We witnessed a profound shift in the global supply chain industry in 2010, a shift affecting shippers, consumers, service providers and investors. A choppy and unpredictable recovery governed a cautious return to investment in business development and capital assets for domestic and international providers. Investment priorities shifted from developed economies to Asia’s emerging markets. And conventional landside and international logistics networks were disrupted.
Although revenues generally improved year-over-year, many providers struggled with depressed margins and weak returns on investment.
A common pre-crisis supply chain refrain — How fast can you get it delivered? — became, perhaps indefinitely, “How much will it cost?” Not surprisingly, inventory velocity slowed throughout the supply chain, driven by a more cautious build-to-order procurement strategy, slow steaming in the ocean carrier industry, and tight capacity across all transportation sectors. Time-definite products and higher levels of air freight were often the “quick-fix” as the peak season approached — increasing transportation costs at a time of stubbornly weak pricing.
Where should providers concentrate investment this year to meet customer demand? Asian sourcing is migrating. In China, manufacturing is shifting northward and to the interior, forcing providers to build new distribution and landside capabilities. Southeast Asia and South Asia are competing with China as a preferred sourcing location. Supply chain providers must respond or become irrelevant bystanders.
Asia’s manufacturing centers are transforming rapidly into the world’s most attractive consumption-driven economies, driving supply chain leaders to search for providers who can design and implement order-fulfillment strategies to help sell their products into markets historically driven by exports.
For the successful supply chain provider, the message is clear: Be creative, focus on Asia, adapt product offerings to embrace radically different inventory strategies, invest in adjacencies, keep your technology fresh and robust, and never take your eye off the bottom line.