A decade sure is a long time.
Many of you wrote to say you enjoyed my review of the year in Supply Chain 2009 last week and also the 2009 monthly chronology of major supply chain events for the year in this week’s On-Target e-magazine.
Hope you will enjoy a similar review on the decade in supply chain, which I offer below.
It is hard to imagine now, but “Supply Chain Management” was not a concept at all broadly understood even in 2000 – nowhere near what it is today. I was an industry analyst from 1998 to early 2000, and I had taken in that period many calls from clients asking for a basic explanation of what supply chain was all about. I remember one specifically from truck maker Navistar in what must have been 1999, with the caller, a director level manager, saying his CEO had read an article on supply chain management and decided Navistar needed to get some SCM religion right now – could I help get them started?
We’ve come a long way in 10 years, haven’t we?
Ten years ago, we had also just passed “Y2K” without the disaster many were predicting for computer systems – after software providers and consultants had hit the gold rush in the few years before then fixing and replacing enterprise systems to address the date field issue.
Gilmore Says:
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"In 2008, we imported $338 billion in goods from China, a 238% gain from 2000."
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Supply chain software was perhaps at it zenith – indeed, there was almost a bit of mania going on with regard to supply chain optimization and e-commerce technology. i2’s stock soared to $200 per share; in May of 2000, it had more than 6000 people at its annual user conference. A decade of problems later that began just a bit after that peak, the supply chain software pioneer will become part of JDA Software in just a few weeks.
Oil prices, hard as it is to remember, were at about $18-20.00 per barrel in 2000, dipping to a low of just above $15 per barrel in the recession of 2001. From there, it was almost a continuous line straight up until the peak in July of 2008 at something $147.00, then collpase again in the recession. (See graph of the decade in oil prices.)
In 2000, Dell was viewed in almost reverential terms for its build-to-order supply chain juggernaut – the model for the supply chain of the future. Dell ran into its own business problems midway through the decade, and in 2008 largely changed its business and supply chain model, and now is just another company with a good but not especially noteworthy supply chain.
It’s hard to imagine now, but China was not much of a force at all at the start of the decade, though things were moving there and that would start to change within just a few years. US imports from China were $100 billion in 2000, and would rise by more than 20% per year from 2002 through 2005 and then 18% in 2006. In 2008, we imported $338 billion in goods from China, a 238% gain from 2000. China’s own economy and role in the world advanced proportionately.
The Auto ID Center at MIT had really just started in 2000, and I think it was in 2002 that the first test of an RFID-tagged pallet was completed in a move from a Unilever DC to a Walmart DC. In 2003, the Walmart RFID “mandate” was announced, as was the formation of EPCglobal, taking over from the Auto ID Center. While there has been much RFID progress outside of the consumer goods to retail channel, the overall lack of progress there in the decade simply would have seemed impossible to most involved eight years ago.
In 2001, in one of our Greatest Supply Chain Disasters of All Time, network gear giant Cisco got caught with way too much inventory in the recession, and took a $2.1 billion inventory write-down. This was actually a seminal event in supply chain, as it causes Wall Street analysts to start looking much more closely at corporate inventory levels to avoid the next Cisco-like surprise. That has translated into much greater CEO/CFO attention on the same, and therefore to the supply chain as well.
There is a lot more, but we are running out of space. Next week in On-Target, we’ll give a chronology of key events in the decade of supply chain – take a look.
Here are what I think are the key forces and changes over the past 10 years of supply chain, some a bit repeated from above:
- Major change for supply chain thinking as it moves from a concept and practice largely embraced by a relatively few number of leading companies to one that is a core part of the business vernacular in 2010 and not well embraced only by the laggards. Chief Supply Chain Officer becomes a relatively common title.
- Relatedly, growth of Sales and Operations Planning from a concept that was being used by a small number of leading companies at the start of the decade to mainstream business practice to align demand and supply today.
- Dramatic change in the use of supply chain performance metrics and tools to drive behavior and performance.
- Lean and Six Sigma move from the factory floor to be applied in supply chain processes generally – in some cases, maybe taken too far.
- Supply chain risk management moves from a concept not much even discussed early in the decade to critical discipline for supply chain executives.
- Offshoring and outsourcing see dramatic growth. Percent of “value added” by final seller of manufactured goods drops into the 15-25% range for many companies. Virtual supply chains go from vision to reality. It was early in this past decade when companies like Levi’s jettisoned their own plants to become brand companies.
- China rises to become major force both as a supplier to the West and as a potential market – challenging US world leadership at the same time. China was not even part of the WTO until late 2001.
- Tremendous consolidation in the supply chain software market. Over the decade, Manugistics, JDEdwards, Peoplesoft, Retek, i2, IMI, countless providers in Warehouse Management System, factory scheduling, and other niche applications taken out by competitors. On-Demand software gains major foothold in market.
- Green supply chain thinking and Sustainability rise from not even really a factor early in the decade to powerful force today, driven in part by Walmart smartly picking up the cause and helping its reputation.
- Transportation Management as a function moves out literally and figuratively from the small office in the back to much more strategic and important element of supply chain excellence.
- Rail transport moves form a sort of invisible, almost forgotten mode except for a few industries early in the decade to major player at its end, fueled in part by import-driven intermodal, and now concerns about transporation costs, carbon emissions, and congestion. Warren Buffer buys Union Pacific.
- Supply chain visibility moves from vague concept mostly discussed by software vendors and industry analysts to important focus in most supply chains.
- Commodity prices and even availability have become much more dynamic and a cause of corporate concern over the past decade; China is acquiring commodity assets all over the world, and said to be hoarding some metals. Procurement function rises in strategic importance.
There’s more, but think this is a good list. Again, look for our chronology next week in On-Target. Would welcome your thoughts on the decade in supply chain to complete the picture.
What do you think were the biggest change and events in supply chain during the 2000s? What did Gilmore leave of his list? Anything special you remember from the decade? Let us know your thoughts at the Feedback button below.
Let us know your thoughts.
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