On an annual basis, the Ferrari Consulting and Research Group provides a series of supply chain management predictions for the coming year. These predictions are provided to our clients and readers of this Supply Chain Matters blog in the spirit of advising line-of-business, multi-industry cross-functional supply chain management and supporting IT teams a sensing of meaningful initiatives, programs or capabilities we feel will be of importance.
Our process began with a revisit and self-evaluation of the prior year’s predictions along with soliciting input from clients, organizations and supply chain technology and services providers. The context of these predictions includes a broad cross-functional umbrella of what today is supply chain management, and includes areas of supply chain leadership and strategy, product management, strategic sourcing and procurement, planning and execution, manufacturing, transportation and logistics, online fulfillment.
In this particular first of the unveiling series, we highlight the first five of our 2018 predictions with some brief summarized descriptors. A follow-on blog will highlight predictions six through ten. Both blog unveilings can be subject of reading during the upcoming Christmas holiday period of downtime and celebration.
Subsequent multi-part follow-on blogs to be published in January will provide deeper perspectives and added insights to each of our predictions.
Throughout the coming year, clients and readers should anticipate augmented research reports and continuous updates to addressing the areas identified in these predictions.
Let us therefore begin with the first five of our 2018 Predictions:
2018 Prediction One: An Buoyant Global Economic and Multi Industry Supply Chain Outlook Comes with Important Signs of Caution
The global economy is now growing at its fastest pace in over six years and most global economists predict that the momentum will continue in 2018. The International Monetary Fund’s (IMF) World Economic Outlook published in October observes that the global economic picture is now very different than just 18 months ago, with accelerating growth occurring in Europe, Japan, China, and the United States. The IMF is therefore forecasting that overall global growth of 3.6 percent in 2017 and 3.7 percent in 2018. Further noted is that while short-term risks are broadly balanced, medium-term are still tilted toward the downside.
The global growth momentum trend is also reflected in current global supply chain management activity indices. The composite global J.P Morgan Manufacturing PMI reading in November 2017 accelerated to an 80-month high, the highest reading since March 2011. Business was reported as improved across the board in consumer, intermediate and investment goods sectors.
Global industry and supply chain teams need to orient their 2018 plans and resources toward managing healthy output levels, but at the same time be prepared to manage the most important cautionary signposts reflected in a far tighter job market, high capacity utilization levels, highly uncertain geo-political trade developments and ever more heightened supply chain risk areas.
2018 Prediction Two: An Optimistic Yet Challenging Year for Industry Supply Management Teams
Multi-industry Supply Management teams approach 2018 with positive optimism regarding business growth, but similar to 2017, we are once again predicting another challenging year for managing direct materials costs. The year will present compounding carryover challenges from 2017, and added ones for the coming year. While inbound commodity prices are forecasted to have modest increases, accelerating global demand for products can lead to individual shortages or supply-demand price pressures. From a supply management leadership perspective, teams will again be tasked with organizational transformation needs out of necessity, and it stepping-up efforts in mitigating and managing supply risk.
Broadened business advisor and general management needs will again permeate areas of Supply Management along with leadership needs in balancing multiple expected business outcome needs. Specific challenges relate to longer lead-times for components, and increased levels of supplier intelligence. Global trade uncertainties, including Brexit, NAFTA and European Union trade developments will require added attention in international supply management strategy and tactics.
Clients and readers will recall that we predicted a supply chain talent perfect storm in 2017, and to a person all our interviews confirmed that this perfect storm played out in multiple industry settings. Described was a great but challenging year in supply chain related recruitment, one that reflects a candidate’s market, with talent in short supply, especially talent in the most demand. At year-end, the U.S. Bureau of Labor Statistics indicates 400,000 unfilled open positions in manufacturing. The trucking industry continues with multi-year efforts to recruit or retain needed drivers while professionals with highly experienced in-demand cross-function supply chain management process and technology skills have far more employer choices in the current environment.
We predict that in 2018, the supply chain talent perfect storm will intensify even more as the dimensions become more challenging from an overall talent demand perspective. Feedback from recruiters is that employers must be prepared to address compensation and work-life balance candidate needs as well as step-up organizational and external training efforts for existing individuals.
With every passing month, the increasing frequency and sophistication of cyberattacks, some by state-sponsored sponsors, threaten to do harm to major brands, services providers and their customers. Many specialists in the field of cyber security are predicting that 2018 will present even more challenges for data and information breaches, and some have raised alarms that the next potential threat will reflect physical control of devices within physical manufacturing, utility or transport networks.
We in-turn are predicting that cyber-related risk and information security safeguarding will consume business, IT, and industry supply chain teams, not so much by choice, but from compelling needs dictated by stockholders, boards and C-Suite executives. Brand and reputational risk is now a significant top-of-mind concern for businesses and budgets will likely reflect supporting mitigation efforts as a top-priority. Such concerns will strain budgets and available resources and will especially consume the time and attention of procurement and supply management teams.
2018 Prediction Five: A Shifting in Priorities for Supply Chain Digital Transformation, Data Management, and Technology Enhanced Business Relationships.
With accelerated adoption of the online buying economy, many industry supply chain organizations have acknowledged needs to transform processes toward what is often termed digital transformation. The challenge up to now, has been articulated by line-of-business and supply chain management leadership as overall readiness, resources, and timing.
We predict that in the coming year, digital timetables will likely accelerate because of more compelling business forces accelerating such changes. One relates to the current speed and scope of multi-industry disruption. The second relates to the comprehensive corporate tax reform measures in the U.S. that could either accelerate or re-focus specific areas of supply chain transformation.
In terms of implications to size of business, we predict that these shifting priorities will have a broader positive impact on small and mid-sized businesses because that will likely not have the legacy of older legacy processes and supporting systems along with the ability to move toward digital transformation with fresh thinking and a quicker pace.
Changed priorities will further involve Industry and Supply Chain Network Clouds, Blockchain Technology pilot proof-of-concepts, Data Management and advanced analytics-based decision-making. We anticipate pause or some setbacks in in Internet of Things (IoT) efforts because of data and cyber-security concerns.
In a subsequent Supply Chain Matters posting scheduled for Wednesday, we will highlight our five other 2018 Predictions.
As a reminder, readers can share or input their individual views of what to anticipate in the coming year by either adding comments to this particular or subsequent posting or emailing us directly: feedback <at> supply-chain-matters <dot> com.
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