Over the past couple of weeks, SCDigest editor Dan Gilmore has highlight supply chain predictions for 2012 from a variety of supply chain gurus and well-known industry analysts. You can find those columns here: Supply Chain Guru Predictions Part 1 and Part 2.
As promised then, we are here offering the full text comments from each of oiur gurus. This week you will find the predictions sent to us by Gene Tyndall, Dr. David Simchi-Levi, Jim Barnes, Mike Regan and Marc Wulfraat. Next week, we'll do the same with 2012 predictions by the analysts at Gartner and IDC
I am pleased to again this Year suggest some predictions, or trends, that we see out there for Supply Chains in 2012. Last Year I suggested five trends that, if the majority of supply chain managers around the globe could improve on, the value of supply chain excellence would escalate to executive agendas and thus advance the global economy and the profession.
I can hardly take credit for any such advances, but I am very pleased to have seen a better understanding of true supply chain costs; some simplification of the complexities; more effective supply chain organizations; more competence in supply chain skills; and a better understanding of how supply chains should contribute to shareholder value. Of course, we have further to go on all these five, but I would observe that the progress has been noticeable.
What do we see for 2012? Well, these trends will continue, because they are about improving the economy and our companies that operate more and more Internationally. But, to be more predictive, let's consider the following four trends:
1. As the economy improves slightly, the question is whether the changes made by most companies to survive during the multiyear Recession will continue as business as usual. Cost reductions, lean practices, more outsourcing, and tighter control of operating costs and capital made the headlines. Will these continue? I would predict for many, they will. The uncertainly, the risks, and the volatility are continuing. Most management teams have become risk adverse, and they will remain so this year.
2. However, the changing customer/consumer is demanding more, and companies cannot afford to try and meet the new needs with old ways. Multi-channel sales will expand and e-Commerce will grow. The e-Fulfillment strategies and operations are in need of challenging, and innovation. The customers are the drivers of change in these times.
3. Demand-Driven Supply Chains will expand. There simply is no way to grow profitably without transforming supply chains to the "new demand-driven" strategies and operations. As technologies have improved for supply chain visibility, and apps have improved for optimizations across the multi-party supply chains, so have new ways of operating demand and supply. While S&OP advances have made some incremental progress, forecasting accuracy remains elusive. Thus, we need solutions that read POS near real-time and drive supply back across the chain with dramatically improved lead times.
4. And, last but not least, the supply side. What about the return of production to the U.S.? The so-called "nearshoring" to Mexico and other Americas? Despite the highly optimistic predictions of the U.S. catching up to China in 3-4 years in manufacturing, we just do not see that. We do see important gains in U.S. manufacturing, in nearsourcing of some final assembly, especially in Mexico, and more postponement of final packaging, as well as key suppliers to the OEM's locating more functions to the U.S. But, the sum of all this will still not be significant when measured against the huge gains in China production. This profile will not change until the U.S. provides substantial regulatory relief and major incentives. Most supply chains will continue to involve long lead times and ocean transport. Hence, the focus must be on #3 above.
As always, predictions are risky, and often wrong. Trends, however, tend to be dominant and prevalent. Good luck in 2012!
Dr. David Simchi-Levi
Some of the issues that have been in the forefront in 2011 will likely dominate the attention of executives in 2012:
(1) Supply chain risk management:
The news in 2011 was dominated with the fallout from two major catastrophic events – the Japanese Tsunami in March and the floods in Thailand in September. Companies will focuse on understanding their risks, modifying their strategies (very few companies) and creating contingency plans.
(2) Supplier performance monitoring:
The demand for more supplier accountability, exemplified by the recent criticism of Apple in regards to work conditions at FoxConn, will require more focus on supplier performance monitoring. This of course is also part of effective risk mitigation strategies.
(3) Manufacturing moves closer to demand:
The anxiety over the decline of manufacturing in the US and attempts to understand and revitalize it are taking center stage. Some recent data shows a new trend towards regional manufacturing (see my Sloan Management Review paper on Is It Time to Rethink Your Manufaturing Strategy?)
This is driven by oil price, labor cost in developing countries and the risk associated with low-cost-country sourcing and manufacturing strategies.
(4) Implementation of Supply Chain segmentation and flexibility strategies:
With the proliferation of channels, products and different customer value propositions, many companies need to segment their supply chain strategy. Indeed, the recent success of Dell, which successfully transformed its supply chain to address these challenges, will encourage other companies to follow.
(5) Investment in sustainability:
Many companies are initiating projects for more efficient packaging and sustainability practices. On the legislative front, California approved a carbon cap and trade policy, Australia instituted a new carbon tax and there is talk of a UN carbon fee on cargo ships. Therefore, there is pressure on companies to invest in reducing carbon emissions and sustainability despite the seeming lack of interest at the US federal level.
Technology will continue to advance on many fronts including:
• Increased use of business analytics - expected boost is likely to come from In-memory technology and investments in this area
• Increased use of RFID for tracking and end to end traceability
• Continued migration to cloud computing
• Innovative use of tablets and cell phones in retail.
(Supply Chain Trends and Issues Article - Continued Below)