Monday, February 24, 2014

Top 10 Supply Chain trends in next 10 years

While surfing for trends in Supply Chain, I came across this article  by an expert and I decided to shed some light on it and share my thoughts on it. I agree with some of author's view and disagree with some. But I hope this stimulates you to think and generates a healthy discussion in the future.

1. Service chains will become more important than product chains

With the emergence of a large portfolio of industries in most of industries, the author believes pre-sales and post-sales services will be the differentiating factors for an organization's success. I agree with this point of view, as I believe an efficient supply chain system, although enabled by a good product design is executed by good services. Looking at any business activity as a process enables one to apply business process modelling and optimization techniques. After all, essentially even in a manufacturing process, a group of workers are serving another internal/external group. Thus, a company like Dell or Apple after having shipped their product focus more on customer service to retain them in this age of intense competition.

2. Companies will need to fully report supply chain externalities

The author defines supply chain externalities as the impact of a company's supply chain on the society. With the increase awareness of global warming and emphasis on reducing carbon footprint, it will be no sooner that regulatory bodies make companies financially accountable for their harmful effects. So we can expect a 10K type of annual report showing these externalities. The economic downturn has also led to an increase in unemployment. Companies may leverage this in the name of Corporate Social Responsibility (CSR) and show many jobs they are creating (whether they are actually do it or not is debatable). Reporting such information will also be helpful from the shareholders' perspective as it is an indicator of the company's sustainability and cost structure.

3. Supply chains must be designed to serve the "base of the pyramid"

This is an obvious one. With the rise of the BRIC economies and the rise of the middle income group population companies need to be more cost effective so that they can sell their products at the same price without falling prey to inflation.

4. Knowledge work and workers will become global in nature

The author says complex analytics, planning, procurement processing and provision of services will be off-shored and cites examples of Brazil, Philippines and Singapore. I disagree here, I believe this already globalized and is not a new trend. On the contrary, as seen in other articles, it is becoming expensive to offshore activities to these centers and cost advantage is diminishing rapidly. So I believe there may be a reverse trend here - US companies will do stop off-shoring some of the activities to simplify their business and also align themselves with Government's agenda of generating more employment.

5. SCM will have a standard certification process similar to that for CPAs

I don't believe that standardization of knowledge is that important in the Supply Chain domain like in Accounting. Supply Chain can be best learnt with an out-of-the box ability and a drive to seek continuous improvement. Standardizing the learning will make it boring. May be if trend #2 is realized, then we may need standardized reporting.

6. Product clock-speeds will determine the number and nature of the supply chains

The author believes products with shorter life cycle are becoming the norm. So a company that produces products with varied life cycles needs to have a supply chains that can cater all of them. Since the shorter ones will be more dominant, companies must look to adjust their supply chain to cater these primarily and also make them agile enough to accommodate the shorter life cycles.

7. Micro segmentation will be key to success

No two customers will have the exact same needs. Thus customization is the new standard. We have seen with "Blank Label" how companies that offer customization to their micro customer segments succeeds. On a larger scale, detailed market analysis of these micro segments needs to be done and appropriately the supply chain must be altered or designed. Having said that, iPhone doesn't provide any customization as far as its product features are concerned but is still highly successful due to good marketing (at times hoarding) despite strong competition from the highly customizable Android. Even though, I agree with the author, how far the customization trend goes is something to watch out for.

8. Technology to support SCM will primarily be "on-tap"

This trend is more due to the technological shift to cloud computing and how software is delivered and used than anything related to supply chain. I believe not only supply chain but all other domains like Finance, Marketing, Human Resources etc. will be reshaped.

9. Leaders will leverage social media in a closed loop feedback process

Yes, BIG data is big and social media gives you a lot of insightful customer feedback that enables you build corporate strategies that also affect supply chain systems. The three Vs of BIG data - Volume, Velocity and Variety are the important factors of such analytics. BUT, the fourth V - Veracity is the most important of them. First and foremost, there has to be a metric to measure the truthfulness and reliability of all the fancy analytics being done. The following video shows you why the veracity of social media data is questionable.

This is the reason why companies still rely heavily on their own data and Enterprise Data Warehouses will never be extinct.

10. Artificial Intelligence will be embedded in mainstream supply chain activities

This one will be interesting. Will self-learning robots replace the workers in Toyota Production System - after all the way they work currently is like robots but keep learning. If technology can introduce that level of learning in robots, then we will see Toyota hire more computer hardware programmers than automobile hardware personnel.

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