This article, from the October 12, 2009 print edition of Canadian Business (and Yahoo Finance), got my attention. After all, I’m a well educated Ph.D. who can build some of the most complex mathematical and computer models in the world, and I often don’t have a clue what these people are trying to, or should I say not to, tell me. (And that’s why I don’t have a personal financial advisor who oversees my financial decisions and plan to keep it that way.)
And we have essentially the same problem as supply management professionals every time a new sales person comes knocking on our door. Is he selling us a better product, or is he selling a fresh batch of snake oil? And how do we tell the difference?
The article reiterated a great piece of timeless advice that we all need to remember, “if it’s too good to be true, it probably is“. That’s not to say that there aren’t categories where you can save 50% or more off of what you’re paying now, as there are, but that they’ll likely only represent a small fraction of the “opportunities” that sales people will try to bring to. By the time you factor in switching costs, logistics costs, quality trade-offs, etc., the real opportunity will in fact be a lot smaller than the sales person may make it out to be.
So do your research, and just like you should start with a security commission check and Google search before you meet with a financial advisor, you should check with the supplier’s local Better Business Bureau (or equivalent) and do a Google search before you get too far down the negotiating path. It’s better safe than sorry, especially in this economy.
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PriceWaterhouseCoopers and the Supply Chain Management Institute recently released Volume 1 of their Transportation & Logistics 2030 report on how supply chains will evolve in an energy-constrained, low-carbon world. The first issue focussed on the scarcity of energy resources and how it will likely affect the industry over the next 20 years and contained a number of theses that were assigned an average probability of likelihood by 48 experts under a Delphi study. Of the 18 theses addressed in the report, the following 11 were assigned a greater than 50% chance of occurrence, with the first thesis given a 71% chance of likelihood.
- Continuous real-time control of the flow of goods eliminates disturbances in the supply chain and thereby significantly increases resource efficiency.
Technology will never eliminate disturbances as some risks can’t be predicted, but given that the real time visibility solutions already available can greatly reduce supply chain fluctuations, I have to agree that most supply chains will flow smoother in 20 years (especially since those that don’t improve will perish in the current economic climate).
- By using standardised measurement and evaluation systems (i.e. emissions trading, toll systems), the carbon footprint of logistics processes in supply chains will be allocated to the causer and factored into the price of the product.
Governments are slow to move, but the pressure is on. This could happen in the next decade.
- Consumer behaviour has changed such that locally produced products are strongly preferred.
Consumer behaviour is already changing to environmentally preferred products … and as consumers better understand the unnecessary environmental damage caused by shipping products halfway around the world that can be produced down the street, this is inevitable.
- Larger means of transport (gigaliner trucks, ultra-large container ships) have become prevalent in order to compensate for rising transportation costs.
We already have 15.2K TEU container ships that are almost 400 meters long, and I don’t see this record standing for long.
- The reduction of transportation costs has become the predominant criterion in determining where to set up production sites.
As the cost of fuel continues to rise, this is inevitable.
- Work environments, everyday activities, and leisure options are better integrated, which has led to considerable reductions in transport.
We’re seeing the start of this revolution today with the rise of the networked person who can work anywhere.
- Autonomous and self-controlled systems (agent systems, automatic guided vehicles) have revolutionized freight transport.
While I think revolutionized is a strong word here, warehouse operations will become a lot more automated and a lot more streamlined.
- Nanotechnology has significantly improved many means and procedures in logistics (e.g. transport, maintenance, repair and overhaul).
This is one I have to disagree with. Until we see some real breakthroughs in the industrial application of nanotechnology, it’s going to be a while before we see a transition from the lab to logistics.
- Personal influence on the logistics process has become more important for customers than the speed of delivery. Customers actively intervene in controlling the delivery process of goods.
We’re already seeing the beginnings of this. If a customer can get the goods when they’re needed, how long they take to get there is not as much of an issue.
- The minimization of energy consumption is the paramount criterion in supply chain design, rather than cost efficiency and speed.
Since energy costs are going to rise as sustainability and corporate social responsibility continues to grab headlines, the focus will shift to minimizing energy. Furthermore, reduced energy consumption will reduce in decreased costs, so a focus on cost reduction won’t be as important.
- The global energy turnaround has now advanced to the point so that in some countries alternative energy accounts for up to 80% of the overall energy mix.
While this will be the case in a few emerging markets, I am going to make the sad prediction that most of the countries in today’s developed world will still be struggling to surpass the 30% to 40% marks.
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