What does 2013 have in store for the supply chain?
If you think forecasting demand is hard, predicting what is likely to happen in supply chain is in most cases at least as difficult, if not worse. But nevertheless this year, I have managed again this to cajole a good number of some of the supply chain and logistics industry's best pundits to peer into their crystal balls and offer their views of upcoming trends, themes and developments.
This year, I am even going to throw my own prognostications into the mix.
As usual, I will use this column this week and next to highlight some of the best of each of these gurus. Then in our On-Target newsletter, we will publish the full text of the comments each one has sent me.
And as a slight switch this year, I asked each pundit to in focus on one specific area, such as strategy, transportation, consumer goods, etc.
This year, we begin with Lora Cecere, founder of analyst and consulting firm Supply Chain Insights, author of the new book Bricks Matter: The Role of Supply Chains in Building Market-Driven Differentiation, and a former analyst at Gartner and AMR, among other accomplishments. We asked her to make some predictions relative to the consumer goods to retail supply chain in which she has long had a strong focus in her work.
In general, she says, "Supply chains are morphing from "supply-centric thinking" to market-driven value networks. The focus is moving from vertical to horizontal, from inside-out to outside-in, and on the use of advanced analytics."
She says that "To win, companies need more than tight integration. Instead, they need to invest in synchronization, visualization, and orchestration. It is time to unlearn the practices of the first two decades of supply chain management to learn new ways to build value networks."
Among the seven predictions in this area she sent us, I picked out several for this column (again the full text will be available in On-Target next week).
First, Cecere says a recent plateau in supply performance will drive a rethinking of supply chain excellence.
"Process [manufacturing] companies have lost 1% operating margin and 1% ROA over the last decade, and inventories in food & beverage have grown by 22%. The only supply chain metric that has improved is revenue/employee," she notes. "As growth slows, companies will get serious about driving supply chain excellence."
When it comes to supply chain software, she says that "Satisfaction with transportation and warehouse management applications is high, while satisfaction with planning software is low. As a result, there will be a new growth for Best-of-Breed planning solutions."
Cecere is also one of many pundits, including us here at SCDigest, who are focusing on how Amazon.com is roiling the retail industry.
"Amazon is now taking aim at the "center store" categories, leading to consumer products disintermediation becoming a reality, Cecere says. She also tells SCDigest that "As the Amazon continues to grow market share and carve out a dominant position in the "center-store" categories, retailers will redefine the store to focus more on service and brand-building opportunities. Consumer goods manufacturers will win through designing value-added services to drive traffic to the retail store. This will be about much more than price and variety, including things like walk-in health clinics, beauty make-overs, cooking events, and health and wellness fairs."
Finally, with the current hyper-focus on multi-channel commerce and fulfillment, and increasingly complex fulfillment paths that involve suppliers and third parties, "companies will discover that they need an inter-enterprise system of record for cross-channel fulfillment to enable drop shipment, cross-enterprise available to promise (ATP), and customer-centric inventory allocation."
Thom Williams, a former trucking industry executive and now consultant and investor in the trucking industry, had to decline on the opportunity to make predictions this year because of investment-related constraints, but he did say that if you want to predict trucking industry changes in terms of capacity and rates, follow the construction industry.
"I remain convinced that little will change with the transport sector's demand/capacity equation until the residential and commercial new construction markets experience further significant upticks," Williams said. Hmm… that gives us a few ideas on some information we might provide to SCDigest readers.
As usual this year, we are also publishing some of the predictions from the supply chain analysts at firms like Gartner and IDC Manufacturing Insights.
In its "predicts" relative to logistics practices and technologies, Gartner analysts say that achieving high levels of supply chain visibility will continue to be a challenge. How big a challenge? Even by 2016, less than 20% of companies will have achieved end-to-end supply chain visibility, they predict .
The number of touch points in the supply chain is increasingly complex, Gartner notes, raising the bar on visibility needs – and challenges. Although various ecosystems of software vendors claim to provide full end-to-end visibility, "this is not the case," it says. "Alternatively, some companies are building out control towers that incorporate information from various systems" to achieve deep levels of visibility.
Gartner is also on-board with our view that "Cloud-based" software solutions will come to dominate the market.
It predicts that by 2016, more than 40% of new logistics application purchases will be delivered through the Cloud. (We predict that the percentage will actually be even higher than that.)
In areas like WMS and TMS, Gartner says the Cloud/SaaS offerings have not to date typically had the functionality of traditional "on-premise" software, which has been a barrier to adoption for companies with more complex logistics needs.
However, Cloud/SaaS SCM software vendors "continue to enhance their applications by adding more functionality," and "they will soon be viable offerings for even complex and sophisticated logistics organizations," Gartner predicts. It adds that "In general, these [Cloud] solutions are unlikely to wholly replace on-premise solutions for at least several years. Rather, they will complement and coexist with traditional enterprise applications."
IDC comes at it from a more manufacturing-centric perspective, and offers 10 specific predictions. Here are a couple of my favorites.
It predicts, for example, that "resiliency" will become an even higher priority for manufacturers looking to master the "massive multidimensionality" of their global supply chains.
I think I agree. Bit just what does that really mean?
"Supply chain resiliency is about both better managing inputs from the demand side of the supply chain and being more responsive on the supply side," IDC says. Manufacturers will need to manage and optimize across an increasingly broad and complex array of variables, it adds (i.e., "multi-dimensionality").
There has been a lot of hype relative to this next prediction, but IDC also believes that the "Big Data" era will start to dawn for supply chain organizations in 2013.
What is so-called Big Data? It's really about leveraging the vast amounts of supply chain related information that's out there through use of advanced analytic tools to gain insights and uncover hidden patterns. Let's face it, few companies even well leverage their transportation data, let alone cross-functional supply chain information.
However, IDC says, "It is one thing to get big data; it is another thing to "get" big data," meaning that some supply chains will have an epiphany about how such analytics can really drive performance improvement - and some won't.
"2013 will be the year when manufacturing supply chains start to really understand what the fuss is all about," IDC says.
OK, that's it for our first round of predictions. Next week, thoughts from Gene Tyndall, Mike Regan, David Johnson, Marc Wulfraat, David Schneider, Evan Armstrong and me.
We'll see you then.
Any reaction to this set of supply chain predictions? Care to send any of your predictions? Let us know your thoughts at the Feedback button (email) or section below.