SCDigest Supply Chain Guru Predictions for 2012

Dr. David Simchi-Levi Professor MIT

Some of the issues that have been in the forefront in 2011 will likely dominate the attention of executives in 2012:

 (1) Supply chain risk management:

The news in 2011 was dominated with the fallout from two major catastrophic events – the Japanese Tsunami in March and the floods in Thailand in September. Companies will focuse on understanding their risks, modifying their strategies (very few companies) and creating contingency plans.

(2) Supplier performance monitoring:

The demand for more supplier accountability, exemplified by the recent criticism of Apple in regards to work conditions at FoxConn, will require more focus on supplier performance monitoring. This of course is also part of effective risk mitigation strategies.

(3) Manufacturing moves closer to demand:

The anxiety over the decline of manufacturing in the US and attempts to understand and revitalize it are taking center stage. Some recent data shows a new trend towards regional manufacturing (see my Sloan Management Review paper on Is It Time to Rethink Your Manufaturing Strategy?) This is driven by oil price, labor cost in developing countries and the risk associated with low-cost-country sourcing and manufacturing strategies.

(4) Implementation of Supply Chain segmentation and flexibility strategies:

With the proliferation of channels, products and different customer value propositions, many companies need to segment their supply chain strategy. Indeed, the recent success of Dell, which successfully transformed its supply chain to address these challenges, will encourage other companies to follow.

(5) Investment in sustainability:

Many companies are initiating projects for more efficient packaging and sustainability practices. On the legislative front, California approved a carbon cap and trade policy, Australia instituted a new carbon tax and there is talk of a UN carbon fee on cargo ships. Therefore, there is pressure on companies to invest in reducing carbon emissions and sustainability despite the seeming lack of interest at the US federal level.

(6) Technology:

Technology will continue to advance on many fronts including:

• Increased use of business analytics – expected boost is likely to come from In-memory technology and investments in this area

• Increased use of RFID for tracking and end to end traceability

• Continued migration to cloud computing

• Innovative use of tablets and cell phones in retail.

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