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.

Last week, we published the full predictions sent to us by Gene Tyndall, Dr. David Simchi-Levi, Jim Barnes, Mike Regan and Marc Wulfraat. (See Supply Chain Guru Predictions for 2012 Full Text Version.)

Wrapping this up, this week we offer more detailed summaries of the interesting predictions made for 2012 by the analysts at Gartner and IDC Manufacturing Insights.

IDC Manufacturing Insights

Supply Chain Practice Leader Simon Ellis and Others

Prediction #1: Manufacturers Will Focus on Clock-Speed Alignment Across the Supply and Demand Sides of Their Supply Chains: As we move into 2012, increasing demand volatility and supply complexity threaten to create higher and higher cadence mismatches — to the point where cost performance and service levels will really begin to suffer. Consequently, we expect manufacturers to focus on better aligning these internal clock speeds.

Prediction #2: The Requirement for Speed and the Ubiquity of Information Will Create a New Landscape for IT Support of the Supply Chain: Rapid adoption of these transformative technologies in supply chain organizations will create new requirements for IT:

Business 2.0 is giving rise to Supply Chain 2.0, where the need to be faster and more nimble in terms of consumer/product user interactions and IT capabilities is poised to dramatically change how services are delivered.

The need to have a more responsive supply chain, driven by both the ubiquity and the volume of data, will drive new capabilities to leverage social business tools and "big data."

Cloud computing and mobility combine to create a level of collaborative connectivity that requires new ways of consuming IT capabilities and a more practical alignment between the clock speed of internal IT decision making and the clock speed of technology.

Prediction #3: Big Data Will Create an Even Bigger Data Quality Problem for Manufacturing Supply Chains: The growth in external data sources, along with an appreciation for the insights that this data can bring to the manufacturing supply chain, is one of IDC Manufacturing Insights' "four forces" in driving IT and technology adoption for 2012. Yet the related conversation of data quality seems to be, as it always is, understated. Just as "little data" has caused big data quality problems over the years for supply chain organizations, "big data" seems poised to cause a massive data quality problem.

Prediction #4: Supply Chain Organizations Will Rediscover the Need for Differentiation — What Does My Supply Chain Stand For?: Continued lukewarm economic conditions will cause more companies to get focused in terms of their unique value propositions, which will then be driven into supporting supply chain strategies. At a high level, companies must pick only one of these to be great at: product-focused, cost-focused, or service-focused. Investments, strategies and metrics will be impacted by that definition of what drives their success.

Prediction #5: Risk Management Will Mature as a Focus Area for Supply Chain Segmentation: The dual natural disasters in Japan in March 2011 highlighted for many companies the relatively poor risk management and mitigation capability inherent to their businesses. What we have been hearing from some manufacturing companies in 2011 is the notion of looking at risk management as another dimension in how they look at supply chain segmentation, and that leads us to our prediction that in 2012 risk management will mature as a focus area
for supply chain segmentation.

Prediction #6: As Manufacturers Adopt S&OP, Integrated Forecasting Capability Will Facilitate Progress in Responsiveness: We are not suggesting that the small, best-of-breed S&OP software vendor is going to disappear tomorrow, but that in 2012, we expect to see manufacturing supply chain organizations increasingly recognize the appeal of a more integrated planning stack as a contributor to speed and supply chain responsiveness.

Prediction #7: Manufacturers Will Continue to Look at Extended Lead Times as a Source of Cost and Rethink Sourcing Approaches Where Necessary: In 2012, we expect to see the view of lead times maturing, with a recognition that longer lead times have a larger inherent cost (supply disruptions, product changes, quality, and obsolescence problems) and that cost must be factored into the network sourcing decision-making processes.

Prediction #8: Cloud Applications for Supply Chain Will Move from a Total-Cost-of-Ownership Focus to a Total-Value-in- Ownership Focus: IT budget pressures will continue to motivate CIOs to look in increasing numbers at cloud computing and focus on TCO; but, it can be so much more than that. We would advocate taking a total-value-of-ownership (TVO) approach to cloud offerings and indeed think this is what manufacturers will start to do in 2012. We expect 2012 to bring a new perspective that focuses on cloud's ability to support shared priorities with better and quicker communication, collaboration, and decision making.

Prediction #9: Manufacturing Supply Chain Organizations Will Focus on Fulfillment Excellence as Service Performance Grows in Importance in a Consumer-Centric Marketplace: Manufacturing supply chains must do a better job of balancing cost and service, and as the consumers becomes more and more informed, and their influence in the consumer-customer-manufacturer dynamic increases, the role of fulfillment will become more and more important. Thus, it is our view that in 2012, manufacturing supply chain organizations will focus resources on fulfillment excellence as the importance of service performance grows.

Prediction #10: Supply Chain Organizations Will Get Serious About New Product Development and Introduction with the Adoption of PLM Tools and a Focus on Clear Internal Business Process: Predicting the performance of a particular innovation in the marketplace is not a perfect science, obviously, and there will always be a substantial failure rate of new products; however, it is our view that with an appropriate NPDI process in place, and with the use of technology tools like product life-cycle management (PLM), the failure rates can be mitigated.

(Supply Chain Trends and Issues Article - Continued Below)

Gartner's Overall Supply Chain Predictions (covers a timeframe of several years):
Noha Tohamy, Mickey North Rizza, and Michael Dominy

By 2014, 20% of Asia-sourced finished goods and assemblies consumed in the U.S. will shift to the Americas: North American enterprises underestimate the total supply chain costs of offshoring to Asia. Escalating oil prices and rising wages erode initial estimates for cost savings that did not account for inventory-carrying costs, lead times and product quality. In addition, production in emerging markets will increasingly be needed for local consumption.

By 2015, at least 25% of new CEOs at Fortune 500 manufacturers and retailers will have deep supply chain experience: Business and financial experience will be a requirement for supply chain executives who are being groomed for top management positions. The Supply chain span of control will continue to expand to include more commercial functions, such as product design and launch, and customer service.
Supply chain should be incorporated as part of every management rotation program to ensure leadership competency across all functions of the corporation.

By 2014, 30% of supply chains will utilize advanced technology to manage commodity volatility, and to improve raw materials management: Commodities have become a larger part of a manufacturer's cost structure. It is not uncommon to see 10% to 40% volatility in commodity prices, which easily translates to a double-digit percentage hit to the bottom line, without effective risk management processes. Enterprises need visibility to treasury's commodity hedges and supply chain's raw material commodity requirements; profitability is at risk without transparency across functions. ERP systems do not allow bill of materials (BOMs) components to be systematically broken down into the raw material cost components that would support effective hedging strategies

By 2014, low-cost country sourcing (LCCS) strategies will give way to optimized-cost country sourcing (OCCS) strategies: Global needs for design, source, manufacture and sell-anywhere strategies require companies to rethink cost-value trade-offs, particularly when product and service demand are highly volatile.

Enterprises will reassess their supply chain networks, including a thorough review of their low-cost country supplier cost structures. The next wave of offshore and local-market sourcing will include optimization of lead times, transportation costs, quality, government stability, supply chain risk and a host of other factors to measure optimized country sourcing.

By 2016, 50% of Gartner's Top 25 will rely on predictive analytics to further exploit low-latency, network-based data: After billions of dollars spent on ERP, many companies still lack the timely, accurate and network-based data that can guide fact-based, timely supply chain decisions.

To leverage "big data," a more-defined predictive analytics solution space will emerge. This will take advantage of both intra- and inter-enterprise data, and will generate actionable recommendations for different time horizons. Traditional business intelligence capabilities will become a subset of this solution space.

Gartner's Global Supply Chain Predictions (covers a timeframe of several years):
Dwight Klappich, Greg Aimi and Several Others

By 2016, less than 10% of logistics organizations will have a chief compliance and risk management officer: Despite data showing that compliance with government requirements and supply chain risk management are at the top of the priority list, the responsibility for these and related issues continues to be fragmented, and is likely to stay that way.

By 2016, 20% of SCM organizations will adopt a supply chain execution convergence application strategy: The emerging concept Gartner calls "supply chain execution convergence" is where SCM organizations adopt a supply chain execution (SCE) application platform that allows them to model, orchestrate and synchronize end-to-end logistics processes. SCE Convergence is where SCE functional silos are broken down, and business processes span, optimize and synchronize across traditional functional domains.

By 2016, slower global trade growth will force shippers to adjust from the proliferation to optimization of international flows: Shippers will evaluate global sourcing options more carefully (e.g., true delivered cost versus risk), take advantage of new shipping-lane patterns, such as those afforded by the Panama Canal expansion or the Far East Trans-Siberian railway, and more comprehensively manage the risks involved. Maturity in international logistics process will enable companies to focus more on optimizing the flow of goods rather than concentrating on just getting the goods where they need to be, as is often the case today.

By 2016, Pan-European intermodal freight adoption will grow by 60% as a result of increasing governmental and sustainability mandates: Use of rail carriage for freight in Europe is much lower in Europe than it is in the US, in part because of many system and infrastructure issues within and especially between countries. Assume that rail and internal waterway services will increase on specific corridors, as a result of combined government-led infrastructure development, operator and shipper initiatives for regular service, and possible issues with road congestion, fuel prices, drivers' availability and safety.

By 2016, over 50% of Global 1000 logistics organizations will be required to systematically report verified emissions and environmental data: The shift from aspirations and feel-good platitudes around sustainable logistics to verified requests for accurate environmental and greenhouse gas (GHG) emissions information and actual performance outcomes is being catalyzed by industry groups, market expectations and regulations. For example, the U.S. Environmental Protection Agency's (EPA's) SmartWay program provided a significant tail wind, and the recently announced WRI Scope 3 protocol is set to codify end-user expectations further.

What do you think of these guru predictions for 2012? What especially resonates with you? Any predictions you would like to make for the year? Let us know your thoughts at the Feedback button below.

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