SCDigest: What will be the supply chain of the future?

May 27, 2009

By Dan Gilmore

a special arrangement, presented here for discussion is an excerpt of a
current article from Supply Chain Digest.

As most prognosticators
acknowledge, predicting the “what” of the future is relatively easy
compared to getting the timing close to right. What I am also struggling
with is the temptation to paint a picture of a supply chain world in which
simply everything is automated – though, indeed, that may very well
be a huge component of the future vision.

But here is a question:
When do we reach a point in the level of supply chain automation, both
physical and informational, that there just is not a whole lot more we
can do in terms of supply chain improvements? Is that point likely to come
fairly soon, or is it decades away?

Ditto with regard to “integration.” It
would also be relatively easy to simply paint a vision where we have virtually
100 percent integration both within the enterprise and across trading partners
and networks. Much more dicey, of course, would be predicting the timing
of this (remembering, for example, the lessons and history of EDI), but
even beyond that, does foretelling a world of near perfect automation and
integration really tell us much? I don’t really think so.

Others have and will
continue to take a stab at this. Perhaps the most well known is MIT’s Supply
Chain 2020 project, started I think in 2003 and initially led by Dr. Larry
Lapide. Here we are now just 10 years away from that end date that seemed
quite distant back in 2003. Is it time for Supply Chain 2025?

I am not sure if that
effort ever resulted in a definitive vision for what supply chain management
would be like in 2020. Among the contributions the effort has made, however,
is to well articulate that the future supply chain is inextricably linked
to what happens in many other spheres, especially political, economic,
and regulatory.

Consider just a few questions:

  • Do democracy and economic freedom
    continue their generally steady march forward, leading to the developing
    economies also continuing to grow in economic might and importance, or
    do things take a step backward?
  • What will China be like 10-15
    years from now?
  • Will the world’s biggest companies
    become larger and larger, and thus ever more dominant – and thus leading
    to a supply chain world of a few giants and many indentured suppliers?  Or
    will there be changing regulatory views on this?
  • What happens with free trade,
    nationalism, and protectionism?
  • Do we have new energy sources,
    or will oil be the main fuel 10 years from now and be at $500 a barrel
    in a “peak oil” world?

You get the idea. My
view right now is I can’t predict the supply chain of the future without
some assumptions about the world of the future, which I thank MIT for pointing

Discussion questions:
Are we anywhere reaching a point in supply chain performance where there
won’t be a whole lot of room for improvement? How do you think the retail
supply chain of 2020 will be different than today?

Note] The author is currently developing a presentation on the supply chain
of the future to be delivered at the Material Handling and Logistics Conference
in September.

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11 Comments on "SCDigest: What will be the supply chain of the future?"

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Doron Levy
Doron Levy
12 years 11 months ago

As far as I’m concerned, there will always be room for improvement in supply chain. Anything from the brand of coffee in the lunch room to automatic Sensormatic Tag integration can be improved upon. I have seen great systems but I look at perfection when each and every store manager and merchandiser will have nothing to say about the accuracy of their fills.

There will always be room for improvement in supply chain.

Nikki Baird
Nikki Baird
12 years 11 months ago

I think the author has it exactly right: the future of supply chain is inextricably linked to the world’s future. Last summer alone is proof of that–after all of the work that people did exporting production overseas, high oil prices suddenly made it economically viable to reopen production not only in Mexico but also in the States, and made shipping from overseas almost prohibitively expensive for certain goods. That kind of evolution will continue. What will differentiate supply chains is how quickly they can detect these shifts and react to them.

Integration and automation give us the information and speed we need to identify a trend, but if integration and automation are applied solely to make supply chains more efficient, we will miss the boat. The future is flexibility, not efficiency. The challenge will be to achieve that flexibility without giving up the efficiencies we’ve already gained. That sounds to me like the supply chain game is far from over.

Phillip T. Straniero
Phillip T. Straniero
12 years 11 months ago

I am a believer that even the most sophisticated supply chain models are always going to be dependent on the accuracy of the forecast. Even with automated replenishment and the most modern forecasting systems, we are in a business that continues to be fairly dependent on price promotion and supply and demand. In my opinion, these are the most important elements in the factors affecting forecast error and supply chain inefficiencies.

I think the 2020 supply chain might be better linked to an RFID-type system that is dependent on front-end sales and automated replenishment but will still be dependent on human input into promotional forecasting. I also think we might find ourselves in a situation where the retail inventory is vendor-owned and vendor-managed until it goes through the checkout and is reconciled electronically.

W. Frank Dell II, CMC
12 years 11 months ago
Our current supply chain can be improved by a minimum of 40 percent. This improvement is in higher service levels and lower inventory. While partner connectivity will play a part, the biggest change must come from the approach. To start with, we must stop wasting time creating inefficiency by forecasting. The sole supply chain driver should be demand. A purchase–be it consumer, distributor or manufacturer–triggers review and potential action. Information to drive the supply chain should be coming daily, not weekly. Real-time information is not a requirement for most industries, but daily information is. Fixed schedules should be the approach of the past. The process is managed by continues review. When a trigger point is reached, an action is executed. For example, a store should be replenished when it has sold a truckload or delivery unit, not because it is Tuesday. Training the workforce and providing support tools will be required to achieve change. We call the next evolution of supply chain Demand Driven Management.
Dennis Serbu
Dennis Serbu
12 years 11 months ago

As we aspire to make systems “Idiot Proof” we also create new generations that mutate into better Idiots. Our greatest challenge now and in the future is execution at the consumer level. As we automate and engineer, we must always recognize that the most important link in the supply chain is the human being. These individuals must be part of the solution, rather than the object of a workaround.

Bill Bittner
Bill Bittner
12 years 11 months ago

There are a lot of questions here, too many to adequately answer in a brief comment, but I think there is one underlying point that is missed in all of the recent discussions of our future economy in general and the supply chain specifically. More and more of our Gross Domestic Product is being derived from “virtual goods.” Whether it is merely surfing on the Internet or participating in virtual games, social networks, or viewing and listening to videos and music, more and more of our economic “goods” are being distributed electronically. No matter what the supply chain of the future looks like, it will no longer represent the portion of the economy it did twenty years ago when much more was based on the distribution of physical goods.

Mark Baum
Mark Baum
12 years 11 months ago

As the author notes, you can only automate so many processes before you hit the end of the road. Emerging markets will continue to enter an increasingly crowded global supply chain conversation.

At the same time, automation will only take you so far when it comes to volatility among key variables–fuel, working capital, credit scarcity, global labor rates, raw materials, the dollar’s value. In other words, you can’t stop supply chain volatility, so learn to manage it.

In terms of what the retail supply chain will look like in 10 to 12 years, I think it’s going to need to be far more flexible. In order to stay in front of the pack, a company will need to create the capability to monitor and respond to the volatile factors that threaten supply chain performance. This requires extracting the right information from systems, but today, insightful analytics are too often buried deep within a stack of data management tools.

Gene Detroyer
12 years 11 months ago

The Supply Chain industry is very interested in Supply Chain dynamics, but until industry in general truly embraces the tools available to the core of their business practices there will always be room for improvement. We read great success stories of adopting good Supply Chain processes. But, those stories represent few of those who actually do make the improvements. The retail industry should be leading the way, on schedule for Supply Chain 2020, but other than Wal-Mart, most are pre-2003.

Bryan Larkin
Bryan Larkin
12 years 11 months ago
There will be many generations before our children’s children’s children find little to improve in the supply chain. Some reasons: 1. Standards aren’t. 2. Everyone wants to do things a bit differently so they stand out or can theoretically compete better. 3. Retailers come up with the same ideas but guard them as if they were the only ones to come up with them–and then they ask suppliers for information in different formats and with different ways of referring to them 4. Every company is at a different place in their investment and operational life-cycle so there is little chance we’ll all be in the same book, let alone the same page. 5. People are involved. If all businesses were wiped out today and we started anew and integrated tomorrow, by the next day we’d not be able to communicate because of changes we made internally to “optimize” our businesses. This would be caused by the siloed nature of businesses and because of those silos people wouldn’t even know they had broken their businesses or… Read more »
Ralph Jacobson
12 years 11 months ago
To answer the question of what the future of the supply chain will be, you must get more specific. First of all, there is no global supply chain “system.” Most of it just happens. 95% of the supply chain in India is a guy riding his bicycle up to a small mom & pop store asking the owner if they want anything he has on the back of his bike today. Sure there are some global companies entering the picture there, however it will take a long time, although not as long we in the US took, for India to get to the level that the US is. And that is not to say that the US is anything special. There is still far too much waste and loss in the supply chain. We have the technology and process experience to create a smarter supply chain system. One that takes into account all stakeholders: Raw Materials Suppliers, Ingredients Suppliers, CP Manufacturers, Wholesalers, Distribution Centers, Ingredients Processors, Retailers/Wholesalers, Non-Profits and NGOs, Trade Associations, Government…and others These… Read more »
Douglas Knuth
Douglas Knuth
12 years 11 months ago

Many of the comments assume that processes and the supply chain are static while technology is dynamic. Changes in the way food products are grown, processed and packaged are as relevant to the discussion as technology. Evolution within the supply chain will continually move the consumer closer to the processor/producer, technology is simply one means of doing so. As Phillip notes, that could mean the checkout line.

But there are other emerging concepts changing the distribution model as well. Localized production for one and web-based sales are another. The food industry, like many others, has reached a critical inflection point. Integration is the key. Distributors, including large retail chains, who fail to address pipeline visibility issues will deem themselves obsolete. I envision a glut of commercial and industrial boxes/distribution centers ten or fifteen years from now.


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