My Top 3 Supply Chain Predictions for 2017
February 7, 2017
By Gene Tyndall
Executive Vice President, Tompkins International
I am pleased to offer my predictions for supply chains in 2017.
To begin with, I am avoiding the obvious forecasts for the year, for example:
• The U.S. macro-economy will expand under the new President, which will be positive for most all business sectors.
• The Digital disruptions will continue, as Amazon, Uber, and other digital-based companies grow and expand into both domestic and international markets, and also into both consumer and industrial segments.
• Cloud-computing will continue to expand, and accelerate, as businesses invest more into less expensive, highly secure, and faster implementations for supply chain systems and apps.
• Customer-centricity is finally prevailing as fundamental to demand-driven supply chains, which by their nature, are more amenable to cost management and predictability than supply-driven long lead times with demand uncertainty.
• Supply chain risk management will not diminish, even as some degree on US-based manufacturing growth is achieved, as many suppliers and components remain global in locations, and risks of disruptions are everywhere.
And, several more could be cited, as again this year, there are no shortages of predictions about the economy, businesses, and the workforce.
Here are my most important “top 3” substantive predictions for supply chains, with the above forecasts serving as the backdrop:
1. Let’s start with Supply Chain Planning (SCP), which most agree creates the supply chains, or adjusts them, based on known conditions and expected sales. Despite the fact that the “art and science” of SCP has improved, and many companies are making use of advanced tools, it continues to be difficult to point to substantive results of plans.
Annual plans, for instance, are often out of date six months into them, as markets change, online order volumes expand, and customer preferences are variable. In addition, Supply Chain planners continue to struggle with integration and alignment with other strategies and plans of their companies. While Sales and Operations Planning (S&OP) processes are meant to improve this prevailing situation, there are too few solid examples of Integrated Business Planning (IBP), where all plans are driven by an enterprise-wide strategy.
Prediction: There will be further progress toward robust and implementable planning, but not widespread transformations to effective S&OP, much less an effective IBP.
Reason: this requires more than Artificial Intelligence (AI), advanced optimization, or predictive analytics. The commonly used phrase to explain good performance, “the integration of people, process, and technology”, will remain elusive for most companies.
2. Next, let’s consider the trends in digitalization. There is no question that the Digital Age is upon us; the real questions are “so what?” and “what next?”. Digital thinking and its components have only just begun to impact supply chains, whether in planning or in execution. Yet, its business disruptions are more and more evident. Digital transformations put companies into uncharted territory, which makes the design of practical planning scenarios both challenging and complex. The normal objectives of effective supply chains fast, efficient, flexible, and agile, are even more complicated to achieve in execution.
Prediction: More and more implementation of digital components, such as the Internet of Things (IoT), robotics, AI, and others, will find their way onto digital platforms that will produce impressive results. This will be especially true in Distribution Centers (DC) and in Fulfillment Centers (FC). But, creating digital supply chains requires a journey, not a project, so we will only see incremental improvements.
3. Last, let’s consider the issues surrounding supply chains in the executive suite. While the last few years have produced significant gains in getting supply chains on executive agendas, we still have a ways to go. With only 25% of companies having a designated Chief Supply Chain Officer (CSCO), we have to wonder why this surprisingly low number remains the case.
Further, we still find gaps in Operations Strategies vis-à-vis Business Strategies, which lead to problems with capabilities and missed opportunities. Even further, we still find senior leaders viewing their supply chains as “cost centers”, and thus push for continuous cost reductions, without understanding the value creation of high-performing supply chains for achieving and sustaining customer loyalties.
One of the lingering key factors for this situation is the recurring functional views vs. process views i.e., operating the company through functional managers, and not through business process leaders. Not only are opportunities lost due to terminology conflicts, but also through functional performance measures. Reducing costs by functions is less difficult than through processes (e.g. order to delivery, procure to pay, or product design to customer), but thus far less important or value-based.
Prediction: We will see gradual progress in this area, but not widespread gains. Neither Enterprise Resource Planning (ERP) systems, nor advanced business planning tools, nor granular analytics, will change management structures, company cultures, behaviors, or processes themselves, until business executives learn to appreciate the contributions of supply chains as business value drivers.
Let’s hope my predictions for continued gradual progress in these three critical areas prove to be exceeded. My previous annual predictions proved to be overly optimistic. Thus, I am suggesting for 2017 that the complexities of people (talent), processes (redesigns and culture), and technologies (digitalization, advanced analytics, AI, and others), will once again limit the transformation of supply chains as forming the most important executive business goal on the agenda.