What trends will affect the next generation of supply chains? That’s a question more and more SCM professionals are asking themselves. The 10 trends offered here are validated with executive input from senior executives across different industries.
- Service chains will become more important than product chains. In many if not most business sectors today, great product is considered to be the table stakes just to play the game. Increasingly, discerning consumers are demanding more from pre- and post-sales service for the goods they buy.
Accordingly, companies that effectively couple the pre- and post-sales service supply chain activities (including product knowledge, in-store service, warranties, responsive consumer services, and the like) will emerge as the winners over their solely product-centric competitors.
That message was underscored by Apple CEO Tim Cook in his recent apology to consumers in China for the company’s perceived failure to listen to feedback about post-sales service.
This was a great example of a company with one of the most innovative products in the marketplace forgetting that the consumer is still largely in charge and that service plus product (in this case, repair and warranty practices) trumps product only.
- Companies will need to fully report supply chain externalities. Corporate externalities are defined as the impacts of an organization’s manufacturing and business processes on other segments of society and the need to disclose those externalities.
While some work has been done on supply chain sustainability and the need to reduce carbon footprint, companies will need to do a much better job of disclosing the end-to-end impacts of their supply chains.
This means measuring and reporting on the effect of major supply chain transactions on jobs created, carbon footprint reduction, sustainable procurement processes, types of labor used, and modes of transportation among others.
The customer or consumer will begin to demand the transparency into these impacts much as these have now on the labeling of food and beverage products.
- Supply chains must be designed to serve the “base of the pyramid.” The late Professor C.K. Prahlad authored a compelling book entitled The Fortune at the Bottom of the Pyramid, which later was modified and widely referred to as the “base” of the pyramid.
The book pointed to the market potential of the five billion-plus people in the world whose incomes are less than $2,000 a year. I contend that companies in the consumable and durable sectors, in particular, will need to create products and associated supply chains to support the products that will cater to this market segment.
To tap into this enormous potential, our supply chains must go through a total utilitarian design philosophy in order to deliver sustainable bottom-line performance. Current supply chain thinking, which is largely based on a cost plus model, will need to shift to a “not to exceed” cost model.
- Knowledge work and workers will become global in nature. Knowledge work in supply chains today accounts for approximately 40 percent of the total labor hours spent. Much of this work deals with complex analytics, planning, procurement processing, and provision of services.
This nature of the work, the need for multi-language support, and the associated local complexities of the different geographies being served will necessitate the seamless globalization of supply chain knowledge work.
As an example, you could see a U.S.-centric company performing supply chain planning in the Philippines, operating procurement centers of excellence in Singapore, and conducting global business analytics in Brazil.
- SCM will have a standard certification process similar to that for CPAs or PMPs. Many universities offer undergraduate and graduate degrees in supply chain management. In addition, professional associations such as APICS, CSCMP, and ISM offer a range of certification programs.
However, in most cases these programs either focus on the basics of SCM or on a specific activity such as import/export or financial analysis. I believe that a fundamental shift will occur in the normalized delivery, content served, and certifications of supply chain professionals.
Many other professions like accounting (Certified Public Accountant), engineering (Professional Engineers) or project managers (Project Management Professional) require national board examinations as well as continuing professional education (measured by a specified number of hours per year).
We contend that a similar professional credentials program will be required for supply chain professionals to normalize the knowledge base of the incoming resources.
- Product clockspeeds will determine the number and nature of the supply chains. We recently worked with a global consumer durables company where over 70 percent of the products had a life span of less than 18 months. Another 20 percent had a life span of three to four years, with the remaining 10 percent exceeding five years.
This “fast clockspeed” lifecycle is becoming more the norm than the exception. The days of the steady and static product catalog is past; thinking otherwise, in fact, is a recipe for disaster. However, we continue to find companies using a single supply chain approach to service all segments irrespective of the time constraints.
The winners of the future will have the same number of distinct supply chains as there are product clockspeeds. In addition, supply chain organizations will need to be aligned by product segments as well as functional segments in a matrix fashion to serve the distinct supply chain needs.
- Micro segmentation will be key to success. Do you have a detailed knowledge of your individual consumer or customer segments—your micro segments? The honest answer for most companies would be “no.” A micro segment is defined as that exact part of the general buying category that triggers the purchasing decision—not the category itself.
To illustrate, in recent work with a provider of led illumination solutions, we discovered that the company had several underserved micro segments—specifically, the design your own/assemble your own accessory segment. However, the ability to identify and service those segments was far beyond the reach of this company’s supply chain.
Going forward, organizations will need to know their micro segments, and their supply chains must be able to effectively service them based on the business strategy. We always encourage our clients to think of their business in terms of the individual consumer or groups of consumers as opposed to a broad brush view of categories. Put another way, adopt a B2C (business to consumer) mindset even if your operation is predominantly B2B (business to business).
- Technology to support SCM will primarily be “on tap.” SaaS (software as a service) is gaining mainstream attention. We contend that most if not all supply chain technologies by 2020 will be delivered and consumed via this method—or “on tap.”
The user will pay for the ability to use the capability and will not have to incur the large fixed costs of ongoing maintenance, upgrades, and infrastructure expenditures that can amount to almost 25 to 30 percent of the cost of ownership.
The widespread adoption of SaaS constructs will likely be accelerated by the rise of cloud computing and diminishing concerns about the security aspects of SaaS.
- Leaders will leverage social media in a closed loop feedback process. Social media data is everywhere today. In recent work we did with a durable goods company, we found that they had 2,000 websites/ blogs that were discussing their products and service needs on a fairly regular basis.
However, this company—like most—did not have a systematic method to study the data and disseminate the information to the various supply chain constituencies (design, planning, procurement, service, manufacturing, and so forth). This is necessary to provide closed loop feedback processes that allow the company to proactively respond to the feedback.
The winning companies will be able to receive, process and act on the data that is being provided to them by their constituents via social media.
- Artificial intelligence will be embedded in mainstream supply chain activities. Humans learn by doing and processes improve as they get “leaned out.” Yet somehow, every time we build a supply chain system we begin the process from the ground up.
Planners go through the same calculation steps every time they start; procurement folks repeat approximately 35 percent to 40 percent of the activities they did in the past. The same holds true for people involved in building logistics and execution systems.
The problem is that when embarking on a supply chain program or initiative we do not have access to algorithms that learn and retain the knowledge and experience of the past. We contend that supply chain artificial intelligence will need to be embedded in more effectively automating mainstream supply chain activities.
Matías has a Master of Business Administration degree, Postgraduate studies in Logistic and a Bachelor of Business Administration (B.B.A.), Major in Foreign Trade.
He is a part-time Professor at the Project Management Postgraduate career at the University of UCEMA in Argentina.
Matías is Partner of NT Advisors and was honored with the PMI Award for Project Excellence – LA Region in 2014 by the Project Management Institute.
Seasoned executive with extensive knowledge of the Argentinean, Brazilian and EEC markets consistently delivering results and exceeding goals.
A visionary leader with proven experience building teams during more than 19 years of working experience; widely recognized by his superiors, colleagues and direct reports due to his leadership skills, creativity, proactivity and strategic vision. Exceptional communicator with a unique talent to organize, plan and execute complex cross functional projects.
Multilingual, highly trained, and hands-on the executive to drive change and create value in key strategic areas such as Operations, Logistics, Supply Chain, Project Management and Business Development.
He drives several projects focused on bringing superior efficiency and improvements to customers in different industries.