Supply Chain Megatrends, Part 2

Stephen DeAngelis

June 28, 2012

In yesterday’s post, I discussed the first six supply chain megatrends of the dozen identified by Dan Gilmore, editor-in-chief of Supply Chain Digest. [“Supply Chain Megatrends 2012,” 16 March 2012] Those megatrends were: Turbo Supply Chain Visibility; Perfect Logistics; Blurring of Planning and Execution; International to Global; Talent Management; and Supply Chain Finance. In this post, I’ll discuss Gilmore’s final six megatrends: Meaningful Collaboration; Dashboards and Real-Time Analytics; Energy and Water Optimization; Next-Generation Distribution Center Automation; Integrated Supply Chain Risk Management; and Cloud-based Supply Chain Software. [“Supply Chain Megatrends 2012 Part 2,” 31 May 2012] Number seven on his list is meaningful collaboration. He writes:

7. Meaningful Collaboration: … Many supply chain leaders are recognizing that they have not a whole lot more to squeeze out of their own operations, and must work cross-trading partner processes as the next area of improvement. To wit: the incredible story of how Lowe’s and Whirlpool are using a truly joint sales and operations planning process to drive mutual success. It isn’t two companies connecting their planning process. There is simply one joint S&OP process (they actually call it something else) between the two companies.”

Meaningful collaboration relies on trust and the ability to share sensitive information securely. Although Gilmore states that he has been skeptical of collaboration efforts in the past, he believes that companies like Lowe’s and Whirlpool will prove that meaningful collaboration provides an almost insurmountable competitive edge. I have written numerous posts about collaboration and the benefits that result from it. For example, see my posts entitled Information Sharing and Collaboration, Dynamic Collaboration: Inside and Out, and Supply Chain Collaboration. Whether collaboration is within or between organizations, how information is shared and presented is critical. The next megatrend identified by Gilmore deals with dashboards and real-time analytics. He writes:

8. Dashboards and Real-Time Analytics: … A dashboard is a real-time decision-support tool that helps managers make better decisions right now. … Now, powerful, real-time analytics are being added to the dashboard mix. The term ‘big data’ is a bit of an overused buzzword right now, but that doesn’t mean it isn’t important. Some of the analytic tools IBM is providing, as just one example, are very cool. All this is not unrelated to trend #3 on the blurring of planning and execution, leading to questions about the differences between these analytics and true optimization, and inevitably to when and how we just let the computers make the decisions.”

Since my company, Enterra Solutions, offers real-time analytic services, I obviously agree with Gilmore that this is an important mega-trend. I also agree that analytic results that are not presented in a user-friendly way to decision makers are almost worthless. Marielle Segarra agrees with Gilmore that the use of dashboards is becoming more widespread. [“Dashboards Can Now Gauge More Data,” CFO, 1 February 2012] She writes:

“Dashboards have been around for many years, but it has taken time for their actual usage to catch up with their intuitive appeal. As business conditions become ever more volatile, however, and as companies lose what little margin for error they had in terms of responding to unpleasant surprises, interest in dashboards is accelerating. Companies are also starting to broaden the range of metrics they can access from dashboards, says David White, a senior research analyst at Aberdeen Group. While in the past senior executives might have focused solely on high-level metrics like sales revenue and profitability, they now use dashboards to track operational and tactical metrics.”

Gilmore’s next megatrend focuses on resources; specifically, energy and water. He writes:

9. Energy and Water Optimization: I am not quite willing to fully jump on the sustainability bandwagon as a megatrend, in part because it almost seems to me to be too easy/trite. But clearly, companies across the globe are and will be increasingly focused on optimizing their use of energy and water. Coming Peak Oil and all the rest clearly will drive diesel prices higher and higher over time, putting an extra premium on reducing over the road fuel consumption both directly (a company’s own operations) and indirectly (broader supply chain). I do fully expect natural gas to have a major impact on powering freight movements over the next five years because of this. Water, in the eyes of many, will become the ‘new oil’ in terms of price, scarcity and supply chain impact for many manufacturers.”

I’ve written a number of posts concerning sustainability and the supply chain. In all of those posts, I’ve stressed the fact that the only sustainability efforts that will have lasting impacts will be those for which a business case can be made. Energy and water optimization are two areas where I believe making such a case will be fairly easy. To learn more about why water usage is a megatrend worth watching, read my three-part series entitled “Let’s Talk Water” [Part 1, Part 2, and Part 3]. In a future post, I’ll discuss some of the interesting developments that are taking place with regards to increased usage of natural gas in the trucking sector. From resources, Gilmore turns his attention to distribution centers. He writes:

10. Next-Generation Distribution Center Automation: It won’t be for everyone, but a growing number of companies, especially in the beverage and food areas, are using very advanced automation for full case picking (ACP – automated case picking) to the point where there are a number of proof points out there across a variety of technology approaches. I believe as there is additional success in ACP, to the point where is becomes close to mainstream in those sectors, there will spill over adoption outside of beverage/food. … These heavily automated facilities are very, very different from what we have known.”

Another factor that will foster this trend will be the continuing spread of multi-channel supply chains. With consumers having an increasing number of ways to purchase products, suppliers and retailers will also require an increasing number of ways to satisfy their demands. Automated distribution centers will undoubtedly be one of those ways. Gilmore’s eleventh megatrend involves supply chain risk management. He writes:

11. Integrated Supply Chain Risk Management: The rise of risk management thinking in supply chain in the past decade has been simply phenomenal. Hardly came up 10 years ago. Rise in offshoring since then started the conversation, important research on the impact of disruptions served as a catalyst for companies to pay more attention to the issue, then we had the Icelandic volcano, Japanese earthquake, and Taiwanese flooding. So what is changing is not so much that there is now more risk management, but that all these factors are driving risk analysis and mitigation to be directly embedded into strategic and supply chain planning processes.”

I agree completely that supply chain risk management processes must be integrated with other essential business processes; especially for companies operating complex and extended supply chains. Supply chain risk management can’t be a “mitigation plan” that is drafted and shelved. It must be a process that is active 24/7 and connected to real-time, global information. For his final megatrend, Gilmore looks to the cloud. He writes:

12. Cloud-based Supply Chain Software: This is simply coming like a freight train, as I predicted a couple of years ago, to the scoff of some pundits who thought the on-demand/SaaS/Cloud model was really only well suited to certain network-centric applications such as transportation management. That has turned out to be simply not true. Cloud-based delivery will dramatically impact not only how companies deploy supply chain software, but how they view it, evaluate, buy it, use it, and much more.”

Organizations simply can’t achieve the kind of supply chain visibility and alignment they require if they don’t have access to integrated data that can be analyzed and acted upon. For most organizations, this means that the move to cloud computing is inevitable. Although there are risks involved, most analysts agree that the benefits far outweigh the risks. Greg Johnsen, executive vice president of marketing and sales with GT Nexus, told the staff at SupplyChainBrain that the cloud is “an information replica of the physical supply chain.” [“The Cloud and the Supply Chain,” 21 March 2012] I believe Johnsen is underscoring a point about visibility that Gilmore made in yesterday’s post; namely: “A combination of technologies – from RFID to GPS to video – is making the level of the level of visibility we can have in our supply chains right now almost limitless.” Johnsen believes that the cloud plays a critical role “when it comes to inter-company collaboration.”

Dan Gilmore deserves a vote of thanks for sticking out his neck and identifying what he believes are the megatrends that will define supply chains in the coming decades. In his words, the combination of these trends will have “huge ramifications.” I agree.