The following Supply Chain Matters blog is part of our ongoing series of deep dives into each of our previously unveiled ten 2017 Predictions for Industry and Global Supply Chains.
At the start of the New Year, our parent, the Ferrari Consulting and Research Group along with our Supply Chain Matters blog as a broadcast medium, provide a series of predictions for the coming year. These predictions are shared in the spirit of assisting industry specific and global supply chain cross-functional teams in helping to set management objectives for the year ahead. Our further goal is helping our readers and clients to prepare supply chain management and line-of-business teams in establishing impactful programs, initiatives, and educational agendas.
The context for these predictions includes a broad cross-functional umbrella of supply chain strategy, planning, execution, product lifecycle management, procurement, manufacturing, transportation, logistics and customer service management.
In an earlier Supply Chain Matters blog postings, we provided deep dives related to:
In this deep-dive series posting, we drill down on our next prediction.
2017 Prediction Six: A Renewed Renaissance in Business Services and Technology Investment
As industry supply chains enter 2017, we believe their there are distinct signs for a renewed renaissance in business services and technology investments that will specifically include compelling needs in supply chain related business process and decision-making needs. While current high levels of uncertainty in global markets persists, we believe that many organizations will not hold back on needed or overdue technology investments related to the broad umbrella that includes augmented supply chain management business process needs. The one gating factor to inhibit such investments remains the availability of talent to harness the benefits of the advanced technology, which opens the door wider for augmented business services.
Changing Business Environment
In the U.S., with the election of Donald Trump as President, and with a Republican Congressional majority, business leaders have turned more optimistic towards a period of expected lower corporate taxes, a means to repatriate cash profits currently held in foreign entities, and a climate of regulatory rollbacks. Within the Eurozone, a political climate fueled by increased populism and a need for more accelerated economic growth similarly lead to a more positive business investment support climate.
Across many industries, the trend of plowing excess cash into stock buyback or increased stockholder dividends have taken a noticeable toll on supply chain and manufacturing business process adaptability needs. Increased profit performance has subsequently been stymied by lack of top-line revenue growth or in increased worker productivity levels and continued reduced supply chain costs. By November 2016, the U.S. unemployment rate had dropped to 4.6 percent with active skilled labor force participation believed to be much lower. Many industry settings are further under pressure by upstart disrupters or more aggressive competition which additionally drives needs for added technology investments to support new digitally-enabled business models.
With advanced business process technology and services buying decisions more centered on line-of-business vs. singular based IT influence, Cloud based technology and services make such decisions more viable since many come with subscription or usage based expense costing vs. fixed capital appropriation. That allows the flexibility to make changes as the business warrants or to augment technology needs based on required bandwidth at any given point. The overriding concern of potential business disruption looms large, which also weighs toward a Cloud-based target business process approach that minimizes significant disruption to mission critical business processes and reduces the managed scope of the technology investment.
Expected Investment Areas
Supply chain leaders have tended to be somewhat conservative, reluctant to embrace perceived new or unproven technology. The adage, “if it ain’t broke, no need to fix it” continues but we predict that will change regarding certain process areas in 2017 as CEO’s require enhanced, digitally-driven top line revenue growth. As noted in Prediction One, industry and global supply chains will be especially challenged by increased risk levels and needs for more informed, analytical-driven decision-making anchored in more predictive decision-making methods. Increased risk levels will manifest in more high-profile cyber and DDoS attacks on corporate networks which spillover or originate in supply chain focused systems.
The continuing effects of always-on online and Omni-channel customer fulfillment will additionally drive needs for added foundational investments in digital supply chain transformation, again focused in areas of mining information insights, more predictive analytics and data visualization trending from vast amounts of existing data. We anticipate further investments in achieving broader end-to-end supply chain network visibility, coupled to inventory, capacity and risk management process and decision-making needs.
In 2017 we concur with some tech vendors that anticipate additional attention from certain industry and supply chain segments in what is being described as “autonomous or low-touch planning systems” that allow the technology to take further control of supply chain planning activities without the need for constant planner intervention and involvement. That can free-up existing planner time for more strategic and tactical planning needs. We anticipate similar autonomous concepts to gain traction in procure-to-pay and order-to-cash processes.
Internet of Things (IoT) Focused Technology
Despite ongoing information security and consistency of global standards hurdles, we predict that early phase or pilot line-of-business driven efforts to prototype new Internet-of-Things (IoT) enabled business models will continue. They will do so because of the need by industry competitors or disruptors to achieve first mover advantage in locking on to new customer revenue streams. Such initiatives will move forward because of needs to develop new competencies in a digital-driven business process and in addressing specific challenges related to data security, interoperability among various edge and core business systems. Initiatives supporting top-line revenue growth while augmenting information security processes are more likely to receive executive and board level approval.
Blockchain technology is being identified by supply chain focused technology providers for applicability in providing higher levels of intelligence regarding the movement of materials across a supply chain or B2B network. Originally developed to support digital bitcoin currency use, this technology is a shared digital ledger, or a continually updated list of incremental transactions. This decentralized ledger keeps a record of each transaction that occurs across a fully distributed or peer-to-peer network, either public or private. The technology is likely to gain broader recognition in 2017 due to its applicability in recording and keeping track of assets and materials.
Industry supply chain teams will likely hear more from technology vendor efforts in developing blockchain technology methods in areas related to supply chain wide transactional automation or supply chain-wide product genealogy and authentication. While we do not anticipate wide-scale mainstream investment in this technology during 2017, industry supply chains should play close attention as to technology vendor developments and planned process support areas since this type of technology has breakthrough potential in certain process areas.
Increased Vendor Merger and Acquisition Activity
A renaissance in multi-industry business process and technology investment activity will surely lead to further merger and acquisition activity involving either the enterprise software, supply chain, Equipment Manufacturing, IoT, and management decision support vendor communities. Autonomous driving, shared riding services and artificial intelligence driven technology will remain of hot interest as will predictive analytics. The name of the game for tech vendors is current and future top-line revenue and profitability growth, specifically cloud and subscription based revenue flows. Signs further point to a more friendly IPO market in 2017 allowing up and coming new technology providers needed capital to expand.
We predict one or two acquisitions involving high-profile supply chain best-of-breed vendors along with a continuation of acquisitions surrounding IoT focused technologies. We anticipate that enterprise vendors will continue to be active in this area along with industrial companies transforming themselves to software companies. Likely players will be Amazon, IBM, General Electric, Google, Oracle, PTC, Siemens, among others. There may well be one or two blockbuster M&A deals in the above segment.
This concludes our Prediction Six drill-down. In our next posting of this series, we will dive into Prediction Seven that calls for enhanced decision-support capabilities among B2B business network and managed services providers.
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