In our previous part one posting, we provided a report card on the first two of our Supply Chain 2010 Predictions penned a year ago.  In this Part Two posting, we reflect on predictions Three through Five.

Prediction Three: Analytics and rapid scenario planning become the key competency for planning, aligning and responding to resource needs across the supply chain.

A year ago we noted that the effects of the global recession have challenged traditional supply chain planning and resource allocation processes. Product demand is in a constant state of flux, and traditional planning and forecasting techniques that rely on past trending to predict the future were not proving to be adequate. That turned out to be quite the case.  There have been descriptions of the ‘just-in-time’ consumer across B2C retail channel, who wait to the very last minute to execute a purchase, or insists on smaller, more cost affordable quantities. In the B2B area, customers often wait until they secure an order, and then insist that suppliers respond to unplanned needs.  All of this has led organizations to rely more on event-driven, or rapid-response planning.

These trends have led to huge resurgence by teams in augmenting the process of sales and operations planning (S&OP).  Indeed, S&OP has turned out to be the most discussed supply chain related business process topic in 2010, with many firms seeking to augment S&OP with broader functional and executive participation, These firms also sought out more forward-looking planning and response tools, and technology vendors who specifically catered to these needs were the beneficiary.

The broader aspects of supply chain business intelligence also had a resurgence, with most all of the major ERP vendors announcing and deploying supply-chain wide business intelligence and analysis tools.  Previous acquisitions of business intelligence technology offering, such as SAP’s Business Objects, became the foundational platforms of these offerings.  In the sourcing, procurement and contract management area, there was renewed interest on the part of customers in broader spend analysis and information discovery related to major categories of indirect procurement, including casual labor, transportation, information technology and others.

The theme of supply chain business processes in 2010 was the ability to make quicker, more timely and informed decisions.

Prediction Four: Supply chain technology deployment to remain tactically focused, hosted application adoption will continue to soar, with continued leveraging power favoring buyers

This prediction also turned out to be correct but there were certain nuances to the trend.  Technology budgets were indeed constrained, and buyers focused on specific tactical process needs or shortfalls.  The emphasis remained on solving a problem with short technology implementation time and rapid payback. Buying decision cycles remained elongated, since teams need to be assured that there is complete analysis and buy-in regarding any technology buying decision.

To no surprise, sourcing, procurement and contract management technology fared rather well in 2010, and most of the major vendors in this area have been noting a good year in component license sales or customer interest. As noted in prediction three, more rapid planning technology was also on the minds of supply chain planning teams, in some cases, de-activating previous optimization-based applications in favor of heuristic or rapid, on-the-fly planning applications. Interest also continued with technology that enhanced supplier visibility and synchronizing customer replenishment or fulfillment processes across the extended supply chain. Many of the user surveys taken during the year continued to point toward tactically focused tools on user shopping lists, tools such as demand response, multi-echelon inventory management, supplier monitoring/management, or global trade and landed cost applications. While customers are clearly influenced on the overall suite breadth of a vendor offering, buying decisions often focused on a certain application.

Adoption of Software-as-a-service (SaaS) or cloud based applications also remained attractive since it allowed for meeting the criteria of rapid deployment, meaningful results at a reasonable cost.  We noticed more entry of SaaS type applications in supply chain wide collaboration, inventory management and analytics.  The nuance however was that supply chain and IT teams are still rather sensitive as to where mission critical planning, supplier, or operational information is stored, and we observed many technology vendors allowing more flexibility in deployment options.

Prediction Five: A resurgence of supply chain carbon tracking along with more momentum in green and sustainable supply chain initiatives.

In our view, this area has shown some momentum but there are mixed results in 2010.

Consumers continue to be sensitive toward favoring environmentally sensitive products, but overall cost of products seems to continue as the overriding choice. While many organizations note that sustainability and green supply chain initiatives have merit, the focus continues to dwell on efforts that save costs for the customer and the business.  Initiatives directed at saving fuel, packaging, or general recycling of materials continue but we observed that the effects of the economy and reduced manpower have slowed the timing of initiatives. Multiple executive surveys published throughout 2010 noted that sustainability compliance was rising as a priority on the CEO and executive agenda, but the timetable has now stretched out across multiple years of initiatives and implementation.

Major retailers, manufacturers and service companies remained very active in declaring supply-chain wide standards and guidelines to insure sustainability. Major announcements of initiatives included General Mills, Kraft, Unilever, along with original activists such as Nike and Procter and Gamble. Many of these initiatives, for instance Wal-Mart, were incorporated into supplier performance goals, which raise the question of which party holds the full compliance burden of sustainability. There have also been some visible setbacks. Frito-Lay attempted to introduce biodegradable packaging in its Sun Chips line of products but consumers complained about irritating package crumbling noise, which forced Frito-Lay to withdraw the package in hopes of a re-design.

Governmental pressures or mandates have waned in 2010, especially in the U.S., where carbon-trading and tracking became a rather hot political issue on the part of conservatives. A year after the much hyped global summit on sustainability, held in Copenhagen, there has been an overall sense of reduced expectations by global governments to mandate any aggressive timetable of compliance standards. Carbon intensive industries have declared their unease with perceived ‘heavy-handed’ governmental directives, while others claim that vagueness in regulations, will slow down any momentum because companies will have the ability to interpret timetables. A lack of global-wide consistency in regulations regarding hazardous materials, product categories, and carbon-tracking standards has only reinforced perceptions of a  cost of compliance burden, and while some larger global-based companies have the power of mandate or veto, smaller businesses remain hampered by cost and reporting burdens.

Green and sustainability will remain important for supply chain considerations, because it continues to make good business sense. However, the effects of the economy and the lobbying of the political system will determine whether there will be any significant increase in momentum. Technology that tracks carbon consumption and sustainability initiatives will also ride the curve of slow and steady adoption.

This concludes our two-part series of report card analysis of our 2010 supply chain predictions.  We will publish 2011 predictions for supply chains before the end of the year.

Now that we have shared some of our perceptions around 2010, we welcome readers to also share their observations regarding predictions that either occured or did not occur in 2010.

Bob Ferrari