Three trends to watch in 2013

As editor of a magazine that focuses on supply chain management, I'm often asked about key developments that will impact how companies apply SCM in their day-to-day business. In a world where technology rules and the pace of change seems to speed up almost daily, there are many such trends worth noting. We'll comment on some of them in this space from time to time, but for now, here are three in particular that I predict will gain more traction in the year ahead.

More manufacturing returning to the United States. Apple's plan to shift some of its computer production from Asia to the United States is a harbinger of more "reshoring" to come. With wages rising in traditionally low-cost countries like China, any cost advantage that offshore labor has over U.S. workers has started to erode. Many companies are rethinking their decades-old strategy of low-cost-country sourcing. Instead, they are starting to move toward "best-cost" sourcing, which takes into account quality and many other factors in addition to purchase price.

Moreover, the ongoing labor strife at U.S. ports serves as a reminder of the risks that come with extended global supply chains. Far-flung supply chains are more subject to disruption from unexpected events (such as natural disasters, strikes, or political upheavals) than are domestic supply chains. As companies look to minimize risks and keep inventories lean, more of them will choose to build products near the point of consumption.

More demand-driven replenishment and production. Consumer packaged goods (CPG) manufacturers have been the pioneers in the movement to achieve demand-signal realization—using actual point-of-sale data from retailers as the basis for production forecasts and replenishment. Some of them have been working with retailers to gain access to actual sales data from the cash register; they then use those demand signals to guide their inventory and production planning. Leading CPG companies have been successfully using demand-signal realization to cut supply chain costs, reduce overall inventory levels, and boost sales. Expect other industries to follow suit this year and begin creating "demand-driven" supply chains.

More use of "big data" analytics. Advances in computer hardware and software have made it possible to pore through enormous amounts of information stored in disconnected databases, often referred to as "big data." This type of analysis allows supply chain executives to make connections between disparate databases that yield clues to better supply chain performance. Companies can conduct a path analysis of their supply chains to get insights into such concerns as where products run into bottlenecks, where the operation adds value, and network locations where damage and unnecessary expenses occur, to name just three examples. In addition, a number of new software vendors are starting to offer big-data analytics applications for the "cloud" that are lower in price than other types.