Dan Gilmour of Supply Chain Digest  in his newsletter for Oct 22, 2009 published a list of “things” that will change in supply chains by 2015.  There were a number of things that Dan identified that really boil down to the blurring of operational supply chain planning and execution.  We have been seeing this trend for some time, driven by the volatility of demand and outsourcing, which in turn drive the need for greater responsiveness.  My full response to Dan’s article is below.  I would welcome your comments.

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Great article, Dan.

I liked your identification of the drivers, and wished that there had been more prediction of what the consequences would be.  For example, how will companies reconfigure their supply chain?  In this particular case, I think we only have to look at Apple and Cisco to see some direction.  Both of them outsource virtually all their production. And of course Apple, as you state in your article, is at the forefront of the “digitization” of the supply chain.

What really fascinates me is the rise of the brand owners in China and India.  I saw an article today in McKinsey Quarterly that China’s economy grew 8.9% in Q3 this year.  Even in the boom period before 2000, growth rates in the US fell short of this number.  Of course, this is even more startling when comparing the growth rate in China over a similar period.

I think we are missing the effect this will have on the Western brand owners such as Apple.  It might seem counter-intuitive given Apple’s record quarter and I have no idea of the product strategy, but I wonder how much they are designing products for the Western world and how much they are assuming the Eastern consumer needs are the same. 

As you correctly point out, there will be huge impacts on “product design, pricing, logistics and much more.” I am fascinated by the growth of Eastern brand owners such as Acer, Lenovo, and Huawei.  We have weathered the storm of the Japanese companies in the 1980’s – Sony, Toshiba, Toyota, Matsushita, … but those were different economic times when those companies were designing products for a western market. 

I am not yet convinced that Western brand owners are paying sufficient attention to the needs of Eastern markets.  These have been very Western focused, but I suspect as the pride in their countries economic performance grows, so will their confidence and demand for products to meet their specific needs.

We have a number of customers who are the forefront of the blurring of operational supply chain planning and execution.  Of the 10 things you identify, I think this is a consequence of many of the others. And you are correct, this blurring is reaching up into tactical planning too with more and more companies running S&OP on an as-needed basis.

The factors you identify, specifically reduced inventory levels and pervasive visibility, are driving this blurring.  We all know that inventory has been used as a buffer between the demand and supply chains.  Reduced inventory levels require a much more agile supply chain that is very responsive to change.  And of course the supply chains need to be reconfigured to be more responsive. 

Dashboards are of course a necessary precursor to understanding whether or not one is on-track to meet future objectives and any deviations need to be addressed before they become “actuals” and appear in a scorecard.

Once again, thanks you for a great article.

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Tags: China, Globalization, Response Management, Sales & operations planning (S&OP), Supply chain, Supply chain planning
Posted in Sales & operations planning (S&OP), Supply chain management
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