Now that this year is coming to an end, lets reflect on what influenced the supply chain in 2015 and prepare for 2016.
1. Commodity prices are at record low
Commodity prices have fallen in 2015 and global growth has slowed down, specifically from the commodity intensive emerging markets. The supply side of the equation has been a challenge, especially for energy commodities. Fracking companies improved efficiency have led to that production has increased. Although the number of drilling rigs has fallen by more than 50 percent, USA alone produces over 300,000 barrels more per day than a year ago.
Because of the uncertainties and risks of elevated raw material prices, the purchasing departments need to work more with supplier agreements and continuously evaluating suppliers in the upcoming year.
2. Global competition is increasing.
Global activity is impacting, more or less, all companies in one way or another. The expectation is another year of uncertainty and challenges in demand forecasting. Overcapacity in China’s industrial sectors will generate greater price pressure, which affects global competition.
There will be an increased need for simulation capabilities and improved demand forecasting to ensure that the expected business outcomes are achieved.
3. Internet makes customers impatient.
B2B and B2C companies feel pressure from customers’ increased expectations. Rapid growth in e-commerce and multichannel retailing are defining new trends.
In 2016, customers will have higher expectations in terms of quick delivery, preferably the same day. The focus is to ensure high product availability and increased customer service levels.
4. Amazon, Alibaba and other 3PL companies drives up the pace.
3PL companies with Amazon in the forefront increases the pace in the supply chain. These 3PL corporations have an infrastructure with drones and warehouse robots to speed up the inventory process and delivery capabilities to customers. They offer services to many e-commerce companies that benefit from the opportunity of improving the reliability of their supply chains, which provides a significant competitive advantage in today’s market place.
Keep an eye on Amazon’s ambitions in the 3PL space and assess whether it can complement or compete with your business.
5. Recruit and retain the right skills.
More companies see logistics as an opportunity to strengthen competitiveness and reduce costs. Logistics industry is one of the most expansive industries currently. By recruiting and maintaining highly skilled staff in logistics, inventory management and purchasing, companies will increase their competitiveness and profitability as well as lay the foundation for future expansion.
Rememeber to build an attractive work environment, keep staff motivated and offer development, training and certifications.
6. 3D printers saves time and resources.
Development in 3D printing has made it possible to use a wide range of materials, including high nickel alloys, carbon fiber, glass, conductive ink, etc. These innovations, along with the price reduction of 3D printers, has increased the practical applications. This technology has expanded to industries including aerospace, medical, automotive, energy and the military.
3D printers can produce almost anything, and it represents a revolution in the industry where traditional and inflexible production on the assembly line becomes redundant. Spare parts and various machine parts are easily printed to order, reducing inventory and transportation costs.
7. Internet of Things (IoT) provides more data for planning.
Internet of Things (IoT) increases the ability to track and communicate with the products. RFID tags are embedded in more items and tags will keep more information about the objects they are applied to. It also increases the ability to communicate data such as weather, damages, traffic, etc., to your various inventory management and business systems.
This will increase over the next five years. The ability to track, trace and monitor inventory will improve in 2016. Organizations will spot inefficiencies they couldn’t see before, recognize and resolve issues before the problem occurs through integrated planning solutions.
8. The hype around the real-time data and big data for inventory planning decreases slightly
In the same pace as information volumes grow, the challenge of trying to understand it increases. There is a growing interest in system support for data collection and data analysis. However, it is easy to be misled by curves with a high correlation but lack a real dependency and irrelevant real-time data.
The key to success lies in developing new processes that will facilitate the consumption of faster data flows. But there is more to it: Users must be trained and you have to figure out what information is important and how users will respond when they receive it.
The hype around the real-time data and big data in the inventory planning and replenishment area decreases slightly as more people realize the danger in reacting too quickly and not waiting for a trend to unfold. Overreacting to random increases in sales can create a devastating chain reaction where all suppliers, in all areas, increase their orders to have enough in stock. The classic Bullwhip effect occurs.
9. Technology and automation of inventory control and purchasing.
According to Gartner, more companies are implementing systems for inventory management and purchasing that are well integrated with ERP and other business systems. Integrated planning as Sales & Operations Planning (S&OP) and multi-echelon planning has become more prevalent in all industries.
As the world becomes increasingly dynamic, it is important to forecast the demand with as high accuracy as possible. To have a holistic view of the IT environment for integrating all parts of the supply chain, including purchasing is vital. In addition, more and more companies move their inventory management into the cloud for increased flexibility and transparency, which simplifies the ability to successfully plan the entire flow of goods.
10. Risk management in the supply chain.
In the past, buyers and inventory planners relied on safety stock to mitigate any risks or disruptions in the supply chain. Due to the global competition and the uncertainty in the economy, weather and political situations, new demands and trends emerged which aims to reduce the potential risks.
Companies will focus more on the risks and effects arising in connection with natural disasters and political changes that affect the supply chain. More companies are moving production closer to its home market to shorten the supply chain and to better manage the shorter product cycles.
11. Sustainability management and corporate social responsibility.
gt;Companies are working in a structured way to reduce environmental impact at every stage in their supply chain. Environmental issues are becoming more integrated in the daily work and there is a big focus on improving energy efficiency.
In 2016, the demand will be an even higher for increased transparency and corporate social responsibility. Maps will be offered highlighting the supply chain, so customers can track the journey of their products have made from production to delivery. More companies will present strategic plans for sustainability work and establish emissions targets to be achieved by 2020. More human rights and democracy projects will become more visible in countries for low cost production.