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The Future Value Chain

Fri, 03/20/2009 - 10:45am
Amy Radishofski, Features Editor, Manufacturing.net

What will your supply chain look like in 2018?

Maybe 2018 is too far ahead. Have you thought about 2012? How about 2010? The world is changing and you can either sit back and wait for the future to happen, or you can take steps to create the future you want.

A recent study by Capgemini, SAP, Hewlett-Packard and GCI identified eight trends that are will affect companies’ value chains in the coming years:

Declining economy -- The economy is weak and consumers are trading down to lower price retailers and brands. Can you handle sluggish sales, or do you need to change your strategy?

Changing society -- Who is my market and how do I serve them? Society is aging and developed markets are stagnant. Moreover, the Asian market is becoming increasingly important, as incomes and consumption levels rise. You may have to adapt your marketing strategy to reach a new generation of customers, or create new offerings for a changing demographic.

Rising costs and scarcity of raw materials -- The access to products is changing. The price of oil has been volatile recently, and global warming and climate changes are affecting future strategies. What will your transportation costs be like if the price skyrockets again? Even if you use biodiesel from corn, think about what that could do to the food industry in the future.

Increased awareness of sustainability -- You may be lean, but are you green? Consumers want products and manufacturing processes to be good for the Earth. They may not be willing to pay more for it, but they expect it from the manufacturers. You should have visibility of sustainability across the entire value chain.

Growing consumer access to technology -- Technology changes the way consumers shop and buy products. Customers can compare products and shop around from the comfort of their own home as they try to find the best deal. Are your marketing information standards consistent?

Changing business models -- Consumer purchasing power is increasing, and so is the availability of technology. This is shifting the business model. How do you market to your customers online versus in physical retail spaces? Merging online retail with physical retail can create duplication issues.

Growing availability of information across the supply chain -- With technology like radio frequency identification (RFID), there is more information available now than ever before. How do you use it? How do you analyze and share it? Do you have IT platforms set up to share basic product information or supply chain visibility? Retailers need to collaborate with retailers. Manufacturers need to collaborate with manufacturers, and manufacturers need to collaborate with retailers.

Increasing concern regarding product safety -- From tainted dog food to lead paint on toys, there have been many high profile recalls lately. Consumers want to know where their products came from and how they were handled. Companies can expect to have a closer relationship with the government regarding prevention methods, as well as reporting contamination and handling recalls.

Companies who can collaborate with trading partners and remain flexible can continue to grow and succeed despite the challenging business environment.

“The supply chain isn’t owned by any one of us anymore,” said Brian Girouard, Global Head of Consumer Product & Retail Practice for Capgemini. “Companies need to focus on how to get products from one point to the consumer more efficiently.”

To help achieve your value chain goals, the report suggests seven steps:

Develop a road map for 2018. Take a look at the global picture and try to take into account the changing situations mentioned above. Consider joint ventures to mitigate risks or try consolidating orders and investing in flexible manufacturing.

Support industry initiatives. Think outside of your own four walls. It’s not just about your own company. If there is an issue facing your industry, every company in the industry is impacted, not just you.

Understand consumer behavior. The consumer drives your bottom line and you need to understand their purchasing process to get the sale. Make retail and products more relevant.

Share information. Become fully connected in the value chain. Avoid hoarding data.

Share your supply chain. Whether it’s sharing a warehouse or sharing a truck with another manufacturer, you can make the supply chain more efficient.

Prepare your people. You need to train your employees to handle the changing environment and discover new opportunities.

Lobby with local and national governments. You need to band together. It’s not just about what’s best for your individual company. You need to think about the industry as a whole.

“You need to take care of yourself internally, but you also need to look backstream and at your customers and create partnerships and programs to benefit everyone,” Girouard added. “It’s the companies that progressively and proactively go after new solutions that are going thrive in the future.”

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