Bangkok Post : Predictions for the 2010 Supply Chain

WEEKLY LINK

We have all experienced the challenges and impacts of the global financial crisis. With a brighter future ahead, let me propose a collection of Supply Chain Predictions for 2010. With thanks to Chris Verstraete and his SCM blog, I have five that are business-related and another five that relate to technology. Let's start with the business ones:

Challenges in restarting business: With early signs of improvement after the global financial crisis, many companies will have difficulty to manage their supply chains and secure favourable transport arrangements. In drastically reducing costs to a minimum, many companies have used up safety buffers, making them more dependent on suppliers and more susceptible to fluctuations in demand or lead-time.

Industry consolidation: Throughout 2009, there were a number of mergers, acquisitions and closures across the overall trading network. That trend will continue as some companies have been able to retain large levels of working capital, while others' stock value has dropped significantly. This is allowing stronger companies to take advantage of the situation to complement their portfolio and improve their competitive advantage. The high-tech and contract manufacturing industries, in particular, will be subject to further consolidation as tradition demand has shifted and market mechanisms change.

Thanks to the crisis: For large multinationals operating in Asia, the global crisis has been a convenient way to explain poor business performance, most likely caused by a combination of poor investment in supply chain operations and systems in combination with an inability to make responsive changes to business activities. Many will use the recovery to replace ineffective management structures and implement serious turn around initiatives. Recovery will be slow with slow growth, resulting in further cost cutting throughout the year. Redundancies will continue as companies try to get their costs in line with realistic expectations.

"In-sourcing": Outsourcing will continue, but the list of target countries will increase. Environmental and logistics cost considerations should favour countries closer to the EU and the US, while the increase in costs in China and India make other countries more competitive. The concept of "in-sourcing" is becoming increasingly popular, where companies directly contract with infrastructure providers and bring in-house appropriate skilled resources to undertake certain management functions, rather than a complete function being undertaken outside the boundaries of the company as many third-party logistics providers (3PLs) have been structured.

Green for sure: Despite the apparent failure of the Copenhagen conference, environmental efforts are here to stay. The supply chain is driving this, first reducing energy consumption reduces cost, second, moving to greener energy reduces dependency from oil, and third, an increasing amount of countries realise that pushing for cleaner technologies foster innovation and the creation of new business opportunities.

Let's look at technology-related trends.

Collaboration: To improve operations of their leaner supply chains, companies will increase collaboration with their suppliers and customers alike. Using improved communication and collaboration, business exchange services will allow closer links with their partners' business systems, linking them in an integrated community. This could be troublesome for stand-alone ERP (enterprise resource planning) solutions.

Cloud computing: Although the business exchanges will allow issues become more visible, the related security risk and threat from hackers will make this new technology vulnerable. Both Microsoft and Google are working hard at implementing new technologies (referred to as cloud computing) which are solely designed for integrating business activities.

New buzzword: manufacturing operations management: Manufacturing Execution Systems are becoming more popular, and their integration with ERP systems will be a priority. As companies continue streamlining their operations, the integration between the production and the supply chain becomes critical. A new term, Manufacturing Operations Management, will start appearing in 2010 and take an increasing importance as companies look more at their overall operations in a holistic manner.

Social networking: Lastly, business intelligence will increasingly be focused around addressing specific business problems, and may as such take many names. Supply Chain Visibility, Product Track & Trace, Warranty/Quality Management and internet monitoring are some of the names that will be used. Increasingly information will come from outside the companies boundaries, be it suppliers, customers or the net itself. In that process, social networking (such as Linked-In) will move up on the radar screens of companies with a strong brand.

In Summary: Over the past seven years the Weekly Link has covered 360 articles and features on supply chain and logistics, we have appreciated the positive feedback on our articles relating to the global financial downturn. Luckily those involved in international trade are now seeing signs of recovery as demand returns and production lines become more active: we wish you a successful 2010 Supply Chain.

Weekly Link is co-ordinated by Barry Elliott and Chris Catto-Smith CMC of the Institute of Management Consultants Thailand. It is intended to be an interactive forum for industry professionals; we welcome all input, questions, feedback and news at: bjelliott@abf1consulting.com, cattoc@cmcthailand.org