Five predictions for the next five years

Supply chain used to be about stuff like inventory turns and on-time delivery. Not to say that doing well against these metrics is either easy or unimportant. In fact, for those hoping to climb a peg or two in Gartner’s Supply Chain Top 25 ranking, these things are table stakes. However, what I’m learning as I spend more time with chief supply chain officers is that what really matters most is getting the future right.

I’ve been lucky enough to get insight into some far-reaching strategies being worked by true supply chain leaders, and with this as background I thought I’d share a few of the longer-term projections that seem to bubble up.

1. Amazon stumbles

Having recently published a report analysing Amazon’s supply chain strategy and seen plenty to admire, I still can’t help being impressed at how quickly traditional retail is learning. Amazon’s massive investment in data centres, logistics infrastructure and software is clearly killing pure store-based retail, but witness how fast the big guys like Target and Walmart are improving while Amazon still fails to make a real profit.

Look at the best specialty retailers like Nordstrom, Burberry’s and REI and what emerges is something plenty of shoppers will prefer to pure-play e-commerce. If Amazon doesn’t settle down soon and decide how it plans to make money, it may find that consumers have moved on. It happened to Facebook. Why not Amazon?

2. Africa becomes your most important growth market

Michael DeWitt, Head of Procurement at Bayer Healthcare, recorded a webinar this week for SCM World in which he predicted that Africa will be the second largest healthcare market in the world by 2100. Starting from the base we’re at today that’s a long way to go up. Big consumer companies like Coca-Cola and Unilever are on to this and mapping out micro-distribution strategies to serve the continent.

Rich in raw materials that are famously hard to get to, Africa will ride two waves of money: one building infrastructure, and another bringing consumerism to the people getting paid to work on that infrastructure. Why fight to sell one more Coke in New York City when you can find millions of new customers in Africa?

3. The Carbon Tax happens

A few people wrote to me following last week’s column denying climate change, but after checking with my good friend and eminent supply chain sustainability expert, Dr Stephen Stokes, I am satisfied it is for real. The angry Rolling Stone article I cited last week quoted Exxon CEO Rex Tillerson saying that global warming is an “engineering problem” – a point that was supposed to inflame readers. Well, it is an engineering problem, and as Stokes says on the matter, it’s the energy companies that have the equipment and knowledge to help solve the problem.

Without an incentive to pay for the mess carbon makes, though, we’ll never even start solving it. The US pays a federal energy tax equivalent to $6 per metric tonne of carbon emissions. This ranks 32nd among industrialised nations – way below such rich, smart countries as Switzerland ($141), the Netherlands ($116) and South Korea ($35). We can afford the tax, and unless we start to measure it and optimise it, carbon will kill us. It will happen soon.

4. Robotics takes off

The idea of robots seems practically quaint, conjuring images of 1950s tin toys or early 20th century fantasy like Fritz Lang’s Metropolis. In reality, though, robotics is very new. The top three robotics makers have installed fewer than 800,000 units worldwide so far. That’s about as many units as Apple sells iPhones in one day.

The first PC-controlled robot was installed in 1996 after the Netscape IPO, which generally marks the dawn of the commercial internet. We have barely begun to learn what robotics can do. I have seen Kiva robots (now owned by Amazon) in action, not to mention welding robots at BMW and semiconductor manufacturing robots at AMD. They are not that amazing but they work, and with essentially zero error. Add in things like 3D printing, smart vehicles or buildings and it’s hard to imagine any supply chain process that can’t benefit from robotics. At the same time, of course, we’re rapidly saying goodbye to the idea of “low-cost country sourcing”. The time to substitute capital for labour is upon us.

5. CSCO becomes CEO

The first marquis instance of this is, of course, Apple’s Tim Cook, who rose from pure materials management roots to become COO and ultimately CEO. The same can be said of Bo Andersson, who went from head of global procurement and supply chain at General Motors to President and CEO of GAZ Group, Russia’s biggest maker of commercial vehicles.

One reason this might make sense goes back to good old sales & operations planning. Supply chain usually leads the S&OP process, which until recently was a tedious political game of trying to settle on a forecast around which operations could huddle to create a build plan. Increasingly, though, S&OP is a profit optimisation game where trade-offs are made between customer wants and production realities. Lessons learned in this crucible are more useful to a CEO than those learned in finance, sales or engineering.

Think big, you’re in line for a corner office.

Kevin O’Marah
Chief Content Officer
SCM World

Please contact me directly with any comments, questions or suggestions. I welcome your feedback.