Recently Adrian Gonzalez penned an article about supply chain trends. ["What Are Your Top 10 Supply Chain Trends?" Logistics Viewpoints, 10 July 2013] The inspiration for Gonzalez' article was a presentation given by Tom Linton, Chief Procurement and Supply Chain Officer at Flextronics, at the Crossroads 2013: Supply Chain as Future Enabler conference at MIT earlier this year. The presentation was entitled A Vision of Supply Chain Evolution. During that presentation, Linton offered his top 10 list of supply chain trends. Since we have crossed the hump for 2013, I thought it might be interesting to compare Linton's list with some of the predictions made about the supply chain at the end of last year. First, let's look at Linton's list as summarized by Gonzalez, with added commentary about some of the predictions made last year. I'm drawing on a 4-part series I wrote entitled The Future of Supply Chain Management (Part 1, Part 2, Part 3, Part 4) for those predictions.
#10: Cloud Computing: Low cost and reliable cloud solutions for global supply chains are starting to emerge; “apps” will transform supply chains.
Last year, Gonzalez predicted that "big data, social media, cloud computing, and mobile technologies will continue to dominate the headlines and that user interfaces for supply chain apps would get a social makeover. Those predictions have certainly proven to be true. Of all of the topics mentioned by Gonzalez, big data and mobile technologies have probably garnered the most attention.
#9: Business Process Convergence: Instead of automating inefficient processes, companies will eliminate them — e.g., replace inter-company business documents such as purchase orders with sense-and-response systems; companies will more seamlessly integrate inter-company functions.
Last year, Kerry McCracken, vice president of business solutions for the Integrated Network Solutions Segment of Flextronics, predicted that companies are going to get wiser in the area of business-to-business electronic commerce. They have to, she insists, because so many "industry giants" currently find themselves "lagging in the area." She stated, "Some folks can't even figure out how to set up an order electronically." She lamented that some "companies are still struggling to embrace the possibilities offered by modern technology." McCracken believed that many young companies were in a better position than large ones because they are more agile and not overburdened with legacy infrastructure.
#8: Global Labor Costs Equalize: Labor arbitrage is in decline as labor costs in Mexico match China's, and India, Ukraine, and Indonesia become more cost competitive.
McCracken asserted that the business world should "expect a 'rearranging of the deck chairs' by companies moving production around the globe to take advantage of the lowest-cost sources." As labor costs equalize, one would expect to see less, not more, rearranging of deck chairs.
#7: Raw Material Scarcity is driving innovation in materials, with companies replacing copper with aluminum, gold with copper, and steel with resin in certain cases. Companies will also need to better manage conflict minerals and rare earth metals.
The National Intelligence Council believes that resource scarcity is going to be a major shaper of the future. Analysts at KPMG agree. In a report published early last year, KPMG analysts identified "ten sustainability megaforces that will impact each and every business over the next 20 years." Resource scarcity was among the sustainability megaforces they discussed.
#6: Skill Specialization: New supply chain skills will emerge, such as managing supply chains in the cloud, and undergraduate and MBA programs will become more specialized.
Gonzalez predicted there would be "more programs and partnerships to address the talent shortage problem." This may be one of Gonzalez' safest predictions. A number of supply chain analysts, including Lora Cecere, have lamented that not enough is being done to attract, train, and retrain talented people. For more on that subject, see my post entitled More Supply Chain Talent Needed.
#5: Regional & Local Sourcing will expand and supply ecosystems will emerge as economies grow; "Made in USA" and "locally-sourced" will drive sourcing.
#4: Emergence of Control Towers as supply chains become more virtual (few or no factories). Supply chain winners will have a global footprint and be transparent, reliable, and flexible.
For more on this topic, read my post entitled Have You Heard about Supply Chain Control Towers? Control towers are all about transparency and connectivity. As a result, they play an important role in Linton's #1 trend non-zero supply chains (see below).
#3: Predictable Unpredictability: Predictability becomes a competitive advantage; supply chains break through barriers to become faster, more cost efficient, and safer.
Supply chain analyst Bob Ferrari agrees. Last year he stated, "The world economy continues to provide an environment of high uncertainty and 2013 will undoubtedly provide more reinforcement."
#2: Corporate Social Responsibility Becomes Fundamental: It won't be an option any more, policies expand globally, emerging country laws catch up, and foreign corporations will follow global norms.
Last year, Mark Buck, a global supply chain and procurement leader with Bio-Rad Laboratories, predicted that we would "see producers taking greater responsibility for launching and complying with green initiatives." Gonzalez predicted "increased adoption of alternative fuel vehicles." I anticipate that the trend towards sustainability will not only continue but accelerate.
#1: "Non-Zero" Supply Chains Win: In other words, supply chains focused on greater collaboration between everyone in the ecosystem will win. This will result in end-to-end supply chain solutions that will create new value for customers.
Some of the predictions made by pundits at the end of 2012 weren't covered by Linton, including:
Craig Cuffie, vice president of supply chain and chief procurement officer with Clearwire Communications, predicted that "Cyber-security will be a growing concern in the coming year." Cuffie was right in both anticipated and surprising ways. Earlier this year, there was a lot of discussion about hacking being pursued by the Chinese military. More recently, leaks by Eric Snowden concerning NSA monitoring has grabbed a lot of attention.
Digital Path to Purchase
Devin Fidler, research director of the Technology Horizons Program, predicted that "within five to 10 years, the internet will become more of a tool for 'disrupting commerce.'" Robert J. Bowman, managing editor of SupplyChainBrain explained what Fidler meant: "Businesses will address the 'last-mile' problem by routing more product directly to customers. Even the U.S. Postal Service is getting into the act, with the introduction of same-day delivery in select cities."
Buck predicted the coming year would be an economist's nightmare, "a stagflation kind of year." Bowman explained: "The battle between the Obama Administration and Republicans over the federal budget, tax policy and the self-created 'fiscal cliff' will have a dampening effect on the economy. Prices will flatten or decline. 'No one's going to be investing cash,' Buck said. 'You're going to see things start to crumble. Maybe things will start to price up at the end of the year.'" Things haven't gone quite as badly as Buck feared, but the term stagflation is probably still a good descriptor.
Craig Cuffie, vice president of supply chain and chief procurement officer with Clearwire Communications predicted that there would only be "a 'limited' amount of re-shoring of manufacturing from China back to the U.S." It's fair to say that reshoring has been limited.
Fidler predicted that "robotics will play a huge role in transforming physical distribution, especially in the warehouse. ... [He] likened this moment in history to the transition from the Arpanet to the internet." Frankly, I'm surprised that this didn't make Linton's top ten list.
Jim Miller, vice president of worldwide operations with Google, predicted that increased use of additive manufacturing (or 3D printing) would change the business landscape. Bowman expanded: "Miller cited the science of 3D printing, in which digital technology makes possible the layering of materials to create solid, three-dimensional objects. Applications include circuit boards, apparel, medical equipment, automotive, engineering and construction. The implications are huge for manufacturers, who could turn out precisely tailored products for customers in extremely small production runs – even one or two items. The technology's full impact might not be felt in the next three to five years, said Miller, 'but there’s more evidence that 3D printers are going to [be] a pretty disruptive force.'"
All in all there appear to be few surprises when it comes to supply chain trends. Most of the trends that have emerged over the past several years are gaining momentum. Companies that haven't adjusted to these trends (believing that they are simply passing fads) should reconsider their positions.