First Thoughts
  By Dan Gilmore - Editor-in-Chief  
     
   
  Feb. 6, 2014  
     
 

2014 Supply Chain Predictions Part 2 - the Analysts

 
 

Last week, we summarized predictions from a number of supply gurus, and then as promised earlier this week provided the full test comments of each prognosticator in our On-Target newsletter– those are very interesting, so please take a look: 2014 Full Text Supply Chain Predictions.

This week, I am going to summarize some predictions from leading supply chain analyst firms, and then briefly add a few of my own for 2014.

Same deal again: next week we'll have more detailed predictions from these analyst in On-Target.

Gilmore Says:

There are just so many barriers to moving away from transaction-based pricing and traditional service level agreements with 3PLs that getting to a more collaborative and value-based approach is just very difficult in practice, Gartner says.


Click Here to See
Reader Feedback


The smart guys and gals at Gartner once again made a set of predictions for global logistics. As usual, they are not really predictions for 2014, but more trends over the next 2-3 years.

Gartner says, for example, that "Through 2018, 75% of companies will struggle to realize their end-to-end supply chain visibility visions due to deployment challenges."

That one surprised me a bit, as it seems to me most large, global companies are making slow but steady progress in visibility, and to have already achieved far deeper levels of visibility than they had five years ago.

Additionally, I learned we have a new three er I mean six-character acronym from Gartner: E2ESCV. That stands for "end-to-end supply chain visibility." We'll see if that one gains much traction. Regardless, Gartner says E2ESVC is about providing "controlled access and transparency to accurate, timely and complete events and data - transactions, content and relevant supply chain information."

Sounds like a good thing, I guess. There are a number of software and logistics service vendors out there promising something of the exact same sort.

The problem, Garter says, is that "There is a discrepancy between what is offered in the market (the "provider view") and what is actually implemented at end-user organizations, providing visibility to their extended value chains (the "user view")."

Add to that the fact that almost all visibility solutions are in effect in functional silos: logistics, manufacturing, procurement, etc., and the challenges of building end-to-end become apparent.

In the end, companies should "have a broad vision, but proceed incrementally with prioritized visibility initiatives," Gartner advices. Yes, that is just the way you have to do it.

On another note, while bullish on concepts like performance-based logistics or "vested outsourcing" between shippers and 3PLs, Gartner does not think these approaches are likely to take off any time soon. It writes that "By 2017, less than 20% of logistics outsourcing engagements will operate using value-based relationship principles."

"While the popularity of value-based logistics outsourcing is on the rise, early attempts to create these unique types of relationships are being met with significant challenges within the buying organizations, in particular within the procurement and legal organizations," Garter says, adding that fewer than 10% of logistics outsourcing relationships are currently based on value-based contracts.

There are just so many barriers to moving away from transaction-based pricing and traditional service level agreements with 3PLs that getting to a more collaborative and value-based approach is just very difficult in practice, Gartner says - even if a shipper recognizes the potential benefits.

Do you agree? More on this soon from SCDigest.

The analysts over at IDC Manufacturing Insights offered two sets of predictions, one for general supply chain and another specific to manufacturing, though the supply chains predictions have a strong manufacturing orientation too.

On the supply chain side, IDC says that in 2014 "The need to be faster will require companies to explore more deeply integrated supply chain planning - and fulfillment functions."

What is interesting to me here is that IDC says the imperative for reducing or eliminating siloed planning efforts isn't so much cost reduction but rather increasing supply chain speed and improving response times.

What's more, IDC says market and competitive realities will force companies to more closely integrate fulfilment execution into the supply chain planning process, something I agree with completely. Most diagrams of supply chain planning processes don't even show execution. That means "throw it over the wall," which just doesn't cut it today. It's about integrated planning and execution.

IDC also says the "demand driven" paradigm will be forced on companies well outside the consumer goods sector, where the idea was first developed, if those firms want to remain competitive.

Key to that will be adoption of "demand sensing" and "demand capture" (POS data) by more industrial types of manufacturers, basically arguing that current channel structures are often barriers for companies to get closer to the customer.

That is by no means a new idea, but manufacturers have struggled to find a way around these barriers without ticking off the channels. Will the need to improve their supply chains at last breakdown these obstacles? We'll see.

In terms of manufacturing specifically, IDC predicts that "Operational resiliency will be the focus of supply chain strategies in 2014 and beyond," adding that "Strategically, in 2013, many manufacturers began the process of determining the 'what' [of operational resiliency]; and we expect manufacturers in 2014 to begin to consider the 'how' and the 'when.'"

In turn, operational resiliency has its underpinnings "in the extreme granularity of data (both upstream and downstream), the increasing need for "accurate" speed in the supply chain, and operational visibility into supply and demand."

I am generally in agreement with this view, but the concept of operational resiliency is still a bit vague, in my view, and the definition probably varies dramatically amongst different companies. Defining the ROI for investments in resiliency is often not easy.

Also on manufacturing, IDC predicts that "On the way toward the factory of the future, 2014 will set the stage for a new manufacturing renaissance."

After a decade or more of relative inattention to manufacturing in many companies and countries, the focus has thankfully returned, IDC says, noting that in the US manufacturing has been a bright spot in the otherwise tepid recovery, and the signs of reshoring strategies continue on.

IDC says that nations "will fiercely compete to develop and attract high-end manufacturing capabilities in industries such as aerospace, industrial machinery and equipment, semiconductors, specialty chemicals, and pharmaceutical."

It adds that manufacturers will get more global in their manufacturing perspectives, and "standardize production processes across their networks of factories and create better visibility, coordination, and orchestration" on a global basis.

This is happening for sure. A local rather than global orientation will kill a manufacturer today.

Forrester Research doesn't really cover supply chain anymore, but it's big in ecommerce, and it says that in 2014 there will be an "inevitable rise in shipping charges" for on-line orders, as etailers fight for profitability. We'll have to see on that one too, as competition may not allow it.

Ok in the limited space left, here are a few predictions for 2014 from yours truly:

• 2014 will be an inflection point in the trajectory of natural gas-based trucks in the US, with a large number of new shippers and carriers joining Lowes, UPS, Saddlecreek Logistics and others in making major commitments to nat gas vehicles. This is where we're headed, with or without government support.

• Growth in developing economies will continue to slow for now, causing multi-national companies some real heartburn relative to strategies that are heavily dependent on emerging market growth.

• 3D printing will make major strides beyond what many observers see, as they do not perceive the direct relevance of "Moore's Law" to this digital technology (me largely ripping off comments I heard from well-known inventor Ray Kurtzweil in 2013).

• Conflict between China and various Asian countries over territorial disputes in the Pacific ocean will expand, perhaps to the point of brinkmanship, and force Western companies and countries to rethink current dependence on China sourcing and hopes for revenue growth there. This situation will be exacerbated by what will be a continued slowdown in China's economy, and maybe even a "hard fall" resulting from its looming debt crisis in 2014-15.

• Cloud-based delivery of supply chain software will continue to gain share this year, on its way to becoming the dominant delivery method by the end of 2015.

We're now done with for 2014 predictions – would love to hear yours.

Any reaction to our 2014 analyst predictions? Have any predictions of your own you can share? Let us know your thoughts at the Feedback button or section below.

 
 
     
  Send an Email  
.