First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  August 30, 2007  

Supply Chain Megatrends

Gilmore Says:
The rise of China as an economic and supply chain force in such a rapid period of time has been nothing short of staggering.

What do you say? Send us your comments here

Note: You can now access our Supply Chain Megatrends Microsite to review each Megatrend, view video discussions, and download Executive Briefs on each Megatrend. Go to Supply Chain Megatrends.

Among the most frequent sort of generic questions I get asked from readers or at conferences is this: What do you see as the most important supply chain trends?

Sometimes this is in the context of a specific industry, which is always a bit tougher, but most often the question is posed in a general sense. What trends are really driving the supply chain strategies of companies right now.

Early this year, we offered a perspective of key supply chain trends for 2007, but those were meant to be things of more immediate impact, not necessarily “Megatrends” that were driving supply chains in the big picture. (As some may remember, the term “Megatrends” was popularized in 1988 by a book of the same name by author John Naisbitt – nothing to do with supply chain.)

So, after consulting with a few of my colleagues, I’ll take the risk of offering 10 Supply Chain and Logistics Megatrends. In this column, I’ll just give a quick summary of the first five, and cover the second five next week. Over the next six months, we’ll take on each of them in more detail. I’d love your perspective too.

There will certainly be some overlap between a few of the Megatrends, but think that is unavoidable.

In somewhat random order, here are the first five of the top ten Supply Chain Megatrends, from my perspective:

  • Alignment: Companies at multiple levels are trying to achieve better alignment within the supply chain organization, between supply and demand, between the supply chain and company strategies, etc. It’s obviously at the core of the strong activity in the area of Sales & Operations planning, for example, but much more as well.
  • Push-to-Pull: This has been around since almost the beginning of modern supply chain thinking – in fact, before – but there is no question that in the past few years, we’ve seen hundreds of companies make the development of more pull-based supply chains a major focus. “Pull-based” is the term I’ve heard Caterpillar use to discuss its supply chain transformation; Procter & Gamble embraces a “consumer-driven” supply chain initiative, while others talk about “demand-driven,” etc. Whatever you call it, it will continue to drive supply chain strategy for a long while.
  • Visibility: This has emerged in just a few years from being a vague and mostly analyst/vendor driven concept to an objective that is near the top of every company’s supply chain goals: improve visibility. It still means lots of things to different people, but it’s what’s driving RFID, is absolutely essential in the global supply chain, etc. Appears to be a journey, not a destination.
  • Virtualization: Yes, this is old news, in a sense – the outsourcing/offshoring trend has been around for a number of years. But most companies have not yet come close to fully dealing with the supply chain requirements or understanding the ramifications – many of them are negative. While a few companies such as CISCO have learned how to effectively manage a hugely virtual supply chain, it will take a new set of skills for most companies. Lately, we’ve even seen food manufacturers like Hershey shed more and more production assets and become much more virtual. Perhaps more interesting – and troubling – a growing percent of companies and industries now are responsible for adding under 25% of the total value of their products – in many cases, that percentage is in the teens. Is this good business strategy? There are some risks, to put it mildly.
  • China: This is obviously related to virtualization, but I think much, much more, and therefore worthy of being a “Megatrend” in its own right. The rise of China as an economic and supply chain force in such a rapid period of time has been nothing short of staggering. As we’ll write about soon, China is rapidly dislocating and dominating entire industries, often using the supply chain as a key element of the strategy. Corporate interest in penetrating the huge Chinese market guides many supply chain decisions. It is a huge opportunity, but there are also huge risks.

So there you have it. The second five Megatrends next week. I’d love to have your thoughts on what you see as the most important Megatrends driving the supply chain. I’ll be giving a presentation on this soon at the HighJump users conference, so maybe I will see you there.

What do you think are the key Megatrends driving the supply chain? What is your opinion of Dan’s first five picks? What would you add, subtract, or add more color to? Let us know your thoughts at the Feedback button below.

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