It is just about time to ring in the New Year.  This is a time to reflect upon the past and turn the focus toward the future.  I do hope that you are enjoying reading both our reflections on supply chain events 2009 as well as the 2010 Predictions series running both this and next week.  As always, feel free to share your own commentary and predictions.

I did not want to close 2009 without noting some perspectives regarding this blog and our New Year’s Resolutions for 2010.   Supply Chain Matters was initiated by myself in February 2008, both as a new voice as well as an extension to our consulting firm.  My goal was to provide broader commentary regarding all of the various facets of global supply chains, of interest to a worldwide audience.  Jason Busch, executive editor of the Spend Matters blog sometimes jokes that I selected the name of this blog to copy the “matters” theme.  But alas the theme was continued with the introduction of the Service Matters blog by my good friend Tim Andreae at MCA Solutions.

The real truth is that I purposely chose the name of this site to reflect what the overall core themes of commentary would be, that supply chain business and technology practices, processes and enabling technology do indeed matter.  Hopefully you have been noting that our postings reflect on both the successes, as well as the disappointments among various corporate supply chains.

2009 has been a great year for this forum, and I want to sincerely thank our loyal readers, as well as our sponsors, for their continuing support.  We have logged 210 different commentaries this year. Since the beginning of the year, total site visits has more than doubled, and daily visits have more than tripled,  making this site one of the top five destinations in supply chain blog commentary.  New visitors, referred to as “unique visitors” in web tracking, have increased over fourfold, and in the past six months, this site has been responsible for over 14 thousand links among various search engine sites.  Our quarterly Supply Chain Matters Newsletter, where we summarize the past quarter’s commentary, has been garnering very positive reader feedback and our distribution list is growing.

We do not sell email lists. Unlike some supply chain web and media outlets, we do not barrage our readers with daily email blasts  in marketing or blatant selling vendor products. Our sponsors are limited, and have been selected on the basis of the quality of their products and service offerings, as opposed to the ad of the month. With ever more limited choices in finding experienced supply chain industry analysis, we anticipate that more of you will utilize our separate consulting and advisory services. All of this has reinforced our belief that we are on the right track for fulfilling your needs.

I cannot close 2009 without thanking my very able proof reader and editor, who happens to be my loving spouse.  Many years as a classroom teacher and school-wide administrator have provided her keen skills in correcting my grammar and prose. I hope to also recruit her as a guest blogger in the coming months.

As we move on to 2010, here are our New Year resolutions for Supply Chain Matters:

• Deeper perspectives on healthcare, alternative energy and green supply chain issues
• More supply chain perspectives for small and medium businesses, who also have their own unique supply chain challenges
• Increased guest postings to provide broader and differing perspectives
• A revised look and feel to this site providing additional reader options
• Increased cross-blogging interchanges to provide different views of certain supply chain challenges
• Introduction of podcasts / webcasts reflecting on key supply chain challenges
• Introduction of a supply chain conference and educational event calendar

Finally, one of my own personal New Year’s Resolution is to try and shorten the length of some of my posts.   Then again, that input comes from my able editor, which means I had better make the effort.

Best wishes to all for a very happy, productive and rewarding New Year.

 Bob Ferrari

In Part One, and Part Two of this series of linked postings, we shared the first three of five predictions for 2010.  In this posting, we outline our fourth prediction.

Prediction Four:  Supply chain technology deployment will remain tactically focused, with continued leveraging power favoring buyers.  The year will also feature more adoption of “cloud” computing.

A highly constrained recessionary driven budget environment impacted the pattern of supply chain technology investment throughout 2009.  My prediction is that this market shift that actually began occurring in 2008 will extend through the bulk of the coming year. 

Severely constrained budgets have limited supply chain technology investments.  Technology investments have been highly tactical or operational focused, fixing problems that absolutely have to get fixed, or investing in technology that is essential to significantly save costs or improve productivity. When the dust finally settles, software industry analysts will cite investments in procurement spend and supplier analysis, contract management, multi-echelon inventory optimization or supply chain performance among others, as areas of most interest in 2009.  I anticipate this tactically-focused investment trend will continue well into 2010.  In the coming year, forward-thinking companies, noting that the bottom has been reached in their industry sector, will make some exceptions by beginning to position themselves for global supply chain competitiveness and growth through selective technology investments, but the landscape of choice remains permanently altered in favor of more buyer choice.

Senior IT and financial executives first preference is that supply chain teams work with existing in-house applications, whether ERP or supply chain in-nature, to address needs.  If that is proven to not be feasible, teams are compelled to do a thorough analysis of investment options. Technology buyers continue to discover that more buying options exist, including software-as-a-service (SaaS) or hosted platform applications.  I believe the popularity of selecting these self-contained applications vs. behind-the-firewall licensed version will increase even more, and hosted technology vendors will benefit more in 2010 by these trends.  Since more and more organizations are increasing their confidence levels in leveraging “cloud computing” options, the move toward business process optimization (BPO) or complete outsourcing of select supply chain processes will become a more attractive option.

It is definitely a buyers market, and technology vendors need to assume that long sales and approval cycles will continue in 2010. Technology vendor references will continue to be scrupulously checked to ascertain what measurable values were received from the technology.  With the latest trends in consolidation among the industry analyst community who specialize in supply chain business process and technology, I believe evaluation teams will turn even more to the Web or to specific social networking groups to directly contact other users, seek external opinion or advice regarding deployment of technology.

In 2010, business process enablement will remain confined to important tactical or operational capability areas:

• A more robust sales and operations planning framework
• Optimizing inventory investment across all tiers of the supply chain
• Enhancing planning to accommodate more forward-looking business intelligence, event or scenario-driven capabilities
• Analysis of supply chain networks for cost and carbon saving opportunities
• Enhancing global transportation, trade and logistics capability

I anticipate that select technology investments in identifying, controlling or mitigating supply chain risk will also pickup sometime in 2010.

Stay connected for the Fifth and final prediction.

 Bob Ferrari

While checking-in on Twitter before the holidays, MfgCrunch alerted to a Washington Post article, Dollar’s decline a boon for U.S. manufacturers.  (free sign-up account required)  The article reinforces what most procurement sourcing professionals already know, that the weak U.S. dollar is helping U.S. manufacturers to win back business previously lost to other global competitors.  This is certainly positive and uplifting news as these manufacturers approach the New Year, but I would add a bit of a cautionary note to the conclusions of this article.

Do not misperceive my intent.  Putting people back to work in U.S. manufacturing is absolutely a positive development and a critical need.  My point is to not get swept-up in point-in-time euphoria.

While the economics of product cost, quality, and logistics tradeoffs are shifting more toward U.S. manufacturing sourcing, the political dynamics of today’s world economy must also be factored.   Here are some points for discussion and consideration:

• The U.S. dollar remains pegged lockstep to the price of oil, and as the price of oil rises and falls, so will the dollar. Thus far, most economists predict fairly stable oil prices in 2010, but all of that can change rather dramatically with another international terror incident leading to supply disruption.
• In today’s global economy, most manufacturers are better off in the long-term being recognized for product and service innovation as opposed to being the lowest-cost producer. Customers will establish a long-term supplier relationship with an innovative supplier, as opposed to an opportunistic relationship with this year’s lowest cost provider.
• Other countries such as China fully understand the economics of the dollar, and will compete aggressively to maintain business, even if it means slim margins. China’s monetary policies help to protect the cost advantages for manufacturing in China.
• Finally, the IMF predicts that the bulk of industrial growth in 2010 will stem from the developing Asia regions such as China, India and South Korea. Any significant shift in sourcing outside of these regions is sure to trigger more internal market protectionist policies such as the recent China policies on government sourcing for high tech and electronics purchases.

My advice to U.S. manufacturers large and small is to enjoy the current advantage of the dollar, but do not waiver from the primary goal of competing in today’s global economy, which is having the most innovative products, services, and supply chain fulfillment capabilities.

As noted in a previous posting, U.S. manufacturers need policies and incentives that insure the most innovative supply networks reside in the U.S.

Agree or disagree?

Bob Ferrari

In our Part One posting, we shared our first of five predictions for 2010.  In this posting, we comment on our second prediction.

Prediction Two: Understanding the vulnerabilities and impact of risk across the extended supply chain, along with effective means to mitigate supply chain risk, will reach the executive agenda in 2010.

This topic is yet another carryover from 2009, but I predict that it will take on more high-level executive visibility in 2010.  The most significant evidence came from a recent ACE Europe / Economist Intelligence quantitative survey involving senior business executives.  The survey clearly brought to light that supply chain risk has reached boardroom visibility and this will cascade across supply chain organizations throughout 2010. Many other CEO and senior executive surveys conducted in the latter-half of 2009 all point to growing concern that risk has become a more permanent outcome of globally extended supply chains.

The existence and incidents of supply chain risk were non-stop throughout 2009.  The obvious risks were certainly those related to the cumulative effects of severe recession. Various economic factors led to incidents of supplier insolvency, capability failures, volatility in inbound commodity pricing and the potential collapse of key industries.  But risk and disruption incidents were far more extensive involving natural disasters, extraordinary weather events, product contamination, product counterfeits, as well as the ongoing threat of the flu pandemic. Risk has impacted multiple industry supply chains, including the most-sensitive and the most regulated.

2010 will bring added risks in commodity price hedging, currency-driven inflation or deflation brought about by continued major shifts in world economies and an increased regulatory environment. The upcoming year of uncertainty extends to supply chain risk, and firms will again need to have cogent identification and risk mitigation addressed.

As we approach 2010, supply chain risk management and mitigation, whether recognized or not, extends well beyond the responsibility of the procurement community, involving many more supply chain and product management functions.   Supply chain disruptions have amounted to losses in the millions of dollars, and have cost some companies major damage to their brands. It should be no surprise that concern has therefore reached the highest levels of management, and that singular accountability or a joint cross-functional team emphasis on risk may well become more focused in the coming year.

Supply chain teams should therefore anticipate a renewed emphasis on awareness, quantification, and mitigation planning related to risk.  One of the continual challenges in prior years has been the lack of singular management leadership and accountability of supply chain risk.  Our prediction is that 2010 will bring clearer emphasis and accountability to this area.

Prediction Three: Analytics and the ability to perform rapid scenario planning become the key 2010 competency for planning, aligning and responding to resource needs across the supply chain.

The effects of the global recession over these past 18 months have challenged traditional supply chain planning and resource allocation processes. Product demand is in a constant state of flux, and traditional planning and forecasting techniques that rely on past trending to predict the future are not proving to be adequate.

As noted in prediction two, continuous supply chain change and disruption is an unfortunate given for 2010.  Severe cost cutbacks have made global supply chain even more lean and vulnerable than they were a mere six or eight months ago.  Consumers and customers will wait until the last moment to place orders, and insist on delivery to match their just-in-time processes. Traditional planning processes that take days or weeks to cycle a plan will not suffice when events require immediate information or commitment. Demand-driven planning will most likely run on very short response times. Planning and resource information will need to be continuously available to be accessed by multiple teams. Multitudes of spreadsheets or planning outputs will not likely be able to keep up.

As industry supply chains enter their post-recession phase, the need for more rapid, event-driven planning will become much more apparent.  Instead of a reliance on past data and trends, planners will have to be able to sense and respond to constant rapid changes or shifts in product demand or supply plans.  Continuous innovation and release cycles in products will challenge both reliance on historic demand factors and require much more time-sensitive sensing of market acceptance and demand patterns.

The winners in 2010 will be those organizations that can predict or anticipate change as it occurs, with scenario plans available to respond in a much swifter manner than ever before.

As noted, a more detailed copy of these predictions is available in a free report. Please send an email request to the following email address: bferrari at blog1 dot com.  (bferrari@blog1.com )  In your request please include the following information:

Your name

Organization and title

Email address

Stay tuned for Part Three and Four of our 2010 predictions.

Bob Ferrari

Electronic Design News (EDN) featured a rather interesting interview with Roy Vallee, the chairmen and CEO of Avenet Inc., a long-time recognized veteran of high volume distribution.  In this interview, Vallee shared an industry outlook for 2010 from the context of the demand-side of high tech and consumer electronics industry.  If you reside in the high-tech, consumer electronics or distribution-related industry, this interview is worthy of a read.

He notes, as other industry observers have also noted, that earlier predictions of disastrous revenue decline made in the first quarter were somewhat less painful for the overall industry by year-end.   He additionally notes that high tech supply chains reacted more dramatically than he had seen in his entire 37 year career in the industry, which is a rather noteworthy comment. “By the time the industry saw a drop in demand, there was a very accelerated and aggressive movement to reduce inventories and cut-back supply chains.” As the year played out, high tech companies tended to align their inventories, even with end demand being below where it was a year ago. He admits that distributors may have cut too dramatically with orders to suppliers causing lots of disappointment with order and cash flow.

Looking ahead to 2010, Vallee believes that the high tech industry will enter the year in pretty good shape in relationship to inventories and capacities, and expects the industry to lead in the U.S. recovery through a gradual increase in end-demand.  Vallee also reflects on positive optimism for growth in China concerning various high tech electronics-related segments.

 A final commentary from my lens would be that readers keep in mind that it was the high-tech sector, both OEM’s, suppliers and contract manufacturers, that not so many years ago initially led the charge for investing in technology that provided broader supply chain resource  and execution visibility through web-based applications.  It would seem that those investments may have paid dividends in navigating the supply chain minefields of 2009.

 Bob Ferrari