SUPPLY CHAIN RESOURCE COOPERATIVE

Well we made it through 2012, and it actually turned out to be a reasonably good year, in terms of supply chain news and events.  There were a few disasters of course, but this now seems to be a commonplace theme for global supply chain planners  (the world’s logisics network are impacted at least once or twice a year by major disasters).  This year the East Coast of the US was hammered by Hurricane Sandy, causing billions of dollars in damage.  Oddly enough, this may wind up as a boost to the US economy, as the cleanup efforts (if approved by Congress) will create a few new jobs..Meanwhile, we narrowly averted another major disaster this past week, when ILU dock workers up and down the East Coast reached an agreement with port operators, calling off a major strike that would have shut down retailers and other importers/exporters.

But what about 2013 – what can we expect?

In drafting these predictions, I’ve relied on some early results from our recently completed BVL Logistics Future Trends and Strategies.   The survey results provide some early clues as to what supply chain managers can expect in 2013.

Network Forces

  • Customer demand for customized logistics solutions will increase. This is a phenomenon that is a consumer-driven phenomenon, as consumers demand more from retailers and e-commerce providers, who are then passing on these requirements back down the supply chain to LSP,  manufacturers, energy providers, suppliers, commodity traders, and mining/oil and gas.  The same thing occurs in healthcare:  as hospital providers struggle to deal with healthcare reform, they will put more pressure on medical device and wholesalers for cost savings, lower working capital, and delivery, which will rippled down the entire healthcare supply chain.  Logistics service providers are being pressured to provide more and more customer-specific delivery solutions to meet a variety of customer demands.  E-commerce is also driving increasing fragmentation of supply chain networks, further complicating the job of logistics providers to meet these needs.  In effect, customers want it “my way”, and are willing to switch brands and suppliers on short notice if they find someone offering a “better deal”.  Companies must have high quality, low cost, flexible supply chain capabilities that also provide sustainable low-carbon footprint solutions to keep customers satisfied!  My prediction in 2013 – Organizations will heavily invest in their network optimization capabilities, supply chain talent hires,  investment in new visibility technology, and  and build greater global process governance capabilities that support these outcomes.  This will entail a set of major supply chain transformation efforts that will kick off this year.
  • Organizations will find themselves increasingly part of a networked economy.  Those who win in these competitive times are those that can best manage relationships with other enterprises both horizontally and vertically in the network.  As customer expectations continue to put more pressure for customized solutions on the network, enterprises in the supply chain are finding that their destiny is increasingly intertwined with others in the network.  The old “arms-length” model of negotiating and competing with others in the vertical and horizontal network no longer works.  Instead, companies are learning that they must collaborate to survive.  Product manufacturing and service delivery are no longer stand-alone capabilities, but are increasingly bundled into a single set of capabilities demanded by customers.  As companies cannot be “all things to all people”, they must find new ways of working with not just customers and suppliers, but in some cases, other competitors as well!   My prediction is that 2013 will bring with it announcements of major alliances, partnerships, and joint ventures between organizations that have complementary capabilities, providing a unique advantage in the marketplace.
  • Cost pressure is and will continue to be not just “alive and well”, but indeed will be ruthless and relentless!  Don’t mean to scare you here, but let’s face it:  customers “want it all” – products delivered to any location in the world, perfect delivery in a shrinking window,  product innovation, and most of all – a low price!  Both industrial customers and individual consumers are no longer willing to pay a premium for services, particularly logistics tracking and visibility capabilities.  The expectation is that online websites, brand manufacturers, and service providers will collaborate with Logistics Service Providers to provide complete visibility as part of their product and service offering.  Other forces driving cost pressure if being driven by government regulations, low-cost country imports, and new forms of global competition.  In 2013, my prediction is that not everybody will pass this bar, and we may see some well-known brand names fall by the wayside as they are unable to eke out margins in this hyper-competitive environment.

External Forces:

  • Globalization into the BRIC and other regions will continue to ratchet up the complexity and make supply chains more difficult to manage.  As companies continue to expand their global footprint, global networks are fraught with complexity due to government regulatory forces, channel fragmentation, and poor logistics infrastructure.  This occurs as organizations venture into new countries with new regulations, clogged roads, bridges and ports, and a confusing array of government regulations that hold up shipments at borders.  But be sure that this will also occur in major Western cities, as government regulations restrict deliveries, push clean air mandates, and force limits on working hours and driving times.  (I’m not saying all these things are bad  - just that they make a logistician’s life more complicated!)  All of these components will continue to escalate, and our prediction is that they will get only worse in 2013.  Also, get ready for any number of supply chain disruptions anywhere along your supply chain.  This could be in the form of hurricanes, labor unions, floods, or you name it.  It is no longer a matter of IF such disruptions will occur but WHEN and WHERE.  Companies need to be agile, responsive, and able to deal with different situations as they arise, or they’re not going to survive.  Customers don’t want excuses, they want execution.  My prediction in 2013 is that there will be at least one or two major government shut-downs, union strikes, major storms, or earthquakes that will shut down major supply chains.  Another prediction is that for some companies, these events will be handled well, with almost no impact on customer service or delivery performance.  Because some companies have invested more than others in risk mitigation and scenario planning, their response will simply be better.
  • One of the most critical concerns in 2013 and beyond for global organizations is the impending talent shortage in global supply chains.  This will occur not just in manual processes (truck drivers, warehouse workers, material handling, expediting), but also in managerial capability (buyers, planners, analysts, schedulers, warehouse supervisors, and distribution managers).  Supply chains cannot operate without people, yet organizations are recognizing that they face critical shortfalls in the number of unfilled job requirements and the shortage is growing with every day.  My prediction:   be on the look out for a major push by organizations in trade schools, universities, community colleges, as well as through social and print media.  This is good news if you’re a graduating senior or MBA student coming out on the job market this year, or if you are thinking of “testing the waters” in the employment market.  This may or may not result in a major reduction in unemployment however, because logistics and supply chain still hasn’t made it to the “big time” in terms of career interests for most people.  A  career in supply chain isn’t as interesting or appealing, as say, marketing or real estate (both areas that are flooded with talent).  But this could be the year when the profession turns the corner…
  1. Volatility of the ecosystem is the “new normal” – and don’t expect 2013 to be calm and peaceful.  In effect, major shifts in customer demand, ordering patterns, government regulations, new competitors, substitute products, short product life cycles, new mobile and social media technologies, and shortened network redesign cycles are driving continuous and massive change.  It seems as if enterprise transformation is now a continuous event, as organizations are continuously adapting and re-inventing their operating model in the face of continuous global change.  The speed and scale of this change is unparalleled in the history of the world.  My prediction:  2013 will be a year of big up cycles in some sectors (Logistics Service Providers, healthcare, analytics software), as well as big down cycles in others (Retail)  and a lot of both highs and lows in others (pharmaceuticals, oil and gas, energy).  I also predict that some incredible new supply chain innovations will be released on network redesign technology, supply chain analytics, disruption scenario planning, and other areas that will help organizations to cope with this uncertainty.
But don’t bet on these predictions.  Because in the end, the only certainty is that supply chain events will be completely unpredictable in 2013.

 

5 Responses

  1. Glen

    January 2, 2013 @ 5:02 pm

    Hurricane Sandy was a great surprise for the U.S. It’s amazing how much of an impact it had. United A/C & Refrigeration

  2. Carl

    January 29, 2013 @ 7:08 am

    Great article, I think these predictions for 2013 will be mostly true, especially the globailization into the BRIC countries even though China is the only country with a above 5% increase in GDP.

    Cheers

    Carl
    Oplas Transport Consultants

Continuing the Discussion

  1. Handfield's Supply Chain Predictions for 2013 | Supply Chain View ... | Logisticsforum | Scoop.it

    January 1, 2013 @ 8:20 pm

    [...] Well we made it through 2012, and it actually turned out to be a reasonably good year, in terms of supply chain news and events. There were a few disasters of.  [...]

  2. Handfield's Supply Chain Predictions for 2013 | Global Supply Chain Management | Scoop.it

    January 3, 2013 @ 8:58 pm

    [...] Well we made it through 2012, and it actually turned out to be a reasonably good year, in terms of supply chain news and events. There were a few disasters of course, but this now seems to be a commonplace theme for global supply chain planners (the world’s logisics network are impacted at least once or twice a year by major disasters).  [...]

  3. Handfield's Supply Chain Predictions for 2013 | Supply chain News and trends | Scoop.it

    April 2, 2013 @ 4:15 pm

    [...] Well we made it through 2012, and it actually turned out to be a reasonably good year, in terms of supply chain news and events. There were a few disasters of course, but this now seems to be a commonplace theme for global supply chain planners (the world’s logisics network are impacted at least once or twice a year by major disasters).  [...]



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