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Predictions from Supply Chain Gurus for 2019 - Full Text Version Part 1

 

Complete Predictions from Mike Regan, Gene Tyndall, and Dr. Chris Gopal; Part 2 Next Week

Feb. 12, 2019
SCDigest Editorial Staff

Recently, , SCDigest editor Dan Gilmore highlighted supply chain predictions for 2018 from a number of supply chain gurus in our virtual panel. You can find those columns here: Supply Chain Guru Predictions for 2019, and Supply Chain Guru Predictions for 201- Part 2.

As promised in those columns, as usual we are also offering the full text predictions from of the gurus highlighted in Gilmore's columns.

Supply Chain Digest Says...

People are going to be the constraining factor in the increasingly competitive and e-business driven supply chain world.

 

Dr. Chris Gopal


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So below are the full text predictions from pundits Mike Regan (TranzAct Technologies); Gene Tyndall (Tompkins International);  and Dr. Chris Gopal (consultant and academic. Really good stuff.

 

Full text predictions from the rest of our gurus next week.

 

So let's get right to it, starting with Mike Regan:

 

Predictions from Mike Regan, TranzAct Technologies, on the Transportation Sector

 

2019 will be a year for shippers to regroup and recover from the Perfect Storm of 2018.

Carriers benefitted from a "sellers market" in 2018, and few shippers were prepared for the double-digit carrier rate increases that blew out freight budgets and resulted in significant unfavorable variances. It was the year freight went from the docks to the boardroom and demanded that C-Level executives finally take a keen interest in strategies to reduce their company's freight costs. As shippers move to clean up after the storm, here are some things they will be addressing:

Volatility in the Marketplace

While rates went only one direction (Up!) last year, shippers will see significant rate fluctuations in both directions in 2019. What will drive these swings? Carriers are intent on maximizing their capacity and have the data and the technology to respond to market directions and change pricing "on the fly."

For example, in the fourth quarter of 2018, there was a 20% (plus) change in spot market rates for refrigerated truckload moves. So, if they have any excess capacity, carriers will quickly lower rates; if capacity is tight, they will quickly raise their rates. But beware, capacity remains tight in general, so even small blips on the transportation radar will have a disproportionately large impact.

Visibility - The Impact of Data and Technology

In 2019, carriers will continue to improve their use of data to analyze and understand their customers. In many instances, carriers already know a shipper's freight better than the shipper. In this post-ELD and dimensionalizer (for LTL carriers) world, they know how long a shipper is utilizing their assets and the space being consumed on their trailers. Carriers (especially LTL carriers) will continue focusing on density and dimensional based pricing to improve their operating ratios. And all carriers will penalize shippers for excessive detention/demurrage as they look for capacity that provides a suitable ROI.

Shippers who live in an "Excel" world (a.k.a. shippers who manage their transportation area with Excel spreadsheets) are in for a world of hurt in 2019. The volatility in the market will reward shippers who have the technology to assess and understand what is occurring in the marketplace, the impact of their freight on carrier networks, AND have the capacity to act quickly and decisively. Shippers who have accurate and reliable data, and who understand the impact of market conditions and carrier constraints, will lower their costs by taking advantage of appropriate sourcing strategies (Hint: Focus on targeted versus global RFPs). Shippers stuck in the land of Excel or Post-It notes will be overwhelmed and harshly penalized because they lack information and the ability to change transportation practices/processes that are affecting their freight costs.

A Voice at the Table

Since freight has moved into the boardroom, CEOs will be looking for answers. Last year, more than one-third of the S&P 500's CEOs cited freight as having a drain on their profits, so expect to see more companies get serious about adopting "Shipper of Choice" initiatives and addressing the inefficiencies within their company. This means transportation professionals will finally have a seat at the table. Consequently, they will have the opportunity to have input on the sales, operational and procurement issues that drive freight costs. But here is a challenge for transportation professionals: If you are going to have a voice going forward, you'll have to understand the issues so that you can provide meaningful input and a positive contribution. In 2019, expect your C-Level executives to be ready to listen and act.


Predictions from Gene Tyndall, EVP, Tompkins International President, MonarchF

 

I am pleased again this year to offer my predictions for Supply Chains in 2019.
As with last year, I will convey my three most important predictions. For 2018, I predicted:


• More innovation and transformations, although not necessarily the right investments.
Continued amazing growth of eCommerce, with impacts all industry segments.
Expanded disruptions, due to customer demands, new technologies, and the ever-increasing "need for speed".


As a critique, these three proved to be consistent with overall strategic trends, but were not necessarily the overwhelming drivers of all tactical changes we observed this year. Too many other factors had serious impacts – the economy itself; the sociopolitical conflicts; and the "Trade Wars" -- impacted supply chains significantly.


Now, on to 2019. Following are my "Top 3" predictions:


First, the strong trend toward eCOMMERCE, with its explosive volume growth, will impact all industries even more this year. This MegaTrend impacts everything – from Business Strategy, to Operations Strategy, to Supply Chain Planning, and to Execution. Whether selling direct to consumers, or to businesses, ALL companies must transform their supply chains to achieve high levels of performance for ALL channels, or risk losses in brand recognition, market share, and/or profit.

The continued goal of "unified commerce" (Omnichannel) will intensify this year. We refer to this as "Unichannel", wherein all channels operate in an integrated way so as to present one view of the products to consumers and customers.

Included within this MEGA Trend is the fact that Fulfillment Centers – as critical points of online order processing – will not just expand; they will also be changed significantly into the enablers of new business strategies, and not just the "cost centers" of the past (someone recently referred to them as "opportunity centers"). They will become "flow centers", changing their mission and traditional inventory storage policies. eCommerce is driven by items (units) and not cases or cartons, whether for B2C or B2B channels. This means that the velocity of inventory matters, and the objective is to carry only what is needed, closer to customers, to fulfill forecasted orders over the next few weeks.

Second, TECHNOLOGY for Supply Chains will explode in both development and adoption. This is no surprise, and it must be considered as a high priority. Digitalization is here to stay as a compulsory objective. The increasingly common terms of technology – such as, artificial intelligence (AI); machine learning; robotics; Internet of Things (IOT); Digital Asset Management; smart replenishment; WES; Digital Freight Brokerage, to name a few – are becoming more commonplace in everyday supply chain discussions. For example, I noticed recently that among the "Top 10" supply chain innovations of 2018 (MH&L), 8 were technology-based.

The predominant goal for supply chains is to become, as Accenture refers to them, "Intelligent Supply Chains". This will mean more needed visibility, but even more important, more self-regulating operations that learn and adjust automatically, within the ranges allowed.

Sometimes people ask, how can supply chains cause, or provide for, "disruptive innovation"? It is one thing to innovate a common process or technology; and, it is quite another to innovate something that is disruptive and value creating. For example, "horizontal collaboration" often refers to shippers cooperating to share carriers. This is innovative, because it is unusual; but, it is hardly disruptive. Yet Amazon has shown that intelligent supply chains can be disruptive. The leaders in businesses today are those that view supply chains as profit drivers and not cost centers. Almost all true disruptors have leveraged supply chains for at least part of their value creation.

Interestingly, surveys have shown that over 20% of Retailers IT budgets for 2019 are for investments in digital transformations. This is significant, and indicates we should see more value creation technologies being adopted this year.

Third, the RELOCATION of assets, sources, distribution, flows of goods, and business processes has already begun and will intensify in 2019.

This trend has ramifications also for all industries and companies. The unpredictable global economic climate, changes in Trade Agreements, increases in cross-border orders, sociopolitical concerns, and targeting new markets will combine to change global supply chains. International Transportation and Trade will return to corporate agendas, in a different way than when China was becoming the "world's factory".

Shifts in sourcing strategies, Trade uncertainties, and continuous disruptions are causing some companies to leave China for alternatives, such as Vietnam, Indonesia, and others, but are having to deal with inadequate supply chain infrastructures. Sustainability, or ethical sourcing, is a continuing goal, yet often impacted by new sourcing locations. Relocation of sourcing in the supply base has important consequences.

The movement to Domestic Manufacturing has another relocation impact. The recent announcement by New Balance of a new advanced manufacturing facility in Massachusetts is an example of this Trend. The return of textiles production in the U.S. is another, as is the regeneration of Steel manufacturing. The need for ethical sourcing of materials and products comes with the manufacturing relocation.

And, of course, the Distribution and Fulfillment of goods is creating substantial relocations. Distribution Centers, Fulfillment Centers, the increasing needs for processing of Returns, and other facilities are changing the Logistics landscape in historical ways.

These significant relocation changes in Sourcing, Manufacturing, and Distribution, all impact total costs. This accelerates the absolute need to employ robotics and other automation, to seek optimizations all along the end-to-end supply chains, and to innovate processes and the flows of goods. 2019 will see all of these objectives on corporate agendas.


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Predictions from Dr. Chris Gopal, Consultant and Academic:

I am pleased to offer my predictions and trends for Supply Chains in 2019.
I'll restrict them to three major trends– because things are supposed to come in "threes" and, otherwise, it will get too lengthy.

The three trends listed here are more than predictions, and are anything but futuristic – they are here and now, will come to the forefront in 2019, and will continue to gain steam over the coming years.

1. People are going to be the constraining factor in the increasingly competitive and e-business driven supply chain world – people across all aspects of the end-to-end supply chain. While the shortage of fulfillment center/DC workers and truck drivers, driven mainly by e-Business, is dominating the news, it is the shortage of qualified supply chain professionals that will prove the true constraining factor. The term of the day is "talent development and management". An increasing number of universities are providing supply chain degree and certification programs but there are still too few, and many of these are mired in the past – either academically or in industry practice. As a result, universities are not meeting the needs of industry.

2019 will see an increasing number of large companies developing their own in-house programs while using specific external expertise, as well as the rise of industry-university collaboration in curriculum and course development and delivery. This collaboration includes both "traditional" and "for profit" universities, and the focus is on content, experiential learning, speed, online learning and cost.

The curriculum will include those skills necessary for supply chain success and developing the next generation of leaders – business acumen, supply chain finance, risk analysis, business analytics, global trade, management of technology and innovation, people, teams and projects, in addition to supply chain functional disciplines, leading practices and company-specific needs (for example, warehouse robotics).

Finally, companies will be focusing on the hiring and retention of good people in the supply chain. And, in this area, small and medium-sized companies need not be at a disadvantage.

2. The integration of the "Customer Experience" and the Supply Chain will be the major trend with companies, a key area for innovation. It already has a start in the Buzzword stakes – one executive told me he was thinking of the "Customer Chain." It is becoming increasingly apparent that the battleground for the consumer is about more than just price – it is the customer life cycle experience that drives revenue, incremental revenue, customer retention, brand equity and the net promoter score.

The bulk of the customer experience is driven by the supply chain – from the Ease of Doing Business (EODB), speed, perfect order and on-time delivery, inventory availability, customer communication, convenience, returns, packaging, ease of change by the customer, mobility and tracking and, of course, upfront transparency and price. Supply chains, historically driven by lowest total cost, are being designed from the "customer back", with elements as diverse as forward inventory, deployment, packaging, segmentation, shared facilities, partnerships, final mile fulfillment and advanced demand-supply management.

None of these are, of course, free, and many re being considered "costs of doing business". 2019 will also see "differentiated service offerings" directed at different customer segments, all driven by revenue and margin potential, and true costs-to-serve.

Supply Chain design, historically driven by lowest total cost, is now being driven by the customer and is "holistically" including elements as diverse as package design, final mile fulfillment, system and forward inventory deployment and transparency to customers.

3. Sourcing will be about risk and supply assurance, not just about cost and cost reduction. Traditional Sourcing and Procurement was (is?) all about sourcing at lowest cost (or total acquisition cost of the product, a concept often proposed but not always used). To this end sourcing executives analyzed industry dynamics and the competition, cost make-up of products, price trends, and emphasized negotiation, payment, INCO terms and everything else around supply and cost.

Today's (and tomorrow's) business environment has changed all that. The supply environment is dynamic and has four relatively new factors that are factored into the Sourcing and Procurement equation of today:

- Total Costs to Point of Use and the enterprise financials – including elements from logistics (and the uncertainties across all modes) and packaging, to costs of control, response and quality, and the impact on the company's financials.

- Corporate Social Responsibility mandates – such as Conflict Minerals, ILO standards and worker exploitation, GHG emissions, exploitation of the environment (for example, palm oil, rare woods) and a host of other issues. Companies need to be careful that their sourced products conform to these mandates and have the documentation to prove it.

- Global Economic Strategies and Trade Issues – such as tariffs, taxes, local, regional and national laws, anti-dumping laws, good citizenship demands, local location, jobs and value-add regulations, and pretty much anything that governments can throw out there for political, economic or nationalistic reasons. And these keep changing.

- Geo-Political Risks – closely related to the above but deserving of their own place. These include environmental and natural disasters, national security and retaliatory policies, espionage, the leakage and theft of IP, and political instability.


This means that Strategic Sourcing and Procurement managers of 2019 and beyond will have to have much more than the traditional, functional perspective, and must adopt methods and approaches to evaluate sourcing from an integrated enterprise and customer view. Leading companies are doing this already. In today's increasingly uncertain environment, this is becoming a necessity.



Hope you enjoyed these insightful predictions. Still more next week from the rest of our guru panel.

Any reaction to any of these 2019 predictions? Which did you like best and why? Let us know your thoughts at the Feedback section (email) or button below.

 

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