Executive Briefings

Focus on Information Will Place New Demands on Supply Chain Managers, AMR Research Says

The "information economy" is poised to surpass the "manufacturing economy," but that doesn't mean the supply chain will be any less important, according to Kevin O'Marah, vice president of strategic research with AMR Research Inc. Speaking at the consultancy's annual Executive Conference in Scottsdale, Ariz., O'Marah envisioned a world where "understanding and managing demand is really the center of the universe." Companies will be focused on what their customers actually want, not what they want to sell them. As a result, they must be prepared to respond instantly to any shifts in market demand. But that can't happen unless information flows smoothly throughout the supply chain on a real-time basis. At the same time, O'Marah said, suppliers will play a far greater role in influencing product design and content. Ten years from now, three-quarters of the value of an automobile will come from suppliers instead of original equipment manufacturers; the figure was 65 percent in 2000. That raises new concerns about product quality-recall rates for cars sold by Detroit's Big Three automakers are already soaring (although the figure hasn't budged for Toyota, O'Marah noted).

Tony Friscia, founder and chief executive officer of AMR, offered four fundamental trends to watch in supply chain management. The first is compliance, as business ramps up spending in order to meet new rules on corporate record-keeping, environmental protection and security against terrorist acts. In 2005, Friscia said, companies boosted spending by 40 percent just to meet the reporting requirements of the Sarbanes-Oxley Act. Spending to comply with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) rose 24 percent. The second trend concerns a greater focus on supply chain risk, as companies adopt strategies to deal with pandemics and other disruptions of a global nature. Only a third of large global manufacturers and retailers have devised such plans to date, Friscia said. The third trend centers on what he called "the fortune at the bottom of the pyramid"-the massive numbers of people that make up the developing world. Although they wield an average of less than $1,500 in purchasing power today, they represent an emerging growth opportunity for business of some $13tr, according to Friscia. In the next 10 years, he predicted, there will be 368 cities in the developing world with populations of a million or more. Finally, he cited growing requirements "at the top of the pyramid"-consumers in the developed world-for products that are more environmentally friendly. "Aging baby boomers are going to force manufacturers to be better corporate citizens," Friscia said. For all of those trends, he added, echoing the theme of this year's AMR conference, supply chains will be called on to "save the world."

Visit www.amrresearch.com.

The "information economy" is poised to surpass the "manufacturing economy," but that doesn't mean the supply chain will be any less important, according to Kevin O'Marah, vice president of strategic research with AMR Research Inc. Speaking at the consultancy's annual Executive Conference in Scottsdale, Ariz., O'Marah envisioned a world where "understanding and managing demand is really the center of the universe." Companies will be focused on what their customers actually want, not what they want to sell them. As a result, they must be prepared to respond instantly to any shifts in market demand. But that can't happen unless information flows smoothly throughout the supply chain on a real-time basis. At the same time, O'Marah said, suppliers will play a far greater role in influencing product design and content. Ten years from now, three-quarters of the value of an automobile will come from suppliers instead of original equipment manufacturers; the figure was 65 percent in 2000. That raises new concerns about product quality-recall rates for cars sold by Detroit's Big Three automakers are already soaring (although the figure hasn't budged for Toyota, O'Marah noted).

Tony Friscia, founder and chief executive officer of AMR, offered four fundamental trends to watch in supply chain management. The first is compliance, as business ramps up spending in order to meet new rules on corporate record-keeping, environmental protection and security against terrorist acts. In 2005, Friscia said, companies boosted spending by 40 percent just to meet the reporting requirements of the Sarbanes-Oxley Act. Spending to comply with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) rose 24 percent. The second trend concerns a greater focus on supply chain risk, as companies adopt strategies to deal with pandemics and other disruptions of a global nature. Only a third of large global manufacturers and retailers have devised such plans to date, Friscia said. The third trend centers on what he called "the fortune at the bottom of the pyramid"-the massive numbers of people that make up the developing world. Although they wield an average of less than $1,500 in purchasing power today, they represent an emerging growth opportunity for business of some $13tr, according to Friscia. In the next 10 years, he predicted, there will be 368 cities in the developing world with populations of a million or more. Finally, he cited growing requirements "at the top of the pyramid"-consumers in the developed world-for products that are more environmentally friendly. "Aging baby boomers are going to force manufacturers to be better corporate citizens," Friscia said. For all of those trends, he added, echoing the theme of this year's AMR conference, supply chains will be called on to "save the world."

Visit www.amrresearch.com.