The Gurus Are Back! 2017 Supply Chain Predictions

We're back as we have done for many years running with predictions for the year 2017 in supply from a virtual panel of supply chain gurus.

In fact, most of our prognosticators are back from 2016, selected again for this great honor - well, something of an honor - because in the past they have made insightful predictions and (very importantly) are able to get them emailed in before the deadline, which was last night at 7:00 pm. Most thankfully arrived much earlier.

As I say every year, given how difficult it is to make predictions in this crazy world of supply chain, these prognostications are part prediction, part a discussion of trends, part some things to look out for - but it is all good, and I much enjoy these pieces every year. As always, I'll publish two First Thoughts columns summarizing those predictions and/or highlighting key points, followed by full text versions of the predictions in our OnTarget newsletter starting next week.

Let's begin with Mike Regan of TranzAct Technologies, who always has something interesting to say, usually related to freight transportation, whether it is at the NASSTRAC annual conference, his own weekly "two-minute warning" videos, or here on SCDigest, where he is a frequent contributor.

"In 2016, we predicted that shippers would take advantage of a soft transportation market and adopt a more aggressive posture in their rate negotiations with carriers," Regan says, adding that in "2017, the proverbial shoe will be on the other foot, and carriers will be taking advantage of tight capacity and looking for higher rates."

Regan believes the impact on transportation budgets will be determined by just how quickly these new contracts and rates go in to effect. Consequently, shippers should expect increases of as much 5% to 7% from truckload carriers, though that may not be immediately reflected early in 2017, depending on the timing of negotiations.

However, "monthly trend numbers could result in transportation and logistics executives having to explain significant budget variances to their C-Level executive," Regan says.

Regan also notes that as retailers and others tighten their delivery requirements (e.g. Walmart's "On Time/In Full" program), companies will be looking for real time data on their shipments to help them avoid chargebacks.  Regan predicts that there will be "continued interest in development/advancement of communication technologies that provide information to carriers and shippers about the location of their trucks and freight."

It's an increasingly real-time supply chain, that's for sure.

My friend Gene Tyndall from Tompkins International, whom I believe has contributed predictions every year since I started doing these columns a number of years ago, is one of the most broadly knowledgeable supply chain experts we have today.

One of Tyndall's observations is that "Customer-centricity is finally prevailing as fundamental to demand-driven supply chains, which by their nature are more amenable to cost management and predictability than supply-driven long lead times with demand uncertainty." 

Nike, Adidas and others, we will note, are in fact transforming their supply chains as we speak to make them more responsive, rethinking very long supply chains based on cheap Asian labor. But that will also take some manufacturing robots to pull off, from what I have read.

Tyndall also bemoans (1) the slow progress in companies adopting true Chief Supply Chain Officer roles; (2) the view of execs that supply chains are still overwhelmingly to be considered as cost centers; and (3) the inability of companies to let go of a functional view of supply chain for one more focused on cross-functional processes.

He predicts that "We will see gradual progress in this area, but not widespread gains. Neither ERP systems, nor advanced business planning tools, nor granular analytics, will change management structures, company cultures, behaviors, or processes themselves, until business executives learn to appreciate the contributions of supply chains as business value drivers. "

Very well said.

Dr. Michael Watson of Northwestern University and his company OpEx Analytics (also an SCDigest columnist) is one of the best there is when it comes to supply chain analytics, and I asked him to offer some thoughts on where supply chain network design and advanced analytics in supply chain were heading in 2017.

He obliged, predicting that "data engineering" will be viewed as an increasingly important skill.

What is "data engineering"? Watson says it is "the art and science of blending data from multiple (and different) sources, automatically cleaning and filtering the data, and transforming the data to be useful for analysis."

Watson cites as a simple examples combining customer data and geocoding information, or transforming a table with monthly demand as column headers and normalizing it.

He adds that "On the harder side, this is combining different demand files and automatically converting to the correct units and currency based on the source file, automatically cleaning out data that meets certain criteria."

Watson observes that this is work that has always been done, but that "It was originally all done in Excel and then Access, But now with tools like LLamasoft's Data Guru or Alteryx you can do it much better and faster."

Most companies of course have only scratched the surface here. The promise is much faster modeling - and thus more modeling projects completed in a given period of time.

Watson also predicts that that supply chain network design modelers will start to use more open source tools, such as R and Python.

He cites, as an example, a company doing some statistical tests on the data prior to running a network model with all its complexity, saying "You may run a regression to predict transportation prices, a forecast to project demand out the next 5 years, or do some data mining to look for bad data," meaning several tools may be needed.

He adds that the growth in the use of open source tools will come from two directions: (1) a career development perspective, as network design modelers will want to learn these new open source tools to increase their market value; and (2) as businesses ask more of their modeling teams, they will need all the horsepower they can get to keep up.

I have not done much in this area (open source analytic tools) but I deeply trust Mike's judgment, so will try to look into this in more detail soon.

Finally for this week, I asked my friend Jim Barnes, CEO of consulting and software firm enVista, to offer some predictions for the retail supply chain. As usual, Barnes had some provocative things to say.

"Omnichannel as a strategy is dead," Barnes says. "The term served a purpose to get traditional (brick-and-mortar) retailers to start thinking about how to break down organizational silos. The reality is that omnichannel is an inward-facing focus versus a customer-centric approach, which is where retailers actually want and need to focus. Customers do not care about, nor speak in terms of, channels."

I agree with that. Barnes follows up by saying "What matters the most in retail commerce is the ability to source inventory closest to the demand point, regardless of order capture form factor, and the ability to delight the customer."

He adds that "Traditional ecommerce will die over time and will be replaced with only a handful of marketplaces, such as Amazon, Ebay, Jet (Walmart), Groupon, Wayfair, Etsy, etc. Brands will have a hard time competing with marketplaces that have an integrated, enabling, unified commerce technology platform and fulfillment distribution networks to deliver in hours versus days, and this includes physical stores."

So how do other retailers compete with these marketplace giants?

Barnes says the answer is merging digital and brick-and-mortar, saying for example that "Sales associates can and should be leveraged as taste makers, empowered to create unique webstores for their in-store clients within minutes."

He also says that "Retail winners are going to be those that focus on inventory flow and compressing cycle times. We need to borrow from manufacturing-centric supply chains that have historically been focused on decreasing lead times and eliminating waste (Lean thinking). The future of retail supply chain will be focusing on increments of one - one customer and one unit as the batch size."

Very interesting - what does Lean thinking in retail really mean? Few know today.

I wish I had more room. Look for full text predictions from the gurus cited above in next week's OnTarget newsletter, and then in my column here next week we'll have highlights from the rest of our panel, which includes the sharp thinking consultant David Schneider, CSCMP Distinguished Service Award Winner Art Mesher, long time supply chain observer Rich Sherman, now of Tata Consulting, deep supply chain thinker Dr. Chris Gopal, and the insightful David MacLeod of the UK's Lean Logistics Limited.

Any reaction to the guru predictions? What resonates with you? What are some of your 2017 supply chain predictions? Let us know your thought at the Feedback section below.