Once a year, just before the start of the New Year, our parent, the Ferrari Consulting and Research Group along with Supply Chain Matters provide a series of predictions for the coming year. These predictions are provided in the spirit of assisting industry supply chain teams in setting management objectives for the year ahead as well as helping our readers and clients to prepare supply chain management and line-of-business teams in establishing meaningful 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 service management.
Our process includes a re-look at all that occurred in the current year, a reflection of future implications, and soliciting input from clients and other supply chain and blogosphere observers. Unlike others, we incorporate a lot of thought and perspective into our annual predictions and take the time to actually scorecard our annual predictions at the end of the year. Readers are welcomed to review our scorecard series of our 2015 predictions that occurred in late November.
In this initial posting, we will unveil our complete listing of our ten predictions for the coming year with summary descriptors. In subsequent postings spanning the remaining weeks of December we will dive further into each of our predictions. In early January, we will publish the complete Ferrari Consulting and Research Group research report, 2016 Predictions for Industry and Global Supply Chains that will incorporate all of our predictions along with even more details and supporting data related to each prediction. This report will be made available to all of our consulting clients and will further be made available for no-cost complimentary downloading in the Research Center of Supply Chain Matters. Anticipate general availability in mid-January with an announcement on this blog.
Let’s therefore begin the process with the unveiling our ten 2016 predictions.
2016 Prediction One: A Year of Uncertainty and Continuous Challenges Related to Global Supply Chain Activity
Our first prediction related to global activity is that industry and global supply chains should anticipate another year of uncertainty in planning product demand and supply needs on an individual geographic region or country basis. From our lens, there will be a need for lots of contingency and various scenario planning options, and sales and operations planning will be very engaged and challenged throughout the year to meet expected business outcomes. Even more production overcapacity across China’s industry sectors will add to downward global pricing pressures affecting specific industry supply chains.
2016 Prediction Two: Favorable Outlook for Inbound Component and Commodity Costs but Procurement Teams Need to Step-up Supplier Management
Global commodity prices, the raw-material of industry supply chains, declined sharply during 2015. The World Bank’s Commodity Markets Outlook published in October 2015 generally called for slightly higher non-energy commodity prices in 2016 including categories of Agriculture, Raw Materials, Fertilizers Metals and Minerals. We believe that may be too optimistic and that continued overcapacity will drive inbound prices generally lower. The most significant commodity price trend remains that of oil, as the price of crude oil has reached seven year lows amidst of global glut of supply and little demand growth.
Due to the uncertainty and the heightened supply risks expected in 2016, procurement teams will need to re-double their efforts focused on supplier assessment and monitoring.
2016 Prediction Three: Turbulence and Continued Change Surrounds Global Transportation and Logistics
As we enter 2016 we are once again compelled to predict another year of turbulence and continued change surrounding global transportation and logistics with particular emphasis in the third-party/fourth-party logistics, global ocean container and air freight segments. We are predicting more consolidation and mergers to occur among ocean container shipping lines and one North America based rail merger to occur in 2016.
2016 Prediction Four: Widening of Supply Chain Talent and Skill Gaps Will Require Organizations to be More Innovative and Purposeful in Recruitment, Career Planning and Training Efforts
We predict that the existing widening skill gaps will compel industry supply chain executives to be more creative and purposeful in recruitment and training. That includes facing the realities of competitive compensation and purposeful career planning for individuals. We expect organizations and recruiters to more broadly define supply chain related jobs in skill dimensions and in expected performance parameters for both current and future organizational needs. Individuals who possess required cross-functional hard and soft skills, including in-depth technology prowess will continue to experience a seller’s advantage.
2016 Prediction Five: Noted Supply Chain Industry-Specific Challenges
In 2016, challenges will remain in B2C Online Retail, Commercial Aerospace, Consumer Product Goods (CPG) and Automotive industry sectors. We have added a further 2016 industry challenge, that being current efforts to deploy more sustainable and health conscious agriculture and food based supply chains.
2016 Prediction Six: Certain Industry S&OP Processes Will Morph to Broader Forms of Integrated Business Planning and Product Management.
The term integrated business planning is often depicted as a specific technology vendor term but in reality, it is a desire that all functions of a firm are aligned at a single set of financial, business, supply chain and operational outcomes. As multi-industry business challenges continue in speed and complexity, S&OP processes will need to foster more agility to effectively deal with change. In 2016 we anticipate that certain S&OP teams, those experiencing high levels of value-chain complexity and business change, will begin to morph S&OP process and decision-making with broader information and contextual decision-making components and begin to identify and address obstacles for incorporating key information integration from product management and financial systems.
2016 Prediction Seven: Internet of Things (IoT) Initiatives Continue to Dive into Realities of Line of Business Strategy and Deployment
In 2016, we anticipate that B2B focused manufacturers and services providers will broaden their perspectives on connected devices and services, especially in the notions of the realities for being a software-driven vs. a hardware-driven enterprise. That includes leveraging intellectual property and software knowledge into more innovative products and services that result in new revenue streams. Thus, the value of products will increasingly be defined by the embedded sensors, software and consequent added services that products provide for customers.
2016 Prediction Eight: Geopolitical Developments Centered on Global Trade Agreements Will Present New Concerns and Challenges for Specific Industry Supply Chains.
Details of the recently adopted Trans-Pacific Partnership will continue to unfold in 2016 while individual sponsoring countries undertake the process of ratification. As TPP details emerge, industry supply chains will begin to uncover certain strategic and tactical impacts related to current global sourcing strategies. China will continue to drive and influence its One Belt, One Road (OBOR) initiative placing additional political and specific industry pressures on certain TPP participants. Industry supply chain teams will thus be caught in the middle of geopolitical pressures and forces in relation to pending strategic sourcing or value-chain design strategies.
2016 Prediction Nine: Alibaba and Amazon Will Expand Their Presence in Customer Logistics Fulfillment.
There are stronger indications that online giants Alibaba and Amazon will expand their presence in last-mile customer fulfillment. Increasing transportation rates and surcharges from both FedEx and UPS in 2015, and in the coming year, make this prediction more viable for the most influential online retailers as well as more evidence pointing to such capabilities.
2016 Prediction Ten: A High Visibility Supply Chain Snafu or Event with Business Implications
This is a prediction that we are obviously reluctant to publish for readers and clients. However, our observation of industry supply chains being whiplashed with unprecedented business change and growing global chain risks leads us to this prediction.
Keep your browser pointed to Supply Chain Matters as we dive into each of the above 2016 predictions in more detail. In the meantime, share your own predictions over and above those that we have outlined. Utilize the Comments section associated with this posting or email us directly with your predictions at: feedback <at> supply-chain-matters <dot> com. We will share all contributed predictions in a final predictions of this 2016 series.
Bob Ferrari, Founder and Executive Editor
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