The Supply Chain Matters blog reflects on why various supply chain management contributors need to increase their perspectives on the larger picture.
In our previous posting we highlighted our first 2019 prediction which relates what supply chain management teams should expect from a global economic outlook perspective.
We sometimes receive feedback from some readers as to why global economic forecasts and higher-level operational manufacturing and supply chain activity indices are areas to pay attention to. Are these not what economists, industry analysts and business news should pay more attention to? In some cases, the answer is yes. Increasingly, and especially in the coming year, the answer is that understanding is very important. Global economic forecasts now include a lot of differing sign posts. As we traverse through the remainder of our predictions for the coming year, they will include differing directions as well, but dig deeper, and readers will be able to discern a shifting of direction, the signs are turning.
Our response is simple- the mission and roles of supply chain management have become far more strategic for supporting expected business outcomes. That includes not only functional key-performance indicators in expected areas for either on-time-delivery, inventory and service levels, but business outcomes related to revenue attainment, product margin, line-of-business profitability and customer retention levels, among others. Some of these goals will conflict.
As readers review all of the various summarized data presented within our first prediction, think about the implications of the trending of data. Consider generalized media reports that the global economy is expected to grow 3.7 percent in the coming year vs. an understanding that economic growth in the coming year is very regional specific. Growth for the U.S. is far different that that of the two other largest economies namely China and the Eurozone. Consider that revenue and profitability growth expectations for your employer may well be focused on a different global region. If you are a supply chain planner, you need to consider that product demand plans will naturally differ by region, and that upside or downside risk to that region’s forecast will have degrees of probability. In other words, global-wide generalized assumptions related to product demand are not prudent given the current global landscape.
Readers likely noticed a lot of emphasis on heightened global trade tensions and tariff actions. If your role is in supply chain operational execution, logistics or transportation management, the implications relate to anticipating added delays in customs clearances due to tariff paperwork classification, a supplier’s added routings of material to bypass a tariff only to discover that authorities crack-down on such methods. Many supply chain planners are already aware that added tariffs caused decisions to move-up inventory purchases to avoid tariff implementation dates. In 2019, the challenge is working with sales, product management and procurement teams to factor residual inventory levels to expected 2019 product demand and now, higher landed costs factors. Perhaps everyone’s to-do list is updating product cost and master data to the new realities of the coming year.
Finally, readers will notice that economic data from global economists differs from the viewpoints of procurement and supply management. That can be from a variety of reasons related to timing of the survey, perspective of those voicing opinions, or industry sectors involved. The overall message is that sales and operations planning, operational and logistics planning in the coming year are likely to be ever changing in terms of assumptions and added data. The discussions will likely be lively and interactive.
The bottom line is to not assume business is great and let’s keep moving to 2018 planning and execution plans and initiatives. Teams will need to dig deep into data, expect business assumptions and priorities to continually change while striving harder to understand and translate what’s occurring across the bigger picture.
Many customer supply and demand network business processes converge across the roles of supply chain management. An anticipated year of high volatility, uncertainty with lots of prevailing risk imply that information will change often, and nothing should be assumed to be permanent other than supply chains and those that make up its fabric do indeed matter for businesses.
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