We predicted last year that three major changes would affect supply chains in 2010: More efficient ways and places to source from, with resulting impact on freight volumes and lanes; searches for new customers and new channels, both in domestic and in emerging markets; and strategic supply chain investments in the second half of the year to prepare for the recovery.
The first two did indeed gain momentum. Diversifying sourcing and distribution locations have caused dramatic changes in the flow of goods. Although China retains its No. 1 priority status, multinational corporations are expanding into other countries and regions. Supply chain investments have not yet returned to pre-recession levels, however. Uncertainty in the regulatory environment and the economic recovery, and increased supply chain risks, have limited innovation and flexibility. Only a few multinationals have invested in the changes needed to truly enable profitable growth.
If 2011 turns out to be the year of recovery, we will surely see more investments for business expansion.
I see the two most important changes in supply chain management, assuming a sustained moderate recovery, as:
- A renewed commitment to strategic sourcing and global distribution. Most companies will work to adapt their supply chains to make or assemble products closer to where they are sold.
- More investments in new distribution channels. Multichannel supply chains are expanding — international, retail, mass merchandising, specialty retail, industrial, e-commerce, B2B, B2C, direct to store, and home deliveries are all poised for growth.
This will mean differentiated goods flows, more flexible networks, and variable costs and service levels. Those companies that can make these two changes, with the proper alignment of growth and operations, will see profitable growth in 2011.