Happy New Year – 12 thoughts on supply chain for 2012

Supply Chain Top 12 predictions for 2012: I published this on my corporate blog, click here, but wanted share on the Thinking Frog as well, Happy New Year!

  1. Planning is dead – Long live planning! You must have planning to establish your goals and allocation of resources, however you need to have better respond and reaction to have greater execution. The promises that advanced planning brought to the supply chain space in the 1990s was unfortunately an empty dream (event today, the best supply chain plans yield less than 50% accuracy). While the advances in planning brought the industry some remarkable promises it also proved how difficult it was to predict the future by simply relying on historical data. Having said that, without going through the planning exercise, businesses and their supply chains cannot determine an end goal and some path to get them there. So planning is not dead, but we need to use it for the purpose it serves – setting the end goals and giving the direction in which to head.
  2. Supply chains will continue to require wide elasticity – more will move on shore while more will shift parts off shore and all will willfully give up control over different aspects of their supply chains. Many of us have read Thomas Freidmans famous book – The World Is Flat – the basic premise of the book is that with technological improvements and in particular telecommunications, our planet has become “flat.” When you are going through the McDonald’s drive through in Chicago the person on the other end of the microphone could be in Vietnam or sitting in Montana. The flatness of the world has been felt in supply chain for a while – we source in all corners of the world, chase low cost manufacturing, distribute to clients in emerging markets and find and train new labor in any market we can access. Supply chains have realized that the race to the bottom with regards to cost is not necessarily the best course of action. For that reason supply chains have sometimes sacrificed low cost for being closer to their customers – for example manufacturers moving their plants for low cost centers in Asia to Mexico or Latin America to reduce the time from production to shelf for their North American market. 2012 will continue to see this as companies weigh the savings in a low cost strategy with the ability to get product to market faster. In addition, a number of these “low cost” countries have themselves become the end client. The supply chains will have to continue to demonstrate a level of bidirectional elasticity necessary to address the both the wide reach of production as well as the growing mix of customers.
  3. Companies will look to shift their supplier strategy, but fail – companies will remain tied to specific suppliers and find shifting to be difficult. The tsunami in Japan the flooding in Thailand, these natural occurrences have given the world a string of wake up calls when it comes to the sensitivity and risk exposure certain supply chains have when reliant upon a small number of vendors, some of which are located in volatile environments. Here is the problem – finding and on boarding new suppliers remains daunting. Developing relationships, business and overall trust does not happen over night. While companies will look to avert risk and try and take out volatility from their supply chains, their ability to do so will remain a challenge. There will be a lot of heat around multiple vendor sourcing, but the ability to truly minimize this risk will remain a moving target.
  4. Predictive time horizons will shorten – supply chains will look to add some short window predictive analytics for real time event processing. Business Intelligence solutions promised the ability to take data, analyze it, understand correlations and provide the user with a deeper understanding of what cause and effect were within their business. That is nice, but hindsight is 20/20. Of course I can tell you from a historic perspective why you did not meet your customers’ SLA or why you stocked out of a certain inventory. With the maturation of such technologies as the cloud and improvement in applications, we are moving to an ability to render short window predictively to the process. Supply chains will demand the ability to constantly look over a short time horizon with real-time analytics, allowing them to better understand how events are affecting their business…right now.  Now the ability to do a deeper post-mortem remains important, the ability to understand in the now how events will impact your business will play a prominent role in enterprises ability to succeed.
  5. Centralized command and control will find a home in supply chain – supply chains will continue to seek a centralized system of command and control. Unlike nation-states, who have moved away from Marxism and centralized economic policy, supply chains would like to have a true form of centralized command and control. This will remain a challenge as many supply chains still leverage a number of siloed systems and instances of the same “software,” yet with the evolution in technology we are constantly moving closer to an ability to seamlessly view what is happening across the supply chain network and do something about events that impact the supply chain. This will also require supply chains to find a way to encourage collaboration amongst all the disparate parts that comprise the process, but at least the technologies to make this a reality are themselves a reality.
  6. Large brand names will become the conductors of the supply chain – rather than actually touch the product, large brands will just orchestrate all the moving parts that comprise their supply chain. Follow the model of Apple, how much of the product do they actually “touch.” Very little. Yet they are able to produce world-beating products. Keeping all the moving parts in harmony is no small feat, but being able to master this is what makes Apple who they are. Companies will continue to gravitate towards this, even in some cases looking to outsource the management of the supply chain itself.  Which leads to the following point.
  7. Logistic providers will seek to be the information and management hub – they will be looked upon by their clients to do more with the information they have. This is not new I realize, logistic firms have sought to be the data brokers for their customers already, but this will take on a greater role moving forward. Logistics providers will be seen as the perfect outsourcer for the supply chain, they should be able to see all the movements of inventory at every stage of the supply chain, open up more data (within the factory walls, at the DC or the store shelf) and you have an entity that has the opportunity to run the supply chain process.
  8. Finance will continue to increase in their involvement in supply chain. It is not surprise that the CFO’s office has become increasingly interested in the day-to-day activities of the supply chain or operations departments. Why? Because at its core those departments are manipulating and managing inventory or better said – working capital. In many cases they have their foot on the accelerator, and the brake, that controls the velocity of free cash flows. While I am not sure we will see supply chain departments migrate completely underneath the financial organization, the joint work between the two will only intensify.
  9. Discrete manufacturers will tackle the service side of the supply chain – to further clear out carrying costs as well as leverage service as a competitive advantage. More and more we are seeing companies, especially in high technology manufacturers who recognize the importance of better managing their services. It is more than simple spare parts management, while that remains an integral component. The way to truly maximize the opportunity is the ability to manage inventory, human capital all the while orchestrating the service level agreements you have with your client base. Smart companies will continue to push the knowledge they gain from this end of their supply chain all the way back to the beginning – the planning side. High Tech and other leading edge discrete manufacturers will look to tie in their PLM and development systems with information gleaned from the services. But the first task will be giving the service side of the business the attention it deserves to become a profit center rather than a cost center.
  10. We will be able to tackle the “C-A” in “P-D-C-A”(PDCA stands for Plan, Do, Check, Act) – first I believe that we should expand the “Check” into two categories one about checking and one about correlation – not just checking the progress but correlating the impacts on the supply chain.  However the ability to tackle the checking and acting simultaneously will become more of a reality in 2012. Forrester Research authored a piece earlier this year talking about the need to bring visibility coupled with the ability to act on supply chain events as vital to the success for enterprises and their extended supply chains. The combination of greater access to computing, always on, unobtrusive technology add-ons and an acceptance by businesses into this capability make it the perfect storm.
  11. Greater usage of unstructured data, think of social media will act as one of your leading indicators. Much like what AMR Research coined a few years ago – the Demand Driven Supply Chain will creep closer to reality as supply chains leverage increased access to unstructured data coupled with their existing understanding of how to maximize information from structured data. This combination will allow companies such as Best Buy to monitor in real time and anticipate which products will sell, allowing demand to drive their supply chain. The obvious first movers will be retail and CPG companies, but others like Dell and Verizon will continue to leverage these signals to manage the service side of their supply chain. Even life science companies will gravitate to usage of unstructured data as they can look to anticipate where flu breakouts or colds or rashes of sun burn will rise through unstructured data mining. Of course this will only increase the wave of Big Data that will only continue to grow.
  12. Finally, that iPad, iPhone, Droid or even yes Blackberry are not just for Angry Bird, eMail and Netflix but will integrate into supply chain. We are all mobile now, whether you choose to embrace it or not. A September report from Forrester Research states that over 50% of all workers today are working either at multiple locations or only remotely. This spills over into the supply chain space.  Mobility will impact supply chains in two ways. First the growth of tablets and smartphones will make the number of nodes where decisions can be made and executed that much greater. The person loading a truck at the receiving dock can instantly update via a tablet, the factory worker can monitor the through put of her assembly line via a smart phone, the person doing inventory in the hospital will be able to scan with an QR code reader from their smart phone and the list goes on. Second, the explosion of mobility will add to the glut of data that can be had. Whether it is communicating directly with clients or positional data, the rise of mobile devices will continue to

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