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Major Trends Impacting Supply Chains for the Next 3 to 5 Years

Surveys conducted by McKinsey and Company indicate that supply chain management is becoming a higher priority in boardrooms at the same time the job is becoming more challenging and complex. McKinsey Principal Yogesh Malik identifies issues for supply chain managers to address now and trends to watch.

Corporate executives are raising the priority of supply chain management and expecting it to deliver more than cost savings, says Malik. "Company leaders are looking at the supply chain not only as a tool to reduce costs but as a means to improve service levels and create competitive advantage," he says.

Malik cites a McKinsey survey of more than 600 companies that were asked about supply chain priorities looking three years back and five years forward. Cost only as a focus dropped by 20 percent, past vs. future, he says. However, when cost was coupled with service level or inventory, the priority increased by 20 percent. "That mirrors what we are hearing from companies," Malik says. "Companies want a supply chain that gives both cost reductions and better service."

Another survey of 60-plus CEOs reflects how the importance of the supply chain is increasing in boardrooms, he says. "More than 90 percent of these CEOs said supply chain capabilities are critical or very critical to success."

At the same time supply chains are becoming increasingly complex, which makes the job of supply chain professionals more challenging and also more exciting, says Malik. Looking out three to five years, he says supply chain managers will "continue to do the great work they have been doing," but they will have new issues to confront. "Companies will have to look at the number of supply chains they operate," he says. "They can't have a one-size-fits-all supply chain, nor can they have dozens of supply chains, so the key questions will be how to splinter supply chains, how many to have and how to design and manage those," he says.

Another challenge will be managing increasing supply chain risk. "Going forward, building a supply chain that not only is efficient, but also resilient will be very critical. Resiliency doesn't come cheap but is essential for companies to be able to serve customers across regions with confidence."

Trends for supply chain managers to keep a watch on include climate change, says Malik. "The emphasis on sustainability will shift some customer needs and will drive providers to become more green in their operations," he says. Another is big data. "With big data comes disruptive ways in which companies will look at patterns and that will impact how they want to manage the supply chain, so how big data evolves is something to keep an eye on."

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Keywords: Supply chain, supply chain management, supply management, international trade, supply chain management scm, inventory management, value chain, global logistics, logistics management, logistics & supply chain, logistics services, supply chain jobs, supply chain solutions, supply chain planning, supply chain systems, supply chain services, supply chain risk management

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