@ Supply Chain Management

Continuing from my first post: Predictions from Supply Chain Gurus – Part 1, I want to take a look at two predictions for 2012 by two noted Supply Chain gurus namely Bob Ferrari and Steve Gold.

First up, Bob Ferrari’s prediction

"The concept for “supply chain control tower’ coupled with more leveraged use of predictive analytics will come to the forefront, but in 2012 there will be a need for vendors and consultants to focus on market education and early adoption support," Ferrari says.

Read all of Bob Ferrari’s predictions here: 2012 Supply Chain Predictions : Is the End of the World nigh?

Second, Steve Gold’s prediction

Gold predicts continued inflation in raw materials and other input costs in 2012 (not all agree with him there, given slowing global growth), but regardless, more interesting is what he says companies must do about it.

Gold says hedging and demand aggregation strategies should be part of the approach that companies take, but that they must also to look at reducing those costs not by focusing on the price or rates they pay, but instead or additionally by "Trying to find a way of redesigning products or working with suppliers collaboratively to consume less" – which he says requires a new way of thinking and acting.

About the above predictions, they’re rather safe predictions – what I’d like to call, trend based predictions. We all know about Big Data and the impact that it’s going to have on every business. However, not all is so clear cut with this predictive analysis stuff – nothing new other than access (and the consequent ability) to a whole lot more information is happening right now. It’s like the old optimist child joke – when she saw a pile of horse manure, instantly jumped in saying that there must be a pony in here somewhere.

Gold’s predictions is also predicated on the widespread feeling that inflation (even hyper inflation) is about to break loose. However, the US Central Bank is operating under the assumption and expectation that inflation is muted. Compare that to my empirical observation from my grocery shopping that inflation is ~ 9-10% on the grocery budget. Of course, if you added say Hard Disk drives to that basket, it might average out things a bit but I’m not in the habit of eating bits and bytes for breakfast.

While commodity prices have been increasing in the past – let’s hypothesize that this is because of easy credit, the spectre of another recession has put the brakes on expected demand and this has consequently led to a fall in prices in the current. If the central banks of the world coordinate another round of easy credit, then we’d switch back to the former situation of increasing commodity prices. This is not looking like inflation or hyperinflation but stagflation. Furthermore, it suggests that stagflation is nothing more than ignorance-flation in the sense that no one really knows what to do and nothing seems to be working out.

More to come…

As promised, here is my take on the Predictions from Supply Chain Gurus for 2012. You can read the article at SC Digest :  Predictions from Supply Chain Gurus for 2012

First up the Gartner Boyz:

Like others, Gartner is projecting a movement of manufactured goods overseas back nearer to US soil, if not within the country itself. It projects that "By 2014, 20% of Asia-sourced finished goods and assemblies consumed in the US will shift to the Americas," which of course can mean Mexico, Honduras, Costa Rico and other nearby sourcing locations.

The drivers? First,they says that many companies initially underestimated the true total costs of long supply chains offshored to Asia, miscalculating inventory costs, greater issues with product quality, lost sales or discounted prices due to long lead times, IP theft, and more.

They also note that some of those issues may soon be exacerbated in some countries (meaning China) as more and more production will be consumed in Asian markets, not Western ones.

Sorry, guys but I predicted this way back in 2006-07. Don’t believe me, you can read it for yourself here: Surviving the China Rup Tide – How to profit from the Supply Chain Bottleneck and The Intimate Supply Chain – Part 1 amongst other posts. The simple point is that none of these supply chain moves (no matter who the guru predicting it is – not even me) are holy writ but they’re very much context writ.

And what explains this shift?

"Customer demand for service excellence and increased product choice at competitive prices is
driving brand owners to reassess the value delivered by their supply networks," the analysts say. "Sacrificing lead time for reduced unit cost will be insufficient to satisfy this customer requirement."

For certain segments of the supply chain, a "nearshore" strategy will make a lot more sense, they believe.

Come on, does this hypothesis pass muster? Isn’t there a recession on still – unofficially but have you taken a look at the purchasing power of the middle class lately?

Production to scale is a great idea when demand is always pointing upwards on a growth chart but it’s a sorry idea if your demand falls off a cliff or in this case becomes as volatile as fickle fig leaf.

Further,

Gartner says that "After billions of dollars spent on ERP, many companies still lack the timely, accurate and network-based data that can guide fact-based, timely supply chain decisions." It also notes that companies are collecting in one way or another vast amounts of information, much if not most of which is not being used effectively for improved decision making. "Big data" is the term associated with the opportunity to better mine this information and extract more value out of it, to the great delight of data warehouse. analytics, and storage vendors.

Now, remember what I said just a few posts back about the inevitable entrance of Big Data into the enterprise world – this is no big secret and my advice to you is to get on the bandwagon now. That’s also the reason why I started my Big Data blog because there’s no escaping this elephant in the room.

This provides a perfect segue into a curious coincidence wherein this firm came into my crosshairs – Lokad. Now, I’m not very familiar with the technology but that will be the focus of my  next blog post as I investigate what they do. The gist of it is that they’re trying to get better forecasts by digging through Big Data.

Stay tuned for that update…

SC Digest has compiled two reports on Supply Chain Guru Prediction on their site. Here are the two reports.

Supply Chain Guru Predictions for 2012 – Part 1 and Supply Chain Guru Predictions for 2012 – Part 2. The SC Digest editor Dan has assembled quite a field of gurus to give their views and I’ll be delving into them in a few posts going forward.

Enjoy!!