Supply chain management is a global activity and process. Manufacturers and customer are worldwide. What will happen in supply chain management? What lies ahead? Supply chains run from suppliers through to customer warehouses or to store shelves. This is a complex and extended pursuit and has strategic requirements. Any discussion of where supply chain management/logistics may be going has to recognise economic growth and what will happen with both customers and manufacturing.
Customers / sales – developing and less developed economies and markets. Sales growth is tied to expanding into new customers and markets. The potential of emerging markets is estimated in the trillions of dollars. There are many developed and developing countries. The BRIC—Brazil, Russia, India and China—are identified as key developing economies. Customers in developed countries continue to want more products; this is both an expansion and fragmentation. In developing countries, the consumer population will continue to grow and become large.
Less developed economies bring other opportunities and supply chain challenges. Logistics infrastructure may not be as developed. Carrier services and schedules, both the import/export and the within country, may not be what is needed for dynamic supply chains. Other logistics services may not be at the levels that corporations are used to. Business practices and levels of people to deal with can differ.
These opportunities may take time to develop, but they do reflect the continuing globalisation of sales and business.
Manufacturing — globalisation or deglobalisation. Sometimes, in discussions about the costs for manufacturing or sourcing in China, the topic can include migrating production back to the United States, Europe or wherever significant manufacturing did take place. This then can raise the subject of onshoring or near shoring.
Transitioning to onshore or nearshore would mean investing in factories and equipment. It can improve supply chain operations and costs. Shorter supply chains aid planning, reduce the working capital tied up with inventories and improve service, whether it means delivery to store shelves or to customers’ warehouses.
The reality is industrial production / manufacturing—and, in turn, sourcing—is global. As with sales, it will expand into other areas. Low cost manufacturing is important to having competitively priced consumer products to sell worldwide. Other industries have different manufacturing needs. This limits any significant movement of production to the United States or to Western Europe.
Depending on the type of manufacturing and industry, manufacturing should often be close to raw materials or to markets. Location of factories is then the need. Depending on the how developed the economy of a country is, the logistics infrastructure may create challenges, as with global sales. Infrastructure begins with ports and airports. This can apply to whether the products move dry bulk, tankers, reefer, general cargo, roll on/ roll off, or container. Either way, logistics is impacted as to increased complexity and to global scope.
Ecommerce. Ecommerce will be truly global. It will mean selling to consumers or businesses located anywhere in the world. This may be done through multiple websites. It could require a blended global supply chain with shipping orders for many different products from warehouses located in key country locations and shipping orders directly from suppliers located worldwide to end customers.
The products involved may mean more than making express / parcel shipments. It may mean using LCL ocean and air cargo. Different types of warehouse operations may be needed to handle such a diverse mix of products for picking, packing and shipping eaches instead of cases or pallets. Customs services in different countries may have to be easier and quicker in order to make timely deliveries. Managing and coordinating these global ecommerce orders, with their underlying need for quick delivery, and the shipping and delivery demands will require logistics services that are not presently available on a global basis.
Logistics Service Providers. Logistics providers will need to adapt to the global changes as to additional geographic cover age and services to meet the new demands. This may mean partnerships or combining services between global and local providers. Economies of scale that have come to be expected with ships, warehouses or other primarily fixed cost areas may be difficult to achieve in certain areas.
The role of 4PLs in complex supply chains may become important. 4PLs, with their supply chain focus, as compared to the 3PLs functional focus, can have a strong place in the evolving supply chain needs. 4PLs have a holistic supply chain view that is important for design, development, and management of supply chain operations. They are solution providers that will be needed as extensions of customers’ supply chain organisations.
3PLs may change. They are presently contract logistics providers that are part of a logistics service parent company. Providers present what they do and may adapt to what each customer wants. They are part of forwarding, ocean, trucking, warehousing or other service companies. These firms are not supply chain practitioners. They are not part of “shipper”/customer companies. As such they may struggle to develop serious value propositions for clients, value that separates them from the competition. This creates a void—and an opportunity. New 3PLs could arise that are part of the shipper community. These could develop from Walmart, Amazon, Alibaba or other large corporations. They would understand that it is about moving orders and inventory, not cargo.
Supply Chain Management. Risk with the extended supply chains will increase. The number of suppliers, factories, markets, customers and logistics service providers, both global and local, to work with will increase. It may include working with suppliers of suppliers in order to better manage production plans and sales programs. Collaboration, especially horizontal / process, and communication will take on new meaning and importance for all partners and participants. Managing supply chains will be a more robust 24/7 responsibility.
Supply chains and organisations will evolve and transform. The test will be how disruptive the changes are. Serving different countries and different markets will demand multiple supply chain processes and approaches. Supply chains will have increased responsiveness and will handle greater diversity. Logistics technology investments will increase. All points in the supply chain product and information flows will be fully integrated, networked and visible. There can be no blind spots. Managing events and exceptions worldwide will be mandatory. Fragmenting supply chains by functions and coping with various internal and external silos will be replaced by process controls.
Supply Chain Segmentation. Supply chains are not monolithic. This is consistent with the fact there is no single supply chain. There are supply chains within supply chains. There is no “one approach”. Effectively directing worldwide supply chains is complicated and requires understanding on the company internal and customer and supplier external vagaries. In addition, there is noise that companies, customers and suppliers create as they demand attention or create problems. The noise distracts from effectively managing the supply chain and adds unnecessary volatility. Supply chains stumble from too much static. Segmentation enables companies to identify, focus and prioritize key sectors and to tier, align, and, if needed, build supply chain resources and capabilities to successfully serve the sectored customers, cross-channels or markets. Instead of applying a standardized supply chain service across all segments, it provides clarity of purpose and enables the company to match the supply chain service with each segment's requirements. Targeting and tiering create a greater profit, realistic competitive advantage. It improves supply chain cost, capital and performance that is necessary as the complexity and scope of a company’s supply chain grows.
Logistics Parks. With increased global expansion, the potential for successful logistics parks increases as a supply chain venue. Each can be the logistics hub for a geographical region to position inventory and for service to customers. This is good for supply chain needs of companies who sell in the region and for logistics service providers who often operate a warehouse in a park—the two end-user customers for these facilities.
Singapore and The Netherlands have proven what logistics can mean to an economy. A well-operated park can be an economic cluster with its employment generation. Economic cluster is key for improving the economic performance of regions. They orient economic development toward groups of companies for common issues. Clusters build on the unique strengths of an area rather than trying to copy other areas. They enable a region to have different sets of economic development opportunities.
Many attempts at creating strongly viable logistics parks have not achieved their potential. These have focused too much on the design in terms of infrastructure and have not done enough as to what is required to attract and retain the two customer sets. As a result, they end up as asset rich and cargo poor.
Conclusion. Supply chain management will evolve as sales, sourcing and manufacturing continue to take new global directions. Requirements to direct and manage operations will advance. Logistics services to support the worldwide dynamics will change. All these are driven by the expanded, complex dynamics of global supply chain management.