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Three trends to watch in 2014
As you prepare for the coming year, it's a good time to think about business trends that will affect not just how you manage your supply chain but also how you do your job. In particular, you may want to keep an eye on the following developments, which I believe will have a profound impact in both regards:
The third industrial revolution. Three technologies—three-dimensional (3-D) printing; lower-cost, intelligent assembly robots; and open-source, digital parts and hardware designs—are transforming manufacturing. In the cover story of the upcoming Quarter 4/2013 issue of CSCMP's Supply Chain Quarterly, IBM consultant Paul Brody suggests that the adoption of these new technologies will quickly redefine manufacturing, shifting production from hardware-based to software-dependent processes.
The switch to a "software-defined supply chain," as Brody calls it, has enormous ramifications for supply chain managers. For one thing, it will compress the time period from product concept to finished goods. As a result, there will be less need for inventory or physical movements of parts and products. This could lead to radical change, yet an IBM survey of chief supply chain officers found that 70 percent were either unaware of the coming changes in manufacturing or had no plans to deal with them.
A shift toward homeland production. "Reshoring"—bringing overseas manufacturing back to its original "home"—is finally seeing small but measurable growth. In the past year a number of companies, including Apple, Motorola, and Caterpillar, have announced that they will move some of their manufacturing from Asia to the United States.
In fact, the fourth annual "UPS Change in the (Supply) Chain" survey conducted by IDC Manufacturing Insights found a sharp rise in interest among tech manufacturers in shifting production closer to the point of consumption. But this phenomenon isn't confined to the United States. The Financial Times reported in November that one in six United Kingdom manufacturers is bringing back production from overseas. Among the consequences: As companies move some manufacturing closer to their main markets, lengthy and complex supply chains will start to shrink.
The continued rise of demand-driven supply chains. An increasing number of companies are trying to base inventory replenishment on demand signals rather than on forecasts. Consumer packaged goods (CPG) companies in particular are trying to use point-of-sale data as the demand signal. But the concept of the demand-driven supply chain is starting to move beyond replenishment. Now some companies are revising production forecasts based on demand signals. If manufacturers can pass that information back to raw-materials and parts suppliers, then supply chains will become more responsive to actual customer demand. That could be invaluable for retailers engaged in e-commerce, where buyers are unforgiving about out-of-stocks.
As the New Year gets under way, watch for these trends to gain additional traction. Stay on top of related developments, and when the time is ripe, you'll be ready to make adjustments to practices and operations—and to take advantage of change.
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