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First Thoughts
  By Dan Gilmore - Editor-in-Chief  
     
   
  March 16 , 2012  
     
 

Supply Chain Megatrends 2012

 
 

Ok, it been five years since I released the first set of SCDigest Megatrends, which were well received at the time, and was a source for me to make a number of conference and company presentations over the next 18 months or so.

To be honest, I didn't fully carry them quite through as well as I had hoped, with plans to do executive summaries of each trend and some other related activities. I only made it about half way through.

Gilmore Says:

This level of near perfection will simply be what customers expect. The question will be how much it costs to get there.


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For what it's worth, here were those ten megatrends from 2007:

• Supply Chain Alignment
• Push-to-Pull

• Actionable Visibility

• Virtualization
• The Integrated Supply Chain Organization
• China

• Performance Management

• Lean Supply Chains
• Risk Management
• Sensory Networks

So I am back five years later, with a new set of megatrends that has some overlap with those from 2007, but quite a few differences as well. I am breaking them out in two parts in this column, and will look at each in more detail in coming months.

So with any further ado, here is the first half of our Supply Chain Megatrends list for 2012, of which there will be 12 in total:

1. Turbo Supply Chain Visibility: A combination of technologies - from RFID to GPS to video - is making the level of the level of visibility we can have in our supply chains right now almost limitless There is almost no technical barrier today to complete visibility - seeing everything, all the time, in real time, or darn close to it.

Over the next five years, what this will mean is that company's need to decide at what pace they are going to roll out these turbo visibility capabilities - and more importantly, better think through what to do with this level of information. Few of us well understand this today. It will transform our supply chains.

2. Perfect Logistics: This level of visibility will mean that for all practical purposes, companies will be able to achieve near perfect logistics. We are already seeing components of it today, with route deliveries being tracked in real-time, analytics off of that which identify any time a driver appears like he or she will miss the schedule appointment time even by a few minutes, re-routing drivers as conditions change, and more.

Missing cartons on pallet? Soon, an absolute thing of the past.

This level of near perfection will simply be what customers expect. The question will be how much it costs to get there. In a sort of odd way, it will also serve to in a sense further commoditize logistics.

3. Blurring of Planning and Execution: Visibility plus need for more rapid response to supply chain and market place dynamics will alter how companies look at the traditional supply chain hierarchy from strategic planning through tactical and operational planning and then on down through execution.

While elements of this top down, sequential model that has been with us from the start will remain, near the end, operational planning and execution will start to become almost a single process, and even tactical planning will become more dynamic. Clearly, planning cannot be dependent on 30-day S&OP schedules.

This will impact not only how we operate our supply chains, but have ramifications for supply chain technology and most interestingly, how our supply chains are organized.

 

 

4. International to Global: Despite the tremendous growth in globalization on both the supply and demand side in the past decade, many if not most companies are really national companies that do business (buy and sell) on an international basis.

That model is rapidly evolving to full globalization, where companies are truly trans-national in their strategies, organization and leadership. Many companies, such as Siemens, IBM and Procter & Gamble, have already largely arrived here already (IBM's head of procurement had been in Asia for a number of years, just as an example), and to succeed in the rapidly growing emerging markets will take innovative and tailored approaches to product, planning, and logistics that require a true global perspective.

5. Talent Management: Companies want to maintain lean staffs (that's an understatement), but want to outthink and outperform their competition through supply chain at the same time. In the end, that will mean the need for fewer, smarter people.

Growing supply chain complexity while overall Lean practices are still the rule results in a sort of supply chain high wire act that again drives the need for talent (though clearly technology will also play a key role here). The need for better integration with the business also challenges traditional, "move the goods" types of expertise.

All this just means the demand for talent will in general exceed the supply for the next decade, driving more companies to develop programs that identify, develop and retain the talent they have. We've had a few leaders here for years - The Limited Brands, Frito-Lay (PepsiCo), P&G - but many companies will start to take talent management a lot more seriously, while others make little effort and just hope to pick off talent from the leaders.

6. Supply Chain Finance: The connection between supply chain and a company's financial performance has been at once both well known but not so well understood. There was something of a watershed with the 2008-09 financial crisis, when companies in effect used the supply chain as a source of cash as traditional credit simply dried up.

The next five years will see the field of supply chain finance continue to mature, and understanding how supply chain impacts the income statement, balance sheet, cash flow statement, and return on assets will become almost essential to reach upper level positions in supply chain. This will be an increasingly common area of internal supply chain training (as some do today).

The position of VP of Supply Chain Finance, found in a few companies already, will become more common.

Ok, there are the first six Supply Chain Megatrends for 2012. The remaining set in two weeks, and will again cover each in more detail during the rest of the year. Hope you enjoy them.

What's your take on Gilmore first six Megatrends for 2012? Let us know your thoughts at the Feedback button below.


 
 
     

Recent Feedback

As always, a very interesting and provocative column.

We've known for many years that better, more timely visibility will help and
should improve performance on all fronts.  As you correctly point out, the
trick is going to be how to handle real time, fine-grained information.  I'm
with you-things will absolutely get better.

Still, as an academic, I wonder how far we can flex physical systems to
optimize them.  Two issues, really

1)  The information may be real time, but travel time and change time are
not instantaneous.  So even if you know you want to divert a container
because of changes in demand, that container is likely to be mid voyage, and
if you get the destination changed, the container is probably in the wrong
unload position.  Figuring out when and how to make these kinds of changes
is certainly possible, but we still aren't in Star Trek land.

2)  Physical movements and production are still subject to economies of
scale and regulation.  I was reading in Transport Topics today that TL
carriers are going to start looking at revenue per hour.  In particular,
several claimed that they will have to change pricing for companies in the
300 to 400 mile range, because the driver will not have time to pick up
another load.  Similarly, it is still going to cost less per cwt to move a
full load vs. LTL, even when both systems are optimized.  Will the value of
the small shipment flexibility (i.e. JIT) always outweigh the TL savings?
Again, the software and people will have to decide.

It's going to be exciting to see how far industry can push the advantages
conferred by real time visibility.

Thanks for a great column.



Arnold Maltz

Arizona State University
Mar, 19 2012

Hello Dan,

Thank you for the five years of this forum as a great source of industry discussion on latest trends, inside and out.

 

I’ve been studying the leadership aspects of business for several years now as a key element in the LEAN training we provide internationally.  One trend that I see growing is the need for LEAN Leadership.  The item on the last post titled Talent Management is on track, and I’d like to add a twist to it.

 

Almost every supply chain is becoming more complex and challenging.  I would however suggest that the NEED for talent is NOT for fewer smarter people.  I would suggest that the need will be for fewer managers which means the trend will drive two things;

1)      Better Leadership – with less management.  Leadership is the source of innovation.  Managers manage existing processes and budgets in prescribed and entrenched environments while leaders drive innovation and creativity which will be the success factors of the next decade in SCM.

2)      More LEAN thinking (not inventory reduction alone) throughout the organization, including supply chain partners.  I can see where more collaboration will ultimately take over where cost of transportation is now primary.  Every organization that grows will benefit from more engaged talent in the ranks applying LEAN thinking for innovation to remove waste.  That is bucking the trend when so many are fresh from downsizing efforts resulting from past management practices.

 

Ultimately the firms that dig in for the 1% gains will become the winners.  Less is more – when there is innovation driving the change.  Flexibility and responsiveness are driving current gains, a trend that will continue.  I believe we will find we need fewer managers and more leaders ready to innovate for further growth.  This is a quality issue at all levels of many organizations.

 

Best regards


Bob Forshay
Vice President, Transformance Advisors
Transformance Advisors Inc.
Mar, 19 2012

Dan,

Risk Management should be included because of the challenge of ensuring non-defective parts and the impact of protecting the supply chain from Cyber attacks.

Regards,


Levern Eady
VP, Business Development
Logicore
Mar, 19 2012

Dan:

I hope all is well with you.
Excellent article. The blurring of planning and execution has been going on
for some time and is very significant. One to perhaps add to your list is:

Risk as an integral part of Supply Chain Management decision-making.

This includes the risks of supply disruption, high demand variability
(up/down), supply/component obsolesence, government regulations, and
economic/geopolitical turmoil.

Cheers



Christopher Gopal


Mar, 19 2012


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