Ok, it’s time again – for the past three years, we have assembled a virtual panel of supply chain and logistics gurus to offer their predictions for the coming year in supply chain. I will tell you, it isn’t easy to do this.
We always have some rotation, and decided to mix it up even more with a largely new cast this year, plus a couple of holdovers from 2009. Some, like Dr. Chris Caplice of MIT and Descartes Systems Group CEO (and 2008 recipient of CSCMP’s Distinguished Service Award) Art Mesher should be known by most readers. Others may be less well-known – but I know them all, and was confident they would have some provocative thoughts.
Below I highlight some of the predictions we received from our prognosticators. Next week in our On-Target newsletter, we’ll publish their full responses under the Trends and Issues section. Look for that.
Mesher says that “2010 will be the first year in what I am calling the “new era of selective specialization". In the last decade we saw the proliferation of microprocessors, handheld GPS technologies and network “presence” everywhere. Using Darwin’s law we mapped these and defined what we saw the last half the decade: the beginning of "the internet of things" or as I call it, “resources in motion.”
"Caplice says the biggest challenge that firms and supply chain managers will face in 2010 is talent management."
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He says this not only means that now items and inventories can be scanned and read while in motion, but that supply chain and logistics software systems “are now seen as continuous versus being a one time, lifetime purchase. He also says that “The SAPs, Accentures and UPSs of the world will begin to discover that the world of the commanding generalist is coming under attack by the subordinating specialist.”
The only point I might make to that is that if that does happens, it is probable that the big guns will simply buy the “subordinating specialists” to keep hold of their positions.
Chris Caplice, Executive Director of MIT’s Center for Transportation and Logistics (and a very smart guy) starts by noting that “the most obvious prediction for 2010 is that the level of uncertainty in the financial markets, commodity prices, consumer demand, and virtually every other facet of the economy that supply chain managers are concerned with will only increase.”
That uncertainty “makes all aspects of a supply chain manager’s job more difficult. It increases the need for more flexible and sophisticated forecasting methods, contractual arrangements, operational models, sourcing strategies, etc.”
But, he says, the biggest challenge that firms and supply chain managers will face in 2010 is talent management – ensuring that they recruit and retain the right people who possess the right skills.
“The short answer is that job satisfaction tends to decline during recessions and the set of skills needed in supply chain management functions is quickly changing. Not paying attention to professional development during a downturn will lead to defections of the best people in your organization during the recovery,” Caplice notes.
David Schneider, president of David K. Schneider & Associates, former Director of Logistics at Pep Boys, and current SCDigest columnist, says “While 2008 was the year of fear, and 2009 was the year of caution, 2010 is the year to be ‘cautiously bullish’”.
He adds that “Companies that kept their powder dry and have capital will deploy that capital into investments that do two things – lower potential carbon exposure and lower potential employee-driven health care insurance exposure. If the project will protect the business from carbon tax exposure – and will help limit or reduce labor, it will get a green light. If it only does one of the two or does them only marginally, the project will sit in limbo.”
Part of that squares with what Dwight Klappich, a supply chain analyst at Gartner, says the early results from the annual joint SCDigest-Gartner supply chain study are showing.
“As the economy recovers, it appears that what companies plan to do is to make investments that frankly allow them to return to growth without having to add a lot more people,” he told us. “They are looking to increase the productivity of the people they already have. The switch is from pure cost cutting in 2009 to cost avoidance through productivity gains in 2010.”
Gopikrishnan G.R, an executive in the supply chain management practice at Infosys, says in 2010 that companies “will face continued pressure to harmonize supply chain operations within a function (e.g., procurement consolidation or enterprise-level transportation management) and squeeze out further efficiency improvements from existing deployments (e.g., spend analytics driving sourcing improvements or extending a warehouse management solution to support multiple warehouses/fulfillment models).”
He adds that he anticipates companies will further consolidate their supply chain assets.
“Green Asset Management is certainly going to bestow brand equity vis-à-vis Corporate Social Responsibility themes,” he says, adding that “equally importantly, there will be a business case for ensuring productivity enhancements within core supply chain functions and lowering overhead costs. Mobile, fleet, IT, operational assets, plants, real estate – all will be up for consolidation.”
Thom Williams, a former trucking industry executive who now runs consulting and analysis firm Amherst Alpha Advisors, gives a sort of “un-prediction,” as he remains pessimistic on the health of the TL and LTL sectors and the overall market equation.
He says that for several reasons, what “won't happen during 2010, but surely will later, is an "alliance of truckload carriers" in which they will band together, formally or informally, so to collaborate (legally, that is) on much needed market, lane density, shipping and delivery schedules, and pricing issues.”
He adds that “When correctly and properly presented by well-prepared TL trucker alliances, the audience of the Dept. of Justice, Congressional and other trade governing bodies will be unable to voice substantive objections; and thus properly organized TL trucker alliances, together with much-needed mergers and consolidations (most likely, all post-2010) will continue to change not just basic North American truckload and LTL markets but, even more so, contract logistics and 3PL activities worldwide.”
Interesting thesis for sure. More on this later.
Jim Barnes, president of consulting firm EnVista, says that on the technology side, “The trend for 2010 and beyond is that supply chain-centric software technology firms will continue to develop their solutions on a single platform which runs on one technology stack with one data model,” a change that will have big operational benefits to users.
He also adds that the impact from the deep recession have not fully played out among supply chain hardware and service providers. “I believe we are going to see additional fall out (companies going out of business) or significant consolidation in the space. Numerous material handling equipment vendors and third-party integrators revenues have been reduced by as much as 50%,” he says.
He also thinks 2010 will bring more logistics outsourcing.
“Although the 3PL market was hit extremely hard, companies will continue to evaluate domestic and global 3PLs to manage their networks,” Barnes says. “I believe that companies now have a renewed focus on determining what their core competencies are and are evaluating ways to clean up both their P&L and balance sheets by off loading asset based services to third parties.”
Finally, as last year the researchers at IDC offered their top 10 supply chain predictions for 2010. We’ll offer a couple of them here, with the full list next week in On-Target.
IDC believes that “Balancing supply and demand across the value chain will prompt a strategic redesign of the supply network,” as companies look to reduce fixed cost structures and create more variable cost supply chains.
Interestingly, IDC also predicts that “Transportation capacity will tighten, causing brand-oriented supply chain organizations to re-think delivery approaches and fulfillment strategies.”
They also see interest in RFID continuing to decline in the consumer packaged goods sector, where it started, but accelerate in apparel and footwear.
That’s all we have room for. This is very hard to do.
What I personally would say is that there are going to be two types of companies - those who bet the economy is going to get better, and therefore get strategic and make investments, and those who continue to "hunker down" and play it very conservatively. One group will be right, but too early to say which for now. The group that is wrong will pay a big price.
Hardest year to forecast perhaps ever. We all knew 2009 would be terrible. 2010 is a real wild card.
What are your reactions to the various supply chain predictions for 2010? Which of them most hit home? What are some of your predictions for the year?
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