Chain Reactions

A Guide to the Hottest Supply Chain Buzzwords of 2008

Finishing off our series on trends/predictions for 2008, here's a look back/look forward analysis on supply chain and procurement developed by global consulting firm Capgemini. The company claims it tackled more than 1,400 consulting projects in supply and procurement in 2007, which if nothing else is a testament to a wide interest in these topics, as well as evidence that these projects aren't as easy to get started as might be desired.

For those who came in late, here are the other installments of our predictions series:

# 1: Outsourcing Will Shift from Asia to the Americas in 2008
# 2: Weaker Dollar Could Make U.S.A. More Attractive to Automakers
# 3: RFID Will Be So Pervasive That You'll Soon Stop Hearing About It
# 4: How Much Intelligence Is In Your Business?

Hot Supply Chain & Procurement Trends in 2007

One-number planning.
Capgemini explains that this new trend in planning and S&OP (sales and operations planning) projects aims to ake sure that both the finance department (budgeting and forecasting) and the supply chain department (forecasting, S&OP, production planning) are working with the same numbers.

Control Tower projects.
Almost all high-tech companies have started up these projects as a result of the increased percentage of manufacturing outsourcing. Where some of the high-tech companies have already outsourced all of their manufacturing operations, these companies increasingly have problems getting visibility into their extended supply chain. Projects are started up to implement global Control Tower to achieve total end-to-end visibility into the extended supply chain.

Service parts logistics.
Margins in the after-market business are higher than in the normal product business hence companies are increasingly investing in their service parts units to increase its revenue.

Retail supply chain transformations.
Demand-driven / pull-driven supply chains are still hot in the retail industry and many retail companies are starting up massive end-to-end retail supply chain transformation projects where their complete retail supply chain is driven by point-of-sale data.

Logistics cost reduction.
Increasing fuel prices has led to increased transportation costs hence many companies are considering transport cost benchmarking, outsourcing tenders etcetera to find areas to keep the transportation costs under control. Freight management and auditing is also an increasingly hot topic to keep the transportation costs under control.

Sourcing of direct materials.
The optimization of procurement processes and departments is still ongoing. Where the initial optimization projects have focused primarily on the indirect spend (e-procurement projects), nowadays the focus is on the direct spend (supplier relationship management, utilizing your supply base for product innovation and growth).

Renewed interest in supply chain strategy projects aimed at revenue growth instead of cost reduction.
Many companies have had a supply chain strategy which was focused on cost reduction. Company executives however are calling for revenue growth and innovation. Supply chain departments are adapting their strategies to focus on these new topics instead of pure cost cutting focus.

Global trade management.
Risk management of global trade is important because of the increased risk of global sourcing and the implications of disruptions in the supply chain. Many companies are starting up projects to professionalize their global trade management processes and to develop simulation environments to be able to optimize their margins in the new global supply chains.

Innovation projects.
R&D departments are refocusing themselves to enable a better environment for innovation. Increasing collaboration with smaller R&D firms (start-ups) puts increased focus on tools and methodologies for working together with external partners in R&D.

Parallel supply chains.
Many European and American companies have already outsourced manufacturing operations to Asia-Pacific. Increasingly companies are setting up also manufacturing operations in Eastern Europe and for the US market in countries like Mexico. These parallel operations enable those market leaders to deliver the low-cost products from Asia Pacific and to deliver the higher-margin products from Eastern Europe. Capgemini points to the trend of fashion retail firms that are pulling product from Asia-Pacific to get the stores full before the season, but are using the Eastern European manufacturing operations to replenish the stores during the season (to avoid lost sales because of the long leadtimes with Asia-Pacific sourcing).

What Will Be Hot in Supply Chain & Procurement in 2008

Price & revenue optimization.
How do you earn the most revenue from the inventory of products / services? Capgemini cites a large retailer which is doing pricing optimization for all of its articles across its stores and the same article is priced differently in each store based on the demographics of the inhabitants living around that store. In spare parts environments companies are increasingly starting up pricing projects to cope with the increasing competition from "independents" and to enable efficient pricing for the huge number of SKUs they typically carry.

RFID has been hyped in the last number of years but now it has reached the bottom and we are seeing a huge uptake in RFID projects around the world. The technology has become mature and companies are seeing positive business cases to implement it.

The market for "green" supply chain projects has grown very fast, primarily in the US and UK markets. Initially started as carbon-neutral initiatives (where the environmental effects of supply chains were simply offset by buying forests elsewhere), the market is now welcoming a new impulse with the "cradle-to-cradle" concepts where the idea is to develop supply chains which do not produce waste anymore.
TAGS: Supply Chain
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