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Supply Chain Guru Predictions for 2010: Full Comments

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  • 1. SUPPLY CHAIN TRENDS AND ISSUES F or the third straight year, SCDigest Editor Dan Gilmore Supply asked a number of Supply Chain pundits to make predictions for what is going to happen in supply Chain Guru chain and logistics management in 2010. Gilmore summarized the Predictions highlights of those predictions last week in his First Thoughts for 2010: column, which can be found here: Supply Chain Guru predictions for 2010. As promised, below you Full will find each contributors full comments. Comments Art Mesher CEO Descartes Systems Group 2010 will be the first year in what I am calling the "new era of selective SCDigest Editorial Staff specialization.” Last decade we saw the proliferation supply chain theory in 1991, I of microprocessors, handheld GPS have mapped the convergences technologies and network presence. and identified the congruence of the trends - the Ven diagram in- Using Darwin’s law we mapped these tersection of these trends. and defined what we saw in the last half the decade - the beginning of This next spawned the conver- "the internet of things" or as I de- gence of business process out- scribed it in 2004, “resources in mo- sourcing (BPO) models, consult- tion.” ing services, SaaS models and freight networks. We will enter a As I forecast in 1997, The Y2K dec- new era where new supply ade also birthed the beginnings of the chains companies and flows will software as a service (SaaS) model. be born and engineered as these new SaaS-based BPO companies So now things can be scanned and intermediate highly specialized read while in motion, and supply collaborations within and be- chain software systems are now seen tween supply chains. as continuous versus being a one SAPs, Accentures and UPSs of time lifetime purchase. So using Dar- There are very cool, highly spe- the world will begin to discover win’s law again and the same tools I cialized companies emerging as that the worl d of the have employed since I began charting we speak in reverse logistic, health care, food logistics. The Supply Chain Digest February 2, 2010 1 www.scdigest.com Copyright 2010
  • 2. SUPPLY CHAIN TRENDS AND ISSUES "commanding generalist" has come hunters. under attack by the “subordinating specialist.” While most firms are good at getting rid of the really bad per- Darwin said we can't see evolution at formers, they have a worse track once because it happens in too small record for growing and retaining and insignificant steps. So 2010 will the top tier. This can lead to an be the year that it is all the same ... organization with a lot of middle- While it’s all changing. ground or B-players – not the best team for future success. When the individual and sparse Dr. Chris Caplice “green shoots” in the economy Executive Director coalesce into a forest, you can expect a massive top-talent flight MIT Center for Transporta- from companies (or business tion and Logistics units) that have not nurtured their star performers. This talent supply chain management func- flight might be a good early indi- The most obvious prediction for 2010 tions is quickly changing. Not cator for the recovery! is that the level of uncertainty in the paying attention to professional financial markets, commodity prices, development during a downturn This is especially difficult for sup- consumer demand, and virtually will lead to defections of the best ply chain management functions every other facet of the economy that people in your organization dur- because the required skills have supply chain managers are concerned ing the recovery. qui ckl y and d r a m a t i c al l y with will only increase. Greater un- changed. The growing uncer- certainty makes all aspects of a sup- Job satisfaction drops during a tainty in all areas coupled with ply chain manager’s job more diffi- recession for a couple reasons. If increased level of supply chain cult. It increases the need for more there are layoffs, the remaining sophistication now requires a flexible and sophisticated forecasting employees tend to suffer from higher level of analytical exper- methods, contractual arrangements, survivors guilt. While they are tise. The broadening of supply operational models, sourcing strate- glad to still have a job, they have chains in most firms from an in- gies, etc. But the biggest challenge the added stress of seeing their ternal-function to a cross-firm that firms and supply chain managers peers and co-workers let go. Ad- focus has raised the importance will face in 2010 is talent manage- ditionally, as we all know, the of soft leadership skills, as well. ment – ensuring that they recruit and amount of work does not de- The ability to influence people retain the right people who possess crease after a layoff, so the re- and organizations that do not the right skills. maining employees have to do directly report to you (e.g., sup- more with less. This is usually pliers and customers) is one of On the surface, the idea that em- reflected in increased productiv- the critical keys to success in ployee retention during a recession is ity of firms (higher output with supply chains today. a challenge sounds ridiculous. No one less input, i.e., employees) com- voluntarily quits in an economic ing out of recessions. The source of future innovation downturn, right? Most companies are lies at the boundaries and inter- dramatically reducing their headcount With a tighter organizational section of firms within a supply – some more strategically than oth- chart there are usually less short chain. The ability to coordinate, ers. So, why with all these other chal- -term upward opportunities for influence, and shape these far lenges that supply chain managers promotion. While all of these flung relations will determine face should they spend precious factors will not necessarily lead how successful supply chains will bandwidth on talent management? to people voluntarily leaving dur- be in the future. This is a big ing the recession, you can rest change over the older set of hier- The short answer is that job satisfac- assured that there is a lot of archical leadership skills that tion tends to decline during reces- dusting off of resumes and get- were required within a more “silo sions and the set of skills needed in ting reacquainting calls to head- Supply Chain Digest February 2, 2010 2 www.scdigest.com Copyright 2010
  • 3. SUPPLY CHAIN TRENDS AND ISSUES -ed” operation. While such cross-integration challenges remain, organizations In 2010, then, I predict that the will face continued pressure to economy will improve, demand will harmonize supply chain opera- rise, and companies will face in- tions within a function (e.g., pro- creased costs (and scarcer supply) of curement consolidation or enter- most commodities and inputs to their prise-level transportation man- operations. But the biggest input agement) and squeeze out fur- scarcity they will face will be their top ther efficiency improvements supply chain talent. from existing deployments (e.g., spend analytics driving sourcing improvements or extending a Gopikrishnan G.R. warehouse management solution Delivery Manager and Head, to support multiple warehouses/ fulfillment models). Supply Chain Management, Enterprise Solutions Among customer-facing applica- Infosys Technologies tions, I believe that e-commerce will continue to get priority, with there will be a business case for businesses emphasizing im- ensuring productivity enhance- As the lead for a practice primarily proved search engine optimiza- ments within core supply chain involved in technology-enabling tion, search ans browse features, functions and lowering Selling, global supply chains, my big bet for catalog management and hassle- General, and Administrative the IT dimension of supply chain free order taking. We are finally (SG&A) costs. Mobile, Fleet, IT, management (SCM) this year would reaching an era of “true multi- Operational Assets, Plants, Real be improved customer experience, channel commerce” in retail Sup- Estate, etc. will all be up for con- both for internal end-users and exter- ply Chain Chains. The three or solidation with work order man- nal end-customers. Supply Chains four disparate channels retailers agement integrating with up- have gained prominence after the had nurtured in isolation are now stream functions of procurement downturn, with managers broadly fo- sharing customer information, and inventory management. cusing on two aspects: product information and impor- tantly inventory information and The usual supply chain suspects (1) Improving efficiencies in the back fulfillment rules. Also going for- would continue to get focus – -end supply chain to reduce costs ward, multi-channel operations inventory visibility, supply- will encapsulate multi-channel demand matching and supplier (2) Enhancing end-customer experi- integration programs. I am also collaboration, to name three. To ence by augmenting the front-end eagerly watching the accelerating tackle global inventory visibility, supply chain. trend of platform or SaaS-based organizations are going to gun offerings moving from the typical for better views into supplier, in- At the back-end, SCM continues to be back-office functions of finance, transit and on-hand inventories plagued with cross-functional integra- procurement, HR and so on to to improve fulfillment percent- tion challenges. Within Supply more core functions like Order ages and reduce holding costs. Chains, this inhibits leveraging cross- Capture, Order Management and In the coming year, replenish- functional workflows to drive broader Transportation Management. ment planning will aim to provide business objectives. The roadblocks improved supply-demand match- are in organization structures and I also anticipate continued asset ing by looking at broader supply lack of shared KPIs, which is why consolidation of capital invest- picture and embracing better Supply Chain Event Management ments deployed across the sup- forecasting techniques. Supplier (SCEM), in spite of huge potential ply chain. Green Asset Manage- collaboration would prosper be- never lived up to its hype, beyond ment is certainly going to bestow yond three and four-way match- confining to alerts and monitors of brand equity vis-à-vis Corporate ing or PO portals to include im- individual applications. Social Responsibility (CSR) proved order updates upstream themes; equally importantly, Supply Chain Digest February 2, 2010 3 www.scdigest.com Copyright 2010
  • 4. SUPPLY CHAIN TRENDS AND ISSUES in the supply chains (date changes, Hub Group, Geodis, Fiege, Nip- partial deliveries, substitutions etc pon Express, Sinotrans, TDG, done systemically). It will also pro- Logwin, Toll Holdings, UTiW, APL, vide near-real time updates until the CAT, Con-wayMenlo, Wincanton, goods reach their destination, be it a Stobart, Ryder, and many oth- buyer distribution center or a 3PL ers. warehouse or the end-customer. Beyond these function-level invest- Dwight Klappich ments, I expect to see increased tai- Vice President loring of supply chains this year due to mergers and divestitures, global Gartner forays of corporations and most im- portantly, the shifting balance-of- In the preliminary analysis of the power among various supply chain data from the annual Gartner- eco-system constituents . This would SCDigest supply chain survey just completed, we find one very undeniably put stress on IT applica- tions for seamless alignment with at lower levels with some new interesting trend: As the econ- businesses needing to reconfigure bidding invitation package. omy recovers, it appears that themselves on a continuous basis to what many companies plan to do So what won't happen during is to make investments that changing partner dynamics. New sup- plier-contract-item combinations on 2010, but surely will at some frankly allow them to return to the buy-side and complex fulfillment point, is the creating of growth without having to add a options moving towards “buy- "Alliances of truckload carriers," lot more people. anywhere, return-anywhere, fulfill- in which they will band together, from-anywhere” philosophy on the formally or informally, so to col- sell-side are two typical examples laborate (legally, that is) on that would trigger rip & rewire initia- much needed market, lane den- tives in the supply chains and conse- sity, shipping and delivery sched- quently, their underlying IT. ules, and pricing issues. Better times beckon in 2010 – the When correctly properly pre- year of recovery. Keeping these sup- sented by well prepared TL ply chain trends in view will help po- trucker alliances, the audience of sition companies capitalize on resur- the Dept. of Justice, Congres- gent opportunities, cut costs, satisfy sional committees, and other customers and drive revenue. trade governing bodies will be unable to voice substantive ob- jections. When thus properly or- Companies are looking to in- ganized, these truckload trucker crease the productivity of the Thom Williams alliances, together with much- people they already have. The AmherstAlphaAdvisors need mergers and consolidations switch is from pure cost cutting (most likely, all post 2010) will in 2009 to cost avoidance The present trucking industry re- continue to change not just basic through productivity gains in mains as much a broken model, one North American TL trucking but, 2010. which cries out for industry leader- even more so, contract logistics ship, the absence of which is now and 3PL activities, worldwide. clearly evident as so many SaaS, Jim Barnes subscription-based, and other soft- Implicated there, of course, are ware providers continue to sponsor President DHL, K+N, DB Schenker, Ceva, webinars that, I believe effectively, DSV, Agility, CHRW, EXPD, Pan- EnVista try convince shippers that freight alpina, Hellman, JBHT, Schneider transportation is a commodity, in- I have organized my predictions National, Pacer International, stantly replaceable and “re-priceable” Supply Chain Digest February 2, 2010 4 www.scdigest.com Copyright 2010
  • 5. SUPPLY CHAIN TRENDS AND ISSUES along several key themes. specifically retailers reduced capital expenditures or cut off Technology Platform versus spending on Supply Chain-centric Suites: projects. I believe we are going to see ad- The trend for 2010 and beyond is for ditional fall out (companies going supply chain centric software technol- out of business) or significant ogy firms will continue to developing consolidation in the space. 4th their solutions on a single platform Quarter software sales are up. which runs on one technology stack Numerous material handling ven- with one data model. Supply Chain dors and third-party integrators Planning and Execution centric soft- revenues have been reduced by ware vendors will adopt Enterprise as much as 50%. for companies to look for low Resource Planning (ERP) work flow cost country manufacturing and and user personalization with com- Green is Real and Here to sourcing. China has been the mon business objects. Meaning there Stay: dominant player as the low cost is only one item master, purchase country for manufacturing for the order, sales order etc, this minimizes Supply chain centric organiza- last 20 years; however, Vietnam, master data integrity issues and en- tions (manufactures and/or Dis- South Korea and Taiwan are sures that ALL supply chain manage- tributors) in the near future will emerging as low cost country ri- ment personnel are using the same need to build environmental sus- vals. data. Data integrity is king when try- tainable global supply chains. ing to develop multiple reports, The trend for most companies is In 2010, US-based companies dashboards or queries across an or- that it is “cool” to be Green and with domestic supply chains will ganizations enterprise and supply many companies don’t see being continue to evaluate cost reduc- chain. Having a common business GREEN a competitive differenti- tion programs that are focused objects that are shared across appli- ator, hence they are not invest- on reducing fixed and variable cations is mission critical to drive the ing in reducing their carbon foot- warehousing cost, inventory and lowest total cost of ownership. print. However, supply chain transportation. centric organizations will not In addition common business objects have a choice as global policy Although LEAN is used widely for are shared between applications makers develop local, state, manufacturing centric compa- (functionality) allowing for either si- country and global laws. After nies, distribution and purchasing multaneous optimization or common spending the last nine months in centric companies have NOT yet work flow. An example would be opti- Europe the US is behind when it caught on to the concept of mizing PO order consolidation for an comes to GREEN initiatives. LEAN. LEAN thinking is not part inbound load plan and sharing that European companies are consis- of a distribution centric com- consolidation with the WMS. Having tently looking at means to reduce pany’s mindset. It is unfortunate one PO table within the data base their carbon foot print output, but true that many executives that is used by both the WMS and specifically in the area end con- are not making LEAN a corporate TMS with shared business objects al- sumer packaging and packaging wide initiative and hence not a lows for improved work flow through used for shipments. top priority within their company. out a company’s supply chain. I meet very few executive that Simple: less is more. can explain basic LEAN princi- Strong Survive and the Weak Die: ples. Globalization, Low Cost Coun- 2009 has been a dismal year for Sup- try Outsourcing, Domestic Although the 3PL market was hit ply Chain Projects. Our economic Outsourcing …Focused on extremely hard, companies will meltdown between late 2008 through Cost Reduction. continue to evaluate domestic 2009 has impacted the vast array of and global 3PLs to manage their services, equipment, consultants and There has been an on-going network. We believe that compa- software providers. Companies and trend and the trend will continue Supply Chain Digest February 2, 2010 5 www.scdigest.com Copyright 2010
  • 6. SUPPLY CHAIN TRENDS AND ISSUES nies now have a renewed focused on what their core competencies are and Their attributes often include a are evaluating ways to clean up both competitive attitude and an un- their P&L and balance sheets by off- relenting work ethic. Generation loading asset-based services to third Xers, born between 1965-1981, parties. are the newest leaders to rise within the ranks of organizations Global Talent and are often recognized by a no - nonsense approach to business There is a serious shortage of supply and a comfortable attitude to- chain professionals that have a global ward change. Millennials, born knowledge and hence it makes ex- between 1982-2003, are the tremely difficult for companies to out- newest members of the work- source to low cost countries when place and are often recognized their talent pool lacks skills, experi- by their technical prowess and ence and knowledge to conduct busi- exceptional team spirit. This ness outside the US. Unfortunately cross-generational workforce most American’s have not traveled brings enormous opportunity for outside the US let alone worked in a every company ready and willing foreign country. Not to mention that to take advantage. many Americans are not bi-lingual compared to EMEA and APAC re- With healthier lifestyles and sources, which does create a barrier longer life expectancies, employ- at times when conducting business. ees will continue to be actively engaged in the workforce longer. Most business around the world is With multiple generations ac- conducted in English, but we Ameri- tively engaged in the workforce, cans lack and understanding of the the generational divide is not just cultural and societal differences a passing fad. Specific genera- within a country. The mindset is what tions and their general attributes is good in the US must be good for will change over time of course, you is quite common. US universities as older generations retire and must create and develop international newer generations enter the la- programs that require students to live bor force, but the differences be- abroad and speak fluently another tween them will only continue. language (2 or 3). Which of our guru predictions The Generation Gap did you find the most inter- esting, insightful, or likely? The generation gap in today’s work What are your predictions for force is getting wider and companies the year? Let us know your that recognize the gap can capitalize thoughts at the Feedback on what motivates each generation. button below. Baby Boomers, born between 1944- 1964, hold most leadership positions within companies today. Supply Chain Digest February 2, 2010 6 www.scdigest.com Copyright 2010