Trend Watch: Seven Supply Chain Concerns for 2004

As 2004 draws near, companies are rapidly putting plans in place to govern their supply chain moves for the coming year. These plans take into account company goals, competitive pressures, and customer demands. But they must also take into account changes in the supply chain world.

Supply chain executives need to be aware of what's happening in the marketplace and what the buzz is all about. By staying informed, they can evaluate the trends and determine their impact on the planning process.

Here we present a look at seven supply chain trends to watch in 2004. Some may have already impacted your 2004 plans; some may just be making your radar. Either way, they are changing the supply chain and, therefore, should be watched.

Trend 1: RFID

Whether it's actually used and implemented or not, RFID will continue to be the buzz as Wal-Mart drives its top 100 suppliers to deliver RFID-tagged products by 2005. Although the impacts of using RFID are still being understood, this technology and other wireless technologies like it will continue to enhance the ability to track goods throughout the supply chain, and by doing so, opens up a whole world of possibility for increased supply chain efficiency through better accuracy.

Trend 2: Emphasis on Software

Continued development and use of software and Web-based solutions to speed supply chain communication and information exchange will be at the forefront of many company improvement plans.

• Web-enabled processes, Web-based sourcing and hosting solutions will use the power of the Internet for communicating real-time information sharing to maintain software and improve procurement and sourcing.
• Because it has been nearly five to 10 years since original WMSs went into use at many large operations, 2004 and beyond will be the time to upgrade technology and add features to your existing system.
• As companies are continually striving to keep costs down, they will seek out more cost-effective solutions for their material handling needs. Using a warehouse control system as a middleware and equipment on the facility floor will help reduce the costs of WMS implementation, risk and will improve the reliability of the WMS by providing greater flexibility and adaptability with greater process improvement.

Trend 3: Focusing Externally

The focus and scope of many companies over the past few years has been on their internal supply chains, but this will not be enough to compete in the future. True Supply Chain Excellence is achieved through a process of growing your individual supply chain link and then your entire supply chain, step by step.

This process includes:

1. Working hard to manage your own link (Business As Usual)
2. Looking outside your link for opportunities to improve technology and costs and inserting best practices in the links around you (Link Excellence)
3. Turning the lights on outside your organization to see the information that needs to be shared with other members of your supply chain, revealing what is and isn't working (Visibility)
4. Working with other suppliers, vendors and customers to drive out costs throughout the chain (Collaboration)
5. Synchronizing new ways of thinking and strategies to provide greater cost reduction and enhanced customer satisfaction. (Synthesis)
6. Meeting the demands of today's economy through a combination of partnerships, flexibility, robust design methods, demand planning and agility (Velocity)

In addition, strategies such as Supplier Relationship Management and Customer Relationship Management drive a greater collaboration between supply chain partners for greater cost efficiencies. SRM can result in immediate savings through a higher level of service and efficiency by a true commitment to the relationship and an ultimate commitment to excellence all around.

Trend 4: Outsourcing

Outsourcing functions to lower-cost suppliers is one way to effectively achieve cost savings and efficiency and allows companies to focus on their core competencies while minimizing capital investment. At the same time, 3PLs continue to improve their technology, performance and service offerings, making outsourcing an attractive, cost effective option. As 3PLs have developed a true focus on "best practices" and invested in optimization technology (advanced WMS, TMS, etc.), moving to a 3PL can also be a way to quickly, and at lower cost, gain access to cutting-edge technology.

Trend 5: Inbound Freight Optimization

As the last frontier of transportation optimization, many companies are focusing on optimizing their inbound freight. Companies will convert inbound freight from prepaid to collect, gain access to TMS optimization capabilities and realize significant cost savings plus increased visibility of inbound shipments from plants and vendors to the DC.

Trend 6: Network Optimization

Companies of all sizes are showing a renewed and growing interest in looking at total network costs and optimization, rather than a look at each cost silo (optimize a warehouse, implement a freight bid, etc). Increased merger and acquisition activity is also driving this trend. Companies are using computer models to evaluate multiple potential scenarios and these often include alternative sourcing—moving some production to fewer plants, to overseas sources, etc.

Trend 7: Globalization & International Supply Chain Management

Increased opportunities for globalization through channel management, enhanced collaboration, new markets and knowledge sharing and management will continue to drive business. For companies already in a global setting, sourcing product globally and moving production to lowest manufacturing costs areas has moved from an "opportunity" basis to an integral part of the supply chain for most companies. This has companies scrambling to match their global logistics capabilities with their growing volume and requirements.