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Report of Pending Product Sourcing Risks for European Based Manufacturers

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This week, The Wall Street Journal CFO Journal warns (Paid subscription required) that an approaching World Trade Organization (WTO) deadline could well make European goods made with components or materials imported from China more expensive. We highlight this news item because it may well be a forerunner to efforts undertaken in 2017 by the new Trump Administration in its Make America First set of initiatives related to global trade.

Such pending actions are a result of a building frustration that Chinese manufacturers are dumping products in other global regions to compensate for declining domestic market demands and consequent excess capacity among various industry sectors. The discerning shift towards a nationalist environment driving political actions and/or political candidates in developed economies now makes such actions more likely.

These tariff actions, however, often feature other broader consequences. As an example, raw steel that originates from China because of lower cost factors, becomes subject to higher punitive import tariffs when dumping is claimed, and thus adds to the previous planned construction costs of projects and products in the destination country. While the EU in some cases, imposes lower punitive tariffs than does the U.S., all can change in the coming months.

The CFO Journal report indicates that on December 11, the European Union could opt to grant China “market economy status” or the EU could opt to draft new trade rules that do away with the distinction between market and nonmarket economies. Regarding the former, sources are quoted as indicating that the odds are not leaning towards China achieving such as status because of the existing pressures from southern EU states and industrial sectors with a protectionist agenda. The December 11th date is key because a clause in China’s WTO admission protocol indicates that countries seeking to impose anti-dumping duties against the nation can only use non-Chinese data until Dec. 11, which marks 15 years since China’s admission to the trade organization.

The WSJ report surmises that the European Commission is more likely to “tighten rules against foreign-government subsidies and dumping- or exporting products at below domestic prices”, punishing those firms that benefit from Chinese subsidies. While the December 11 deadline would likely be missed, the revised proposal could be in place by the spring of 2017.

The report cites other sources as indicating that such an effort: “poses risks for companies that have outsourced parts of their supply chain to China.” European industries such as automotive could suffer the effects through higher import duties on China based parts and intermediary products.  Other industries could well be impacted according to this report.

The consequent obvious question is how will the government of China respond to such initiatives and whether more punitive Chinese import tariffs are imposed across various industry product value-chains that spill over to other global trading blocks such as the United States.

For strategic product sourcing and supply chain network planning teams, these potential trade enforcement scenarios that are global in perspective require teams to be prepared for educating senior management on product and business margin impacts. Once more, contingency product sourcing planning will likely be a more important core competency in the months to come.

 

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


The Initial Signs of the Donald Trump Era- Continuous Change, Uncertainty and Supply Chain Risk Mitigation

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As Supply Chain Matters has noted in prior commentary, the election of Donald Trump as the incoming President of the United States will present quite a number of global and domestic supply chain management uncertainties for industry teams to manage over the coming months, and perhaps years. The question is how to be prepared.

Thus far, Trump’s initial communications and proposed Presidential Cabinet appointments would imply that campaign promises to kill unfavorable trade agreements as well as openly confronting American companies to keep jobs in the United States are holding true. Then again, news of potential Cabinet and advisor appointees would imply a pro-business administration.

The first public confrontation involving the heat and air conditioning Carrier business unit of United Technologies over proposed job reductions that were transferring to Mexico has received quite a lot of media coverage. Trump’s supporters are elated with this initial confrontation. In the end, after closed door discussions, Carrier has agreed to keep roughly 1,000 jobs in Indiana, while the state of Indiana had to agree to provide UTC upwards of $7 million in financial incentives to remain in the state. While Carrier still plans to invest $16 million to retain some operations in Indiana, the intent is to go-ahead with the movement upwards of 1300 other jobs to Mexico and close another facility in Indiana as originally planned. While visiting the Carrier Indiana facility yesterday, Trump once again vowed to reexamine existing trade agreements such NAFTA, and put U.S. businesses on-notice that there would be consequences for any decision related to the movement of jobs out of the country.

Political opinion is now raising the specter of U.S. corporations having to base business sourcing decisions on threats of punitive actions. That further raises speculation that other countries will respond to a Trump administration with threats or their own punitive actions.

On a somewhat positive note, the selection of Elaine Chao, a former Cabinet secretary serving eight full years during the Bush Administration as the nominee for Secretary of Transportation is being perceived as an intent to follow-through on the campaign promise to aggressively invest in needed infrastructure in roads, bridges and other badly needed U.S. transportation infrastructure needs. Ms. Chao provides what is widely perceived as an extensive policy background and she is also the spouse of U.S. Senate Majority Leader Mitch McConnell. If confirmed, Ms. Chao will inherit management of current unprecedented levels of safety related recalls involving the U.S. automotive sector, especially those related to air bag inflators manufactured by supplier Takata. She will have oversight of regulations pertaining to Uber-like transportation services as well as regulations pertaining to autonomous driving vehicles.

For industry supply chain teams, there is little doubt that capabilities in assessing supply chain network design decision support options based on criteria related to direct labor costs, inventory, transportation and landed costs, as well as what may be constantly changing local content requirements will be essential.  Capabilities in managing what may turn out to be very fluid and changing global trade management policies and regulations will obviously be essential along with integrating such information with existing product sourcing and planning systems.

Supply Chain Matters sponsor LLamasoft has already indicated a marked uptick in interest levels in the firm’s supply chain network design and Supply Chain Guru focused technology coming from UK based firms because of the Brexit referendum, and anticipates similar increased interest levels as the Trump leadership era unfolds.

As teams prepare for their 2017 investment and resource budgets, minimizing risks related to global sourcing and material movements, deeper analysis and more informed decision-making capabilities, along with overall agility in supply chain focused decision making should be high priority areas.

In 2017 and beyond, supply chain and product management teams will indeed be very involved in counseling senior and line-of-business management on the various whiplash effects of a far more changing global trade environment.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Free Trade Discourse- Time to Shift Emphasis Towards More Meaningful Initiatives

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Prediction Eight of or 2016 Predictions for Industry and Global Supply Chains (Available for Complimentary Downloading in our Research Center) anticipates developments surrounding global trade will occupy the attention of many industry and regional global supply chain organizations in 2016 and beyond.

The most prominent trade development is turning out to be the ratification process involving the proposed Trans-Pacific Partnership (TPP). In early October, ministers of the 12 TPP countries announced conclusion of their negotiations regarding trade among what is estimated to represent 40 percent of current global GDP, which is rather significant, especially from a global supply chain context. The countries to be included in TPP are: Australia, Brunei, Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. In early February, ministers from the 12 countries signed-off on the overall agreement paving the way for the individual member country ratification process that must be completed in two years.

Supply Chain Matters highlighted some of component sections within TPP in a two-part commentary series in November.

As we near the completion of Q1, the TPP ratification process among member countries has involved much political discourse. It now appears that a building political tide among developed countries will delay or possibly derail TPP.

Our original feeling was that as TPP details emerged, industry supply chains would begin to uncover certain strategic and tactical opportunities and impacts related to current global sourcing strategies. Some of these impacts will relate to specific industries and include either current or potential future global value-chain strategies that exist in China, Vietnam, the Eurozone or other countries. Among the goals of TPP was lower trade barriers and increased export opportunities for developed countries in their efforts to market and sell more products in the emerging markets of Asia.

However, as the ratification process continues to unfold, lots of concerns are being raised regarding the true benefits of open global trade as well as the protection of jobs in developed countries.

While business trade groups and associations such as the U.S. Chamber of Commerce have endorsed TPP, other industry factions as seeking either additional concessions or added protections. For instance, pharmaceutical firms are seeking broader provisions for intellectual property protection while the apparel industry remains concerned that TPP could disrupt efforts in fast fashion sourcing, where regional designs are sourced and produced in the consumption region just as the Eurozone of the U.S. in order to accelerate time-to-market turnaround.

Yesterday, a front page article appearing in The Wall Street Journal provided added awareness to the notion that free trade policies are not at all resonating with the electorate in the United States and other developed nations. Resentment toward free trade and indeed building frustrations around government policies more influenced by lobbyists and big business appears to occupy the minds of voters, and consequently, legislators.

In the ongoing U.S. Presidential primary voting process, candidates for both the Democratic and Republican parties have each declared opposition to TPP. What’s even more interesting is to observe primary elections held in U.S. states that would seem to have significantly benefitted or were harmed from free trade. For instance South Carolina, which has become a hub for automotive manufacturing and exporting for a variety of foreign based manufacturers, had voters electing to favor candidates openly opposing TPP adoption in its current form. A state such as Michigan which remains the hub of automotive supply chain manufacturers with unionized workers opted for candidates such as Donald Trump and Bernie Sanders who threaten to blow-up existing trade deals that take away from U.S. jobs. It’s interesting to hear Mr. Trump rail on a company such as Apple that favors a supply chain sourcing strategy where upwards of a million contract manufacturing assembly jobs exist across China.  Perhaps Mr. Trump’s staff have read some of our Supply Chain Matters related to Apple.

In yesterday’s report, the WSJ cites a survey of 1200 people conducted by Caddell Associates, indicating that among Republican voters, by a margin of 59 percent to 4 percent, and among Democratic voters by a margin of 35 percent to 4 percent, many believe that trade deals benefitted other countries rather than the United States.

Thus, political support for TPP ratification among both U.S. political parties has indeed faltered making any ratification this year somewhat unlikely.  Similar opposition is building in other developed countries such as Australia, Canada and Japan.  Meanwhile, countries such as Vietnam are embracing the potential benefits that TPP will provide to that country’s economy.

Perhaps lost in all of the current discourse are broader tenets provided by TPP in areas such as intellectual property protection, stricter social responsibility and labor collective bargaining requirements along with broader and more impactful supply chain sustainability standards.

Obviously, in order for TPP to gain ratification, much more education and informed discourse will be required. Those companies that favor TPP will have to shift their energies from one of political influence to that of public education and open discourse. Other trade initiatives such as the Transatlantic Trade and Investment Partnership (T-TIP) could be bogged down by the same political discourse.

Rather than be muddled by ongoing uncertainties as to trade and manufacturing sourcing environments, we are now of the view that energies are better focused on efforts directed at insuring long-term supply chain sustainability and greenhouse gas emission reduction strategies. This is an area where, despite political rhetoric, there is a building populace consensus that our planet is in jeopardy from the effects of global climate change.  Those effects include risks to strategic supply continuity and longer-term impacts to markets served.

By influencing value-chain sourcing strategies towards strategies that insure supply chain sustainability you risk not getting de-railed by an uncertain political tide directed at the perceived value of free trade agreements. While business executives can rail on too much regulation and regulatory complexity, they should readily understand that climate change poses a far greater strategic threat.

We would certainly value reader comments on this topic.

Bob Ferrari

© 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Supply Chain Matters 2016 Predictions for Industry and Global Supply Chains In Detail- Part Five

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With this posting, we will wrap-up our Supply Chain Matters series outlining in more detail, 2016 Predictions for Industry and Global Supply Chains. These predictions are provided in the spirit of assisting industry supply chain teams in setting management objectives for the year ahead as well as helping our readers and clients to prepare Supply Chain Matters Blogsupply chain management and line-of-business teams in establishing meaningful programs, initiatives and educational agendas.

The context for these predictions includes a broad cross-functional umbrella of supply chain strategy, planning, execution, product lifecycle management, procurement, manufacturing, transportation, logistics and service management.

Our predictions series includes a re-look at all that occurred in the current year, a reflection of future implications, and soliciting input from clients and other supply chain and blogosphere observers. Unlike others, we incorporate a lot of thought and perspective into our annual predictions and take the time to actually scorecard our annual predictions at the end of the year.

Readers are welcomed to review our complete listing of all ten 2016 predictions for industry and global supply chains.

In our Part One posting, we dived into Prediction One that addressed what industry supply chains should anticipate in global chain activity and Prediction Two, what to expect for inbound commodity and component costs as well as unique challenges for sourcing and procurement teams in the coming year.

Part Two of our in-detail predictions explored Prediction Three, turbulence and continued change in global transportation / logistics, and Prediction Four, the growing supply chain talent and skills gap requiring organizations to be more innovative and resourceful.

Part Three reviewed our prediction of certain industry-specific challenges occurring in 2016.

Part Four dived into Prediction Six, S&OP processes morphing into broader forms of integrated business planning, and Prediction Seven, how Internet of Things initiatives will dive further into line-of-business deployment realities.

In this posting, we further explore into our final three predictions.

 

2016 Prediction Eight: Geopolitical Developments Centered on Global Trade Agreements Will Present New Concerns and Challenges for Specific Industry Supply Chains.

Major developments surrounding global trade will occupy the attention of many industry and regional geographic supply chain organizations in 2016. They will impact current tactical and to some extent, strategic plans related to the import and export of goods. The most prominent will be the ratification process involving the proposed Trans-Pacific Partnership (TPP), China’s potentially competing One Belt, One Road (OBOR) initiative, Transatlantic Trade and Investment Partnership (T-TIP) and the Country of Origin Labeling (COOL) directive. All of these combined will require industry supply chain teams to allocate dedicated management attention to each, along with implications and/or conflicting strategies implied by each.

Details of the recently adopted Trans-Pacific Partnership will continue to unfold in 2016 while individual sponsoring countries undertake the process of ratification. Supply Chain Matters published a first look at TPP elements in November. As TPP details continue to emerge, industry supply chains will begin to uncover certain strategic and tactical impacts related to current global sourcing strategies. Some of these impacts will relate to specific industries and include either current or potential future global value-chain strategies that exist in China, Vietnam, Japan, the Eurozone or other countries. China will continue to drive and influence its One Belt, One Road (OBOR) initiative placing additional political and specific industry pressures on certain TPP participants. Industry supply chain teams will thus be caught in the middle of geopolitical pressures and forces in relation to pending strategic sourcing or value-chain design strategies.

The original COOL legislation had good intent, requiring meat products sold in supermarkets and grocery stores to specifically indicate where the animal was born, raised and slaughtered.  Reports indicate that the original law was prompted by the lobbying of U.S. ranchers who compete with the Canadian cattle industry, and later garnered the interest of consumer watchdog interests. In 2015, the World Trade Organization ruled that the U.S. efforts was anti-competitive to Canadian and Mexican animal ranchers. This issue will need resolution in 2016 along with potentially conflicting standards coming from The Transatlantic Trade and Investment Partnership (T-TIP). T-TIP is a trade agreement among the 28 European Union member countries and the United States. It addresses increased access to both member markets for goods and services but it comes with certain definitions as to product branding and country of origin.  For instance, parmesan cheese can only originate from certain regions of Italy, and other products of a similar nature have to be labeled or termed differently. The measure further calls for singular approval processes for products, standardized customs and border forms and fees.

Global trade advisory firms such as Livingston International and others are advising industry supply chains to prepare for a number of potential scenarios involving the ongoing trade dispute process invoked by COOL. We certainly concur. While industry supply chain teams might perceive that legislation affecting packaging disclosure of meat products has little to do with service parts, chocolates and wine, it indeed does.

All of these global trade issues will percolate in the coming year and they well may get complex and confusing to sort out.

 

2016 Prediction Nine: Alibaba and Amazon Will Expand Their Presence in Customer Logistics Fulfillment.

There are stronger indications that online giants Alibaba and Amazon will expand their presence in last-mile customer fulfillment. Increasing transportation rates and surcharges from both FedEx and UPS in 2015, and in the coming year, along with building frustrations over service arrangements make this prediction more viable for the most influential online retailers as well as more evidence pointing to such capabilities.

In late 2015, social media including Supply Chain Matters picked-up a report indicating that an undisclosed major retailer was piloting its own chartered air freight services.  An initial report of Amazon’s involvement in secretive air freight services came from a posting by Motherboard which referred to operation “Aerosmith” launched in September from an unknown corporation and run by Ohio-based aviation services provider Air Transport Services Group (ATSG). The report indicated that the unnamed company had leased four Boeing 767 air freight aircraft and was operating out of the Wilmington Air Park near Columbus Ohio, a former DHL air freight hub. As we went to press with these predictions in the middle of December 2015, The Seattle Times reported,  citing cargo industry executives that Amazon was separately negotiating to lease 20 Boeing 767 air cargo jets for its own air-delivery service. Similarly, The Wall Street Journal, citing more than a dozen current and former executives from both Amazon and UPS, literally confirmed that the online retailer is taking steps to move closer to last mile delivery.  The reason, Amazon’s shipping costs were reported as being 11.7 percent of total revenues, up from 10.7 percent a year ago. According to the WSJ report, Amazon’s spending with UPS exceeds $1 billion alone.

Another data point was Amazon itself which at a holiday focused shipping event, disclosed that it has acquired and deployed thousands of its own Amazon Prime branded fleet of tractor-trailers for transportation needs among its various customer fulfillment and logistics sorting centers.

These three separate but related developments, dedicated surface and air freight capabilities, coupled with well-timed holiday announcements on advanced drone delivery vehicles all lead to our prediction that all of these capabilities will unveil themselves in a more end-to-end contiguous customer fulfillment and premium last-mile delivery capability for Amazon Prime members in 2016.

Similarly in 2015, Alibaba conducted one of the largest online shopping events to-date. According to China based Alibaba, this year’s Singles Day online event recorded a record 91.2 billion yuan ($14.3 billion) in one-day gross sales.  Volume was reported as surpassing last year’s $9.3 billion in sales after 12 hours. For the sake of comparison, 2014 and 2015 online Black Friday and Cyber Monday volumes do not come close to that of this year’s Singles Day event for the Chinese online retailer and its other associated online sites.   Because of the last-mile delivery challenges within China, Alibaba continues to invest in its own last-mile customer delivery capabilities, and in 2015, came reports of expanding relationships with other global parcel delivery entities such as the U.S. Postal Service.

Amazon and Alibaba will continue to move upstream in last-mile parcel delivery capabilities and this will serve as a wake-up call for remaining online retailers with dependence on higher customer fulfillment and logistics costs. Free Shipping policies have consistently attracted online consumers in buying decisions and offsetting costs will remain the determinant of profitability of online orders in the months to come. Consequently, existing parcel delivery service providers will experience more shipper pushback regarding rate structures.

Needless to state, the industry dynamics of B2C online last mile customer fulfillment are about to change in 2016.

 

2016 Prediction Ten: A High Visibility Supply Chain Snafu or Event with Business Implications

This is a prediction that we are obviously reluctant to publish for readers and clients. However, our observation of industry supply chains being whiplashed with unprecedented business change and growing global chain risks leads us to this prediction.

The potential for supply chain disruption, whether from natural disasters, political or other unforeseen or unexpected events has greatly increased.  The significant explosions and fire that occurred in the proximity to the logistics complex at the Port of Tiajin in 2015 were the latest reminder.  Some firms are dealing with the financial and business effects of that event.

Continued pressures to reduce overall supply chain costs in 2016 leads us to conclude that there may well be one or more high visibility supply chain or key supplier breakdowns in the coming year. Industry supply chains that have already undergone multiple years of cost or staffing reductions are likely candidates. Also are industries with highly extended value-chains without adequate risk mitigation. Significantly reduced resources, capacity or product quality assurance and monitoring will likely be casual factors, although public statements will indicate otherwise.

Suppliers will continue to experience pressures to reduce costs but at the same time provide more agility and responsiveness to changing needs. As we approach 2016, there is already an uptick in product recall incidents along with certain supplier quality shortfalls. We believe that the wide scale adoption of zero-based budgeting techniques increases the overall supply chain risk profile.

As to what industries such a snafu will occur, consumer product goods, food, retail, high tech consumer electronics and perhaps medical equipment are likely profiles.  We hesitate to add commercial aerospace to this prediction, but that could be possible.

 

This concludes our series of deep-dives into all ten of Supply Chain Matters 2016 predictions.

All of the content presented in this series along with added detailed perspectives will be incorporated in a comprehensive research report available for complimentary downloading in early January in our Supply Chain Matters Research Center. Look for an upcoming announcement as to availability.

In the meantime, share your own predictions over and above those that we have outlined. Utilize the Comments section associated with this posting or email us directly with your predictions at: feedback <at> supply-chain-matters <dot> com.  We have already received other insightful predictions and look forward to accumulating others.

We will share all contributed predictions in a supplemental predictions commentary at the end of December.

We take this opportunity to thank all of our readers and designated sponsors for their loyal following throughout 2015.  Please take the opportunity to review the capabilities of each of our sponsors.

We extend a Happy Holidays wish to all and best wishes for the coming New Year.

Rest-up, renew and re-generate during the holidays and let’s collectively tackle various industry and global supply chain challenges throughout 2016.

Bob Ferrari, Founder and Executive Editor

©2015 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog.

Content appearing on Supply Chain Matters® may not be used by any third party without written permission of the author and our parent, The Ferrari Consulting and Research Group.

 


Supply Chain Matters 2016 Predictions for Industry and Global Supply Chains

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Once a year, just before the start of the New Year, our parent, the Ferrari Consulting and Research Group along with Supply Chain Matters provide a series of predictions for the coming year. These predictions are provided in the spirit of assisting industry supply chain teams in setting management objectives for the year ahead as well as Supply Chain Matters Bloghelping our readers and clients to prepare supply chain management and line-of-business teams in establishing meaningful programs, initiatives and educational agendas.

The context for these predictions includes a broad cross-functional umbrella of supply chain strategy, planning, execution, product lifecycle management, procurement, manufacturing, transportation, logistics and service management.

Our process includes a re-look at all that occurred in the current year, a reflection of future implications, and soliciting input from clients and other supply chain and blogosphere observers. Unlike others, we incorporate a lot of thought and perspective into our annual predictions and take the time to actually scorecard our annual predictions at the end of the year. Readers are welcomed to review our scorecard series of our 2015 predictions that occurred in late November.

In this initial posting, we will unveil our complete listing of our ten predictions for the coming year with summary descriptors. In subsequent postings spanning the remaining weeks of December we will dive further into each of our predictions. In early January, we will publish the complete Ferrari Consulting and Research Group research report, 2016 Predictions for Industry and Global Supply Chains that will incorporate all of our predictions along with even more details and supporting data related to each prediction. This report will be made available to all of our consulting clients and will further be made available for no-cost complimentary downloading in the Research Center of Supply Chain Matters.  Anticipate general availability in mid-January with an announcement on this blog.

Let’s therefore begin the process with the unveiling our ten 2016 predictions.

 

2016 Prediction One: A Year of Uncertainty and Continuous Challenges Related to Global Supply Chain Activity

Our first prediction related to global activity is that industry and global supply chains should anticipate another year of uncertainty in planning product demand and supply needs on an individual geographic region or country basis.  From our lens, there will be a need for lots of contingency and various scenario planning options, and sales and operations planning will be very engaged and challenged throughout the year to meet expected business outcomes.  Even more production overcapacity across China’s industry sectors will add to downward global pricing pressures affecting specific industry supply chains.

 

2016 Prediction Two: Favorable Outlook for Inbound Component and Commodity Costs but Procurement Teams Need to Step-up Supplier Management

Global commodity prices, the raw-material of industry supply chains, declined sharply during 2015.  The World Bank’s Commodity Markets Outlook published in October 2015 generally called for slightly higher non-energy commodity prices in 2016 including categories of Agriculture, Raw Materials, Fertilizers Metals and Minerals. We believe that may be too optimistic and that continued overcapacity will drive inbound prices generally lower. The most significant commodity price trend remains that of oil, as the price of crude oil has reached seven year lows amidst of global glut of supply and little demand growth.

Due to the uncertainty and the heightened supply risks expected in 2016, procurement teams will need to re-double their efforts focused on supplier assessment and monitoring.

 

2016 Prediction Three:  Turbulence and Continued Change Surrounds Global Transportation and Logistics

As we enter 2016 we are once again compelled to predict another year of turbulence and continued change surrounding global transportation and logistics with particular emphasis in the third-party/fourth-party logistics, global ocean container and air freight segments. We are predicting more consolidation and mergers to occur among ocean container shipping lines and one North America based rail merger to occur in 2016.

 

2016 Prediction Four: Widening of Supply Chain Talent and Skill Gaps Will Require Organizations to be More Innovative and Purposeful in Recruitment, Career Planning and Training Efforts

We predict that the existing widening skill gaps will compel industry supply chain executives to be more creative and purposeful in recruitment and training. That includes facing the realities of competitive compensation and purposeful career planning for individuals. We expect organizations and recruiters to more broadly define supply chain related jobs in skill dimensions and in expected performance parameters for both current and future organizational needs. Individuals who possess required cross-functional hard and soft skills, including in-depth technology prowess will continue to experience a seller’s advantage.

 

2016 Prediction Five: Noted Supply Chain Industry-Specific Challenges

In 2016, challenges will remain in B2C Online Retail, Commercial Aerospace, Consumer Product Goods (CPG) and Automotive industry sectors.  We have added a further 2016 industry challenge, that being current efforts to deploy more sustainable and health conscious agriculture and food based supply chains.

 

2016 Prediction Six: Certain Industry S&OP Processes Will Morph to Broader Forms of Integrated Business Planning and Product Management.

The term integrated business planning is often depicted as a specific technology vendor term but in reality, it is a desire that all functions of a firm are aligned at a single set of financial, business, supply chain and operational outcomes.  As multi-industry business challenges continue in speed and complexity, S&OP processes will need to foster more agility to effectively deal with change. In 2016 we anticipate that certain S&OP teams, those experiencing high levels of value-chain complexity and business change, will begin to morph S&OP process and decision-making with broader information and contextual decision-making components and begin to identify and address obstacles for incorporating key information integration from product management and financial systems.

 

2016 Prediction Seven: Internet of Things (IoT) Initiatives Continue to Dive into Realities of Line of Business Strategy and Deployment

In 2016, we anticipate that B2B focused manufacturers and services providers will broaden their perspectives on connected devices and services, especially in the notions of the realities for being a software-driven vs. a hardware-driven enterprise. That includes leveraging intellectual property and software knowledge into more innovative products and services that result in new revenue streams. Thus, the value of products will increasingly be defined by the embedded sensors, software and consequent added services that products provide for customers.

 

2016 Prediction Eight: Geopolitical Developments Centered on Global Trade Agreements Will Present New Concerns and Challenges for Specific Industry Supply Chains.

Details of the recently adopted Trans-Pacific Partnership will continue to unfold in 2016 while individual sponsoring countries undertake the process of ratification. As TPP details emerge, industry supply chains will begin to uncover certain strategic and tactical impacts related to current global sourcing strategies. China will continue to drive and influence its One Belt, One Road (OBOR) initiative placing additional political and specific industry pressures on certain TPP participants. Industry supply chain teams will thus be caught in the middle of geopolitical pressures and forces in relation to pending strategic sourcing or value-chain design strategies.

 

2016 Prediction Nine: Alibaba and Amazon Will Expand Their Presence in Customer Logistics Fulfillment.

There are stronger indications that online giants Alibaba and Amazon will expand their presence in last-mile customer fulfillment. Increasing transportation rates and surcharges from both FedEx and UPS in 2015, and in the coming year, make this prediction more viable for the most influential online retailers as well as more evidence pointing to such capabilities.

 

2016 Prediction Ten: A High Visibility Supply Chain Snafu or Event with Business Implications

This is a prediction that we are obviously reluctant to publish for readers and clients. However, our observation of industry supply chains being whiplashed with unprecedented business change and growing global chain risks leads us to this prediction.

 

Keep your browser pointed to Supply Chain Matters as we dive into each of the above 2016 predictions in more detail. In the meantime, share your own predictions over and above those that we have outlined. Utilize the Comments section associated with this posting or email us directly with your predictions at: feedback <at> supply-chain-matters <dot> com.  We will share all contributed predictions in a final predictions of this 2016 series.

Bob Ferrari, Founder and Executive Editor

©2015 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog.

Content appearing on Supply Chain Matters® may not be used by any third party without written permission of the author and our parent, The Ferrari Consulting and Research Group.


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