This continues our series of commentaries outlining our 2012 Predictions for Global Supply Chains. These predictions are provided in the spirit of advising supply chain organizations in setting management agenda for the year ahead, and in helping our readers and clients to prepare their supply chain management teams in establishing programs, initiatives and educational agendas for the New Year.
Readers are welcomed to review our previous series of postings. These include:
Prediction Five: The concept of “supply chain control tower” will come to the forefront, but in 2012, there will be a need for vendors and consultants to focus on further market education and early adoption support.
In our discussions, presentations and attendance at 2011 supply chain forums and events, we have discussed and heard from manufacturers on the need for a “supply chain control tower” technology enablement. The term itself is not one that was primarily conceived by technology vendors, but rather industry visionaries who now acutely understand that there is need to have complete visibility and decision control of all that is occurring across the extended global supply chain. The clock speeds of business change have increased dramatically, along with their subsequent impact on supply and demand planning and fulfillment execution needs. Sequential planning cycles predicated on historic data views and incorporation of the impacts of the latest real-time events are the new challenges for managing highly dynamic supply chains.
The control tower concept stems from OEM’s primarily in the high tech and consumer electronics industry that are deeply involved in supply chain planning and fulfillment execution in a highly extended and complex network. They have come to understand that constant volatility in product demand, supply, and other unplanned events are exposing the vulnerabilities of cadence or process driven planning, execution or S&OP processes.
Supply chain teams require more-timely, and more forward looking decision making vs. just visibility to what has occurred. A control tower can become a single utility view for tracking information related to supply chain wide events, decisions and information flow. In essence, it can provide an information hub that supports two-way decision-making, interaction and extended collaboration for what is occurring and what needs to occur. Consultants and systems integrators have also honed-in on this new requirement, and some pilot process implementations will continue in 2012.
Technology vendors have greatly overhyped the terms “supply chain wide visibility” and we believe that users demand much more supply chain business process control specifics and capabilities with this new concept. Our prediction is that in 2012, the supply chain control tower will come to the forefront of discussion, but this is still an early phase period of market adoption and early adoption. The notion of a supply chain control tower will benefit from more discussion among both functional and IT support teams and will require more market education of the various technology elements that can enable this concept. The payoff in industry competitiveness and financial benefits can be huge.
We anticipate that the technology vendors themselves will converge on this area from four separate perspectives: supply chain execution, supply chain planning and business process management (BPM)/ business intelligence (BI), and B2B trading network perspectives. This will place the burden on consultants, system integrators and end-user teams to sort out the best approach for specific needs. Vendors and consultants will also need to provide more hand-holding support to early adopters in their deployments.
Prediction Six: Cloud computing and broader managed services options directed at enabling selective supply chain business processes will continue to gain more traction.
The momentum for cloud computing technology adoption continued during 2011 as manufacturers, retailers and service enterprises filled-in tactical holes within supply chain problem areas such as procurement efficiency, overall spend reduction, broader supply network collaboration and deeper insights into demand and supply patterns.
The prospective of a much more challenged global economy and added pressures to reduce cost and improve service levels directed at maintaining or acquiring key customers is a given in the coming year. External clouds can provide more flexible options for supply chain networks to exchange information with key customers and partners and collaborate more effectively on planning and execution needs. We therefore believe that more organizations will turn to broader cloud computing adoption or managed outsourced service options for selective supply chain process areas during 2012. Cloud deployments will continue to include both private and public cloud options, with private clouds continuing to be favored within supply chain mission critical management process areas.
The cloud computing option provides enterprises with a further means to limit large up-front costs for the acquisition of key technology, and further provides the flexibility for offsetting the traditionally high annual software maintenance fees associated with enterprise level behind the firewall software use. Cloud-based technology further provides a role in helping supply chain networks to foster “plug and play” process support capabilities. A key sign of acknowledgement of cloud computing market adoption occurred in late 2011 as dominant ERP providers made acquisitions to shore-up their cloud computing options for customers. In late October, Oracle agreed to acquire cloud customer service provider RightNow Technologies, and in early December SAP agreed to acquire HCM cloud provider SuccessFactors. The ERP providers will have to mask their desire to sell more “seat-based” revenue opportunities with the need for customers to have meaningful cloud options that do not require major upgrades of the existing ERP technology stack.
Smaller, specialized cloud oriented supply chain technology vendors will continue to gain more market visibility. Selection however should consider that some vendors may be targets of acquisition from bigger players in 2012 (see Prediction Seven). Insure that your service-level agreements include provisions for carryover, in the case of acquisition or merger.
We also continue to hear reports from vendors and consultants that more managed services options directed at select supply chain process areas are gaining interest. A big help in this area has been a broader understanding and education of the concepts of Vested Outsourcing, as advocated by the University of Tennessee. Vested Outsourcing calls for a outcome-based partnership among the outsourcer and the managed service provider for establishing goals for defined outcomes, joint oversight, and win-win incentives.
Look for more uptake in 3PL / 4PL partnerships in logistics and order fulfillment process needs, procurement of indirect services, and some areas of supply chain planning related to steady-state product offerings. In the U.S., 3PL’s are mindful of the likllihood of a truck capacity shortage if overall manufacturing activity increases, and are continuing to take advantage of cloud delivered technology, intermodal modes, optimized shipment structures and a heightened focus on collaborative capacity utilization.
Managed service options will continue to provide an attractive option for small and mid-sized businesses, but cost competitive, develop or buy factors will remain a part of the process.
This concludes Part Five of our Supply Chain Matters 2012 Predictions. In Part Six, we will explore our Prediction Seven, reflecting on added M&A And strategic partnership activities among technology providers, and Prediction Eight, a move toward stepped-up standards and mitigation efforts on the part of industry and governments to combat the growing problem of counterfeit parts and supply chain theft.
In the meantime, readers are encouraged to share observations and added predictions from your industry and functional lenses.
© 2011 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters, All rights reserved.