Supply Chain Outlook: Where Will 2016 Take Us?

Here’s a good piece via Modern Material Handling by Bob Trebilcock:

Last week, I spent Monday and Tuesday at the Rosemont Hilton in Chicago with 100 or so senior supply chain executives, presenters and exhibitors at the first Supply Chain Outlook Summit. As a rule, I write a column with takeaways from each event I attend. What makes this one a little different is that, well, I hosted the event for Peerless Media and Supply Chain Management Review. I promise I won’t brag about how good the moderator was – after all, you may have attended and have seen me in action. 

The theme for the conference was The Future Of Supply Chain Management: What You Need To Know For 2016 And Beyond. We represented each of the functional areas of the supply chain, from procurement to final goods distribution, along with a look at the economy, technology, sustainability, and culture. Each of the presenters gave an overview of where they think their slice of the supply chain is headed next year. I don’t have room to write about them all here, but I think there were several key takeaways.

One is that the US economy is in better shape than we might think. That was the message from Brian Beaulieu, an economist and the CEO of ITR Economics. While it’s true that the economy is hardly ablaze, Beaulieu expects slow but continued growth for the next several years; more importantly, he sees the US leading the world economy. As to the next recession, expect it to be short-lived and mild. Which isn’t to say that Beaulieu sees Blue Skies into infinity: He expects significant issues late in the next decade as the country deals with the full impact of the baby boomers on Social Security and Medicare. One message he drove home that caught my attention is that for all the emphasis we place on China, the US still commands 22.5% of the world’s GDP, compared to 13.4% for China. That’s a lead Beaulieu does not foresee dramatically changing in the near future. 

Much has been written about the impact of e-commerce and the driver shortage on transportation costs. While those are true, Chainalytics’ Kevin Zweier reminded us that this is an age-old story. He shared a quote from the 2011 CSCMP State of Logistics Report: “Practically every truck manufacturer and nearly all employers complain of the great difficulty of securing drivers who are competent and who will work handling freight …” The twist? It was originally published in the publication Traffic World in 1916. So, while there may be nothing new under the sun, shippers will still face challenges next year, including rate increases from 3% for truckload and less-than-truckload shipments to 5% for parcel shipments. Expect continued downward pressure on ocean freight rates due to over-capacity.

Similarly, much has been written about the reshoring of manufacturing from low-cost countries like China back to Mexico and North America. The phenomenon is real, Rosemary Coates, executive director of the Reshoring Institute, told us. At the same time, Coates offered several pieces of sobering advice. For one, leaving China is not as simple as packing up your equipment and turning out the lights. You may have to buy out employee contracts; leave equipment, technology, molds, and other IP behind that will probably be used to compete against you; and once you set up shop in North America, you may find that your supply base is still off-shore, along with the skilled workers you need to operate your new plant. 

My last takeaway was how well many of the points made by presenters aligned with the challenges being faced by a panel of three Chicagoland supply chain executives. The roundtable was led by John Caltagirone, executive director of the Supply and Value Chain Center and Loyola University Chicago, and featured Tim Engstrom, VP Supply Chain Operations for Walgreen’s; Craig Espevik, Vice President, Operations for Yaskawa America, Inc.; and Fabio Pettenati, Vice President Supply Chain for Barilla America Inc. 

Each was grappling with different challenges – Engstrom discussed Walgreen’s approach to finding and developing new talent for its warehouses along with efforts to reduce packaging; Espevik explained how Yaskawa is managing manufacturing operations on a global basis; and Pettenati described what its like for a food producer dealing with volatile commodity prices. More importantly, each illustrated the importance that supply chain management is playing in the strategies their companies are undertaking to continue to lead in their industries. 

I, for one, left with a sense that it’s an exciting time to be in our industry. I’m looking forward to the future of supply chain management in 2016 and beyond.