First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  September 6 , 2007  

Supply Chain Megatrends, Part 2

Gilmore Says:
Everywhere I go, companies are moving Lean thinking and Lean initiatives from the factory floor to the broader supply chain.

What do you say? Send us your comments here

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

What are the “Megatrends” driving supply chains today?

Last week, I offered five of my ten Supply Chain and Logistics Megatrends (See Part 1). For those that missed it, those first five (in summary form) were:

1. Focus on Alignment: Between supply chain and the business, between supply and demand, etc.
2. Push-to-pull: Getting more “demand-driven”
3. Visibility: It’s on the top of most supply chain agendas these days
4. Virtualization: Not just offshoring/outsourcing, but also, in part, a long-term risky move in which the company adds less and less of the total product value
5. China: Worthy of a trend all by itself, China is changing the global supply chain and competitive landscape

I will now suggest the next five.

6. Centralization: Everywhere, companies are centralizing supply chain operations and functions. In fact, one could argue that the “integrated supply chain” practically requires a level of centralization to best manage the entire process and the inevitable trade-offs that must be navigated. As a subset, companies continue to centralize transportation, procurement, etc. – in part because the technology now makes it much easier to do so. Can you ever go back?

7. Performance Management: More than ever, companies are really using metrics to drive supply chain performance, and an increasingly sophisticated set of electronic scorecards and “dashboards” to monitor and report on performance. Obviously related to the Alignment trend, leading companies are trying to develop clear “line-of-site” between corporate and high level supply chain goals and individual metrics. The “people” part of the equation.

8. Lean Supply Chains: Everywhere I go, companies are moving Lean thinking and Lean initiatives from the factory floor to the broader supply chain. Sometimes, they are combined with Six Sigma to become Lean Six Sigma programs – 3M is a good example of the latter strategy. In part, this trend is being driven by the relentless cost reduction focus that finds so many companies in its grip, rightly or wrongly.  But if your company isn’t looking to Lean now, it will be soon.

9. Risk Management: In the face of many infamous supply chain disruptions (e.g. Milliken’s only factory capable of producing a proprietary carpet fiber burning to the ground in 1995), and widely read research from Georgia Tech’s Vinod Singhal showing the long-term impact of supply chain disruptions on shareholder value, a growing number of companies are more formally focusing on managing and reducing supply chain risk. Supply chain risk has become a boardroom level concern (ask Mattel), and supply chain leaders are doing sophisticated scenario analysis to better understand their risk potential. As Nokia just decided, single sourcing of key components is rapidly vanishing as a strategy.

10. Sensory Networks: From RFID to “motes,” companies are building out infrastructure to track goods and assets in near real-time. This “internet of things” will involve auto id (e.g. RFID), Global Positioning Systems, wireless and other technologies, but the end game is knowing where everything you have is all the time. We have not fully considered all the implications, challenges and benefits of this. Gartner has called it “instrumenting the supply chain.”

 So there you have it. What else almost made the list?

  • The Green Supply Chain: Clearly it’s a big deal right now, but is it a Megatrend? It’s too early to say so yet – there may be some faddish components here. But we’re watching closely.
  • Cost Reduction Imperative: As mentioned above, everywhere I go supply chain execs are under relentless pressure to decrease costs to stay competitive and maybe more importantly to meet Wall Street expectations. Maybe this is beyond a Megatrend – a “Permatrend?” But it seems worse to me than ever before.
  • Distribution Automation: We’re early here, but I believe you will see a huge move in the U.S. to automate additional parts of the distribution process. Why? Labor costs and headaches simply continue to rise. Combined with new technology developments, and this will be a very hot area for the next decade.

So there you have the complete list. I would really welcome your comments and feedback as always.

What do you think are the key Megatrends driving the supply chain? What is your opinion of Dan’s 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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