Supply Management in the Decade Ahead I: An Introduction

Back in May, I overviewed seven critical supply strategies for succeeding in a dynamic world, as summarized in the article Succeeding in a Dynamic World that was jointly written by the ISM, CAPS Research, and A.T. Kearney after an initial foray into the data returned by a survey undertaken by the parties in an effort to provide an update to The Future of Purchasing and Supply: A Five and Ten Year Forecast, a report that was published back in 1998.

Since then, on October 3, the full report Succeeding in a Dynamic World: Supply Management in the Decade Ahead was released. In addition to deep dives into each of the critical supply strategies that were identified in the initial article published through the ISM, it also covered the major forces driving change, the impacts on business models and strategies, and the new and expanded missions, goals, and performance it found for supply management. There were a lot of great insights in this 140-page publication, and this series of posts is going to cover some of the more important ones.

The report starts off by noting that a lot has happened in the last ten years. When the previous study was released, there were no iPods. The Euro had not been introduced. Business process outsourcing to India was still in its infancy. The dot-com boom and bust had not yet occurred. Terrorism was but a remote possibility in most of the developed world.

Since them we’ve had extensive e-system implementation, outsourcing, globalization and low-cost country sourcing, movement to center-led supply organizations and cross-functional teaming, formal category strategies, enhanced understanding of supplier and supply chain costs, and efforts to better integrate supply chains applying lean principles and Six Sigma.

The report identified six external forces that will impact companies and their strategies in the coming decade. The external forces are:

  • Globalization of the World Economy
  • Demographics
  • Changing Consumer Demand
  • Natural Resources and Environmental Pressures
  • Regulation and Activism
  • Technology

It then identified seven “wild-card” forces that, if they occur in such a way as to affect an organization’s supply chain, would also require a company to adjust their strategy:

  • Global Epidemic
  • Military Conflict
  • Country Disintegration
  • New Protectionism
  • Terrorist Resurgence
  • Hacker Hell
  • Quantum Leap

It also asked survey respondents to rate the impact of twenty-five specific external functions on business on a scale of 1 to 7, and the following were the top 13 forces identified with a impact rating of 4 or more:

  • Rising Energy / Raw Material Prices
  • Regulatory Changes
  • Increased Competition from Established Competitors
  • Spot Shortages of Key Raw Materials
  • Changing Customer Requirements / Buying Habits
  • Increased Emphasis on Supply Chain Security
  • Increased Environmental Regulations
  • Industry Consolidation
  • Emergence of New Technology
  • Terrorist-Inspired Instability
  • Major Change in the Value of the US Dollar
  • Increasing Competition from New Entrants
  • Rising Interest Rates

However, when the respondents were allowed to add their input, the following forces were determined to be the most important overall:

  • Global Competition
  • Merger, Acquisition, and Supply Market Consolidation
  • Increased Governmental Regulation
  • Technology Advances
  • Customer and Channel Dynamics
  • Increased Product Variety and Shorter Life Cycles
  • Social Responsibilities
  • Environmental Responsibilities

The reality is that a lot of external forces impact, and will continue to impact, the supply chain, and, more importantly, these forces will continue to interact in complex ways that are hard to predict and that, when combined in certain ways, will have a much more dramatic effect than any single force could have on its own. The only certainty is that the speed, variety, scope, and rate of change will increase over the next decade.

In Part II, we will address the eight forces that supply managers rated the most important overall.