EMERGING TRENDS IN
SUPPLY MANAGEMENT
Robert J. Trent, Ph.D.
Supply Chain Management Program Director
Lehigh University
rjt2@lehigh.edu
EMERGING TRENDS IN SUPPLY CHAIN
MANAGEMENT
Supply Management professionals will…
Increasingly be accountable for contributing to
corporate-level financial metrics – revenue,
ROI, ROA, ROIC, ROSMA, IRR, working capital,
cash flow (finance as our new best friend)
 Supply chain managers speaking the one
true language of business
SUPPLY MANAGEMENT’S IMPACT ON
ROIC
Return on
Invested Capital
Improves
Better
Profits
Improves
Cash
Flow
Enhances
REVENUE related:
 Fa s te r n e w p r o d u c t d e s i g n &
development
 O p t i m u m & r e l i a b l e p a r t s & r aw
m a te r i a l s s u p p l i e r s
 Excellent transportation ser vice
providers
 Innovation sourcing with suppliers
COST related:
 Re d u c e f r e i g h t c o s t s & c l a i m s
 Re d u c e m a te r i a l c o s t s
 Re d u c e i n d i r e c t m a te r i a l s / s e r v i c e s c o s t s
 Re d u c e m a n u f a c t u r i n g v a r i a b i l i t y
Improves
Improves
Lower
Invested
Capital
Enhances
WO R K I N G C A P I TA L r e l a t e d :
 I m p r ov e p ay m e n t te r m s w i t h s u p p l i e r s
 U t i l i z e i nv e n to r y p r o g r a m s w i t h s u p p l i e r s
C A P I TA L E X P E N D I T U R E r e l a t e d :
 I m p r ov e r e d e p l oy m e n t o f u s e d a s s e t s
( “ a s s e t r e c ov e r y ” p r o g r a m s )
 Re d u c e tot a l c o s t s a s s o c i a t e d w i t h
capital spending
Copyright 2004 Greybeard Advisors, All Rights Reserved
Reprinted with Permission.
EMERGING TRENDS IN SUPPLY
MANAGEMENT
Supply Management professionals will…
Increasingly apply financial thinking and
analysis to Supply Management activities
 Example – supplier development presented
as an investment rather than an expense,
managing inventory in terms of working
capital management
EMERGING TRENDS IN SUPPLY
MANAGEMENT
 Supply Management professionals will…
Become involved extensively and early in
capital expenditure projects and energy
management (the ever broadening domain)
EMERGING TRENDS IN SUPPLY
MANAGEMENT
 Supply Management professionals will…
Wage a serious battle against supply chain
complexity (the next generation of Lean?)
EMERGING TRENDS IN SUPPLY
MANAGEMENT
 Supply Management professionals will…
Better understand supply chain costs,
including supplier switching costs, transaction
costs, and TCO
EMERGING TRENDS IN SUPPLY
MANAGEMENT
 Supply Management professionals will…
Better understand how to become a preferred
customer with suppliers (and why becoming a
preferred customer is important)
EMERGING TRENDS IN SUPPLY
MANAGEMENT
 Supply Management professionals will…
Understsand where and how to stress true
supply chain collaboration
EMERGING TRENDS IN SUPPLY
MANAGEMENT
 Supply Management professionals will…
Focus on talent management as a response to
demographic and competitive demands
EMERGING TRENDS IN SUPPLY
MANAGEMENT
 Supply Management professionals will…
Focus on “top line” or “innovation sourcing”
within supplier management rather than
simply cost management
EMERGING TRENDS IN SUPPLY
MANAGEMENT
 Supply Management professionals will…
View supply chain management and risk
management as largely overlapping in their
focus
Understanding mega-trends
Risk-sharing with suppliers
Viewing predictive analytics as the next big
thing!
EXAMPLE OF PREDICTIVE ANALY TICS—
2012 SUMMER OLYMPICS (WSJ)
Predicted Medals (Gold):
USA
108 (40)
China
92 (38)
Russia
83 (29)
Great Britain
66 (22)
Germany
49 (16)
Australia
42 (13)
Japan
39 (13)
France
31
(9)
Italy
30
(9)
Korea
24
(7)
EXAMPLE OF PREDICTIVE ANALY TICS—
2012 SUMMER OLYMPICS (WSJ)
Predicted Medals (Gold):
USA
108 (40)
China
92 (38)
Russia
83 (29)
Great Britain
66 (22)
Germany
49 (16)
Australia
42 (13)
Japan
39 (13)
France
31
(9)
Italy
30
(9)
Korea
24
(7)
Actual (Gold):
104 (46)
87 (38)
82 (24)
65 (29)
44 (11)
35
(7)
38
(7)
34 (11)
28
(8)
28 (13)
SUPPLY CHAIN RISK MANAGEMENT
PREDICTIONS
P1: Companies will increasingly understand, and at
times be willing to increase their risk appetite.
P2: Risk management will become an embedded part
of supply management.
P3: The need for effective risk management will force
companies to look past tier one suppliers.
P4: Supply chain risk metrics will shift from reactive
to predictive indicators.
P5: Companies will transition from a “pockets of
excellence” risk management model to an
enterprise-wide excellence model.
SUPPLY CHAIN RISK MANAGEMENT
PREDICTIONS
P6: Total cost of ownership (TCO) models will
increasingly become part of the risk assessment
process.
P7: Risk management tools will become increasingly
sophisticated.
P8: Risk categories and specific kinds of risk will
continuously evolve and change.
P9: Risk management approaches will rely more on
prevention and less on mitigation.
SUPPLY CHAIN RISK MANAGEMENT
PREDICTIONS
P10: Companies will increasingly benchmark their risk
management practices against other companies.
P11: Supply chain risk will increase as companies pursue
growth opportunities in emerging markets.
P12: Continuous improvement of risk management
capabilities will be a major corporate priority.
P13: Risk management will expand vertically and
horizontally.
SUPPLY CHAIN RISK MANAGEMENT
PREDICTIONS
P14: Companies will increasingly appreciate the
interrelationship between enterprise and supply
chain risk.
P15: An emphasis on supply chain risk management
will affect a company’s culture.
P16: Effective risk management strategies will help
achieve a competitive advantage rather than
simply providing a defense against unwanted
events.
P17: Transparency and real-time data updates will
increasingly replace reactive and batch -data
updates.
Thank you!
Any questions or comments?