Posts in Category: Logistics and supply chain management

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.


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:



Hendricks, K. B., & Singhal, V. R. (2008). The effect of product introduction delays on operating performance. Management Science, 54(5), 878–892.

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.

Salin, V., & Hooker, N. H. (2001). Stock market reaction to food recalls. Review of Agricultural Economics, 23(1), 33–46.

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.

Wood, L. C., Wang, J. X., Olesen, K., & Reiners, T. (2017). The effect of slack, diversification, and time to recall on stock market reaction to toy recalls. International Journal of Production Economics, 193, 244–258.

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.

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.

Assurance of supply and food security – essential in the 21st century

Do you want fries with your horse meat burger?

Supply chains are funny things. Firms often take the word of their trading partners that everything is as they say it is. Supplies and materials are infrequently checked.

As a result, something as simple as ‘meat’ can be supplied, used, and sold for a while before anyone notices that anything is amiss.

Horse meat burgers? Possibly not a problem, except when the meat has been labelled as ‘Beef’. Hm. So – Irish company, supplying ‘beef’ that isn’t beef and instead horse meat. Sure, horse meat is vastly cheaper – but they’d have to think that they’d be caught out. Possibly the manufacturer of the hamburger patties was caught out with faulty supplies? But why wasn’t the different meat noticed? Why did it take such a long time for someone to pick it up?

Security of supply and being able to assure consumers that everything in the supply chain is OK is becoming an increasingly important competitive advantage, rooted in supply chain management. Being able to verify materials and provide assurance is particularly crucial in the food and beverage industries.

Just in the Western world?

Hell no – this is important everywhere. While in Hong Kong the other year I was having a meal in Mc Donalds (YES – even my students told me that this was stupid! I’ve since been and tried a variety of local meals and foods and enjoyed most of it!). While munching the food, I noticed that McD was advertising (on the paper sheet on the plastic tray) that they have complete visibility over their chicken supply chain, assuring consumers that the meat was safe, compliant with regulations, and was generally GREAT to eat. Trust McD. In this case, with a strong firm in the chain, sourcing from a few major firms to make a small range of food in the restaurant, there is probably better chances that McD is doing a good job, much more so than a supermarket chain like Tesco is doing a good job of making sure that there is no horse meat in meat patties from one supplier (how many SKUs does Tesco have? Probably upwards of 40,000!).

Burger King – stopped using the horse meat pattie supplier. You would have thought that Burger King would likewise have been able to provide assurance that their materials were ‘good’ and trustworthy … hm….

Food – assurance of supply and security of supply is crucial. Welcome to 21st century supply chains.

nDiVE – the start of an AWESOME project in supply chain education

Welcome to 2013 and the first day of a 24-month project to improve operations and supply chain management education – the nDiVE project ( and nDiVE is all about representing more data and information within a virtual environment to enable learners to better understand supply chain complexity, particularly where there is a separation of time and/or space between the cause-and-effect. This can be particularly pertinent in supply chain quality or health and safety. We are improving authenticity, allowing students to get a taste of real-working environments in a way that is entirely safe, and supporting their effective education. We have a range of colleagues from around the world working on this, experts in authentic learning, virtual environments, simulation, and business education.

This is going to be an awesome project and it should change the way that supply chain management education is approached, both within a tertiary environment and, we hope, later also within the corporate training environment.

Global Logistics in Mining 2012 conference

Wow – just got back from the Global Logistics in Mining 2012 conference (London, UK). Fabulous conference, excellent people. Lots going on around the world. We had some interesting discussions about:

  • Projects all with unique and interesting challenges (e.g., in Africa, Central America, isolated areas in Russia)
  • Technology supporting logistics improvements (e.g., using RFID or automating on-site operations)
  • Challenges operating within developing countries (e.g., within Africa and Central America).

I had a blast and I met some great people. While there are many logistics challenges ahead in mining, the room was filled with some of the brightest minds I’ve met so I am confident all the challenges will be overcome, one way or another!

Thanks to the folk at Fleming Gulf for organizing this.

Dynamic supply management

“Dynamic supply management, ensuring continuous fit with business objectives, offers a significant advantage to firms and builds a strong foundation for sustainable success.”

– Lincoln C. Wood
Quote fromMining Procurement and Supply 2012 conference, Perth, Australia (June 12-13 2012)


This is a pretty incredible state – logistics is the heart of business here. It’s crucial whether we look at resources and mining or other commodities, such as what we have growing here in the wheat-belt. Here’s a simple shot showing some of the amazing infrastructure that is in place and which, during certain parts of the year, is exceptionally busy. We must have hit them on a slow day 🙂

Logistics in Western Australia

In a state renowned for the mining and resources boom, logistics is BIG BUSINESS. However, there are other businesses that are crucial to the well-being of the state that also require significant logistics infrastructure and support.

The entire south-west segment of the state profits from being in the ‘wheat-belt’. A wonderfully fertile part of the country – but when the wheat needs to be harvested and moved, this must occur FAST. To ensure that this can happen there is a range of expensive infrastructure in place. Passing through a nearby town, we caught the following few of photos of some of the permanent infrastructure. This is a big operation to get the wheat moving fast and furiously to the coast and then out into the world.