Five Supply Chain Trends That Shaped 2012

Supply chain technology continued to evolve throughout 2012 as companies realize that a highly visible supply chain is necessary for success in today’s business climate. Of course, overall IT trends such as the cloud, big data and mobile are impacting the supply chain sector just as they do other sectors.

But there are other trends specific to supply chain that came to the forefront in 2012. Based on my discussions and work with clients, here are the five trends that truly shaped supply chain this year.

1:) Improved Customer Service Levels Over Cost Cutting
This was the foremost trend during 2012 and will continue through 2013. Supply chain costs have been continuously cut since the recession began four year ago but customers have begun pushing back on the cost cutting measures that negatively affected service levels. Companies are now focusing on how to improve service levels while simultaneously decreasing costs.

2:) Execution Moves Ahead Of Demand & Supply Planning
Demand and supply planning has been rightly focused on as this is a critical point for supply chain success. However, the ability to execute on the plan when forecast errors occur - a constant issue - results in the need to focus more and more on execution. Forecast errors, or the difference between what is planned and what occurs, are driven by every day issues of “abnormal” supply chain events that can cause major disruptions. The ability to react efficiently and effectively is critical to every supply chain and primarily relies upon end to end supply chain process visibility at the transaction level. This was a theme that came up again and again in 2012.

3:) Resurgence of Contingency Planning
As supply chains have gotten leaner, the reduced inventory levels require the ability to react quickly when abnormal events occur or stock outs will increase exponentially. Because these events are occurring more frequently, responding to them in an effective manner is a must or companies will face severe revenue losses. The result is that we have seen resurgence in contingency planning this year to ensure that supply chain functions continue even in emergency situations. More importantly, companies want to know how well they performed against their plan and if the plan was truly followed. When a crisis occurs, individuals have the tendency to find “work arounds” to resolve the issue as quickly as possible. Companies are focused on developing contingency plans, executing those plans and understanding in real time if their plans are effective.

4:) End-To-End Partner Communication & Collaborative Execution
All partners in the supply chain from retailers through raw material providers must constantly collaborate on what events are occurring, the data behind those events and how they can execute as a unified group to respond to the challenges as they unfold. Trading partners in 2012 are now acting in a concerted manner based on transparent information to resolve issues when they happen. Solving a problem by pushing costs to another supply chain partner is an antiquated proposition as companies realize that cost shifting is not a sustainable, competitive solution.

5:) Big Data Is Becoming Mandatory
Big data was the big IT story in 2012. And combining the data of multiple supply chain partners, turning that data into information and being able to react and execute accordingly requires a lot of data. Big data solutions combined with complex event processing (CEP) solutions are being used more than ever this year to digest the enormous magnitude of available data and turn it into executable actions. Leveraging these tools with supply chain visibility solutions will quickly become a “must have” rather than a “nice to have” as companies utilizing these tools set the bar for the new normal in supply chain performance.

Supply chain technology is helping to transform the way companies do business with consumers and each other. If there is one thing these five trends have in common it is that having constant feedback and control over supply chain functions is key to doing business in today’s ever-changing environment. For this reason, these trends are likely to continue into 2013 and beyond.

Editor’s Note: Sean Riley is Director of Supply Chain Innovation for Software AG and a recognized supply chain thought leader. He works directly with companies – including many of the Fortune 100 – to help them create more agile supply chain functions

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