In my previous Part One posting, I provided a mid-tear reflection on the first three of my five 2009 predictions for global supply chains. Overall, my sense is that most of the predictions are holding true.
In this posting, I will explore the final two predictions and my view of where the community stands.
Prediction 4: A changed offshore and near-shoring framework
Mid-year status: Ongoing, but Opportunistic
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 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 falter in recession.
I believe that so far in 2009, the bottom-line for outsourcing and near-shoring is that companies are being opportunistic around future growth markets and betting on where the growth opportunities will lie in the coming years. Thus far, that is not the U.S. or Europe.
Prediction 5: Singular leadership for the global supply chain
Mid-year Status: Active, but in different dimensions
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. 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 change 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 developments thus far, I will modify this prediction to state that continuing business pressures will cause significant organizational change involving supply chain organization.
Additional Mid-Year Prediction
I should also take this opportunity to add a comment of whether I would personally add another prediction at this point of the year.
I’m going to go a bit out on a limb, but I would surmise that with all of the severe cost cuts that supply chain organizations have taken thus far, coupled with many of the business and external challenges we have already outlined, that we may well observe a visible supply chain failure in the coming months. I do hope I’m proven wrong, but I’m going to add this prediction for added commentary by readers.
Please share your own comments. How do you view these predictions thus far in 2009?
Would you add any predictions?