In our Part One posting, I provided an end-of-year reflection and final grading on the first three Supply Chain Matters 2009 predictions for global supply chains. In this posting, I will grade the remaining two predictions.
As previously noted I’ve assigned my own grading, on a scale of A (excellent- you nailed it), B (pretty darn good), C (average- you had the right idea), D (what where you thinking). Of course, since I’m self-grading myself, readers are more than welcomed to dispute my grading by adding individual commentary
Prediction 4: A changed offshore and near-shoring framework
Status: Ongoing, but Opportunistic Final Grade: B
The basis of this prediction was my feeling that as industries began to rebound in the post-recession, organizations would take a more rationalized view of overall sourcing. I noted that the BRIC (Brazil, Russia, India, and China) countries would be the first that companies would focus on, because they were each showing positive market growth potential before the global recession began.
As I reflect on the current situation, the majority of these countries, with the exception of perhaps Russia, are indeed leading the growth charge. There have been many manufacturing companies, which we have been noting on this blog, who are clearly shifting or increasing their design and production operations into these regions. I have also noted that the outsourcing decision is becoming more differentiated. Companies I believe will continue to outsource for cost advantage, but the more over-riding objective will remain new market access and growth. The latest announcement from Daimler noting that it would shift manufacturing of its C-Class sedans away from Germany and to the U.S. was somewhat in-between cost-driven and market access. Individualized new sourcing decisions stemming from firms such as Dell Computer and certain Japanese consumer electronics OEM’s have been cost driven, shifting previously owned manufacturing activities more toward contract manufacturers located in lower cost regions.
The situation of near-shoring is somewhat more clouded. The rising levels of drug-related violence, the current decline in overall demand within U.S. markets, and the past incident of the H1N1 flu outbreak have caused manufacturers to take a pause in targeting Mexico. It seems that Canada or the U.S. will remain a more pragmatic option. Previous near-shoring in Eastern Europe also appears to have stalled as the European consumer economies continue to demonstrate flat or slower growth.
In 2009, the bottom-line for outsourcing and near-shoring was that companies became opportunistic in assessing where the market growth opportunities lie in the coming years, and what the most cost-competitive sourcing decisions needed to be to insure overall advantage or competitiveness.
Prediction 5: Singular leadership for the global supply chain
Status: Active, but in different dimensions Final Grade: B Minus
Predictions need to be bold, as well as grounded in realities. It was for this reason that I predicted that supply chains in 2009 will become more centrally managed. Thus far, this prediction is being played out, but not solely based on centralized management.
As an example, Dell began the year with a massive re-structuring that placed supply chain leadership in the hands of re-aligned global product groups, but again changed that relationship to a geographic alignment, the sum total being a decentralized focus of supply chain’s voice Announcements from companies such as Hitachi, Sony, Toyota would thus far indicate a more centralized focus.
I may have thus misjudged the end-state, but perhaps on the right track in terms of pending change. The reasons were obvious. Most cost reduction gains made prior to the recession were probably made with the constraints of existing organizational structures. Procurement can do only so much with suppliers, distribution and logistics can do only so much with transportation and logistics costs. Centralization and/or alignment with worldwide product management changes the game and opens new opportunities to overcome previous barriers. It also facilitates a more holistic view of overall planning and fulfillment processes, as well as opportunities to better integrate supply chain decisions with product development and marketing.
With 2009 developments now as hindsight, this prediction should have stated that continuing business pressures will cause significant organizational change involving supply chain organization.
Added Prediction Six at Mid-Year: A Visible Supply Chain Failure
Status: Most Likely Averted Final Grade: C Plus
When visiting 2009 Predictions in June, we added the above prediction because there were many supply chains in a very precarious state. At the time, I did note that I was a bit out on a limb, but my feeling was that all of the severe cost cuts that supply chain organizations have taken coupled with the business and external challenges coming to pass in our 2009, that we may well observe a visible supply chain failure before the end of the year.
The visible candidates that I had in mind when I added this mid-year prediction were Boeing, Chrysler, and General Motors. Each had to deal with significant challenges related to suppliers as well as overall value-chain capability, and the situation was not looking good. At year-end, it appears the each of these potential candidates have taken on proactive leadership actions to avert our prediction. I must admit that this was one prediction that I’m pleased did not occur, and I enthusiastically accept my lower grade.
As I look back and grade all six of the 2009 predictions, they were overall, pretty darn good. Of course, its one thing for a blogger to be able to pen such predictions, quite another for readers to have to deal with and overcome these challenges during this unprecedented year of significant challenge and change.
Many in the supply chain community lost their jobs as a result of cost and business developments in 2009, and those that survive have to deal with not having enough hours in the day.
My final comment is to shout out a hearty salute and “well done” to all planning, procurement, logistics, distribution and other related communities for proactively managing and navigating through a very difficult 2009. The challenges go on, but its time to give yourself and your teams a pat on the back and a “thumbs-up”. The year 2009 was yet another not to be forgotten.
Let us take the time to enjoy the upcoming holiday season and renew for the coming New Year.
Again, feel free to share your own comments and grading perceptions relative to 2009.
I’m currently drafting the Supply Chain Matters 2010 Predictions, so keep this site bookmarked for upcoming posts.