Crafting a Profitable Supply Chain for Artisans

Editor’s Note: Every year, 40 or so students in the MIT Center for Transportation & Logistics' (MIT CTL) Master of Supply Chain Management (SCM) program complete one-year thesis research projects. The students are early-career business professionals from multiple countries with 2 to 10 years of experience in the industry. The research projects are sponsored by and carried out in collaboration with multinational corporations. Joint teams of company people, MIT SCM students, and MIT CTL faculty work on real-world problems chosen by the sponsoring companies. In this monthly series we summarize a selection of the latest SCM research. This month we look at a project completed by Zyad El Jebbari, who analyzed the supply chain for handicrafts in Morocco for his SCM Program master's thesis. The project was supervised by Dr. Edgar Blanco and Dr. Tauhid Zaman. For more information on the program, visit http://scm.mit.edu/program.

The handicraft industry in Morocco represents more than 9% of the country's GDP and employs over 2 million people. Yet artisans struggle to expand the global market for their products, with total exports accounting for a mere 8% of the industry's revenue. The primary overseas market for these products is the United States, which generated about $10 million of revenue in 2013.

At present the classic retail distribution model predominates in Morocco, but this adds minimal value for artisans largely because middlemen downstream in the supply chain capture much of the revenue.

The research project analyzed the country's handicrafts supply chain, and developed a model that could help the industry boost both export volumes and artisans' share of the profits.

Assessing the choices

In addition to the traditional retail distribution model, Moroccan sellers of handicrafts also use ecommerce and online fair trade retail channels to market their wares to end customers. However, these channels have a number of serious drawbacks such as a lack of funding sources, high inventory risk, and long lead times.

First, the research analyzed the existing distribution models. Each one was scored according to six criteria. On the artisan side these were access to funding, profit margins, and overall market access for artists in developing countries. The customer side criteria were the quality of shipping and logistics management, emotional link and trust, and lead time. A national customer survey of potential American buyers identified these as the top three criteria impacting the decision to buy.

After evaluating current practices, a hybrid platform was developed to meet the challenges highlighted by the initial research. This crowdfunding platform, called MoroCrafts, offers a new distribution model for handicraft products that reduces inventory and financing risks, and increases artisan profit margins. A pilot test of the model was carried out on the Kickstarter funding platform for creative projects.

Hybrid version scores

MoroCrafts achieved the highest scores on all the performance criteria used to evaluate the supply chain models. Its main disadvantage is a lead time for exports of up to two months (for highly customized heavy low-value products), based on the proof-of-concept model implemented on Kickstarter.

Still, the hybrid option is an extremely promising alternative for the industry. The prepayment of items through a crowdfunding platform combined with an efficient internal supply chain is a better commercial mechanism for both buyers and sellers. Tools developed on Twitter enable sellers to market their wares more effectively and build an engaged buyer community. And these strategies can be expanded to other social media platforms including Facebook, Instagram, and Pinterest.

Importantly, the scoring framework developed by the researchers can be used to assess the efficiency of distribution channels for a wide range of exports. Moreover, there are ways to improve the new model by, for example, incorporating inventory holding costs for low-value items. Another possibility is to expand the model's social media reach, and tailor it to other e-commerce channels.

For further information on the research contact Dr. Bruce Arntzen, Executive Director, MIT Supply Chain Management Program, at [email protected].

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