Top 2012 Supply Chain Stories and What They Mean for 2013
- December 28th, 2012
- By: Loraine Lawson
If you look at most New Year’s predictions, you’ll see they usually are just a continuation of the previous year’s trends. With that in mind, here’s a look at the top B2B stories from 2012 that we think will continue to grab headlines in 2013.
1. Insourcing is in, and outsourcing is out (sort of). One of the most significant supply chain stories of 2012 was the technology sector’s decision to shift more manufacturing back to the America, a practice dubbed “insourcing” or “re-sourcing.” Supply chain disruptions due to natural disasters in Asia, problems with protecting intellectual property and the rising costs of labor in China were among the reasons tech companies decided to shift some production back to the West. Even though the shift was not particularly political, the re-sourcing trend became a national economic story during the presidential campaign.
How it will play out in 2013: Apple CEO Tim Cook recently announced a new line of Mac computers will be built in the U.S., so it’s a safe bet this trend will continue in 2013. That’s much-needed good news for the U.S. economy, so these stories will continue to grab national headlines. That said, as B2B.com noted, not all the growth will be in the U.S. Some companies will opt to invest in other parts of the Americas. Also, while some sectors are choosing to relocate to America, there will still be significant investment in Asia as corporations such as Ford Motor Company compete for a foothold with Asia’s growing middle class — and it’s disposable income. Asia is no longer just a place to find cheap labor: It’s a growing market, with its own companies manufacturing and sourcing throughout the region.
What it means for you: This is a good time for all procurement leaders to rethink their company’s sourcing strategy. You may find that sourcing locally may be a better option, particularly as a risk management strategy or to reduce the costs of moving goods. When reviewing your sourcing options, keep in mind that a region’s ability to recover from a disaster is more important than it’s risk of experiencing a disaster. Logistics, infrastructure, and political stability are all factors to review. One way to mitigate your risks is to source in multiple regions.
2. Big Data and Complex Event Processing. Big Data and predictive analytics became a hot topic of discussion for CIOs and even CEO this year. During 2012, use cases emerged for how Big Data, especially when coupled with complex event processing, could help improve the supply chain.
How it will play out in 2013: Big data isn’t going away; in fact, experts say it will became a key part of corporate IT infrastructure.
What it means for you: Big Data, especially in-memory processing, could have far-reaching ramifications for companies that invest in it. In addition to using in-memory process to speed up B2B transactions, it will improve the performance and scalability of your B2B systems. It could also be the foundation for the type of agility you’ll need to implement a demand-driven supply chain or respond to new marketing strategies, such as fast fashion. It could also lead to a better understanding of what happens within the supply chain, as businesses become more data-driven.
3. Compliance, corruption and social responsibility make companies responsible for their entire supply chain. In 2012, global companies came under increased pressure to account for their entire supply chain. First, the California Transparency in Supply Chain Act went into full effect, requiring large manufacturers or retail sellers to audit suppliers for human trafficking and slavery. A similar bill has been proposed at the federal level. Then, Wal-Mart’s sourcing in Mexico made national headlines after the New York Times published an exposé outlining a list of corruption and bribery charges. A fatal factory fire at Bangladesh garment factory Tazreen Fashions, widely-publicized problems at Foxconn, and a scandal in Australia over child labor being used to manufacture Sherrin soccer ball manufacturer made consumers question fair labor and sourcing practices.
How it will play out in 2013: This isn’t the first time companies have been in the hot seat for using suppliers who rely on child labor and unsafe working conditions. But technology has changed our ability to find and share these problems — social media gives these problems more traction, according to a recent study showing companies are under pressure from several angles to become more socially responsible. If a federal bill similar to the California Transparency in Supply Chain Act passes, more companies will be forced to act or face fines.
What it means for you: While it can be tricky to monitor suppliers and their suppliers, take this issue seriously. Invest in technology that helps you gain visibility into the entire supply chain, and work with third-party auditors and watch groups to audit your supply chain so you won’t be caught off-guard by a scandal. Finally, make it clear to your front-line managers that bribery and corruption, even in other nations, will not be tolerated.
4. Car sales rose to the best level in five years. Here’s a trend no one knew about until year end: The top four U.S. Automakers closed out their biggest year since the recession began. Overall, automakers in the U.S. saw a 13 percent jump in vehicle sales over 2011 — and that’s the biggest increase they’ve seen in auto sales since 1984, according to CNN.
How it will play out in 2013: This is big news going into a new year, since it’s seen as a major indication of economic recovery. Also, one analyst said it indicates young buyers who have been living with their families are now venturing out on their own, creating new households. Keep in mind, though, that new car sales were also helped by strong prices for used cars, making new car prices more competitive after trade-in.
What it means for you: Obviously, the significance of this depends on your company’s industry, but if the experts are right, it could mean the economy is ready to commit to the recovery. New households will need to be furnished and stocked, as well. While this is a good sign, it’s best to stay flexible and be ready to adjust supplies and manufacturing schedules as needed. Insourcing might be a better option now, since it removes the long-lead times required for manufacturing abroad. You might want to think about ways to control stock levels while reducing cost.
5. The Olympics, iPhone 5 and Hurricane Sandy. On the surface, these events seem to have little in common, but they provided insight into massive supply chain and logistics situations. The Olympics involved seven years of planning for more than one million spectators, plus an additional 300,000-plus athletes, officials and media. The iPhone 5 launched was also thoroughly planned and executed, with one of the world’s best supply chain operations supporting it. Likewise, Hurricane Sandy hit major U.S. manufacturing, storage and transportation sites,
How it played out: There were stories of shortages at a few Olympic Park venues, and Procurement Leaders reports that some blamed the Olympic supply chain, which others denied. Despite it’s well-oiled supply chain and supplier redundancies, Apple had to delay fulfillment for online pre-orders, and though it may be a coincidence, the company recently announced plans to insource more of its production. Meanwhile, parts of the northeast are still struggling to recover from Hurricane Sandy, pundits are still pontificating on what supply chain managers can learn from it, and some retailers say it did hurt holiday sales.
What it means for you: Even the best planned supply chains encounter unexpected problems, whether it’s from unforeseen customer behavior, a problem with a supplier or a disaster. Smart companies will prepare before disaster strikes through risk management, building resiliency into their supply chain, and forging meaningful partnerships with suppliers.
Oh, and one other thing you can do: Keep reading B2B.com in 2013 to find out more ways to supercharge your supply chain.