Predictions for Global Logistics

Several Analysts at Gartner

By 2016, application mega-vendors will collectively control one half of the global supply chain execution market: The supply chain execution (SCE) market [mostly WMS and TMS] is in transition. The application mega-vendors - Infor, Oracle and SAP - are using their global reach, large customer bases, broad industry coverage and ability to continually invest in their SCE products to provide more competitive SCE offerings and capture a disproportional percentage of new SCE business. Over the next four years, this will result in the megavendors capturing half of the SCE market - in other words, half the number of named SCE customers.

Gartner estimates that software as a service (SaaS) and cloud TMS will command 25% of the total addressable TMS market, which represents significant growth potential.

By 2016, less than 20% of companies will be able to provide end-to-end supply chain visibility:A recent survey revealed that supply chain visibility and event management had the lowest rate of adoption, with only 10% of respondents saying that their companies had these functions fully deployed.

The adoption of end-to-end supply chain visibility applications will be low for several reasons:

High number of touchpoints: Supply chain visibility has many potential points of failure, which mean different things to different people. This makes it hard to clearly define what the goals should be, how to get there and what the benefits are.

Expensive: Supply chain visibility systems can be expensive to obtain or build, and companies have trouble creating business cases. However, many companies have reaped significant ROI from investments in supply chain visibility technology investments.

Changing application market: Various ecosystems of software vendors claim to provide full end-to-end visibility, even though this is not the case. Alternatively, some companies are building out control towers that incorporate information from various systems.

By 2016, more than 40% of new logistics application purchases will be delivered through the cloud: Even though more SaaS applications are available and most new vendor entrants have a SaaS deployment model, supply chain leaders still prefer hosted or on-premises applications, largely because SaaS SCM solutions have not reached functional parity with leading on-premises SCM offerings. However, Gartner has seen a marked shift in demand from on-premises to SaaS for low complexity logistics environments, such as modest warehouse environments or small shippers.

However, as SaaS SCM vendors continue to enhance their applications by adding more functionality, they will soon be viable offerings for even complex and sophisticated logistics organizations.

By 2016, 10% of consumer value chain companies will intentionally share supply chain resources as a part of collaborative logistics programs: Today, all consumer packaged goods (CPG) manufacturers' value networks operate in isolation, but, in reality, their combined networks overlap tremendously. For example, the distribution centers of most CPG companies serving the major consumption geographies within the U.S. and EU are located within 50 to 100 miles of each other.

They all serve the same customers independently from their own locations.

It is easy to envision the amount of real overlap that exists in the physical operation of these networks. We call this the "many to many to many" phenomenon. This presents an opportunity for collaborative logistics - that is, companies working together to reduce additional waste and inefficiencies of supply chains operating in isolation.

Gartner predicts that the following emerging trends will drive logistics and supply chain professionals to explore collaborative logistics further within the next five years:

Rapid growth causing more urban congestion: The number of cities with populations of more than eight million is projected to double by 2015.9 By 2020, Mumbai, Delhi, Mexico City, Sao Paulo, New York, Dhaka, Jakarta and Lagos will achieve megacity status (that is, more than 20 million people). There will be many more consumers in smaller, more congested locations.

Consumer and corporate sustainability demands: These will continue to drive CO2 reductions, as well as the sustainable supply of products and services.

The need to deliver shareholder value: This will require organizations to increase profits by reducing logistics costs, which are a significant contributor to the cost of goods sold (COGS) in the consumer sector.

Constrained distribution networks in emerging markets: In these markets, many of the CPG and food manufacturers are the first ones to require substantial widespread distribution, infrastructure and capacity.

Predictions for the Manufacturing Supply Chain

Several Analysts at IDC Manufacturing Insights

Prediction #1: Resiliency Will Become a Priority for Manufacturers Looking to Master the "Massive Multidimensionality" of Their Global Supply Chains: The pace of business continues to accelerate, demand is more volatile than ever, and supply complexity continues to grow. In this context, proliferation of products and services is putting pressure on the manufacturing supply chain to be more responsive and resilient, in support of both service and cost performance

Prediction #2: Considering the Inherent Cost of Long Lead Times, Manufacturers Will Continue to Look at Their Global Supply Networks Through the Lens of Both Regional and Country-Level Sourcing: Manufacturers are now finally realizing, and being able to measure, the inherent cost of long lead times - not just the mechanical calculation of transportation and inventory cost but the underlying cost of poor service levels and responsiveness. This will lead to changes in sourcing practices.

Prediction #3: Recognizing the Need for Better Service Levels and Mass Customization, Manufacturers Will Look Again to Postponement Techniques and Data Analytics to Drive More Effective Customer Insights and "Smarter" Fulfillment: Integrated, or smarter, fulfillment is something we are seeing in manufacturing companies that are tying procurement spend and transportation management together to form a more cohesive view of transportation - and the ability to make faster and more informed trade-offs to support fulfillment objectives.

Prediction #4: Manufacturing IT Organizations Will Have to Support a More Productive Supply Chain Ecosystem: IT organizations will transition from a project- and asset-centric delivery organization to a service-centric provider of business capabilities. Success in the future will not be measured on the work (e.g., projects on time or network availability) but on the consumption of the services defined, provisioned, and managed by IT.

Prediction #5: Service Excellence Will Reemerge as a Strategic Priority: We expect that in 2013 manufacturers will restore service as a key strategic priority as a way to differentiate products (both physical and service), as opposed to the recent extreme cost focus, and bolster customer satisfaction and loyalty. To the degree that we continue to see supply chain management (SCM) and product life-cycle management (PLM) become more aligned, supply chain organizations must take a more holistic view of service excellence throughout the entire product and service life cycle.

Prediction #6: The "Modern" Supply Chain Will Get "Smarter": Although today a significant number of manufacturing supply chain organizations still operate planning capabilities characterized by multiple independent business processes and disconnected IT tools, resulting in extended planning horizons, poor interaction between the supply and demand sides of the supply chain, and inadequate service delivery, this is changing. As best-in-class manufacturers take a more holistic view of their planning functions and integrate previously separate processes, they are seeing significant improvements in their business' speed and responsiveness.

Similarly, supply chain execution is also evolving from a previously unconnected set of processes to a more cohesive effort
to integrate warehousing, transportation, and the procurement activities that relate to SCE.

Prediction #7: Manufacturers Will Focus Efforts to Improve Collaboration Both Upstream with Suppliers and Downstream with Customers: the ability to more efficiently and effectively collaborate with supply partners on the supply side of the supply chain and customers/channel partners on the demand side of the supply chain is a critical component of resilience. But in the modern supply chain organization, it is not just about the business process or the desire to collaborate; it is about the technology and technology tools to enable efficient exchanges and manage large amounts of data - and to do it in a smarter way.

We expect that in 2013 manufacturers will increase their efforts to collaborate with supply chain partners and explore technology tools to facilitate the exchange.

Prediction #8: Through the Lens of Risk Management, Global Trade Management and Import/Export Capabilities Will Drive Investment Priorities: In surveys IDC Manufacturing Insights has conducted with end-user companies, there is a self-reported internal gap when asked about import/export competence in general - and global trade management (GTM) specifically.

In this context, for 2013, we anticipate that manufacturers will invest in import/export capability with tools like GTM.

Prediction #9: Manufacturing Supply Chain Organizations Will Invest in Technologies That Enable Visibility, Visualization, and Virtualization: Part of the visibility challenge is the ability to adequately articulate benefits, but part of it is also the lack of a good definition. It is the view of IDC Manufacturing Insights that being clear and precise about what visibility means will actually enable manufacturers to be more successful in understanding and then communicating attendant benefits.

Despite the challenges, technology and the fuller availability of data are bringing the aspiration of visibility into focus, and we expect manufacturers to make significant progress in 2013.

Prediction #10: The "Big Data Era" Will Dawn for Supply Chain Organizations: 2013 will be the year when manufacturing supply chains start to really understand what the fuss is all about. It is one thing to get big data; it is another thing to "get" big data. Indeed, in the conversation about supply chain resiliency, one quickly realizes that it is only possible to master massive multi-dimensionality by capturing, understanding, and effectively (the "what" and the "when") acting upon the requisite detailed data - thus the notion of extreme granularity.

That's it for part 1. We will be back here with more full-text predictions from our supply gurus next week.

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