Industry supply chain teams continue to drive on achieving and enabling their various 2015 strategic, tactical, and operational line-of-business business and supply chain focused performance objectives. This series of postings is the opportunity for Supply Chain Matters to reflect on our 2015 Predictions for Industry and Global Supply Chains that we published at the start of this year.
Our research arm, The Ferrari Consulting and Research Group has published annual predictions since our founding in 2008. Our approach is to view predictions as an important resource for our clients and readers, thus we do not view them as a light, one-time exercise. Thus, not only do we publish our annualized predictions, but every year in November, look-back and score the predictions that we published for the year. After we conclude the self-rating process, we will then unveil our 2016 predictions for the upcoming year.
As has been our custom, our scoring process will be based on a four point scale. Four will be the highest score, an indicator that we totally nailed the prediction. One is the lowest score, an indicator of, what on earth were we thinking? Ratings in the 2-3 range reflect that we probably had the right intent but events turned out different. Admittedly, our self-rating is subjective and readers are welcomed to add their own assessment of our predictions concerning this year.
In the initial posting of this Predictions Score Card series, we looked back at both Prediction One– global supply chain activity during the year, and Prediction Two– trends in overall commodity and supply chain inbound costs.
In this Part Two posting, we look back at predictions three and four.
2015 Prediction Three: Momentum for U.S. and North America Based Manufacturing Continues and Motivates Broader Investment Needs
Self-Rating: 2.8 (Max Score 4.0)
As we entered 2015, we predicted that the momentum for U.S. and North America based manufacturing would continue with discernible benefits for certain industries and countries. We further pointed to needs to broaden investments in industry supply chain value-chain ecosystems, tiered component supply chains as well as U.S. logistics and transportation infrastructure.
U.S. production and manufacturing activity reflected in the Institute of Supply Management (ISM) PMI Index indicated average growth activity in the first-half of 2015, but somewhat of a declining trend by the second-half of the year. A number of U.S. based manufacturers or brand owners revisited their global production sourcing strategies and re-shored. However, the jury is still out as to whether the trend reflects a substantial rebirth of U.S. manufacturing. Growth however seems to be driven by a smaller number of specialized industries and firms. A strong U.S. dollar created significant headwinds for U.S. based manufacturing costs making areas such as Asia and the Eurozone countries more attractive in raw material and component costs. That has deflected interests in the further building-out of North America based value-chain components.
On the transportation and logistics infrastructure front, in the first-half of this year, manufacturers and retailers continued to feel the effects of the U.S. West Coast port disruption, with holiday related imports and exports flowing in too-late to be sold, and generating lots of consternation on west port infrastructure and labor practices. U.S. East and Gulf Coast ports continued to invest in infrastructure to prepare for the opening of a widened Panama Canal in 2016 allowing more Asia sourced goods to transit direct to East Coast ports.
Manufacturing PMI activity for Mexico averaged 53.17 from 2012 until 2015, reaching an all- time high of 57.1 in December of 2012. In 2015, PMI activity has averaged 53.4 through October which reflects a steady as well as a higher pace than that of the United States. Many global manufacturers continue to invest in Mexico as the lower-cost alternative for satisfying North and Central America based demand. The Boston Consulting Group continues to maintain that the manufacturing costs among China and United States place Mexico as a more attractive alternative for certain direct labor intensive industries.
2015 Prediction Four: Internet of Things (IoT) Continues to Attract Wide Multi-Industry Interest but Challenges Need to be Purposely Addressed.
Self-Rating: 3.8 (Max Score 4.0)
Our prediction was that cross-industry interest levels surrounding products and services leveraging IoT would continue to attract wide multi-industry interest. Indeed, that high level of interest and investment continues, not only across manufacturing focused industries but in the technology industry as well. Research firm Gartner is now estimating that there will be 6.4 billion connected devices in 2016, growing 30 percent from 2015. The one clear testament to this trend was a statement by General Electric Chairmen and CEO Jeff Immelt who declared to his employees: “We went to sleep as a broad based manufacturer and woke-up as a software and analytics company.”
Our prediction further concluded that IoT would drive a further convergence among product and service focused supply chain planning, execution and product lifecycle management processes and that indeed is occurring as well. Many manufacturers continue to explore and deploy product strategies that incorporate both physical products with sensory based services and added intelligence.
Finally, our prediction was that the realities in the lack of consistent global-wide standards addressing data security concerns will provide visible challenges for broader industry deployments. Indeed, the technology vendor community has now recognized these concerns particularly in the light of continued large scale cyber-attacks and associated data thefts throughout 2015. Our recent coverage of this year’s Oracle Open World featured comments from Oracle founder and CTO Larry Ellison as declaring that the technology has not gone far enough in actively addressing data and information security threats and global-wide standards. More efforts will be required in order to insure continued large-scale investments in IoT related strategies and programs.
In our next posting in our look back on 2015, we will review Prediction Five reflecting on certain industry-specific challenges.
In the meantime, please share your own observations and insights regarding momentum in North America based manufacturing and Internet of Things during this year.
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