Tuesday, February 19, 2013

Drivers of Supply Chain Change

During last week’s lecture, we talked about the forces and trends that could impact future supply chain. The same CapGemini report on future supply chains divides these drivers of change into two main types: External forces, those that are outside the control of the industry and Industry trends, things that can be controlled to a certain extent by the industry.[1]

External Forces Impacting Supply Chains

The emergence of new markets in Brazil, Russia, India, China and Korea could skew supply and demand to these countries. This could eventually impact the amount of goods imported by these countries from the global market, making them influential players in the global supply chain. Also, as natural resources become scarcer, manufacturers will have to shift their focus on sustainability. With declining supplies of raw materials, energy could get more and more expensive, forcing companies to adopt ecologically responsible solutions. In addition to new markets and sustainability, supply chains could also be impacted by urbanization of the world’s population. According to Capgemini’s projections, over 50% of the world’s population will be urban by 2010—this will significantly change customer demands for goods. As the world’s population migrates to urban areas, their dependence on technology will also increase. Supply chains will have to incorporate these technological advances to accommodate market demands. Lastly, as supply chains become global, regulations could be passed at the national, state and even international level to increase social responsibility and ensure that resources are being used economically.[2]

Industry Trends Impacting Supply Chain

Unlike external forces, the industry can control some trends that affect future supply chains. For instance, consumer behavior will become more demanding. As consumers’ needs and expectations from different products increase, product developers will have to find innovate ways to address these needs. Increasing consumer demand will lead to increased product flow, especially because of the increasing urban population. This could strain supply chain transportation, forcing the industry to rethink how products will be distributed. Finally, these changes in consumer demand and product flow will increase supply chain complexity. With more players joining the supply chain network and increased use of technology, the industry will have to switch to transparent information sharing to increase efficiency. By collaborating with different stakeholders in the supply chain, the industry can improve service to consumers.[3]

To address external and industry trends, companies will have to share information with other members of the supply chain. This could take away from companies’ competitive advantage—can the industry balance collaboration and competition? Also, increasing complexity of supply chains will force companies to adopt innovative methods—in such cases, should companies be transparent about their supply chain management methods? Can they still maintain their competitive advantage?

[1] 2016: Future Supply Chain, Global Commerce Initiative, Capgemini, p.12, May 2008.
[2] Capgemini, p. 13.
[3] Capgemini, p.14. 

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