency.
Supply Chain and Operations Department Chair and Mosaic Company-Jim Prokopanko Professor of Corporate Responsibility K.K. Sinha and Sriram Thirumalai, a PhD alum and an associate professor at Texas Christian University, sought to assess the financial implications of medical device recalls to understand if these consequences are severe enough to deter companies from introducing potentially hazardous medical devices into the market. They also looked at a cross-section of medical device companies to examine the effects of firm characteristics on the costs of poor quality and the characteristics likely associated with device recalls.
“Contrary to conventional wisdom, the findings of the study demonstrate that the capital market penalties for medical device recalls are not significant—the costs of poor quality are not severe,” Sinha says.
Although troubling to consumers, the reason that capital market costs of poor quality are not a significant deterrent to introducing potentially hazardous medical devices is the lack of a strong market reaction—markets learn to expect recalls.
Sinha says their study, “Product Recalls in the Medical Device Industry: An Empirical Exploration of the Sources and Financial Consequences” (Management Science, 2011), has motivated several follow-up lines of inquiry. First, this study had focused on market reactions in the short-term. New studies are investigating the long-term impact of recalls on shareholder wealth.
Second, other studies are exploring the mechanisms by which companies learn. “Given the high frequency of recalls across firms in the medical device industry, one follow-up study is exploring the role of learning spillover from recall experience across product categories and exploring the preventive and controls aspects of learning.”
Third, the study has motivated inquiries into the causes of a lack of strong negative reaction to medical device recalls—especially since capital markets have been known to have a strong negative reaction to automotive recalls and food recalls.
“Given that recalls are an inevitable reality of technological progress, and that medical device recalls continue to occur in spite of the rigorous product quality checks conducted by firms and government regulators such as the FDA, we need to complement the reactive approach to handling product recalls with a proactive and predictive approach so that the product manufacturers and regulatory agencies can either prevent the occurrence of recalls or minimize the disruptive effects of recalls,” Sinha says.
Discover the impact of research taking place across the Carlson School:
Output & Impact: Accounting
Output & Impact: Finance
Output & Impact: Information and Decision Sciences
Output & Impact: Marketing
Output & Impact: Strategic Management and Entrepreneurship
Output & Impact: Work and Organizations