Predictions for the Coming Year: Supply Chain Management, Part 2

Stephen DeAngelis

January 07, 2014

In Part 1 of this post, I discussed some of the predictions about the supply chain sector made by “a handful of practitioners” at a recent meeting of the San Francisco Roundtable of the Council of Supply Chain Management Professionals and by Andrew Roszko, senior vice president of sales at Descartes. The Roundtable predictions were discussed in an article by Robert J. Bowman, Managing Editor of SupplyChainBrain. In a subsequent article, Bowman discussed a few more of the predictions made at the Roundtable. [“(Future) Nights of the S.F. Roundtable, Part Two,” 23 December 2013] In this post, I’ll discuss those remaining predictions. The first prediction involves corporate responsibility.

Prediction: Corporate social responsibility will become a much greater concern of global supply chains, said Mark Buck, MOD global supply chain and procurement leader at Bio-Rad Laboratories, Inc. But the growing pressure for compliance won’t come from traditional regulatory sources. Instead, it will be felt in new governance guidelines that affect publicly traded companies in the area of sustainability. Think about the new conflict-mineral reporting rules dictated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, and policed by the U.S. Securities and Exchange Commission. (Are you ready to begin reporting by May 31, 2014, on the presence in your supply chain of conflict minerals from the Democratic Republic of the Congo?) Or the earlier Restriction of Hazardous Substances (RoHS) directive of the European Union, which has had a huge impact on anyone shipping high-tech and other types of product within that region of the world. Buck said companies should get acquainted with the acronym ESG, for Environmental, Social and Governance. Next year, he said, they’ll have to begin conforming to the work of the Sustainability Accounting Standards Board, which is laying out a template for responsible behavior by U.S. public companies. In the process, the SEC is bound to become a ‘third arm’ of regulation. ‘It is coming,’ Buck said.”

Bowman reports that there was some disagreement voiced by fellow panelists; but, the disagreement didn’t involve his prediction about the increased importance of social responsibility. Disagreements were voiced about Buck’s implication that traditional government regulations would be less important. Detractors didn’t believe that governments would ever give up that role. I agree with that point, but I also agree that other sources of pressure are going to be felt in the compliance area. In the past, I’ve noted that more shareholders are pressuring companies to act more socially responsible. I believe that trend will also continue. Bowman writes that “Jim Miller, vice president of worldwide operations with Google, Inc., agreed that sustainability requirements will place new compliance pressures on companies, but noted that the SEC has no capability to enforce the rules. (The conflict-minerals provision of Dodd-Frank contains no fines or other sanctions for companies that fail to comply. The consequences would come in the form of public condemnation and damage to one’s brand image.” The next prediction involved additive printing.

Prediction: [Michael Hester, head of planning, allocations, distribution and logistics with BevMo,] repeated a current favorite of many business visionaries: 3D printing. The technology ‘is going to have a huge impact on distribution-center operations,’ he said. Instead of having to manage large parts inventories, D.C.s can sell the right to make a given item on a 3D printer, then do the job overnight. The result will be significant savings on the cost of standing inventory. But Hester doesn’t believe that 3D printing is just around the corner. He sees it becoming commonplace within the next five to 10 years.”

I agree with Hester on both counts. Additive printing will eventually make a big supply chain impact, but it will be years before we really see exactly how large that impact will be. There are lots of challenges that need to be overcome before additive manufacturing becomes the game changer that many analysts predict. The most important challenge is making the process faster. For the near-term, “Hester said the real value will come from deploying it for specialized parts that are otherwise hard to obtain and in short supply.” The next prediction involved the rise of new technologies and how to use them.

Prediction: The next couple of years will see a flurry of new technology – so much, in fact, that companies won’t possess the required expertise with which to embrace it, [Kerry McCracken, vice president of business architecture and delivery with Flextronics,] said. The task of technology management will therefore become more distributed, with an even greater reliance on outsourcing, and the use of partners with application-specific expertise. She envisions multi-entity IT partnerships that will ‘transform the way companies work together.’ In the process, the role of individual chief information officers will lessen – at least with respect to the oversight of in-house systems.”

Bowman reports that some panel members believed that this “scenario is already a reality.” The increasing importance of Big Data for most companies means that many departments want to get involved with data management and analysis. Vendors are likely to help make this scenario easier to manage by incorporating user-friendly tools in their products. Nevertheless, the CIO is likely to become an orchestrator of data operations and not the sole administrator. Hester did agree “that technology is driving much more outsourcing.” The final prediction dealt with how the world of electronics is going to have to change if the current consumer vector is to be maintained.

Prediction: [Jim Miller, vice president of worldwide operations with Google, Inc.,] pronounced himself ‘shocked’ by the wave of electronic devices that dominate society today. ‘I think there’s a growing recognition that we consume resources – that we’re really not sustainable,’ he said. ‘There’s no way that we can continue on this journey.’ Miller sees an opportunity to create a ‘circular economy’ that recognizes how products are sourced and made, and how their contents can be recovered in a responsible manner. The next two to three years, he said, will see a ‘major shift’ toward greater social responsibility among producers of high-tech goods.”

I first wrote about the concept of a circular economy back in 2012 in a post entitled Supply Chain Sustainability and the Move towards a Circular Economy. As I noted in that post, the most challenging part of implementing a circular economy will be getting consumers to embrace it. Bowman reports that McCracken disagreed with Miller “at least to the extent that a circular economy would come about from each company’s stand-alone efforts. ‘An industry is going to be created around that,’ she said. Individual consumers and businesses simply aren’t that focused on the recycling of old, unfashionable products.” Buck said that businesses might very well focus on recycling when “they can’t get access to enough raw materials to make their products. ‘That circular economy is going to have to happen.'” I think it is only “going to happen” if consumers are given some incentive to keep their old products out of landfills. They don’t want to get hit up front with a deposit (like some states place on plastic bottles). They would prefer getting rewarded at the back end with buy back or trade-in programs that are user friendly.

There is a purportedly Chinese adage that says: “May you live in interesting times.” That adage can be either a blessing or a curse, depending on your circumstances. Supply chain professionals certainly live and work in an interesting time and they must deal with both the blessings and curses associated with changing circumstances.