Executive Briefings

The Supply Chain in the Year 2010

Sales and operations planning is growing in importance to manufacturers and so is the necessity to manage risk, says Simon Ellis, practice director, supply chain strategies, at IDC Manufacturing Insights. In his analysis, Ellis assesses the future of outsourcing and the health of the supply chain.

Waste reduction is quite simply the driver for the buzz about sales and operations planning, Ellis says. "Companies are struggling in this economy and can no longer afford the inefficiencies and waste in their supply chains. We're seeing for 2010 a new intention to invest in better S&OP processes. At the end of the day, you need one set of numbers that all departments can operate on."

Ellis acknowledges that he had predicted that 2009 would be risk management's year. Clearly, businesses had bigger problems to attend to, so supply chain managers largely focused elsewhere. Nevertheless, companies are much more aware of the risk inherent in the decisions and trade-offs they make, Ellis says. Consequently, risk-management capabilities are being built into supply chain planning and inventory optimization tools and ERP systems. "I'm not sure we will see separate risk management applications, but they are being embedded into other systems," he says.

Another prediction: 2010 will be a more robust year. Many factory closings are permanent in Ellis's view. That requires investment in better supply chain planning capabilities and inventory management tools. "2010 will be a growth year," he says, "but starting at a lower baseline, perhaps 75 percent of what it had been."

Outsourcing "still has some legs," which is to say that companies will continue to spin off activities until they feel that the things that are left are those that no one else can do better. As it is, companies are still defining their core competencies.

In transportation, the cost of oil will again rise, Ellis says, so some of the caution that supply chain managers had begun to shake off will have to be reinstated.

To view this video in its entirety, click here.

Waste reduction is quite simply the driver for the buzz about sales and operations planning, Ellis says. "Companies are struggling in this economy and can no longer afford the inefficiencies and waste in their supply chains. We're seeing for 2010 a new intention to invest in better S&OP processes. At the end of the day, you need one set of numbers that all departments can operate on."

Ellis acknowledges that he had predicted that 2009 would be risk management's year. Clearly, businesses had bigger problems to attend to, so supply chain managers largely focused elsewhere. Nevertheless, companies are much more aware of the risk inherent in the decisions and trade-offs they make, Ellis says. Consequently, risk-management capabilities are being built into supply chain planning and inventory optimization tools and ERP systems. "I'm not sure we will see separate risk management applications, but they are being embedded into other systems," he says.

Another prediction: 2010 will be a more robust year. Many factory closings are permanent in Ellis's view. That requires investment in better supply chain planning capabilities and inventory management tools. "2010 will be a growth year," he says, "but starting at a lower baseline, perhaps 75 percent of what it had been."

Outsourcing "still has some legs," which is to say that companies will continue to spin off activities until they feel that the things that are left are those that no one else can do better. As it is, companies are still defining their core competencies.

In transportation, the cost of oil will again rise, Ellis says, so some of the caution that supply chain managers had begun to shake off will have to be reinstated.

To view this video in its entirety, click here.