Future of business supply chains

A report from The Economist Intelligence Unit FUTURE OF BUSINESS: SUPPLY CHAINS Talent test: managing the supply chain revolution Rapid advances in technology are fast transforming supply chains into instruments for business advantage and greater profits But those who must manage and manipulate them are not adapting nearly as quickly Data, networks and high-powered computing are helping make supply chains more agile, streamlined and robust As a result, supply chains are transforming from logistics operations focused on cost management and efficiency into dynamic business networks that facilitate swift responses to market changes and enable business growth (Please see the briefing paper “Future of business: supply chains” in this research programme.) Creating and operating these fast-evolving supply chains requires significant organisational change “New [technology] tools will transform the way supply chains are designed and managed, presenting a new and significant challenge to logistics and supply-chain management,” says Stan Fawcett, professor of global supply chain management at Weber State University in Ogden, Utah “Many traditional approaches will need to be reimagined.” Acquiring the talent to implement change is becoming a major corporate challenge Demand is rising for tech-savvy supply-chain managers, experts say, yet neither the industry nor the education system are equipping people adequately with the skills and knowledge required to capitalise on the opportunities that lie ahead ❛❛ Many traditional approaches will need to be reimagined ❜❜ Stan Fawcett, professor of global supply chain management at Weber State University in Ogden, Utah FUTURE OF BUSINESS: SUPPLY CHAINS Digital disruption Data collection and analysis are offering companies unprecedented transparency and enabling new levels of insight into vast and far-flung sets of relationships An array of forces are driving increased demand for qualified supply-chain talent, but the most powerful is the emergence of “pervasive commerce”—anytime, anywhere buying and selling made possible by the rise of social, mobile, cloud and big data technologies Supply chains have had to adapt to support this transformation of business, while supply-chain managers have had to acquire many new skills Modern supply-chain managers oversee a complex web of interactions that enable a vast array of business activities “You have to manage all the relationships—from customer relationships to supplier relationships,” Mr Fawcett explains “The supplier network is a combinatorial nightmare.” “Supply chains now are global, and they have become more integrated,” adds Paul Ballew, global chief data and analytics officer at Dun & Bradstreet—and companies are keen to get clearer views inside them “They need to understand how the interconnectedness of tier-two and tier-three suppliers affect the primary suppliers, and they need to understand if there are forward-looking risks that could disrupt their supply chain or their quality or whatever their business objective is.” Fortunately, data collection and analysis are offering companies unprecedented transparency and enabling new levels of insight into vast and far-flung sets of relationships “We have two things that we never had before: We have global data that tracks transactional interactions between businesses, and, secondly, we have analytics that allow us to deal with large data sets to connect the dots in terms of buyers and sellers,” Mr Ballew © The Economist Intelligence Unit Limited 2014 says “This involves an incredibly complex networkdiscovery process.” Meanwhile, a new breed of cloud-based business networks is emerging to connect companies with a vast pool of potential suppliers, ultimately replacing catalogues, web searches, phone calls, emails and sales meetings These platforms help companies vet potential partners and meet specific needs—whether to boost diversity or local-country sourcing or to meet corporate social responsibility goals—more effectively These new technologies enable companies to engage in more active, less reactive supply-chain management and to collaborate in new ways with suppliers, which can create new value and lay the groundwork for what might be dubbed “pervasive value creation” along a company’s entire supply chain A shift in skill sets, a shortage of talent The implications of all these changes for executives are profound Indeed, the redesign of supply chains is being accompanied by major changes in the roles and responsibilities of supply-chain managers (Please see related research “Future of business: human resources”.) “Today’s global supply chains require a new focus on technology and innovation as well as a willingness to invest in these areas for the long term,” said Scott Sopher, a principal at Deloitte Consulting and the leader of its supply-chain and manufacturing operations practice, in a press release “A true commitment to innovation will help organisations better prepare for the future, manage supply-chain risks and stay ahead of the curve.” The shift in focus to innovation and away from FUTURE OF BUSINESS: SUPPLY CHAINS ❛❛ Companies need supply-chain talent with the right skills, experience and mindset to harness the value of supply-chain innovations Unfortunately, the right kind of supply-chain talent is extremely difficult to come by these days ❜❜ Study by the Material Handling Institute, March 2014 cost reduction and operational efficiency is changing the portfolio of skills and knowledge that supply-chain managers must possess For instance, the expansion of big data analysis is driving a need for training in statistics, forecasting, probabilities, mathematical modelling, finance, economics, marketing and accounting, according to Mr Fawcett As a result, companies are looking in new places for new hires “While employees for the first generation of supply-chain talent were recruited from engineering programmes—primarily chemical, mechanical and industrial engineers— today’s entry-level employees are coming from business school supply-chain programmes,” writes Lora Cerere in the 2014 Supply Chain Talent Report But good candidates are in alarmingly short supply, making talent the number one supplychain risk for companies today, according to Ken Chadwick, an analyst at Gartner, a US industry research firm Competition for talent is so fierce that 85-100% of graduates of university supplychain programmes have jobs before they graduate “Companies need supply-chain talent with the right skills, experience and mindset to harness the value of supply-chain innovations Unfortunately, the right kind of supply-chain talent is extremely difficult to come by these days,” a March 2014 study by the Material Handling Institute and Deloitte maintains This demand will only grow; the report predicts the addition of 1.4m new supplychain jobs by 2018 in a field that currently employs about 6m people While the supply-chain management field struggles to scale up, it will also have to gear up for even greater changes ahead There is no time to waste © The Economist Intelligence Unit Limited 2014 FUTURE OF BUSINESS: SUPPLY CHAINS Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper About SAP SAP is the world’s leading provider of enterprise application software SAP solutions are designed to meet the demands of companies of all sizes—from small and midsize businesses to global enterprises Additional information can be found at London 20 Cabot Square London E14 4QW United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8476 E-mail: london@eiu.com New York 750 Third Avenue 5th Floor New York, NY 10017 United States Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: newyork@eiu.com © The Economist Intelligence Unit Limited 2014 Hong Kong 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com Geneva Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: geneva@eiu.com Cover: Shutterstock www.sap.com  .. .FUTURE OF BUSINESS: SUPPLY CHAINS Digital disruption Data collection and analysis are offering companies unprecedented transparency and enabling new levels of insight into vast... a company’s entire supply chain A shift in skill sets, a shortage of talent The implications of all these changes for executives are profound Indeed, the redesign of supply chains is being accompanied... changes in the roles and responsibilities of supply- chain managers (Please see related research Future of business: human resources”.) “Today’s global supply chains require a new focus on technology