Gilmore Says:

For most of us today in supply chain and logistics, we are living in “interesting times.” Count your blessings. What do you say? Send us your comments here

“May you live in interesting times.”

Most of you have probably heard this phrase, an English translation of an ancient Chinese proverb. The meaning is two-sided, especially around the word “interesting,” which is really thought to mean “turbulent.” The sense is this: if your daily experience is dynamic and challenging, you’ll have a richer existence, in the grand scheme of things, than you’ll find in the easy life.

For most of us today in supply chain and logistics, we are living in “interesting times.” Count your blessings.

That continues to be the sense I have as we start 2008. Global supply chain pressure, ferocious competition and the demand for continuous improvement, short cycle times, etc. – you know the litany – are likely to be combined with a slowing economy, which adds new pressures.

So with that intro, we decided to ask a number of industry experts to offer their perspectives on what issues, trends, and strategies are likely to impact supply chain and logistics thinking in 2008. Several of the prognosticators are friends; others are individuals whose expertise I have come to respect. As always, we strive to find the best insight for SCDigest readers.

Below, I summarize just a few of the key observations of each. You’ll find the full 2008 predictions from each of our nine experts on our web site: Key Trends Impacting Supply Chain Management and Logistics for 2008. I promise you’ll enjoy them.

Gartner’s Dwight Klappich says conditions may force companies back to basics in 2008.

“Supply chain management organizations will be forced to divert their attention away from strategic initiatives like innovation; instead they will have to focus more time and effort on tactical and operational issues driven by economic and competitive pressures” he notes. But interestingly, he says that many leading companies have already attacked the low hanging fruit. “The next level of cost reduction is going to be more difficult and require more organizational sophistication and creativity to identify different ways to streamline processes and remove costs,” he adds.

Dr. Larry Lapide of MIT agrees – and says this may mean a reversal of some current trends.

“With oil and logistics costs over the past few years, we'll see more effort in trying to keep these costs down. Many companies will 'slow down' their supply chains by using less expensive and slower transport modes,” Lapide said. “This will, of course, mean that inventories will increase - especially in-transit and at just-in-time sites.”

He also thinks there may be some return to in-house manufacturing over both quality issues and the need to be more reactive to demand without inventory build-ups.

Dr. John Langley of Georgia Tech, in part, says companies will need to get more focus on “integrated logistics.” 

“Practitioners and academics are still searching for the “holy grail” in terms of supply chain integration, but daily, pragmatic issues continue to stand in the way of needed progress,” Langley said. He cited barriers including: functional silos within organizations; inability of supply chain organizations to put the betterment of the supply chain ahead of major objectives such as short-term profitability; continually-changing, unpredictable, and frequently irrational demands of customers throughout the supply chain.

DRCA’s Jon Kirkegaard has two takes – what he thinks will happen, and what he thinks should happen.

In the former category, for example, he thinks the fall in the value of the dollar and other factors may lead to more production being brought back to the US. He sees a “decline in the false dialog that the future is in service industries and the realization that the future is in “value add manufacturing” of many types.”

In the latter, he thinks we ought to see buyers more rigorous about demanding ROI from their technology spend – but is not optimistic, saying companies should “demand quantifiable IRR/ROA in weeks from investments and not fall prey to “trust me” technology investments.”

Jeff Karrenbauer of Insight (another “Dr.” actually) agrees with Kirkegaard on the likely evolution in views about offshoring, saying too many outsourcing decisions have been based on faulty analysis.

Going to China “was once seen as an obvious decision (and still is by too many firms and Wall Street analysts), based myopically on comparative labor rates,” he said. “However, such questions are increasingly being subjected to much more sophisticated analyses that include procurement, manufacturing, transportation, warehousing, cross-dock, in-transit, cycle, and safety stock inventory, port handling, duty, and tax costs, together with an assessment of quality, intellectual property theft, and disruption risks. In short, the “obvious” outsourcing choice of, for example, the Pacific Basin, is often simply wrong.”

More on this interesting thesis later in SCDigest.

Dr. Jim Tompkins of Tompkins Associates also looks at the global perspective, saying that companies need to think more about “total delivered costs,” not just total “landed” costs.

“Organizations continue to rely upon total landed cost, and this results in not effectively looking at which ports should be used, as well as the reconfiguration of their domestic distribution network,” he says. This focus on understanding total delivered costs, combined with sourcing trends that are changing the physical flows of offshored Asian goods, “really sets the table for some huge supply chain transformations” in 2008 and beyond, he adds.

Several of our experts, such as Adrian Gonzalez of ARC Advisory Group, looked closely at trends in transportation. He’s sees a collision emerging between the “solutions” of TMS software vendors, 3PLs and some consulting firms.

“Simply stated, software vendors will add managed services to their offerings (e.g., i2, LeanLogistics), 3PLs will offer technology-only solutions (e.g., Transplace), and consultants will also leverage technology to provide managed services (e.g., Chainalytics with their benchmarking service),” he told SCDigest.

Speaking of Chainalytics, consultant Gary Girotti thinks the overcapacity seen lately in the transportation market to the advantage of shippers will disappear in 2008. That situation “will end as carriers pull back capacity and hit the wall on margin reduction potential.”

This will also reflect itself in service challenges for shippers, “as carriers exit unprofitable markets and lanes.” He also expects a continued shift from truckload to rail/intermodal.

Last, but by no means least, Dr. Marshall Fisher from the Wharton School at the University of Pennsylvania thinks the consumer goods-to-retail supply chain will continue to focus on “the last 50 yards” – getting goods to the retail shelf effectively.

"Many retailers report numerous execution short falls, including stock outs on the shelf due to inadequate stocking from the backroom, inventory record errors, and incorrect signage and pricing, all of which hurt the quality of a customer’s experience, and therefore sales,” he told SCDigest. “Most retailers view in store labor as a cost to be minimized, rather than an asset to be leveraged. As a result, many stores have a minimum number of store associates earning minimum wage, and this is having a huge negative impact on the top line.”

That’s all we have room for. Again, please read our experts’ full comments. We are in interesting supply chain times.

What are your comments on our experts’ predictions for 2008? What are some of your own?

Let us know your thoughts at the feedback link below.