Tim Kraft, Visiting Assistant Professor of Operations Management
Karen Zheng, Associate Professor of Operations Management
Do consumers place a monetary value on supply-chain visibility? Are they willing to pay more for a product that is “socially responsible”?
A new study led by two professors at the MIT Sloan School of Management suggests that the answer is yes – at least to a point. Tim Kraft, visiting assistant professor of operations management, and Karen Zheng, associate professor of operations management, set up a “behavioral lab” that mimicked the dynamics of a real-world supply chain. It consisted of a three-player game, with participants playing the roles of consumer, seller and worker.
The experiment examined whether a consumer is willing to pay more for a given product if the seller provides visibility into its treatment of factory workers. The decisions of all players directly impacted their ultimate payments. So how much of a premium did the “consumers” agree to pay for products of the socially responsible “seller”? How did their actions affect the lot of the “worker”? And can a limited experiment of this type really mirror behavior in the real world?
Trust is important to our relationships with friends, family, and acquaintances. Less understood, though, is the role trust can play in business relationships. When businesses deal with each other, their first impulse often is to summon their lawyers. But I have found in my research that there are many situations in which trust can be an effective replacement for costly and time-consuming contract negotiations.
To understand the role of trust in business, I and two colleagues, Ozalp Ozer of the University of Texas at Dallas and Kay-Yut Chen of Hewlett-Packard Laboratories, conducted a series of computer laboratory experiments that simulated one of the most vexing problems in supply chain management: The tendency for manufacturers to issue overly optimistic forecasts.
Despite the ongoing economic turmoil, the job numbers for our MBA class of 2011 are very strong. In fact, we’re back to the same offer rates we saw before the recession.
As of this writing, 94% of the class has an offer. This is up from 81% last year and closely matches the 93.4% we saw in 2006 and 92.7% in 2007. Similarly, on-campus recruiting opportunities were back to the same levels we saw in 2006 and have so far remained firm as we move into this academic year.
Measured against the deaths of thousands and the threat of nuclear meltdown, economic damage to supply chains seems a small matter. But it is nonetheless true that the earthquake and tsunami that hit Japan last week will affect important global industries. When major supply chains break, businesses and consumers around the world feel the consequences.
Japan is a world leader in many industries, from computers to steel to machine tools to automobiles. In the region hit by the quake and tsunami, factories and other businesses have been shut down and may not reopen for weeks or months. Interruption of energy supplies has forced plants elsewhere in the country to close or limit operations.