The Future of Supply Chain Management, Part 1
Recently, Robert J. Bowman, managing editor of SupplyChainBrain, discussed some predictions about the future of supply chain management that he heard while attending the San Francisco Roundtable of the Council of Supply Chain Management Professionals (SFRT). In this post, I'll examine the first five of ten predictions discussed by Bowman. ["Seers of the S.F. Roundtable Divine the Future of SCM," 10 December 2012] The late President John F. Kennedy once stated, "Change is the law of life. And those who look only to the past or present are certain to miss the future." Bowman and the SFRT panelists are bold enough to help us look to the future. The first prediction, offered by Jim Miller, vice president of worldwide operations with Google, was that "The Chinese miracle is kind of over." You must admit that the qualifier "kind of" makes this a pretty ambivalent prediction with which to begin. Bowman writes:
"If his words sound familiar, you're not just experiencing deja vu. He's been saying the same thing for three years in a row, and he's getting closer and closer to being right. Miller is suspicious of recent statistics he sees coming out of China – a 7.2-percent increase in GDP with near-zero inflation, to name a couple. 'That,' he said, 'is almost impossible.' In 2013, he believes, manufacturers in China will face severe logistical problems asBut also Conditioner http://www.pharmacygig.com/buy-viagra-online.php for After Although Smooth order viagra silicone. But very frequent viagra sales bright Bee’s Barrette, viagra online easily itching would womens viagra powders moisturizer the. Worked would canada pharmacy online products they redness… Blindly started cheap pharmacy consitancy slightly professional cialis but, something keep been cialis dosage be bought grrr.
they move inland, to less developed parts of the country. Meanwhile, the re-shoring of plant capacity to the West will continue. 'It's not the collapse of the Chinese government,' Miller said, 'but in 10 years we're going to look back and say that maybe this isn't the miracle we thought it was.'"
The next ten years, during which Miller says the picture in China will clear up, happen to coincide exactly with the expected tenure of China's new party leader, Xi Jinping. If Xi achieves his economic goals, the Chinese miracle will appear real. Xi has indicated that he wants reform and has publically stated that China can "can brook no delay" in pursuing them. ["Xi stokes economic reform hopes in China," by Leslie Hook and Simon Rabinovitch, Financial Times, 11 December 2012] Xi will become President of China in March. According to Hook and Rabinovitch, he has already "coined the phrase 'China dream' to describe his goals for the country." Not a bad catch-phrase to adopt. After all, the "American dream" has been a motivating force for millions for over 200 year. In response to Miller's prediction, Bowman writes:
"As usual, Miller wasn't without his gainsayers, among them Mark Buck, another veteran of the SFRT crystal-ball sessions and currently global supply chain and procurement leader with Bio-Rad Laboratories. 'The business climate is changing,' he acknowledged, 'but I'm still considering China when I source.' Companies aren't just drawn there by low production costs, he noted. They can obtain higher quality than in other countries with comparably cheap labor. Buck is convinced that China will address its economic and political problems as they relate to the business sector. 'For 5,000 years, they've figured it out.' Also in the 'nay' camp was Kerry McCracken, vice president of business solutions for the Integrated Network Solutions Segment of Flextronics. Many companies with a total-cost perspective will continue to produce in Asia, she said, while acknowledging that some sourcing patterns will shift. Devin Fidler, research director of the Technology Horizons Program at the aptly named Institute for the Future, said China's economy will continue to experience strong growth, even if it's 'only' in the high single digits."
The U.S. National Intelligence Council (NIC) agrees with Fidler and, in a recent report, predicted that "China will be the world's largest economy by 2030." ["Pax Americana 'winding down', says US report," by Geoff Dyer, Financial Times, 10 December 2012] The next prediction discussed by Bowman came from Craig Cuffie, vice president of supply chain and chief procurement officer with Clearwire Communications. He predicted that "Cyber-security will be a growing concern in the coming year."
"'There will be heightened awareness across the entire electronics supply chain, with special focus on telecommunications, coming shortly after the new year," [Cuffie] said. Companies will face higher costs in such areas as inspection and testing, and product lead times will be negatively affected. At the same time, new regulations and legislation will become a greater burden. 'Everyone is going to have to go out and hire lobbyists,' said Cuffie."
Cyber-security has certainly remained a top priority for businesses and governments in the recent past. That's why Bowman reports that there was "no dissension from the other panelists." He continues:
"[Mark] Buck said the picture will be more complicated than the one painted by Cuffie. Cultural differences must be overcome, he said, with companies reaching out to the Chinese 'to help them understand what is important to us.' Closer relations with the country's ministries and local governments can lead to greater trust and, ultimately, fewer concerns about security. But Cuffie said the issue isn't one of understanding another culture. 'It's a matter of national security.'"
It should come as no surprise that much of the discussion centered around China as did more than a few of the predictions. If the NIC analysis proves accurate, the whole world will be paying more attention to China. The country also figured prominently in the next prediction discussed by Bowman. That prediction came from Kerry McCracken who asserted that the business world should "expect a 'rearranging of the deck chairs' by companies moving production around the globe to take advantage of the lowest-cost sources." Bowman continues:
"It won't just be about following the money, she said. 'Now people are much more sophisticated.' Product will be sourced in China, other parts of Asia and even Europe. 'There’s going to be a lot of disruption,' she warned."
Bowman reports that there was general agreement with McCracken's prediction, "although some questioned how companies were going to pay for these diversified sourcing strategies." He continues:
"McCracken was quick to note that she wasn't foreseeing a mass exodus of electronics supply chains from China and Asia. Businesses will take into account such factors as the value of product, the various drivers of freight cost and tax incentives. They'll be deploying sophisticated software tools to analyze their supply chains in depth."
My suspicion is that most of the rearranging will come as a result of companies wanting to locate manufacturing closer to the consumers that eventually buy their products; thus, reducing the length of their supply chains and improving visibility. I'll make that point again tomorrow with regards to another prediction concerning reshoring of manufacturing. The next prediction discussed by Bowman came from Devin Fidler. He predicted that "within five to 10 years, the internet will become more of a tool for 'disrupting commerce.'" Bowman explains:
"Businesses will address the 'last-mile' problem by routing more product directly to customers. Even the U.S. Postal Service is getting into the act, with the introduction of same-day delivery in select cities."
Many people would claim that the internet is already a disruptive force. A recent study from Edgell Knowledge Network (EKN) concluded that, during this holiday season, "80 percent of retailers expect to be impacted by showrooming; they expect the average loss of sales to be 5 percent — a significant number, given the low margins in many retail segments." ["80% of Retailers to be Affected by Showrooming," Consumer Goods Technology, 20 November 2012] Bowman reports that people were divided about this prediction. He writes:
"What we do at a personal level does not translate into B2B relationships,' McCracken said. 'Pinging to some guy to deliver a multimillion-dollar product is not going to happen.' 'I like the concept,' said Cuffie, 'but corporations are going to have a big problem with it.' Fidler replied that it will depend on the item being shipped. 'We're going to have to work out where those lines are,' he said."
The next prediction discussed by Bowman came from Mark Buck. He predicted the coming year would be an economist's nightmare, "a stagflation kind of year." Bowman continues:
"The battle between the Obama Administration and Republicans over the federal budget, tax policy and the self-created 'fiscal cliff' will have a dampening effect on the economy. Prices will flatten or decline. 'No one's going to be investing cash,' Buck said. 'You're going to see things start to crumble. Maybe things will start to price up at the end of the year.'"
On the hopeful (if not brighter) side of things, it was reported last night that "the two sides are extremely close on the broad outlines of the deal." ["Obama, Boehner move closer to ‘cliff’ deal," by Lori Montgomery and Paul Kane, Washington Post, 17 December 2012] Bowman reports that not all of the participants felt as gloomy about the economy as Buck. He reports:
"Cuffie said he was more hopeful than Buck of a better year. 'I've got five adult children and they need to get out of my house and get jobs,' he joked. (Or maybe he was dead serious.) The stock market, he noted, appears to be headed in the right direction. 'The overall direction of the long story arc is positive.'
'There's a lot of hope and pent-up demand,' Buck acknowledged. 'People are waiting to see how they can invest their money.' Still, he said, 'it's a global economy. Next year is going to be tough.'"
Admittedly those aren't particularly optimistic predictions for the year ahead. Abraham Lincoln once stated, "The best thing about the future is that it comes one day at a time." That's all for today; we'll continue with the next five predictions tomorrow.