Last year around this time I made a lot of predictions about what 2014 would hold in store…Let’s revisit some of these, and see what has happened (or what hasn’t!) Here are my predictions from 2014, and an update on what I think will happen in these areas. Most of them really haven’t panned out yet…but have a longer time horizon than I originally anticipated..
Global supply chain footprints will continue to expand.
No question the global supply chain is still going strong. However, the global economy has certainly gone soft…with the exception of the US! While it seemed like many companies would be moving more towards the BRIC countries, global events have proven this uptake to be relatively slow. Brazil had an election that proved to be radically unpopular with the global business community, Russia has alienated itself and is hurting due to the rapid drop in the price of oil, while India and China are in a holding pattern, with tepid growth. So while globalization hasn’t gone away, people are re-thinking global supply chain outsourcing, particularly as wages and risks are both rising in global emerging countries.
As Companies Expand Globally, So Will the Level of Operational Complexity
No surprise here – many, many complexities continue to arise. With Amazon and others going to same day deliveries, the e-commerce boom is making transportation and delivery infrastructure more difficult to navigate. Everybody seems to think that digital devices will somehow reduce all this complexity. Sorry, but having my iPhone tell me my shipment isn’t going to make it in time, isn’t going to make the shipment make it in time! Physical logistics will become more and more important, which comes down to fundamental process execution, performance measurement, teamwork, and communication…in other words, back to the basics!
Increased Globalization Brings Increased Risks of Supply Disruption
Duh! I sure called this one right…Globalization linked with increasing labor costs in countries such as China, as well as fuel costs and regulatory shifts, are driving a dramatic impact on where companies source, where they produce, and the complexity of processes required to sell to the customer. The recent spate of terrorism in France, the massive and mysterious number of airplane disasters in Malaysia, and even more regulatory risks will continue to drive greater disruptions – which again means better communication, risk mitigation, and early warning systems to alert managers when there is a problem.
Regulatory Requirements Will Grow as Governments Seek to Overcome Shortfalls in Operating Revenue
The last SCRC conference again emphasized the increasing complexity of logistics regulations, protectionist policies, product regulations, compliance to customs, trade, local content issues, and security requirements. This is likely to continue. More of the same. If you aren’t thinking that “the government is part of every supply chain”, then you are in for a rude awakening. The solution? Make government relationship management an important part of your strategic planning process.
Supply Chain Technology Investments Will Continue to Escalate..and so will Master Data Management. As multiple parties across the extended global supply chain have access to the same “sheet of music”, the global supply chain orchestra will be playing their instruments and produce a masterpiece of sound. The only problem is….we need someone to establish a solid master data system so we are all in tune! This is the biggest problem I see on the horizon. Without accurate and timely data that is properly coded and classified, whatever fancy “big data” analytics are produced will be utterly meaningless.
Cost Pressures Will Continue to Escalate. This is an area many companies are continuing to attempt to navigate using “hardball negotiation” methods that focus on “tips and tricks”, as opposed to collaborative “fact-based negotiation”. An increasing number of companies I’ve been working with are making the increased investment in training to drive improved market intelligence, cost modeling, and power-leverage management, that emphasize working with supply chain partners to drive down costs, while keeping an eye on margins to make them palatable, but not excessive. All parties in the supply chain will need to have a common view to cost reduction through productivity, quality improvements, value-added activity, transportation efficiency, and working capital management.
Supply Chain Analytics Will Emerge as a Key Enabler to Performance. I’ve been most disappointed by what I’ve seen in this area. There are a few interesting providers out there, but many companies are still floundering when it comes to using analytics to envision what is happening in their supply chain. Hopefully 2015 will produce some products that work and that are interesting, and not created by techies with no knowledge of how supply chains really work…
Internal Analytics Applications Will Focus on Business Intelligence, ERP, and Product/Process Cost Data. This is the biggest opportunity I see for 2015. An NC State team worked with a major manufacturer to create a backbone cost database that establishes different types of cost data, including actual data, assumptions about the data based on prior history, and approximated data based on “best available information”. Cost modeling will be the most important of all supply chain tools and methodologies in the coming year, not only for building “cost to serve” models, but also to identify opportunities to drive collaborative cost reduction models… with supply chain partners, internal discussions with engineers, sales account managers, and purchasing category managers.
Network Analytics Applications Will Draw on Data from Partners with a Focus on Sharing Across Platforms. Lots and lots of work to do here…we continue to see many legal teams are loath to do this, but the fact is that knowledge and data sharing drives better performance….period. Understanding what is inside people’s heads and being able to share that knowledge will be one of the biggest issues at work here..
Collaborative Analytics Will Determine the Winners Information derived through collaborative sharing of information from diverse sources, sometimes pulled together from various sources, and jointly acted on will build capabilities that will be difficult, if not impossible, for competitors to copy and mimic. Again – people need to LEARN how to share insights and capture them in a meaningful way.
Community-based Analytics – analytics that are contributing to insights on sustainable supply chains and corporate social responsibility, both critical imperatives for manufacturing companies today. This is especially true for predicting disruptions in today’s globally extended supply chains.
So, my predictions in 2015 really haven’t changed much since 2014…maybe we will see some real progress on these though in the coming year!