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Using the event study method in logistics and supply chain research
The other day I had an article published in the International Journal of Applied Logistics, entitled: “The Event Study Method in Logistics Research: Overview and a Critical Analysis,” authored with Jason X. Wang. In the article, we provide an overview of the event study method, with a particular focus on the different statistical tests of significance used to evaluate abnormal returns as there is a range of test statistics but there seems to be some confusion amongst management scholars on which are best to use under which circumstances. We also provide an overview of some existing research using event study method in leading logistics journals, focusing on common elements and their focus. The review of existing articles demonstrates a range of different topics that can be addressed using event studies and also highlights some areas for improvement for scholars using the method in this research discipline. Finally, we spend some time examining possible research problems where the use of event studies could provide significant benefit and help develop further insight. Jason and I hope that the article is helpful and useful to readers.
Reference:
Wood, L. C., & Wang, J. X. (2018) The event study method in logistics research: Overview and a critical analysis. International Journal of Applied Logistics, 8(1), 57-79. https://doi.org/10.4018/IJAL.2018010104
International Journal of Applied Logistics 8(2) has been released
The International Journal of Applied Logistics has released volume 8, issue 2. This consists of four articles:
- The Reverse Logistics of Cross-Border e-Tailing in Europe: Developing a Research Agenda to Assess the Environmental Impacts
- Overlaying Human Resources Principles to the Goal: A Research Note
- Challenges Facing Humanitarian Logistics in a Nonprofit Organization
- The Event Study Method in Logistics Research: Overview and a Critical Analysis
The collection of articles demonstrates the international breadth of logistics challenges around the globe, from environmental impacts of e-tailing in Europe through to humanitarian challenges in Africa. I hope you find the research interesting and useful!
Participation in the Wool Innovation day
A great big thanks to the team behind the Wool Innovation day held a couple of weeks ago in Christchurch, New Zealand. They gathered a range of participants from over the country with interest in technology and innovation + an enthusiasm for wool! It was a pleasure to be part of the forum and, I hope, have contributed to the progression of the industry and products. It was very pleasing to have an invitation to the event and be able to participate.
A design thinking approach was used to develop and assess several ideas. The participants all had a great deal of fun and everyone came away richer for the experience.
I will be watching this space with interest to see how the ideas develop!
Our research published on the operational influences on the stock market reaction to toy recalls
The effect of slack, diversification, and time to recall on stock market reaction to toy recalls
My team and I have just had our research accepted into the International Journal of Production Economics after several rigorous reviews and revisions – published as Wood, Wang, Olesen, and Reiners (2017). The article is titled: The effect of slack, diversification, and time to recall on stock market reaction to toy recalls
In this work, we used event study methodology, which has been used in the Operations Management literature to study demand-supply mismatches (Hendricks & Singhal, 2009), medical device recalls (Thirumalai & Sinha, 2011), product introduction delays (Hendricks & Singhal, 2008), and food recalls (Salin & Hooker, 2001) among other topics. The calculations gave us an abnormal return value for each event that we then used in a cross-sectional regression to test a series of hypotheses that relate to the operational decisions that managers can make. Specifically, we were looking at geographic and business diversification; financial, inventory, and capacity slack; how long a product is on the market for before it is recalled; and whether reactions to the recalls change appreciably over time.
Abstract:
Past toy recalls have led to an increase in consumer concerns while toy manufacturers and retailers increasingly outsource and create longer supply chains, making it more challenging for them to ensure toy safety. This article examines firms making toy recall announcements to assess the impact operational characteristics have on the negative stock market reaction to the announcement. 135 toy recall announcements in the U.S. from 1979 to 2016 were analyzed using event study and cross-sectional regression. While a toy recall announcement results in a negative stock market reaction, our results show that greater levels of business diversification, inventory slack, and a longer time to recall are all associated with a less negative stock market reaction. In contrast, greater capacity slack is associated with a more negative stock market reaction. We find no evidence that geographic diversification or financial slack influences the stock market reaction, nor have reactions changed appreciably over time. This article contributes to the product harm and product recall literature by focusing on these operational elements. Managers should be aware of the benefits of greater slack and business diversification while planning their business, and the impact of a longer time to recall.
Video abstract/overview:
References:
Hendricks, K. B., & Singhal, V. R. (2009). Demand-supply mismatches and stock market reaction: Evidence from excess inventory announcements. Manufacturing & Service Operations Management, 11(3), 509–524. https://doi.org/10.1287/msom.1080.0237
Thirumalai, S., & Sinha, K. K. (2011). Product recalls in the medical device industry: An empirical exploration of the sources and financial consequences. Management Science, 57(2), 376–392. https://doi.org/10.1287/mnsc.1100.1267
Congratulations to the Summer Scholarship students
Big congratulations to the University of Auckland Business School students who have completed their work for the Summer Scholarships (giving them the chance to work with faculty members over the summer on some research projects). I was fortunate enough to supervise a project with Rikki Smith, who did an outstanding job on the project and displayed a high level of initiative and aptitude in her research work.
Great oral examation for his PhD – Congratulations, Linh Duong!
A couple of weeks ago, one of my students completed his oral examination, where he did a great job defending his research and work that he completed as part of his PhD. Congratulations – Linh Duong!
Linh has worked hard over several years on his project, entitled: A Multi-criteria Continuous Review Inventory Management System for Perishable & Substitutable Products.
This research is particularly interesting for those folk that manage perishable goods, whether these goods are foodstuffs or pharmaceuticals. A key element of the work was the inclusion of substitutability — a really important concept in contemporary business practice, where consumers are happy or willing to buy a substitute product if their preferred product is not in stock. The practical impact, from the perspective of those managing replenishment, is that ‘normal’ consumption of a product can be boosted if there is additional consumption driven by the substitution effect.
We had an enjoyable examination process. As usual, the Postgraduate Centre staff did a fantastic job setting everything up and ensuring that the process was seamless. The convenor walked us through the process earlier and did a great job during the examination itself. The oral examiners asked a range of interesting questions on a range of factors and issues in the thesis. Linh did a great job of addressing the questions and adding additional insight into the examiners’ understanding of the research.
Thank you, Linh, it was great working with you on the project and I’m sad to see this come to a close. Thanks also to Associate Professor William YC Wang, Linh’s other supervisor, who provided valuable support and assistance during the project.
Last week, another of our AUT PhD students also had a successful oral examination – congratulations to Freddie Mbuba! Congratulations also to his supervisors, Associate Professor William YC Wang and Dr Karin Olesen.
A great Transportation and Logistics Conference in Hsinchu
Linh N K DUONG presenting at the 6th Transportation and Logistics Conference in Hsinchu
We have just finished the 6th Transportation and Logistics Conference, held at National Chiao Tung University in Hsinchu. This was a great chance to catch up with Dr. Kuancheng HUANG, one of my friends, as he helped organise and host this great event. We had a range of presentations during the conference on a variety of transportation and logistics issues, including tracks on:
- logistics policy
- city logistics
- data and information
- container shipping
- terminal and warehouse operation
- cross-border and river transport
- green logistics
- intermodal and cross-border transport modelling
- maritime logistics
- aviation logistics
- economics, industries, and supply chain
One of my students, Linh N K DUONG, did a great job presenting some research we have completed on transport-on-demand logistics.
After two full days of great presentations on some fascinating research, complemented with panel discussions and an engaging keynote by Prof Michael Bell, we had the technical tours on the final day. There were three locations that we could visit. In the morning you picked between either the Taipei Port (learning more about the Port Facilities and FTZ Operations) or the SYNNEX Distribution Center. In the afternoon, both groups combined at the Taoyuan International Airport where we learned more about the Air Cargo Facilities and the new T3 Project and associated planning. This technical tour opportunity capped off an excellent conference.
I’m looking forward to the next conference in 2018!
Site visit to the Auckland Airport
On 2016-07-19, my Global Operations Management class was bundled onto a bus and transported down to the Auckland Airport. When we arrived, we split into two groups for two separate sessions.
First – my group was given an overview presentation, focusing on the long-term growth and capacity management challenges facing the airport. This included an overview of the airport strategy for growth and an overview of expected increases in visitor numbers. The increase in tourism and the number of airlines flying into the airport was impressive, highlighting the role of the airport as a ‘gateway’ four many tourists as they visit the country. Some of the challenges of the growth were presented, including an overview of the different types of capacity and how some elements of the airport can have capacity added incrementally while others require more substantial capital expenditure and a significant increase in capacity all in one go.
Second – we received a short tour around the airport precinct. In this situation, we looked at the airport real estate holdings and developments, focusing on supporting a burgeoning commercial hub and the growth of companies. A range of different warehousing spaces were available, allowing firms to ‘grow’ and expand as they become more successful. We were also fortunate enough to have an overview of the operations centre, where they monitor the day-to-day operations within the terminals. Here, a range of cameras and dashboards are constantly monitored, allowing managers to re-allocate staff accordingly to bust queues and smooth the journey of passengers through the terminals as much as possible. Metrics and KPIs are displayed and used to improve the allocation of resources over the day.
A great big thanks to all the folk at the airport! The class and I really enjoyed the time we spent there.
Littlefield Labs simulations in our operations management classes
Another fun week and we were running the Littlefield Labs simulation in two of our operations management classes. First, in the Postgraduate Diploma class on Supply Chain Management, with a focus just on management of capacity with a scenario focused on queuing and leadtimes. Second, I run a scenario with my Global Operations Management class (in the Business Masters programme), focused on capacity management and the use of appropriate contracts given operational performance. It’s a great group of talented students so I’ve given them a reasonably challenging situation to keep them busy in the session. We run the in-class session over a 120-minute team-based learning (TBL) session, giving us plenty of time to get into the simulation. All the best to the students – it should keep them busy and entertained over the session!