Year end supply chain predictions for 2009 from i2 Technologies

“Love stinks.”

I’m willing to bet The J. Geils Band didn’t have the current economy in mind when they penned that lyric. But anyone still in business today is probably humming some variation of love stinks to describe the current state of affairs.

The shift from growth mode into survival mode, is going to drive changes in business processes and supply chain best practices, predicts Anand Iyer, vice president for global process consulting at i2 Technologies.

“At the highest level, we’re seeing a shift in the balance of power between IT departments and the business today,” says Iyer. “By and large, that shift is away from what IT thinks is nice from an architecture standpoint and towards the business realities of coming up with solutions to get the job done.”

Iyer and his colleagues have come up with five predictions of what they expect to see in the supply chain over the next year.

1. SaaS and other engagement models will dominate in 2009: Companies will seek to focus technology budgets on gaining a competitive advantage quickly without additional infrastructure. Outcome-based service engagements will be encoded into contracts in 2009 utilizing a managed business process services approach. In this model, the software provider isn’t just providing the software tool; it is also providing a team that knows how to analyze and report on the data collected by their system. A planning provider, for instance, may do the planning for its customer. “I was personally involved in a project with a long-time customer that rebalanced inventory across their product lines,” says Iyer. “We did the analysis and then presented reports that were used by their logistics people to plan what to ship by boat and by air.”   

2. Risk becomes real and so does risk management: Supply chain agility will go from being a conference topic to a practical imperative for most companies. The focus will shift from traditional planning tools to process playbooks that use tools and point-of-use analytics coupled with process structures that emphasize governance mechanisms. The emphasis will be on rapid informed decision making as a key component of risk management. In this case, i2 isn’t talking about the risk of a terrorist attack. Rather, it is looking at how a company mitigates the risk of an unexpected shutdown because of a parts shortage or the risk to a manufacturer if its retail customers fail to get products from the DCs to the stores for a promotion. “We’re being asked to do analytics right down to the point of replenishment,” says Iyer.

3. Supply chain solutions drive a "greener" enterprise: Enterprises focusing on green initiatives are driving bottom line value and winning over customers. Streamlining the supply chain enables companies to decrease both human and manufacturing waste, optimize transportation networks and drive a leaner and greener business. Despite economic challenges, green initiatives driven by supply chain efficiency will continue to be a focus for companies. “If you’re looking for an example, look at how Amazon is replacing plastic clamshell packaging with recyclable boxes,” says Iyer. “At the same time, we’re seeing more companies talking about backhauls and re-evaluating their transportation modes.”

4. Business Intelligence (BI) will no longer be a separate enterprise application category: There will be a sharp shift in focus from the traditional technology-focused BI implementations that merely deliver the same tired descriptive and retrospective reports. Instead, a unified science of supply chain analytics will emerge that delivers prescriptive analytics to decision makers at the point of use. As a consequence, analytics will cease to exist as a separate category and become a fundamental part of the decision support landscape. “The shift we expect to see is business intelligence evolving from a reporting tool to a point-of-use tool,” says Iyer. “I’ve got a truck I can send out today. What do I put on it and where do I send it to get the most value from that shipment? That’s point of use intelligence. Not an end of the month report that’s less useful.”

5. The rise of the first-principle supply chain professional: In a break from the highly compartmentalized nature of supply chain professionals in recent years, the need for multi-dimensional expertise will lead to greater demand for first-principle practitioners. These professionals will be equally at home discussing Service Oriented Architecture or the relative merits of different stochastic programming algorithms and leading a sales and operations planning meetings or revenue and cost management initiatives through large teams. “One of our customers recently told us that they’re recruiting from the same schools where we recruit,” says Iyer. “We’re finding that our customers are now looking for individuals who can pull data, and also understand what that data means to their supply chains. That convergence of skills is going to become the norm.”