Predicts 2012: Global Logistics

Over 60% of surveyed companies view logistics as nonstrategic; yet expectations for near-perfect performance place increasing stress on global logistics organizations.

While the notion of "perfect logistics" is just emerging, global logistics pressures and challenges continue to mount. This research will examine five predictions that could radically impact global logistics organizations over the next five years.

• As supply chain complexity and risk grow, only 14% of companies are positioned to effectively exploit risk, and few, if any, have yet seen fit to elevate compliance and risk management to an executive-level position in the supply chain management (SCM) organization.
• Thirty-five percent of Gartner SCM User Wants and Needs survey respondents identified the inability to synchronize end-to-end business processes as an issue, which will drive increased demand for SCM application convergence.
• As cross-border trade growth slows, supply chain organizations will be forced to adjust from proliferation to optimization of international flows.
• Growth in the use of intermodal freight in Europe will be fueled by government investments, changing business conditions and sustainability strategies. Sustainable logistics is emerging as a must-do "next-practice" for shippers and logistics service providers.

• Consider the value of establishing an executive leadership position responsible for global compliance, and risk management, governance and control, that is specific to the logistics function.
• Audit your SCM application portfolios to determine opportunities to exploit SCM application convergence.
• Consider creating a single global logistics organization, staffed with multifunction logistics talent, and focused on the optimization of distribution networks and carrier portfolios, with a concentration on risk management and responsiveness.
• Corporate logistics strategy must address long-term transport modal advantages by defining clear and, sometimes conflicting, business and sustainability objectives as part of a complete supply chain design and evaluation exercise.
• Whether logistics are undertaken internally, or through outsourced third-party logistics (3PL) providers, defines a sustainable logistics strategy, which sets out the key objectives, and operational and financial performance targets.

• By 2016, less than 10% of logistics organizations will have a chief compliance and risk management officer.
• By 2016, 20% of SCM organizations will adopt a supply chain execution convergence application strategy.
• By 2016, slower global trade growth will force shippers to adjust from the proliferation to optimization of international flows.
• By 2016, Pan-European intermodal freight adoption will grow by 60% as a result of increasing governmental and sustainability mandates.
• By 2016, over 50% of Global 1000 logistics organizations will be required to systematically report verified emissions and environmental data.

For many SCM organizations, the economic challenges of the past several years continued throughout 2011, forcing a further focus on controlling costs while protecting customer loyalty. With expectations for a slow business recovery in 2012, the outlook remains cautiously optimistic, but investment plans are conservative. 2011 was also a year where the fragility of global supply chains was highlighted, with multiple environmental and geopolitical events disrupting supply chains. Cost volatility remains a challenge – particularly with energy – and the negative impact of continuing debt crises in many of the mature economies has impacted SCM organizations.

"Predicts 2012: Global Logistics" summarizes the trends and events that will shape the strategies and tactics SCM organizations will need to employ to support their evolving global logistics operations. This year's global logistics predictions continue to highlight that, while logistics operations might be out of sight, out of mind, logistics is under significant pressure to deliver near-perfect performance, while business conditions continue to become more complex, risky and difficult. We found in our most recent Supply Chain Management User Wants and Needs study that 84% of respondents believe that supply chain complexity is a significant and growing challenge, and that close to 90% believe it is getting more complex. Furthermore, we continue to find a growing gap between supply chain leaders and followers, where leaders are better prepared for the changes ahead. Leaders are those firms that see supply chain as a primary source of competitive advantage. These organizations tend to be early adopters of emerging technology, and are typically risk exploiters. They will be the most likely organizations to respond positively to the global logistics events on the horizon. Nevertheless, the changes outlined in this research will affect most logistics organizations, and the impact will depend on how prepared organizations are to adapt to these events.

Strategic Planning Assumption: By 2016, less than 10% of logistics organizations will have a chief compliance and risk management officer.

Analysis By: Dwight Klappich

Key Findings:

In Gartner's annual Supply Chain Management User Wants and Needs study, we found that 84% of respondents felt that supply chain complexity is a significant and growing challenge for their operations. Roughly 90% of respondents believe that complexity will increase in the next three years, with close to 50% of companies saying it will increase significantly. Respondents were also asked to consider the organization's business priorities for the next year. They rated the importance of the following in order from most important to least important: compliance with government mandates, globalization, risk management, and security and sustainability. While publicity is greatest around sustainability, our study found that the impact of government mandates, and the effects of increasing regulation, have a more significant impact on logistics organizations. Additionally, the effects of globalization, risk and security all scored notably higher than sustainability as having significant impacts on logistics.

While the study found these are significant concerns for respondents, the study also found that few organizations have, or intend to formalize, the management and governance of these important issues. For example, while supply chain risk was identified as a growing and important problem, the majority of supply chain organizations have yet to make risk management a core competency.

• More than 40% of respondents said that increased supply chain risk is one of the top-three contributors to their organizations' supply chain complexity.
• Only 4%, however, identified risk as the most important contributor to complexity. This number doubled from 2009.
• Only 14% of respondents are positioned to effectively exploit risk, while 86% avoid or reluctantly tolerate supply chain risk.
• Only 18% of respondents said they have formalized supply chain risk management.
• 50% of respondents have no intention of formalizing risk management (25%), or are considering formalizing it a year from now or later (25%).

While compliance, risk management and security are all issues SCM organizations deal with today, as the numbers on risk management highlight, few have formalized even one of these. While government mandates have an increasing impact on SCM organizations, responsibility for understanding and managing these is scattered across SCM organizations. Other than the head of SCM, no one owns these in total. For example, for trade compliance, it is not uncommon to find one group responsible for import, and another for export.

The study's findings show that, while the need appears great, the urgency to formalize governance and control remains limited. This is why we think the number of SCM organizations that adopt this role will remain below 10%. However, as the data suggests, the need is far greater. Short of a cataclysmic event, the progression to a formal management and governance structure, featuring a chief compliance and risk management officer, will be regrettably slow. Where it does take hold, we believe this role will emerge first in two areas:

• First, in highly sensitive industries like aerospace and defense, we already see some move in this direction, where things like trade compliance have been elevated to a C-level executive position. It is not a stretch to assume that this role will expand in scope from first focusing on trade compliance, with stringent cross-border trade restrictions, to eventually including things like risk management and security.
• Second, we anticipate some move in this direction will be in the logistics service provider (LSP) space. Since the business of LSPs is SCM and compliance, risk, security and sustainability are fundamental to their business. The leading-edge providers will formalize these functions to protect the interests of the firm, to protect the LSP from liability should something happen and as a means to promote differentiation beyond price.

Organizations that adopt this structure will be able to exploit compliance and risk management for competitive advantage. While governance and control are the first priorities, the more important goal must be to use this foundation to put in place capabilities to help make better and quicker decisions. Short of having a formalized compliance officer role, companies could pay more attention to risk, and have risk management standardized in supply chain, under the leadership of the VP of SCM. They can start using risk adjusted trade-offs in network design, sourcing, allocation and vulnerability assessment, but have the heads of SCM lead these efforts. Regardless of the approach, supply chain resiliency will depend on having a strong handle on the implications of changing compliance mandates and risk scenarios. As the study showed, 14% of organizations see risk as natural, and something they can and should exploit for competitive advantage.

Recommendations:

• Make compliance and risk management a logistics core competency; ensure linkages to supply chain governance structures and processes, such as sales and operations planning (S&OP).
• Formalize compliance and risk management governance and response mechanisms, even if your initial steps are rudimentary.
• Incorporate supply chain compliance and risk management into your business continuity planning.
• Create a role of chief compliance and risk management officer that owns responsibility for creating the vision, strategies, and governance protocols, procedures and processes.

Strategic Planning Assumption: By 2016, 20% of SCM organizations will adopt a supply chain execution convergence application strategy.

Analysis By: Dwight Klappich

Key Findings:

Most SCM organizations struggle with functional and application silos that make orchestrating and synchronizing business process across their organizations nearly impossible. Application portfolio fragmentation is caused by many factors, such as buying stand-alone applications over time as well as how companies have been structured (such as developing or implementing applications, regionally or by business unit), mergers and acquisitions (M&As), and outsourcing. In Gartner's annual supply chain study, the inability to synchronize end-to-end business processes was noted as the second-highest-rated barrier to achieving SCM goals, with over 35% of respondents identifying this as an issue. Their application portfolios are often fragmented across multiple vendors and products, and these are often highly customized and aging. Business conditions have changed since they first implemented these applications, and they are incapable of adapting well to these changes. Likewise, the high cost to maintain these fragmented portfolios, while a motivation for change, keeps them from investing in the transformational innovation that will drive greater levels of business value. The emerging concept Gartner calls "supply chain execution convergence" is where SCM organizations adopt a supply chain execution (SCE) application platform that allows them to model, orchestrate and synchronize end-to-end logistics processes. SCE Convergence is where SCE functional silos are broken down, and business processes span, optimize and synchronize across traditional functional domains.

Consider the following:

• Application silos (e.g., multiple vendors, products and legacy systems) are pervasive in SCM.
• There was a high degree of customization of older applications.
• Application silos are at various levels of maturity, and business conditions have changed since implementation of the original applications, forcing application silos to be in a near-constant state of flux.
• Integration and maintenance of application silos are an increasing burden on IT.
• It is nearly impossible to create end-to-end business processes in the fragmented application environment of most SCM organizations.
• The high cost to maintain existing application silos keeps organizations from investing in transformational innovation.

Market Implications:

SCE convergence refers to the growing need for supply chain organizations to do a better job orchestrating and synchronizing processes, subprocesses, and activities across functional domains like warehousing, transportation or planning. More precisely, leading-edge supply chain organizations increasingly want to support end-to-end processes, such as order-to-cash, where the end-to-end process spans traditional functional and application boundaries, and activities can be orchestrated without regard for functional domain or application silo. The problem, today, is that the end-to-end fulfillment process spans the customer service, warehouse and transportation areas and, as functional silos, it is impracticable to coordinate activities across all domains, given the current application landscape in most SCM operations. Today, processes functionally reside in separate applications, typically ERP or CRM for customer service/order management, warehousing for fulfillment management, and transportation for delivery management. While warehousing and transportation are the most obvious points of convergence, they are by no means the only ones. It is important that SCM organizations recognize that the next level of business value will come from breaking down silos by assembling composite processes that bring together subprocesses and activities from specific domains, then allowing the user to assemble these into a larger (converged) end-to-end process. In current environments, data and transaction integration is doable, but "process" integration is elusive.

While originally touted as doing so, ERP didn't solve the end-to-end process orchestration problem. Some specialist vendors are beginning to support rudimentary SCE convergence. Leading vendors' SCE platform initiatives, while nascent, provide some simple cross-functional data and process integrations, but currently minimal cross-functional process orchestration and synchronization. Early adopters are beginning the process of transitioning to SCE convergence, starting by defining consistent business objectives across supply chain execution functions. As the early adopters demand solutions to support their efforts, we expect vendors to pursue SCE convergence more aggressively, delivering more robust capabilities over the next three to five years.

Recommendations:

• SCM organizations should begin mapping end-to-end processes across their application portfolio to identify opportunities to exploit SCE convergence.
• SCM organizations that have gaps in their SCM application portfolios should address these gaps, but now with an eye toward how new applications fit an SCE convergence paradigm.
• Users should place more emphasis on vendors' technical architecture and platform strategies, with this equal to or just below functional requirements.
• Look beyond data integration and focus on E-to-E process orchestration, synchronization and, eventually, optimization.

Strategic Planning Assumption: By 2016, slower global trade growth will force shippers to adjust from proliferation to optimization of international flows.

Analysis By: Robert Anderson, Marcus Blosch, Paul Lord

Key Findings:

After peaking late in the last decade, global trade as a percentage of global GDP will continue trending downward. This outlook is compounded by projected sluggish growth in the major economies of the U.S. and Europe. Additionally, a continuous flurry of natural disasters around the world, and an increase in geopolitical tension, have raised awareness of the risk exposures associated with global trade. Companies now understand that lower sourcing prices in low-cost countries do not always translate to value in total landed/delivered cost and reliability. The focal point of global trade will also shift from the developed to emerging economies as companies look for new sources of growth.

Market Implications:

Shippers will evaluate global sourcing options more carefully (e.g., true delivered cost versus risk), take advantage of new shipping-lane patterns, such as those afforded by the Panama Canal expansion or the Far East Trans-Siberian railway, and more comprehensively manage the risks involved. Gartner estimates that 60% of current multinational manufacturers will organize to manage logistics globally in order to gain economies of scale, visibility and manage risks associated with volatility in currency exchange rates, taxes and margins. With high levels of uncertainty, network design and optimization become key to making trade-offs between cost and service levels, globally and locally.

With oil prices projected to remain volatile and at high levels, logistics costs will have a significant impact on product cost. By managing logistics globally, companies can gain economies of scale by centrally negotiated and managed contracts for sea and airfreight, a sharper focus on the efficiency of the global network, switching transport mode and using postponement strategies. Supplier bases will change, and we anticipate a wider use of nearshoring – bringing larger, higher-demand volatility items closer to their markets, further helping to reduce cost. Furthermore, to drive efficiency and lower costs, companies will focus attention on the execution elements of the supply chain:

• Network and inventory optimization
• Warehouse and inventory management systems
• Transport management systems (TMSs)

Emerging markets, while slowing slightly, will still generate impressive growth rates. While countries in these markets still offer ample opportunities for low-cost sourcing, the focus will switch from low-cost sourcing to serving the local market as the middle class expands. Success in these markets is by no means assured; considerable time and effort will be needed to overcome local issues, such as regulation and bureaucracy, weak protection of intellectual property (IP), underdeveloped infrastructure, corruption and different product expectations. To service these markets, new products and services tuned to the local market will be needed, along with a localized distribution strategy to reach the new consumers. Companies will seek to evolve their distribution strategies to balance global efficiencies against the need to be responsive to local-market demands.

These trends will lead to the following market dynamics:

• Increasing focus on globalizing logistics to reap economies of scale.
• In emerging markets, responsive local organizations will be needed to ensure success in meeting business objectives.
• The ability to manage global supply chain risk will become more of a critical competitive differentiator.
• The execution elements of logistics will be emphasized, with companies in developed markets seeking to invest in warehouse management systems (WMSs), TMS, inventory optimization, and fuel and transport mode modeling and management. Emerging markets will follow, but at a slower pace that's linked to their maturity.
• Networks will be rationalized, spreading assets to reduce risk, and moving inventory closer to consumers.
• Sourcing and developing local talent will be a critical success factor, and a source of advantage to those that do this well, and a source of disadvantage to those that don't.

Recommendations:

While global trade is set to decline, well-managed companies can still grow, and do so profitably. To do so, they need to follow these recommendations:

• Global manufacturers and distributors, with revenue over $1 billion, must create a single global logistics organization, staffed with multifunction logistics talent, and focused on the optimization of distribution networks and carrier portfolios, with a concentration on risk management and responsiveness.
• Decisions regarding international transportation mode should include consideration of inventory carrying cost, value at risk and service objectives. Avoid focusing solely on transportation cost at the expense of other risk-contributing factors affecting your distribution chains.
• Develop network and inventory optimization to allow placing inventory closer to consumption, or in line with financially efficient supply chain drivers that can evolve in time. Use postponement strategies to further optimize inventory use. Ensure that your approach to optimization takes in a risk perspective.
• Develop a risk management approach. Identify key risk areas in the network, create mitigation strategies and focus on supply chain visibility to better assess where vulnerabilities lie.
• Institute a strong talent management program in emerging markets. Build on local market knowledge and experience, with an ongoing training program for local staff. Integrate local staff into the organization and governance of the global logistics operation.

Logistics service providers should increase global operating capability across the major regions of the world, and develop a diverse and capable workforce that has a service mentality and international experience and perspectives. Balance global efficiencies with local responsiveness.

Strategic Planning Assumption: By 2016, Pan-European intermodal freight adoption will grow by 60% as a result of increasing governmental and sustainability mandates.

Analysis By: Vladimir Krasojevic

Key Findings:

Intermodal transportation is the use of at least two transport modes on door-to-door deliveries, without goods reloading. These might include, but are not limited to, truck-rail-truck or truck-water/ocean-truck. Today, U.S. rail freight volume market share is about 40%, which is much more than in Europe, where it is currently only about 10% in quantity and 16% in weight (tons per kilometer). European rail capacity is focused principally on passenger traffic. Freight harmonization is slow, with some continued infrastructure issues, power and rail gauge differences, low priorities on freight services and strong influence of national railway structures, despite liberalization of the market.

Long term, by 2050, the EU's transport strategy is targeting a 30% modal shift from road to rail. Subsidies by several governments (Belgium, U.K., Germany, Switzerland and Austria) are focused on rail harmonization and intermodal support. During 2010, overall European intermodal transport was about 170 million tons of goods, with an average distance of 680 kilometers. However, this is still a small fraction (less than 2%) of overall freight transportation volume in Europe. More than 55% of intermodal transport is serving continental hinterland transport of containers to and from ports; 45% is continental intra-European Union (EU) transport.

The EU sees an important role for intermodal transport, shifting volumes to more environmentally and economically sustainable modes – rail, internal waterways and short sea transport. Investment in infrastructure, terminals and rail harmonization is planned, and it is unlikely there will be a major policy change despite unclear economic development prospects in the EU due to high public debt. Over the previous five years, intermodal transport volume grew by 7% per year. We expect growth of 10% per year through 2016, with total growth of 60% for the intermodal sector by 2016.

Today, we do not see many, if any, single shippers willing to pay disproportionally high transportation costs exclusively for "sustainable" transport. However, we do find that shippers will favor more sustainable transport if the solution offers similar reliability, delivery, frequency, time, cost and flexibility.

Market Implications:

Consider the following developments:

• Growth in use of intermodal transportation will depend on overall demand, regularity of service and competitive pricing, as compared to road transportation. EU member states, together with intermodal operators, are developing specific freight corridors that allow railway connection and that are reliable and cost-effective solutions. The Trans-Siberian land bridge, Bosphorus Europe Express (Turkey-Slovenia via Balkans), Reefer Express (Spain to U.K.), Viking land bridge between the Baltic Sea and Black Sea, and EU project Flavia for Central and Southeast Europe are a few examples of corridors that will increasingly attract new volume to the European intermodal network.
• The economical distance necessary for effective use of intermodal freight is now close to 600 kilometers, which is down from the 800 kilometers previously assumed as the minimum. Due to new intermodal providers, with traction control on the rail network, better flow synchronization, and increasing road congestion and subsidies, intermodal transport might now be considered down to 300 kilometers.
• EU transport strategy gives particular importance to modal shift, from road to rail on a long-term basis, with development of "green corridors" and sustainability objectives. As shippers start to optimize their logistics and production footprint in Europe, mainly through network concentration and nearshoring, there is a growing potential for coordinated transport development between road and other modes of transport, with considerable impact on company logistics costs and sustainability improvement targets.
• EU initiative Marco Polo has the objective of reducing CO2 impact by 20 billion pounds, between 2007 and 2013. This is equivalent to 700,000 annual truck movements between Paris and Berlin. More than 400 projects will be financed in this period, with total grants of over €430 million. Interventions are expected to impact modal shifts – "catalyzer actions" focused on eliminating intermodal bottlenecks, short-sea development enhancements, traffic avoidance and common learning actions. This amount looks important, but this is only a fraction of the projected €1.5 trillion necessary for transport network modernization between 2010 and 2030.

Recommendations:

• Assume that rail and internal waterway services will increase on specific corridors, as a result of combined government-led infrastructure development, operator and shipper initiatives for regular service, and possible issues with road congestion, fuel prices, drivers' availability and safety. Analyze your company's current transport modal structure, from the perspective of structural changes in transport alternatives in the market.
• Learn through collaboration with trade partners and best practices of other companies "what good looks like," with modal shift changes in their logistics network. More than 120 intermodal providers are active in the market in Europe, and they are actively developing a new network and services. Check with your team, LSP and peers to find out what their experience is, and whether meaningful pilots might be created to deliver immediate business results and an opportunity to measure other impacts. Do not trade cost, service and flexibility for any type of modal change. Use the pilot to compare current and long-term options, conditions and risk assessments for structural changes.
• Set the agenda and define transport strategy scenarios in your supply chain network, making it clear that intermodal might be the response to increasing transport cost. Define targets for intermodal adoption, based on the network assessment and modal advantages that exist.

Strategic Planning Assumption: By 2016, over 50% of Global 1000 logistics organizations will be required to systematically report verified emissions and environmental data.

Analysis By: Marcus Blosch, Stephen Stokes, Greg Aimi

Key Findings:

Sustainability continues to move away from corporate social responsibility initiatives and projects, and into being core business practices and strategically driven. Many companies recognize that sustainability is a sound business practice, and a way of driving innovation and efficiency into their operations. Likewise, sustainability is increasingly broadening from an enterprise to supply-chain-wide priority and strategic driver. Logistics is an area where many organizations begin their sustainability efforts. It can have a major impact in two ways – by improving the operational efficiency of logistics, and by transforming logistics to be sustainably driven. Customers – internal and external – will increasingly demand that logistics be sustainable.

The shift from aspirations and feel-good platitudes around sustainable logistics to verified requests for accurate environmental and greenhouse gas (GHG) emissions information and actual performance outcomes is being catalyzed by industry groups, market expectations and regulations. For example, the U.S. Environmental Protection Agency's (EPA's) SmartWay program provided a significant tail wind, and the recently announced WRI Scope 3 protocol is set to codify end-user expectations further.

The Scope 3 protocol recognizes logistics as one of 16 upstream and downstream emissions-related activities, which are required to be tracked and reported to achieve Scope 3 compliance. While not legally binding, the new protocol is likely to have a significant impact on the market, if experiences from its predecessors (Scope 1 and 2) are anything to go by. Recognizing this as a significant driver of behavior change, we predict that by 2016 over 50% of Global 1000 logistics companies will be required to increase focus on sustainable logistics services, and report verified environmental data.

Consider the following:

• At the simplest level, sustainable logistics can drive an increase in operational efficiency, reducing fuel consumption, carbon footprint and material usage.
• Sustainable logistics can go further, transforming the logistics network to meet the vision of the company, driving innovation, adoption of new technologies and processes, and marking the company as a leader in sustainability.
• Customers are increasingly demanding sustainable logistics services as an important input to their own sustainability initiatives.
• Today many 3PLs see sustainability as an important offering in their product portfolios, and the number of companies offering these services is set to increase by 2016.
• Governments continue to enact regulations, which force companies to adopt sustainable logistics practices (such as the recent proposed carbon tax in Australia and China).
• The European Union Emissions Trading System (EU ETS) now includes emissions from air transportation, freight and carriers, originating outside of the European Union nation states.
• The WRI Scope 3 reporting protocol now provides a quantified framework for reporting on supply chain GHG emissions.

Market Implications:

Governments are set to continue to enact environmental legislation that has a profound impact on logistics operations. In Europe, the ETS continues to take shape, and the EU has recently set its sights on aviation. In the U.S., the EPA continues to drive a sustainability agenda through its SmartWay initiative. In Asia/Pacific, Australia has recently proposed a carbon tax; China is moving to pilot an emissions trading scheme; and New Zealand and India have schemes in place. Over time, regulations will become increasingly tighter.

Customers are increasingly demanding sustainable logistics services. Many companies who use 3PLs are looking to them as partners to help drive the overall sustainability agenda. For 3PLs, this represents a significant opportunity, moving away from simple carbon offsets to providing services oriented around sustainability. They will meet the sustainable objectives of their clients by reducing energy consumption, reducing carbon footprint and reducing materials used through services such as network optimization, inventory management or multimodal shipping.

Sustainability is set to move beyond a focus on just cost and efficiency. More-advanced companies will use sustainability to drive toward a sustainable transformation. Innovation in products and services and the adoption of new technologies (such as smart buildings and electric vehicles) help them move toward being "carbon-neutral" and a collaborative value approach to stakeholders and partners.

These trends will lead to the following market dynamics:

• Companies will increasingly develop sustainable logistics strategies, and place expectations on supply chain partners and third-party suppliers.
• Companies will make investments in metrics, measurement and reporting systems to underpin their sustainable initiative objectives. This will also provide opportunities for service providers to implement technologies and business processes, and undertake verification services.
• Companies will focus initially on the execution elements of logistics, looking to make savings in fuel, energy and materials usage. Network and inventory optimization will also become key competencies.
• 3PLs will continue to build out their logistics offerings, initially focused on the efficiency aspects of sustainable logistics.
• Leading companies will set out a more visionary agenda, looking to transform the way they do business. Sustainability will become the key mechanism for logistics innovation – "smart" logistics will emerge.

Recommendations:

• Whether logistics are undertaken internally or through outsourced third-party logistics providers, define a sustainable logistics strategy, which sets out key objectives, and operational and financial performance targets.
• Develop a framework of metrics and measures to track your sustainable logistics initiatives. Ensure that the framework supports the WRI Scope 3 supply chain emissions protocol. Investments in supporting IT systems will also be required.
• Leverage internal staff, partners and industry groups to use sustainable logistics performance as a means of leveraging innovation. This might include packaging redesign, network optimization, vehicle drivetrain and aerodynamic considerations, or operator behaviors. Ultimately, a multifaceted approach to driving innovation into logistics maximizes efficiency gains and sustainability outcomes. Quantify the risks and value at stake by undertaking individual product or product group life cycle analysis. Use that data as a basis for targeting investments and improvements for maximum benefit.

In response to your requests, we are taking a look back at some key predictions from previous years. We have intentionally selected predictions from opposite ends of the scale – one where we were wholly or largely on target, as well as one we missed.

On Target: 2011 Prediction – By 2015, "co-opetition" will become a differentiating best practice in best-in-class logistics organizations.

This initiative has a full head of steam behind it as several pilot projects have already proven successful, and these early efforts are highlighting the challenges and have become a proving ground for exemplary solutions. Moreover, we see companies approaching emerging markets where logistics capacity and capability are constrained, with a cooperative mind-set from the onset.

Missed: 2011 Prediction – By 2015, 20% of Fortune 2000 companies will orchestrate strategic outsourcing relationships with lead logistics provider (LLP) partners.

A 20% adoption of LLP relationships appears to be too aggressive, based on further research in the development of strategic logistics outsourcing arrangements. While we do see most large organizations rationalizing their logistics provider portfolio and, overall, working with fewer strategic providers, the advent of the LLP is not gaining traction at that rate. Forming and using logistics providers in a strategic supply chain capacity where the relationship is structured to provide joint-value-based outcomes will be closer to just under 5%, within this time frame.