These are exciting times for supply chain professionals. Not since the late 1990’s (when many would argue that the discipline of supply chain management finally came of age) have we seen such a confluence of forces that all foretell radical change. Pundits, analysts and practitioners are all pondering the opportunities and challenges ahead. In a recent post on Supply Chain Insights’ Global Summit blog, I wrote about my key takeaways from the Supply Chain Insights Global Summit on imagining the future of supply chains. Shifts in consumer behavior, the rise of emerging markets, breakthroughs in disruptive technologies and growth of sharing economies all lead me to believe that we are now at an inflection point. Supply chains of the future will be fundamentally different from supply chains today.
While I believe there are many profound changes on the horizon, here are three predictions to get the conversation started:
Innovation focus will shift to information flows
Much of supply chain innovation and value creation to-date has been through re-engineering and optimizing product flow. By and large, information flows are still an indirect consequence of product flows today. In the digital supply chains of the future, tremendous value will be created by rethinking information flows. Product flows will still be important, but information flows will drive them.
– The field is ripe for innovations in deriving customer insights. Customer insights will drive changes in offers and positioning of product, which will in turn drive the product flow across supply chains. Look for an upcoming post by me for more on this topic.
– Co-creation of designs with customers combined with technologies such as social networks, 3D printing and robotics will create opportunities to transform the supply chain. An example would be delivering product platforms to the customer and enabling configuration and personalization locally through cloud based access to design libraries and live contact with expert service providers.
Reverse logistics will no longer be in a silo
One side effect of omni-channel commerce is significant increase in returns. We will no longer be able to look at forward and reverse product flows in silos. It is time to start looking at both flows together as a cycle touching the customer forward and back. Furthermore, there is significant inventory moving around in return flows that could be resold if curated and managed appropriately.
Agility will tame uncertainty
With only a few exceptions, such as in the determination of safety stocks, supply chain plans are driven by best estimate forecasts with little regard to the uncertainty around them. Today we look at uncertainty as a disruption and strive to minimize forecast error. Tomorrow, we will be more interested in characterizing uncertainties and understanding their underlying drivers so we may collaboratively shape demand and drive supply considering the full range of uncertainty across the entire supply chain. Optimization work will shift towards developing plans with contingencies that are robust against known risks. Furthermore, as I have discussed in a previous post, planning and execution will converge to enable greater agility and superior performance.
After changes upon changes, we are more or less the same
After some reflection, the challenges before us, as well as the solution approaches we are likely to employ, are not actually that new. For instance, SCM World’s Chief Supply Chain Officer Report from September 2014 indicates an explosion of complexity, volume and urgency of demand. Supply chain professionals have been reporting increasing complexity and rising customer expectations for many years now. We have been on this same trajectory –just the scale and scope is greatly amplified.
As in the past, customer satisfaction will remain a dominant raison d’être for the supply chain. It is just the scope will now span from anticipating the need even before customers place orders all the way through the entire cycle of delivery, customer experience and after-market support.
Operational efficiency will still be created by removing latency and synchronizing end-to-end. It is just that the ends will now expand to include a geographically distributed, but digitally connected, collaborative community of supply chain partners.
Finally, the best performers will still be those that are able to translate business strategy into smart plans and local execution to drive profitable trade-offs. It is just that strategy, planning and execution will now be coordinated across marketing and merchandizing as well as sales and operations. Be it a retailer, a manufacturer selling directly, or an individual in a sharing economy model – the winners will be those that can deliver superior customer value while simultaneously managing cost-to-serve trade-offs profitably.
What do you think? Do you have predictions about the future of supply chains that you want to share? We would love to have that discussion.