Supply Chain Megatrends 2012 Part 2

Thursday, 31 May 2012 14:04

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2. Perfect Logistics: This level of turbo visibility will mean that for all practical purposes, companies will be able to achieve near perfect logistics. Customers will come to expect it.

3. Blurring of Planning and Execution: Visibility combined with the need for more rapid response to supply chain and market place dynamics will alter how companies look at the traditional supply chain hierarchy from strategic planning through tactical and operational planning and then on down through execution. In the end, operational planning and execution will start to become almost a single process.

4. International to Global: Despite the tremendous growth in globalization on both the supply and demand side in the past decade, many if not most companies are really national companies that do business (buy and sell) on an international basis. That model is rapidly evolving to full globalization, where companies are truly trans-national in their strategies, organization and leadership.

5. Talent Management: Companies want to maintain lean staffs (that's an understatement), but want to outthink and outperform their competition through supply chain at the same time. In the end, that will mean the need for fewer, smarter people. More companies will develop programs that identify, develop and retain the talent they have.

6. Supply Chain Finance: The next five years will see the field of supply chain finance continue to mature, and understanding how supply chain impacts the income statement, balance sheet, cash flow statement, and return on assets will become almost essential to reach upper level positions in supply chain. This will be an increasingly common area of internal supply chain training (as some do today).

Ok, now for the next six, making an even dozen megatrends:

7. Meaningful Collaboration: I have been a bit of a cynic on supply chain collaboration for a long time. Lots more talk than action and results, from my view. But I really believe this is at last changing, because many supply chain leaders are recognizing that they have not a whole lot more to squeeze out of their own operations, and must work cross-trading partner processes as the next area of improvement.

To wit: the incredible story of how Lowe's and Whirlpool are using a truly joint sales and operations planning process to drive mutual success. It isn’t two companies connecting their planning process. There is simply one joint S&OP process (they actually call it something else) between the two companies. There are other example.

A point some observers are missing here is the competitive barrier this is creating. Lowe's won’t be doing this with some other appliance manufacturer. Whirlpool has won.

8. Dashboards and Real-Time Analytics: This is a holdover of sorts from the last list of megatrends, but I have added “real-time analytics” to the description.

The term dashboard is often misused to mean “scorecard.” A scorecard is a reporting tool that presents information and insight about past performance. A dashboard is a real-time decision-support tool that helps managers make better decisions right now. Go visit GNCs distribution center in Anderson, SC to see how managers use a dashboard to close out pick waves more precisely and consistently.

Now, powerful, real-time analytics are being added to the dashboard mix. The term “big data” is a bit of an overused buzzword right now, but that doesn’t mean it isn’t important. Some of the analytic tools IBM is providing, as just one example, are very cool. All this is not unrelated to trend #3 on the blurring of planning and execution, leading to questions about the differences between these analytics and true optimization, and inevitably to when and how we just let the computers make the decisions. (Shout out to Tom Dadmun of Adtran who got me thinking the dashboard way several years ago during a presentation at an i2 user conference.)

9. Energy and Water Optimization: I am not quite willing to fully jump on the sustainability bandwagon as a megatrend, in part because it almost seems to me to be too easy/trite. But clearly, companies across the globe are and will be increasingly focused on optimizing their use of energy and water.

Coming Peak Oil and all the rest clearly will drive diesel prices higher and higher over time, putting an extra premium on reducing over the road fuel consumption both directly (a company’s own operations) and indirectly (broader supply chain). I do fully expect natural gas to have a major impact on powering freight movements over the next five years because of this.

Water, in the eyes of many, will become the “new oil” in terms of price, scarcity and supply chain impact for many manufacturers. It already a key issue for many today (see Kraft). Expect water management to be an increasing A list topic over the next few years.

10. Next-Generation Distribution Center Automation: It won’t be for everyone, but a growing number of companies, especially in the beverage and food areas, are using very advanced automation for full case picking (ACP – automated case picking) to the point where there are a number of proof points out there across a variety of technology approaches.

I believe as there is additional success in ACP, to the point where is becomes close to mainstream in those sectors, there will spill over adoption outside of beverage/food. There is also a recent resurgence of interest in AS/RS systems. All frankly in the name of significantly reducing labor costs and headaches.

These heavily automated facilities are very, very different from what we have known.

11. Integrated Supply Chain Risk Management: The rise of risk management thinking in supply chain in the past decade has been simply phenomenal. Hardly came up 10 years ago. Rise in offshoring since then started the conversation, important research on the impact of disruptions served as a catalyst for companies to pay more attention to the issue, then we had the Icelandic volcano, Japanese earthquake, and Taiwanese flooding.

So what is changing is not so much that there is now more risk management, but that all these factors are driving risk analysis and mitigation to be directly embedded into strategic and supply chain planning processes. This is new. (Thanks to the always insightful Chris Gopal for helping me restate this trend, BTW.) We will need new tools, such as David Simchi-Levi’s recent Risk Exposure Index. Is risk and cost a new trade-off curve that must be managed? I say yes.

12. Cloud-based Supply Chain Software: This is simply coming like a freight train, as I predicted a couple of years ago, to the scoff of some pundits who thought the on-demand/SaaS/Cloud model was really only well suited to certain network-centric applications such as transportation management.

That has turned out to be simply not true. Cloud-based delivery will dramatically impact not only how companies deploy supply chain software, but how they view it, evaluate, buy it, use it, and much more. A game changing shift that will probably result in some winners and losers from the current status quo.

One thing I can say with almost certainty is that the next time I do these megatrends in a few years this won’t be on the list, because the war will be nearly over by that point. Huge ramifications.

OK, that's my list. More detail on each throughout the year.

What's your take on Gilmore's dozen Megatrends for 2012? What would you add or subtract? Let us know your thoughts at the Feedback button below.

Source: http://www.scdigest.com/ASSETS/FIRSTTHOUGHTS/12-05-31.php?CID=5896