The following commentary can also be viewed and commented upon on the Supply Chain Expert Community web site.

This morning I had the opportunity to join fellow bloggers Trevor Miles from Kinaxis and Lora Cecere of The Altimeter Group in a thought leader’s webcast focusing on the topic regarding the potential of the social supply chain.

Trevor set the context for what is described as social, by noting what Geoffrey Moore, noted author and IT observer, labels as systems of engagement.  Lora touched upon current examples and the potential use of social methods in the customer-facing side of supply chain, while I explored some examples and potential that I believe are applicable on the supply side of supply chains.

If you did not have the opportunity to view the webcast, I believe that a replay will be made available on the Supply Chain Expert Community web site.

The topic of leveraging social systems can evoke a number of different responses and I’m sure that your organization is no exception.  In my discussions with other supply chain professionals and even among the blogosphere, there are differing opinions and viewpoints.  Some will note that social media is really nothing more than Twitter and Facebook, and who has the time (or desire) to want to read an endless stream involving all sorts of personal or other updates.  Some senior executives may currently have this viewpoint.  However, if you examine some of the efforts of early adopters, and if your lens is broadened to the notion of how people and teams can communicate with one another and gain insights, the value of social supply chain may have a different lens for your organization. Social concepts do not equate to endless 120 character streams of unrelated or broadcasted information.

Like any other new technology, the focus should not be centered on the technology itself, but rather the business problems that need to be solved, along with the various options available to solve these business problems.  For instance, how can we gain more early warning on pending supply or specific supplier problems?  Are certain products experiencing extraordinary quality failures?  How are our customers responding to our new product launch and what connotations will that have on supply plans? If a supply chain related disruption occurs, and existing communication channels are temporarily unavailable, how will we gain insights as to what is happening at the source?

Yesterday, I had the opportunity to hear a talk from Dr. Andrew McAfee, principal research scientist at the MIT Sloan School of Management, who originally identified the term, Enterprise 2.0. Dr. McAfee observed that while there is some healthy skepticism, leveraged use of social systems have the potential for organizations to connect teams of knowledge workers.  He provided a powerful quote from Lou Platt, a former CEO at Hewlett Packard: “If only HP knew which HP knows, we would be 3X more productive.”  Dr. McAfee further noted that the pace of business has permanently changed, and change will continue to come at a faster pace, and  in global perspectives, sometimes despite all means of planning. While we are in the early days of this transformation, unlocking the explicit and tacit knowledge  of teams of individuals can be the difference in how tough problems are tackled and solved in a much more timely manner.

On our webcast, Trevor Miles reminded our audience of a quote from Angel Mendez, senior vice president of supply chain for Cisco Systems.  “There are over 20,000 employees involved in the activities of Cisco’s supply chain, only 2,000 of which work directly for Cisco.”

That is the new reality of supply chain management for many in our community and that, I would argue, is the strongest consideration for keeping an open mind in incorporating social concepts in your supply chain processes. While we are in the early adoption phases of incorporating social mechanisms, the competitive benefits are important to consider for supply chain management needs.

I’ve encouraged a commentary stream on the Supply Chain Expert Community site and readers are welcomed to login and add their perspectives on this topic.

Bob Ferrari

There have been a number of reports of late that are noting that inflation has become a significant challenge in China’s economy, and this situation is already motivating some industry supply chains to shift component and finished goods sourcing strategies involving China.

A recent Bloomberg BusinessWeek  article notes that pay among China’s migrant laborers rose by 40 percent in 2010, and is expected to climb an additional 20 to 30 percent in each of the next three years.  Predictions are that all of China’s 31 provinces and regions will likely have to boost minimum wage levels in 2011.  Wage increases are not just confined to the high manufacturing concentrated global regions, but within some interior regions of China as well.  Meanwhile, a building global-wide food crisis along with international pressures directed at accelerated de-valuation of China’s currency, adds additional fears for social unrest along with possibilities for further inflation.

Economists are already speculating that China’s economy may be in the lens of the termed ‘Lewis turning-point’, when surplus labor dries-up and hikes in wages, inflation and prices ensue.  The open question is when does this occur.

As BusinessWeek notes in its article, wage sensitive producers involving global apparel, retail and specialty goods are already in-process of re-evaluating or shifting their China sourcing strategies, in favor of other lower-cost regions. Other industry sectors may selectively follow, depending on their individual business needs and circumstances.

In our Supply Chain Matters 2011 Predictions for Global Chains published this past December  (available in our Research Center drop-down page), we predicted that the landscape for global outsourcing of components and finished goods would shift in 2011, and much more attention will be placed on outsourcing strategies.  We however did not anticipate that changing global dynamics would come so quickly in 2011.

There are some important considerations that readers should ponder in these quickly changing forces.  First, sourcing and supply chain planning teams will need to have more sophisticated analytical tools to analyze their options.  Consider that even as I pen this commentary, continuing social turmoil in Libya and the Middle East have caused oil prices to spike to a high of $115 per barrel. Where the price of oil will eventually land in the coming months is open to speculation and debate.  If there is one significant lesson that can be derived from sourcing decisions made in the past is that sourcing teams cannot just view direct labor costs as a sole determinant in any sourcing decision.  There will always be a need to balance considerations for transportation with corresponding needs for servicing geographic fulfillment, including China itself.  Another consideration is the speed of which the analysis, actual decision, and re-deployment takes place. The ability to shift sourcing quicker than the competition can be an important competitive advantage, while having flexible options may be another factor in assessing options and industry competitiveness factors.

The situations surrounding China and other global regions is once again in flux, and now is the time for sourcing and supply chain professionals to exercise smarter, and more intelligent supply chain management sourcing, decision-making and deployment capabilities. Our global world is getting much more complex, and supply chain sourcing decisions will continue to require more sophisticated analysis tools.

Bob Ferrari