Essential Guide

A guide to global supply chain management

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What's ahead for logistics management technology?

In the future, manufacturers will tighten up their logistics practices due to the high cost of oil, among other factors.

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A guide to global supply chain management

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Some people underestimate or gloss over the importance of logistics -- perhaps not surprising, given its rather unsexy nature. Manufacturers, however, fully understand that their reputations and competitive positions are riding on executing logistics well. Jobs are lost when there are breakdowns in logistics.

In the future, effective logistics management technology will be more important than ever as the focus of competition shifts from individual companies to whole supply chains. When each link in the supply chain is functioning at maximum efficiency, the whole chain will win.

In order to do that, all companies will have to approach logistics management technology in a much more sustainable manner, according to Patrick Dixon, noted futurist, author and chairman of Global Change Ltd., a consultancy based in London. Beginning in the near future, supply chain sustainability will increase in importance in manufacturing as it will elsewhere, not just because of worrisome global climate change, but also because of the shifting price of oil and other types of fuel.

Supply chain sustainability becoming logistics management focus

Reducing shipments will be "the most compelling way to improve the bottom line," said Dixon in a keynote speech at the RedShift RedPrairie users' conference in Scottsdale, Ariz. "We will see coexistence of two huge forces that will transform our future -- the growing concern about the future of our planet and the toxic price of oil," he said, citing coming prices above $75 per barrel. "This affects every manufacturer and distributor."

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Dixon also believes manufacturers will pull back significantly on the offshore and outsourcing production models they have relied upon for the last several decades, in part due to the ever-higher cost of shipping goods made in one location to another location across the globe.

"The result [of high fuel costs] is that all kinds of outsourcing and offshoring decisions we have already made will not hold up in the future," he said. And the coming inclination against offshoring won't just be a matter of cost -- it will also relate to increased risk, and the growing need for velocity and agility, he added. In order to prevail, supply chains will need to be more flexible than they are now. "We simply cannot manage supply chains with the complexity we now have across very long distances," said Dixon.

E-communities collaborate to control complexity

In the future, supply chain-oriented e-communities will be the platforms for manufacturers and their partners to leverage shared data for their mutual benefit, according to Josh Greenbaum, principal at Enterprise Applications Consulting in Berkeley, Calif. Though these communities first appeared as online marketplaces in the late 1990s during the dot-com boom, they ran into problems with user acceptance and competing standards.

"The [online community] models are evolving," said Greenbaum. "In the future, we can expect to see logistics as a service or supply chain as a service play out" in these forums. The key to acceptance of e-communities will be if all the players in a supply chain -- large and small -- can afford to join and participate by sharing their information. This likely means the largest companies in each category will subsidize the participation of the smaller players, Greenbaum noted. "It's worth it if they share their information. Once they have visibility, there is no telling what they can do with it," he said.

These e-communities could greatly increase overall efficiency while at the same time decreasing waste and environmental impact. Sharing information seamlessly could eliminate or greatly reduce the instance of such things as identical product shipments crossing each other on their way to being delivered, said Dixon -- for example, shipping 100 widgets from New York to Washington while another company ships 100 of the very same widgets from Washington to New York.

Greater visibility could result in product swaps that would decrease the need for the product to be shipped in the first place, cutting down on the negative environmental impact while boosting profitability for both sides, said Dixon. Whether or not this rather utopian vision of logistics management technology comes to pass is yet unclear. But this is one equation that could go far beyond win-win with positive effects coruscating throughout and across manufacturing supply chains.

This was first published in September 2012

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