What won't happen during 2010, but surely will at some point, is the creating of "Alliances of truckload carriers," in which they will band together, formally or informally, so to collaborate (legally, that is) on much needed market, lane density, shipping and delivery schedules, and pricing issues.
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For the third straight year, SCDigest Editor Dan Gilmore asked a number of Supply Chain pundits to make predictions for what is going to happen in supply chain and logistics management in 2010. Gilmore summarized the highlights of those predictions last week in his First Thoughts column, which can be found here: Supply Chain Guru predictions for 2010. As promised, below you will find each contributor's full comments.
Dr. Chris Caplice
MIT Center for Transportation and Logistics
The most obvious prediction for 2010 is that the level of uncertainty in the financial markets, commodity prices, consumer demand, and virtually every other facet of the economy that supply chain managers are concerned with will only increase. Greater uncertainty makes all aspects of a supply chain manager’s job more difficult. It increases the need for more flexible and sophisticated forecasting methods, contractual arrangements, operational models, sourcing strategies, etc. But the biggest challenge that firms and supply chain managers will face in 2010 is talent management – ensuring that they recruit and retain the right people who possess the right skills.
On the surface, the idea that employee retention during a recession is a challenge sounds ridiculous. No one voluntarily quits in an economic downturn, right? Most companies are dramatically reducing their headcount – some more strategically than others. So, why with all these other challenges that supply chain managers face should they spend precious bandwidth on talent management?
The short answer is that job satisfaction tends to decline during recessions and the set of skills needed in supply chain management functions is quickly changing. Not paying attention to professional development during a downturn will lead to defections of the best people in your organization during the recovery.
Job satisfaction drops during a recession for a couple reasons. If there are layoffs, the remaining employees tend to suffer from survivors guilt. While they are glad to still have a job, they have the added stress of seeing their peers and co-workers let go. Additionally, as we all know, the amount of work does not decrease after a layoff, so the remaining employees have to do more with less. This is usually reflected in increased productivity of firms (higher output with less input, i.e., employees) coming out of recessions.
With a tighter organizational chart there are usually less short-term upward opportunities for promotion. While all of these factors will not necessarily lead to people voluntarily leaving during the recession, you can rest assured that there is a lot of dusting off of resumes and getting reacquainting calls to headhunters.
While most firms are good at getting rid of the really bad performers, they have a worse track record for growing and retaining the top tier. This can lead to an organization with a lot of middle-ground or B-players – not the best team for future success. When the individual and sparse “green shoots” in the economy coalesce into a forest, you can expect a massive top-talent flight from companies (or business units) that have not nurtured their star performers. This talent flight might be a good early indicator for the recovery!
This is especially difficult for supply chain management functions because the required skills have quickly and dramatically changed. The growing uncertainty in all areas coupled with increased level of supply chain sophistication now requires a higher level of analytical expertise. The broadening of supply chains in most firms from an internal-function to a cross-firm focus has raised the importance of soft leadership skills, as well. The ability to influence people and organizations that do not directly report to you (e.g., suppliers and customers) is one of the critical keys to success in supply chains today.
The source of future innovation lies at the boundaries and intersection of firms within a supply chain. The ability to coordinate, influence, and shape these far flung relations will determine how successful supply chains will be in the future. This is a big change over the older set of hierarchical leadership skills that were required within a more “silo-ed” operation.
In 2010, then, I predict that the economy will improve, demand will rise, and companies will face increased costs (and scarcer supply) of most commodities and inputs to their operations. But the biggest input scarcity they will face will be their top supply chain talent.
Descartes Systems Group
2010 will be the first year in what I am calling the "new era of selective specialization.”
Last decade we saw the proliferation of microprocessors, handheld GPS technologies and network presence.
Using Darwin’s law we mapped these and defined what we saw in the last half the decade - the beginning of "the internet of things" or as I described it in 2004, “resources in motion.”
As I forecast in 1997, The Y2K decade also birthed the beginnings of the software as a service (Saas) model.
So now things can be scanned and read while in motion, and supply chain software systems are now seen as continuous versus being a one time lifetime purchase. So using Darwin’s law again and the same tools I have employed since I began charting supply chain theory in 1991, I have mapped the convergences and identified the congruence of the trends - the Ven diagram intersection of these trends.
This next spawned the convergence of business process outsourcing (BPO) models, consulting services, SaaS models and freight networks. We will enter a new era where new supply chains companies and flows will be born and engineered as these new SaaS-based BPO companies intermediate highly specialized collaborations within and between supply chains.
There are very cool, highly specialized companies emerging as we speak in reverse logistic, health care, food logistics. The SAPs, Accentures and UPSs of the world will begin to discover that the world of the "commanding generalist" has come under attack by the “subordinating specialist.”
Darwin said we can't see evolution at once because it happens in too small and insignificant steps. So 2010 will be the year that it is all the same ... While it’s all changing.
Delivery Manager and Head, Supply Chain Management, Enterprise Solutions
As the lead for a practice primarily involved in technology-enabling global supply chains, my big bet for the IT dimension of supply chain management (SCM) this year would be improved customer experience, both for internal end-users and external end-customers. Supply Chains have gained prominence after the downturn, with managers broadly focusing on two aspects:
(1) Improving efficiencies in the back-end supply chain to reduce costs
(2) Enhancing end-customer experience by augmenting the front-end supply chain.
At the back-end, SCM continues to be plagued with cross-functional integration challenges. Within Supply Chains, this inhibits leveraging cross-functional workflows to drive broader business objectives. The roadblocks are in organization structures and lack of shared KPIs, which is why Supply Chain Event Management (SCEM), in spite of huge potential never lived up to its hype, beyond confining to alerts and monitors of individual applications.
While such cross-integration challenges remain, organizations will face continued pressure to harmonize supply chain operations within a function (e.g., procurement consolidation or enterprise-level transportation management) and squeeze out further efficiency improvements from existing deployments (e.g., spend analytics driving sourcing improvements or extending a warehouse management solution to support multiple warehouses/fulfillment models).
Among customer-facing applications, I believe that e-commerce will continue to get priority, with businesses emphasizing improved search engine optimization, search and browse features, catalog management and hassle-free order taking. We are finally reaching an era of “true multi-channel commerce” in retail Supply Chain Chains. The three or four disparate channels retailers had nurtured in isolation are now sharing customer information, product information and importantly inventory information and fulfillment rules. Also going forward, multi-channel operations will encapsulate multi-channel integration programs. I am also eagerly watching the accelerating trend of platform or SaaS-based offerings moving from the typical back-office functions of finance, procurement, HR and so on to more core functions like Order Capture, Order Management and Transportation Management.
I also anticipate continued asset consolidation of capital investments deployed across the supply chain. Green Asset Management is certainly going to bestow brand equity vis-à-vis Corporate Social Responsibility (CSR) themes; equally importantly, there will be a business case for ensuring productivity enhancements within core supply chain functions and lowering Selling, General, and Administrative (SG&A) costs. Mobile, Fleet, IT, Operational Assets, Plants, Real Estate, etc. will all be up for consolidation with work order management integrating with upstream functions of procurement and inventory management.
The usual supply chain suspects would continue to get focus – inventory visibility, supply-demand matching and supplier collaboration, to name three. To tackle global inventory visibility, organizations are going to gun for better views into supplier, in-transit and on-hand inventories to improve fulfillment percentages and reduce holding costs. In the coming year, replenishment planning will aim to provide improved supply-demand matching by looking at broader supply picture and embracing better forecasting techniques. Supplier collaboration would prosper beyond three and four-way matching or PO portals to include improved order updates upstream in the supply chains (date changes, partial deliveries, substitutions etc done systemically). It will also provide near-real time updates until the goods reach their destination, be it a buyer distribution center or a 3PL warehouse or the end-customer.
Beyond these function-level investments, I expect to see increased tailoring of supply chains this year due to mergers and divestitures, global forays of corporations and most importantly, the shifting balance-of-power among various supply chain eco-system constituents . This would undeniably put stress on IT applications for seamless alignment with businesses needing to reconfigure themselves on a continuous basis to changing partner dynamics. New supplier-contract-item combinations on the buy-side and complex fulfillment options moving towards “buy-anywhere, return-anywhere, fulfill-from-anywhere” philosophy on the sell-side are two typical examples that would trigger rip & rewire initiatives in the supply chains and consequently, their underlying IT.
Better times beckon in 2010 – the year of recovery. Keeping these supply chain trends in view will help position companies capitalize on resurgent opportunities, cut costs, satisfy customers and drive revenue.
(Supply Chain Trends and Issues Article - Continued Below)