First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  October 22, 2009  

Supply Chain 2015


As some of you may remember, earlier this year I told SCDigest readers that I had signed up to do a presentation in the fall on “The Future of Supply Chain,” and at the time offered a few preliminary thoughts and asked for some help.


Didn’t get a whole lot of help, it turns out, and of course I spent the next couple of months doing precisely nothing until it started to get towards the end of summer, when I at last started to get busy on this.


I have now delivered my “Supply Chain 2015” presentation twice, once at the Materials Handling and Logistics Conference in Park City, UT, and more recently at the Georgia Tech Supply Chain Executive Forum in Atlanta. Feedback from what I can tell has been pretty good. I am delivering the presentation again in Chicago the first week of November.


I will repeat what I said in the first column, and that is that you cannot predict the supply chain of the future independent from your predictions about the world of the future. Will oil be at $50 per barrel or $250 by 2015? Your future supply chain will look at lot different depending on the ultimate answer to that question.

Gilmore Says:

You cannot predict the supply chain of the future independent from your predictions about the world of the future.

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Ditto with global trade policies. Will “globalization” continue unabated, or will nascent protectionism and nationalism in some areas of the world gain momentum? Will a “carbon tariff” on imported goods radically change the offshoring equation?


I do not think enough companies really look at many of these key issues, and do scenario planning based on the different possibilities. You can’t change the world, but you can see how current supply chain strategies and networks might play out under different scenarios, evaluate the return from building more flexible supply chains, and develop plans in advance for how the supply chain should react depending on how things actually play out.


Another example: in my presentation, I took a simple look at what would happen if sales growth at Walmart’s US stores compounded at an annual of 6% through 2015 (it grew 6.8% in 2008, and Walmart clearly has some of its mojo back). I won’t go through the data here, but let’s just say that the cumulative growth over that period would be huge – and has to come out of someone’s else’s market share – maybe a lot of someone else’s. Will that happen? How will your supply chain change if it does? These are the questions.


As I also said earlier in the year, the first temptation is simply to predict a supply chain world that is more automated, integrated and collaborative. That’s how I started out, actually, but in the end, what does that really tell us? Clearly, this is the general direction, and I suspect will always be so. But I am not so sure that helps us out very much.


So, I forced myself to get more granular – to name 10 fairly specific things that are likely to occur by 2015. My filter was some combination of “most likely” and “most important,” though largely subjective in that regard.


With that, in very summary fashion, are the top 10:

  • A majority of companies will have reconfigured their supply chain networks: Many companies have supply chain networks developed for a different era. Fuel prices, green SCM concerns, virtualization and more will lead many to fundamentally rethink those networks over the next few years.
  • Supply chain planning and execution will start to blur: A topic we covered in detail in a major report, the need for response based on market demand and other factors is outstripping current planning cycles. Tactical and even some operational planning become completely intertwined with execution, causing changes in organizational structures, processes and technology. 
  • We see substantial drops in overall inventory levels: Inventory levels have remained flat for many years now. But the lessons of this recession - that maybe we can get by with less combined with supply chain simplification programs and new technology - really will drive step change drops in inventory levels by 2015.
  • Web-based supply chain software comes to dominate the landscape: I haven’t completely been on this bandwagon until recently, but by 2015, this is how it is going to be – which has many major implications.  More confident of this than about any other prediction on the list. Once this becomes the lead approach for almost all vendors, the shift will happen rapidly.
  • Green drives transportation collaboration: The logic of transportation collaboration and the financial benefits haven’t done it. The capacity crunch of 2005-06 almost did, but then that went away. Green will finally do the trick, and we will see much more cross company load-linking and even sharing of capacity between competitors. But does this commoditize logistics?
  • Visibility to everything, all the time: The technology is really here now to have it, and despite RFID’s current lack of direction, it will become very commonplace by 2015. Understanding what to do with this information is the real challenge. 
  • Common deployment of real-time performance management: Scorecards are rear-view looking; dashboards help you make decisions right now. A few companies have already developed these kinds of capabilities; they will be widely deployed by 2015.
  • Distribution centers will take one of two paths: Lean and un-automated (and very flexible), or automated to a level hard to imagine today. Again, something else we have written about in the past; see new Automated Case Picking (ACP) Report for more details. The robots are coming.
  • Supply chains focus turns to emerging markets: This is simply where the growth will be – perhaps explosively so. This will impact product design, pricing, logistics and much more. Those that get it right will have huge corporate advantage – as companies like Procter & Gamble smartly focus on “micro-logistics.”
  • Digitization increases impact on the physical supply chain: A tsunami wave of digitization is happening, dramatically impacting physical supply chains, often in not obvious ways. We all know that itunes is putting CD makers out of business, but that filters down to record stores and even producers of the plastic resins used to make CDs. Think the future is bright for watch and mid-level camera makers when you will have both in your cell phone? I have many more examples. Look forward on how your company – and your career – might be impacted by digitization.

That’s my list. It was fun, and as I have experienced, gets people thinking. Would welcome your comments, as always.


What do you think of Gilmore’s Supply Chain 2015 predictions? What would you add, subtract or change? Let us know your thoughts at the Feedback button below.

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