Two weeks ago, SCDigest editor Dan Gilmore highlighted supply chain predictions for 2017 from a number of supply chain gurus in our virtual panel. You can find that column here: Supply Chain Guru Predictions for 2017.
Then last week, we published the full text version of those predictions (see Predictions from Supply Chain Gurus for 2017 - Full Text Version Part I), and then highlights from the predictions from the other hald of our virtual panel (see The Gurus Are Back! 2017 Supply Chain Predictions II).
Supply Chain Digest Says... |
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In a digital, connected age, change is systemic with many small repercussions building over time, like placing dominoes, building to a single, catastrophic fall.
Rich Sherman |
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So that leaves just the full text predictions from the second half of our panel, which includes consultant Dr. Chris Gopal, David Schneider of David K. Schneider & Company, Art Mesher, CSCMP Disitinguished Service Award winner, former Gartner analyst and CEO of Descartes Systems, Rich Sherman of Tata Consulting, and David MacLeod of Learn Logistics Limited, a UK organization focused on supply chain education. More good stuff.
So let's get right to it, starting with Chris Gopal.
Predictions from Dr. Chris Gopal
Returning to my roots, I have bucketed what I see as three major trends and predictions for 2017 into the Process-Technology-People categories. In doing so, I am avoiding the various buzzwords such as "demand-driven" or "customer-centric", which are obvious as strategic intents but have become mired in the selling of a host of software tools and IT services.
Global trade uncertainties, national pressures, risk and source compliance will lead to increased complexity in sourcing, network design and location.
The economic world is getting less global and more national, leading to increased tariffs, trade regulations, protectionist measures, and a focus on local jobs. Three other macro factors are coming into play here:
- increasing scrutiny because of National Security concerns, the "diamond" supply chain and political-military risks
- compliance and scrutiny on the source of supply for elements such as conflict minerals and slavery/exploitation,
- the management imperative of speed of customer response, quality and availability of product, control, and the real total cost of end-to-end fulfillment.
We now have a supply chain environment where sourcing and the location of facilities (supply chain network) must consider far more than the "traditional" cost elements. This is requiring new methods and approaches - not optimization, but trade-offs. Many of the parameters will be subjective, and include quality, risks and costs of disruption, loss of IP, local jobs, public perception, the element of National Security in some cases, and, naturally, total costs - including tariffs, incentives, effective taxes paid, costs of loss of control and quality, transportation and time.
Companies will move past the "digitization" label and assess specific technologies in terms of their real supply chain benefits and costs.
2017 will be the year of the "decision and insights" technologies - answering the question: "How do we use the available data for maximum impact?"
Digitization is now a term that encompasses almost anything to do with information and technology along the end-to-end supply chain. While there are several technologies that are having a significant impact on the supply chain (the word "transformation" is often used), such as cloud computing, blockchain, machine learning and robotics/autonomous vehicles, the real story lies in the acquisition and use of "decision and insights" technologies - those that provide both an understanding of current and future supply chain performance as well as predicting the behavior of customers and suppliers.
These will include:
- reporting, dashboarding and analytics that address inventory, S&OP and costs (the "basic, bread-and-butter" analytics)
- understanding, satisfying and managing the customer - costs-to-serve, customer buying patterns and differentiated service offerings, risks,
- those tools that either enable or make supply chain decisions. - predictive analytics, cognitive computing and, yes, AI.
The key, however, to all this is data - accurate and timely data, and heterogeneous data from multiple sources.
 Talent Management is a critical issue, but the definition of talent is changing, leading to increased in-company and focused action-oriented managerial education.
We are all predicting a growing supply chain management talent shortage, and this is certainly happening. However, there are several factors that are changing the dynamics of education:
- technologies, data and automation - the "digitized" supply chain
- the necessity of interacting in a multi-national and extended supply chain
- increasing complexity and integration of the end-to-end supply chain processes
- distributed facilities and workforce
These demand more than the "technical" disciplines of warehouse management, transportation management and manufacturing assembly. While these are important, they can be learned on the job.
Companies need education in a way that makes a rapid impact on their business, that is less costly than traditional educational courses, and that creates value. This is calling for a different model of education and development - lower cost and tailored in-house executive and managerial education that can de delivered remotely, using experienced professionals, and includes specific problem-solving, design, process improvement and innovation. This will pose a significant challenge to our education system.
Predictions from David Schneider of David K. Schneider & Company
The changes in Washington DC and the resistance that comes with those changes will shape what happens to driving factors that shape the US supply chain. The new administration and majority led congress will fight to roll back and replace health care, environmental, energy and trade initiatives of the past administrations against vocal and energized opposition.
Energy Infrastructure:
Several actions underway will affect transportation cost factors, including:
1. Reauthorization of the Dakota Access Pipeline approval is not going to be a slam-dunk. While the Trump administration will reverse the federal obstacles, opponents will heighten their efforts to stop the final construction of the last segments under the Missouri river. Oppose they will, but the oil will flow, if the owners consortium of Energy Transfer Partners, Sunoco Logistics Partners, Phillips 66, Marathon and Enbridge are able to carry the required financing to complete. Opponents not only used the Federal government to attempt the stoppage of the work, they also turned to the banks who loaned money for construction, convincing DNB ASA to put leverage on the energy companies to find a different route. If the Dakota Access does come on line in 2017, some Crude by Rail volume will disappear, and fuel prices in the mid-west will drop as the landed cost of Dakota Sweet into the mid-western refineries drops.
2. Resistance from community and environmental groups against Crude by Rail shipments continues to manifest as Bakkin Crude continues to move via rail to the East Coast refineries. For the communities safety and fear are the major drivers. Railroads will look for routing alternatives that keep the CBR trains away from population centers. However, there is no perfect route. The cost to operate the trains increases, which is rolled into the landed cost of the crude into the refineries, and perhaps the costs of the refined products, depending on the commodities markets.
3. There will be another accident along the aging finished petroleum pipelines in 2017 similar to what happened to the Colonial Pipeline in 2016. In market storage of refined stocks is so thin that a disruption of more than three days will create price hikes of 25 cents or higher downstream of the failure point.
Coal demand, and production, continues to drop.
 US Corporations Prepare to Come Home:
Influenced by not only the President's bully pulpit, favorable corporate tax reform, or even a substantial change in import tariffs, US based companies start planning the move of more operations into North America. Not all will come home to the US, but many will figure out ways to play both sides of the two NAFTA borders. The corporations are already moving work from Asia to Mexico as that country places more pressure on Asian import tariffs. These manufacturers will have a voice in the negotiations that revise NAFTA - and will attempt use Mexican manufacturing to sell products to other Latin American markets using favorable tariffs for Mexican exports. We will see few factories actually move, but will see the groundwork.
More Chinese, German and French global companies acquire major American companies to obtain in-country access to the US markets. The spread will be broad as they acquire manufacturing, technology, food, retail, transport and agriculture. What we saw to date was just "getting started", and 2017 becomes a major year.
Amazon Creates an Awesome Transport Network
Amazon continues to build out its hybrid owned / operated / outsourced transportation model, building an integrated transportation system that uses all modes and methods controlled by a wicked fast and powerful optimizations system that makes decisions about how an item moves when the customer makes the purchase decision. Where it makes sense Amazon will own and operate the core backbone assets of the network, including the Fulfillment Centers and the Sortation Centers. It will control through charter airfreight systems, stopping just short of becoming its own airline. The fleet of over the road trailers grows, all hauled through dedicated and contract drop and hook line haul carriers. Final mile delivery of time sensitive and perishable executes through a dedicated fleet.
Meanwhile, An Army of Ants enters the eCommerce arena
UPS and FedEx volume grows as the rest of the eCommerce industry grows. Inexpensive shopping platforms (Shopify & Megento) integrate with accounting (QuickBooks) small WMS platforms (Fishbowl) and parcel carrier platforms to empower more small manufacturers, distributors and retailers as new eCommerce players. The new class of entrepreneurs, the new immigrants from Asia, Africa and the Middle East become importers of foods, clothes and good from their home countries to resell to fellow immigrants in micro omni-channel businesses.
Predictions from Art Mesher
Year of the 3rd dimension -
Up!
 This will be the year of the new discovery. Drones and their sourcing facilities and delivery mechanism will use space in the air to attempt to uncongest the congested. The notion of " as the drone flys" gets real along with the risks of systems failures , such as the accidents of things, crashing drones, dropped packages, or floating warehouse hildenbergs..the right of safe fair and managed passage will become evidential reality and who owns what air might really matter especially when coupled with staging real real estate (parks to decouple automous vehicles outside major commercial corridors ) … launching pads for hindelberg warehouses or schools (fish) of drones) . its not to far fetched to see a ups type van in a park with ten drones out doing delivery .
Once again the railroads realestate and the air above it (will) could be trade lanes just as railroads sold the telcoms the right to trunk along their tracks . In 2017 we will discover the inner space to outer space..
Drones and automous trucking are happening exponentially and are way more real than most people expect and I believe that is going to be come much more clear in the year to come.
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Predictions from Rich Sherman, Tata Consulting
As companies continue to transform and evolve to "digital" in 2017, the revolution spurred by digitization (transforming physical transactions and date to digital) and digitalization (integrating physical material flow paths with digital data flow paths) will intensify based on the geo-political and macroeconomic uncertainty and volatility that we will experience in 2017. Companies will have to adopt more "ecosystem" thinking based strategies as changes will not be linear. Rather, change in 2017 will be disruptive based on the repercussions that small changes have to market ecosystems. I'll be citing the disruption of the general merchandise retail market as an example.
Security, Privacy, and Data Ownership
As the commercial internet of things/everything and the social media internet collide more frequently, cyber-attacks will intensify spurning deeper security requirements and public awareness to the value of data. As the value of data becomes more apparent and people begin to realize the monetization of their personal data for analytics and personalized marketing and sales, they are going to want a share of the pie. Look to increased legislation on privacy and access/use of personal and corporate data.
 Master Data Management and Cloud Computing Are Business Discussions
With the recognition of data value, Gartner group has called data the oil of the 21st Century. In 2017, as companies are transforming to digital, master data management and harmonization are required to unlock the value of data. We will continue to see master data management increasingly move from the IT back office discussion to business owner lead discussions to strategically leverage data and improve performance. Digital is no longer optional. It is a competitive mandate.
Analytics are the Data Refineries
If data is the oil then advanced business and artificial intelligence and machine learning are the refineries that convert the data into meaningful insights. However, the progressive maturity levels in analytics are difficult to "leap". The more mature stages of analytics, e.g. predictive and prescriptive, are difficult to achieve without building a history of actions, attributes, and method to outcome. As a result, companies that fall behind in adopting digital strategies, master data management, and new segmentation and personalized market and operational initiatives may never be able to catch up. Look to the general merchandize retailers as an example of a market segment facing extinction from digital trending.
Cloud Technology Deployment and Connectivity
2017 marks the maturing of cloud solution deployments and connected commerce (mobility). The capability to rapidly deploy digital technology though hybrid implementations of existing on premise applications integrated with new cloud deployed application offers hope to companies that have fallen behind. Everyone and everything is becoming connected as commercial "apps" and cloud deployed solutions are increasingly driving a connected, shared, and "as a service" economy that will continue to disrupt markets and drive laggards to extinction. Democratized commerce may not be as far off as people may think with advances in autonomous vehicles and robotics accelerating. Again, this disruption will occur at an ecosystem level that can put entire industries, not just companies, in harm's way.
We Are Still On the Tip of the Iceberg
For many, the changes that have occurred and are occurring are still being underestimated. This comes from our traditional linear thinking that change can be resisted and a "wait and see" strategy is safest. However, in a digital, connected age, change is systemic with many small repercussions building over time, like placing dominoes, building to a single, catastrophic fall. General merchandise retailers aren't necessarily coming to a sudden end, their inevitable extinction has been building for some time. Their market has been shrinking for some time with the extinction of many "wait and see" banners. Many have been absorbed by larger chains, some are evolving to the omnichannel world, and most, while waiting like their weaker competitors did, will become extinct. Digital has created new markets and economics. To compete in the future, all industries, not just retail, have to think omnichannel, omnidirectional, and Eco-systemically to meet the challenges of 2017 and grow into 2018. Market and product segmentation based strategies, new collaborative partnership, and digital technologies are required to pick where the domino that knocks either your competitor or you will be placed. It's no longer IT and the business… it's just business.
Predictions from David MacLeod of Learn Logistics Limited
It was just over 7 years ago that I came across a paper delivered by Professor Helen Haste of Bath University here in the UK to an audience at Harvard. As an educationalist she was focusing on what she termed new competences that would be required by children to equip them for the world in the 21st century. They have influenced my thinking hugely and I believe that they show the way for supply chain practitioners in 2017.
Collectively we will simply need to be better at:
• Managing ambiguity - there are few if any easy answers to the problems and challenges we face on a daily basis. Life will not be easy and there will be contradictions. We don't just need one silver bullet but a magazine of them!
• Agency and responsibility - in a supply chain world or more correctly a network of demand chains no one achieves anything on their own. The ability to work effectively and efficiently through others whilst not having direct responsibility is critical.
• Finding and sustaining community - it is people that make a difference; they are the welds that hold supply pipelines together ensuring smooth flow and no leakage. Whilst they may never meet or speak to each other they are a vital
community that needs to be nurtured. We must all be prepared to reach out.
• Managing emotion - if ever a year proved that human beings do not always make rational decisions then 2016 was the one. Practitioners need to be able to recognise and separate these two facets of human nature; empathising with the emotional whilst sustaining the rational.
• Managing technical change - not just from the arrival of the latest gadget or system, but harnessing the power that they can unleash to improve productivity as the ever-inventive mind finds different ways of using innovation, but never forgetting that technology is only an enabler.
Much of the above could well be perceived as being rather threatening. Having said all that I remain relatively optimistic. Logistics and Supply Chain practitioners are light on their feet and punch above their weight on a daily basis. They are used to solving problems and keeping stuff on the move, but one prediction I can have real confidence in making is that they are going to have to up their game in 2017.
Hope you enjoyed these insightful predictions.
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