The question: “What Does the Future Hold for Supply Chain Management?” Supplying the answers were participants in the annual panel presented by the San Francisco Roundtable of the Council of Supply Chain Management Professionals, as well as fellow panelists and the audience. Here are five more:
Prediction: Parcel and small-package carriers are going to alter they way they charge for shipping, and customers will have to respond, said Michael Hester, senior vice president of merchandising operations and supply chain with BevMo! Corp. In fact, both UPS and FedEx have already announced a move to dimensional pricing, whereby the rate for a parcel of less than three cubic feet is based on both its cube and weight. (Both carriers already use that formula for pricing larger packages and air shipments.) The change takes effect at the end of this year. “Expect an acceleration of custom, made-to-order packaging, where everyone tries to minimize the impact of dimensional pricing,” said Hester.
Response: You can’t argue with a development that is only weeks from becoming a reality. The question is how shippers will respond. Many are already tackling the challenge of designing more efficient packaging, both from an environmental and cost standpoint. There’s general agreement about the excessive “air” that fills many packages today, along with the glut of filler material that makes for bigger boxes. One of the drivers behind the trend is Amazon.com, noted Greg Ginsburg, vice president of global sourcing and supply chain design with The Clorox Company. The e-commerce behemoth views overly large packages as “money going out the door.”
Prediction: The concept behind the ride-sharing service Uber and its competitors will begin to affect the structure of supply chains, said Kerry McCracken, vice president of business solutions for the Integrated Network Solutions segment of Flextronics. She envisions the formation of an industry that will bring together existing infrastructures and partners in a series of creative, ad hoc relationships, all with the intention of fostering more responsive supply chains. The strategy will be of particular value to new-product introductions and ramp-ups, she said.
Response: Other panelists agreed, but the audience was split, with some members believing that it’s too early for the emergence of a radically new supply-chain model. McCracken noted that a similar degree of disruption is already underway in the e-commerce sector, triggered by the rapid rise of China’s Alibaba Group Holding Ltd. Amazon, she said, is “terrified” of this newly dominant player, which promises to foster an unprecedented level of business-to-business integration.
Prediction: Supply chains will adopt new techniques for enabling manufacturing within emerging countries, said G.S. Iyer, director of worldwide materials with Citrix Systems. Their ability to solve the demand-supply equation will be tied to resources and intelligence within those countries, and become less dependent on outside parties. Mobile apps and cloud technology will aid in the localization of manufacturing, he said.
Response: McCracken wasn’t sure. She cited the problem of ever-shifting government tax policies within emerging countries, a practice that often amounts to “rearranging the deck chairs.” Manufacturers will rely as much as possible on local resources, she said, but global supply chains can’t reconfigure their infrastructures overnight. A silicon wafer fabrication plant, for example, isn’t going to suddenly pop up in a new and unfamiliar location to support high-tech production. “There are going to be aspects that are [still] global,” she said, “and only pieces of it will be done locally.”
Prediction: Software consumers will continue to migrate toward e-commerce and away from brick-and-mortar purveyors, said Lisa Bugajski, senior director of product delivery operations with Adobe Systems. In addition, buyers “will become more comfortable about coming to the manufacturer.”
Response: Hardly a controversial view, if you assume that software purchases are running in the same direction as most other retail transactions. Despite all the hype and press that e-retailers get, they still account for only a small portion of total retail sales, so there’s plenty of room for growth in that sector. As for the trend in software sales, panelists said it will depend on the level of customer service, and how well the application actually performs. Again, the growing popularity of the cloud is likely to push consumers toward direct relationships with online vendors.
Prediction: Expect to see the emergence in retail stores of a “middle brand” that splits the difference between traditional store brands and lower-priced private labels, said Ginsburg. Smart merchandisers will figure out a way to serve the demographic that consists of consumers who are losing purchasing power, but want both value and quality. Whether the solution comes from the consumer packaged goods or privately branded sector remains to be seen. “There will be a middle brand,” said Ginsburg. “There will be too much value in the economy to avoid it.”
Response: Among general audience agreement, some stood up to dispute the idea. They referred to the huge number of price points and SKUs already crowding retail shelves, and asked whether existing upper- and lower-priced goods can make room for yet another category to fill that supposed void. Hester said private labels, typically produced by a third party on the retailer’s behalf, have already cornered the market on price, yet could also provide the requisite quality to satisfy a consumer’s desire for an option that offers the best of both worlds.