A couple of weeks ago, I reviewed 2006 from a Supply Chain Digest perspective, highlighting many of the important stories and themes we covered – and those that drove the highest level of reader response.
As promised then, I am now going to offer my more general thoughts on Top Ten trends in supply chain and logistics for 2006. While we are flooded with similar lists in general news, entertainment and other categories, I really don’t see too much like this in the supply chain, so I hope you enjoy.
So, in reverse order, you will find my list below. As always, we’d welcome you comments, agreements, disagreements, or any other perspective you would like to share.
10. Voice Technology in Distribution Goes Mainstream: It’s been building for the last couple of years, but voice technology in order picking and other distribution processes seemed to really go mainstream last year, as price and performance continue to improve, and the recognition of the productivity gains available become much more widely understood.
9. Labor Unions at an Inflection Point: This was a story we specifically covered in 2006, with our piece on auto parts maker Delphi’s still inconclsive push to dramatically reduce its North American union wages and move many operations offshore. There has been more action, with GM and Ford getting UAW agreement to shed tens of thousands of workers, Goodyear wringing strong concessions from its union last month, Chrysler perhaps sending a message to the UAW before the 2007 negotiations with an agreement with a Chinese automaker (see story in This Week’s Supply Chain News Bites), and more. If this trend continues, it could have big implications for supply chain costs and offshoring decisions. But will a Democratic Congress ignite some union pushback? Stayed tuned.
8. Concern over Commodities: Though it abated in the fourth quarter, concern over the availability and price of raw materials, from copper to rubber, caused many companies to rethink supply chain strategies, sign very long term agreements, and even, yes, return to a level of vertical integration. Caterpillar blames a revenue shortfall in part on the inability to receive needed levels of supersized tires, that in turn blamed in part on rubber shortfalls. Is anyone really paying attention to all those commodity deals and acquisitions Chinese companies are making worldwide?
7. Continued Supply Chain Vendor Consolidation: 2006 saw plenty more of this action, including supply chain software pioneer Manugistics being acquired by JDA, Symbol Technologies agreeing to be acquired by Motorola, “roll up” company SSA being acquired by another roll up company Infor, and many more. Make no mistake – in a maturing software market, it’s now all about acquiring customers and taking out overhead costs through acquisitions.
6. The Perfect Storm Blew Over: Long term, we still have many transportation challenges to deal with, but port congestion was basically a non-issue in 2006, and trucking capacity certainly swung back much more in balance with demand, easing rate pressure. Fuel prices even managed to drop substantially throughout the fourth quarter (see nearby story on the year in diesel prices in News and Views). We say enjoy it while you can…
5. Focus on Risk Management: Following a lot of academic research and work in 2005, we saw a huge number of companies turn their attention to supply chain risk mitigation in 2006.
4. Supply Chain Icons Stub Their Toes: We’ve been talking about Dell and Wal-Mart as the supply chain leaders for so long, most of us say it without thinking – or often knowing why. Both these leaders had the overall troubles in 2006, with no clear path back to glory for either one. Important because it shows supply chain advantage is never forever, and if Wal-Mart someday loses it current level of dominance it will have huge industry ramifications across the supply chain and more.
3. RFID Slows - but Grows: Many observers, including Supply Chain Digest and certainly a number of RFID-focused vendors, saw little momentum in terms of real action in the EPC-based consumer goods-to-retail market, in part as Wal-Mart moved much its attention to a series of other supply chain, store strategy and external issues, rather than the RFID roll out. The number of consumer goods manufacturers doing anything meaningful with RFID is still just a handful, and RFID announcements on the retailer side were very quiet in 2006. On the other hand, we saw strong progress with RFID in a wide variety of other markets and applications, as a supporting technology, not a cause in itself.
2. Global Supply Chain Gets Serious: As we predicted early in the year, in 2006 we saw huge numbers of companies finally get that global supply chain isn’t a logistics sub-discipline – it’s an area where performance can mean the difference between company success and mediocrity or worse. We thought the CSCMP conference in October spent a bit too much time on global sourcing and logistics, but then again, maybe not…
1. The Greening of the Supply Chain: It’s just starting to ignite, but we predict the most significant trend of 2006 will be that this is the year where the environmentally friendly supply chain (aka “sustainability”) really turned the corner, and companies started to take real action. To the surprise of many, an early leader: Wal-Mart. From energy efficiency to alternative fuels to packaging and much more, the supply chain will increasingly be colored green.
That’s my list… would love to hear your reaction.
What are your thoughts on out top 10 2006 trends. What would you add – or subtract?