12.13.07 top 10 sc predictions - idc: the premier global ... · 12/13/2007 · for 2008...

Global and North American Supply Chain Top 10 Predictions for 2008

Manufacturing InsightsSimon Ellis & Kimberly KnickleDecember 13, 2007

© 2007 Manufacturing Insights, an IDC company. All rights reserved. 2

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About Manufacturing Insights

Leading provider of fact-based market research, custom research and strategic advisory services

Focus on the strategic business application of information technologies for manufacturing companies

Provide unique insights on how to improve business processes through the use of technology

Cross the gap between IT and business with a globalperspective

Global team utilizing resources throughout IDC– “On the Ground” analysts in Asia/Pacific and Europe


Introducing Our Speakers

Simon Ellis, Practice Director, Supply Chain Strategies– Supply chain expert with over 20 years experience at global CPG

manufacturer Unilever – most recently as Supply Chain Strategy Director/Futurist for Unilever North America

– Led Unilever’s global RFID program– Expert on CPG industry and brand-oriented value chains– Specializes in advising clients on LCS (Low Cost Sourcing),

RFID, Data Synchronization, Lean, and Six Sigma

Kimberly Knickle, Practice Director, Emerging Agenda – Expert on supply chain strategies, sustainability, RFID and

sensor networks– Expert on chemicals industry and asset-oriented value chains– Helps identify technology for specific application needs– Recognized leader in Enterprise Application Integration (EAI)

strategies


Agenda

Supply Chain Practice Overview

Manufacturing Challenges for 2008

Top 10 Predictions for Supply Chain

Essential Guidance & Implications– End Users and Vendors

Questions– Live Meeting Chat or Audio


Global Supply Chain Strategies

Address challenges manufacturers are facing across their supply networks

Leverage worldwide data collection for global topics, with reports that address regional issues

Reach across manufacturing segments

Build a bridge with retail coverage

Target audience– Supply chain business executives– Manufacturing CIOs– IT strategists


Manufacturing Challenges

Innovation– Products – Processes

Growth– Revenue/Share– Profits

Productivity– ‘Do more with less, faster’– Sustainability– ‘Aging’


Manufacturing Challenges Drive Business Initiatives

Introduce new products and phase out unsuccessful ones in a global market

Synchronize operations with true demand

Reduce buffer inventories

Comply with mandates and regulations

Deliver goods with variable schedules, in special sizes, combinations, and more


Recent Global Supply Chain Survey Results

Global survey of manufacturers, retailers, and wholesalers

823 respondents in Europe, Asia Pacific (includes China), North America– 648 manufacturers– 175 retailers and wholesalers

Goal: Identify innovation and IT investment in supply chain and relate to overall business objectives


Recent Global Supply Chain Survey Results

Business Objectives– Increased quality and customer satisfaction– Reducing overall cost and improving productivity

Supply Chain Strategies– Reducing costs: Materials, manufacturing, transportation, and/or logistics– More responsive, more timely decision-making across the supply chain

IT Investments– Advanced supply network planning or manufacturing scheduling

Profile: Companies under 10,000 employees; asset and engineering oriented manufacturers

– Advanced inventory management or inventory optimizationProfile: Companies with 1,000+ employees; brand, technology, and engineering oriented manufacturers

Top 10 Supply Chain Predictions for 2008


Top 10 Predictions

These are predictions for 2008. As such, they are areas of anticipated focus based on our research, briefings with both end users and vendors, and knowledge of the industry.

The order of the predictions is not prioritized by impact or importance. All of the 10 predictions we discuss are areas that we believe will drive activity and IT spending before the end of 2008.

Please keep in mind that …


Prediction #1 - New Supply Chain Investments Have to be Simpler and Faster to Integrate, and Must Deliver Value Sooner

Drive for business process advancements puts more pressure on integrating supply chain applications quickly.

Longer-term survival of smaller/best-of-breed vendors depends upon partnership strategy to deliver best practices.

Simplification - New investments must be simpler and faster to integrate, and must deliver value sooner.


Prediction #2 – Outsourcing Reaches Deeper into the Business

Outsourcing continues to ramp up and reaches supply chain areas that were once considered core competencies.

IT Budget pressures mean core competencies are a smaller set of priorities and outsourcing supports “do more with less” strategy.

‘Strategic outsourcing’ will result in companies becoming increasingly reliant on the extended supply network.

Cost - Outsourcing reaches deeper into the business, as companies redefine core competencies to a smaller set of strategic priorities.


Prediction #3 – Profitable Proximity

Low cost country sourcing isn't just about China, it's also India, Vietnam, South America …. and sometimes it just doesn’t make sense.

Skyrocketing energy costs (as well as currency exchange rates), and the implications for transportation/logistics costs may change the dynamic for many categories.

While low-cost manufacturing is seductive initially, a 'total supply chain cost' perspective is far more sensible.

Cost, the sequel - Manufacturing cost still matters, but companies increasingly look at total supply network cost to evaluate sourcing options.


Prediction #4 - Emergence of Sustainability

The new metric for the 2008 supply chain is sustainability, reprioritizing criteria for suppliers to include environmental factors and regulatory compliance.

End-users demand visibility into their own operations and those of their suppliers and suppliers’ suppliers.

Emergence of Sustainability - Your suppliers’ problems become your own, especially when they are related to sustainability.


Prediction #5 - Business Value Comes First, RFID Technology Second

Radio Frequency Identification (RFID) has finally shed its hype – and not a moment too soon!

Implementations are returning to first-principles of business problems and ROI.

Current and potential buyers are impatient with RFID and only move forward if vendors deliver complete applications with ROI.

First Principles – Business value comes first, RFID technology second.


Prediction #6 – Start your RFID Projects at Home

More sensible RFID implementations bring a reemergence of ‘four walls’ applications (asset tracking, ingredient monitoring, assembly process monitoring).

Successful RFID pilot applications are across the manufacturing segments with many examples of both IT and non-IT asset/spare parts tracking.

A greater focus on ROI, and the chronic shortage of qualified RFID system integrators further motivates companies to ‘start where you know’.

Four-Walls Focus for Technology – Start your RFID projects at home.


Prediction #7 – Quality Reigns Supreme in a Back to Basics Approach

A renewed focus on back-to-basics raises the profile of lean and six sigma quality controls within the supply chain.

The supply chain faces a fading infrastructure and loss of talent (or knowledge), yet the challenge to fundamentally balance cost and productivity with customer service intensifies.

Quality control practices, used successfully within manufacturing, become an increasingly necessary component of the supply chain.

Focus - Quality Reigns Supreme in a Back to Basics Approach.


Prediction #8 – Risk Management is the Key to Becoming Global

Risk management becomes a priority as companies struggle to movebeyond multi-regional operations to truly global supply networks.

It enables companies to better balance the tradeoffs inherent in low-cost country sourcing and extended supply networks, and more.

Risk management impacts the development of sourcing strategies, where business interruptions can be far more pervasive and extended in global supply networks.

Things will go wrong - Risk management is the key to becoming global.


Prediction #9 – The Supply chain is the Essential Ingredient for Global Competition

Expect more consistent participation of the supply chain in broader business decisions, as well as a renewed focus on supply chain execution systems (SCE).

There is a reduced tolerance for supply chain ‘waste’ and clear evidence that supply chain involvement in NPDI (‘supply chain as partner’), can speed up the process and reduce rework.

Continued pressure on supply chain costs motivates businesses tolook more closely at better execution - TMS, network optimization, event management.

The TRUE Global Supply Chain - Finally, companies recognize that the supply chain is THE essential ingredient for global competition.


Prediction #10 – Focus on Fulfillment-Driven Techniques

Supply chain planning elevates demand-shaping techniques and moves more to a fulfillment-driven, rather than demand-driven, approach.

Companies find the challenge of moving from ‘capacity optimization’versus ‘buffer inventory optimization’ approach difficult to overcome given the cost tradeoffs.

Distance Matters - Practical application of fulfillment-driven techniques wins out over the lofty demand-driven dreams to deliver SC efficiency.


Implications for End Users

Functional and IT resources should be positioned to be able to support constant or unanticipated change throughout 2008.

As companies continue to evolve from multi-regional to truly global supply networks, Supply Chain agility becomes increasingly important.

Consider a renewed and business-relevant focus on risk management to enhance your ability to quickly and efficiently respond to changes in either product lifecycle management, supply flexibility, or supply chain contingency planning.

Think first-principles, particularly in the context of implementing new technology or adopting 'industry darlings'.


Implications for End Users

Assess low-cost manufacturing sourcing strategies utilizing a total system cost approach that incorporates all costs associated with a final product – including risk-related supply interruptions.

Continue efforts to broaden lean, postponement, or Six Sigma initiatives beyond the manufacturing floor. Consider the Manufacturing Insights framework for supply chain–wide fulfillment execution systems that connect processes and information on the execution floor with overall needs for customer fulfillment.


Implications for Technology Vendors

We expect to see upward of 5% worldwide growth for supply chain applications and technology (although increasingly gloomy economic predictions for the U.S, in 2008 may depress growth somewhat), with certain geographies such as Asia/Pacific growing at double the worldwide rate.

End-user focus on speed and ease-of-integration means that those vendors seeking to grow beyond the average worldwide rates will need to either have very focused product strategies to support regional markets requirements or continue to consider pre-integrated partnerships.

We see a return to ROI-driven investments, with end-users expecting fully integrated and complete applications.

This will be particularly important in the growth and application of new technology, where potential customers are tending to look more closely at either business-process or existing technology as more practical and prudent alternatives.


Implications for Technology Vendors

We see movement to begin with internal 'four walls' implementations of new technology before attempting extended supply chain engagements.

Finally, we see a desire from end-users for better decision making tools. This came through loudly in the Manufacturing Insights 2007 Supply Chain Survey, and it is implicit in a number of our predictions where trade-offs must be made. An example would be in the last prediction where we talk about the fact that although manufacturing cost still matters, companies are increasingly looking at total supply network cost when evaluating sourcing options.


Questions? Live Meeting or Audio

Simon Ellis, Practice Director, Supply Chain Strategies

[email protected]

Kimberly Knickle, Practice Director, Emerging Agenda

[email protected]


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12.13.07 top 10 sc predictions - idc: the premier global ... · 12/13/2007 · for 2008...

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