Tag Archives: strategic sourcing

10 Megatrends for Supply Chain Management—where will you be in 2020?

srm chain

Developing Strategies for Success

2015 is becoming the year of the merger, which means industry consolidation, megamergers and industry consolidation across most supply chains. This trend is driving many companies to develop exclusive, integrated, competing supply chains. Companies that have advanced this practice are Apple, Samsung and Toyota with end to end integration serving the final customer. The key drivers of this type of supply chain are cost transparency, value creation, integrated business systems and innovation. Is your company on top of the trends that shape your supply chains?

To gain control of supply chains, you need to have a good understanding of the trends that will shape supply chains in the coming years. The 10 megatrends I’m seeing are:

  1. Supplier relationship management is becoming a core competency
  2. Value creation is more desired than price management in the future
  3. Innovation transfer is required for the success of the entire supply chain
  4. There is a movement toward portable manufacturing
  5. Contingent work forces are becoming more prevalent in business
  6. Internal and external collaboration is a business requirement
  7. Business strategy alignment will be required between all links in the supply chain
  8. Distribution, logistics and asset management will be a bigger priority
  9. Life cycles are becoming shorter
  10. Supply chain and manufacturing agility will be required to dominate competition

The supply chain management function has been evolving to keep pace with the changing trends. I’ve seen many companies struggle to keep up—those who make the investment to develop skills and improve processes succeed. The diagram below shows some of the key trends that have impacted and evolved supply chain management.

Evolution of SCM

As I see it, it is essential to move from a customer/supplier relationship to an integrated supply chain focus. While some companies have made the leap and lead their industries, others are still back in the price management focus.

Can you make the leap?

Having it both ways

In the words of a former executive, Jean-Louis Gassée, Apple Computer has been using its supply chain strength as a “strategic weapon” to maintain its market dominance. Gassée was quoted in a New York Times article (10/24/11) that describes how Apple has become both an innovator and a price-leader in the smartphone and tablet markets.  The Times describes how Apple has used its successes and cash to make bold supply chain moves — such as a five-year, $1.25 billion deal for flash memory for iPods and other devices — that have been giving it a cost advantage against its competitors. It made that deal in 2005 and it has been paying off ever since, along with many others.

According to the research firm iSuppli (as quoted on epicmobiles.com), Apple’s cost to produce the basic 16GB iPhone 4S is $196. Those models sell for $199 online with a two-year carrier service contract. That means the fees Apple collects from AT&T, Verizon and Sprint are not subsidizing any of Apple’s costs. They are pure gross profit.

As The Times points out, for years Apple was considered a brand that offered cool, but pricey products. However, it has managed its supply chain so well that it now delivers it both ways — cool products and competitive prices.