Welcome to a new year.
Congratulations. You made it through 2018.
It has been a while since I penned a blog post on New Year’s predictions, but today as I sit and drink my hot chocolate, I feel the itch to write.
The bears are starting to chase the bulls from the field. Fourth quarter public market results coupled with tax and tariff uncertainty define a shifting market. Bear markets drive heightened interest in supply chain management. The impact may surprise us. Today, we have younger leaders driving clicks on keyboards. The teams in these seats did not experience the down market in 2007 or the start of the market run in 2009. The teams are new. These supply chain groups are more global and diverse. They bring fresh thinking and what I believe is a healthy questioning of the status quo. The traditional processes, rooted in historical relationships with large system integrators and technologies will crumble, as companies push for answers on value. The response to the shifts to the market coupled with technology capabilities may drive a step change in process capabilities.
Gradually companies realize that the supply chain is a capability, not a function. The evolution of leaders is challenging the mental models of the supply chain. Companies cannot save their way to supply chain excellence with cost-cutting and inventory management — the requirement is customer back capabilities. Unfortunately, the rusted nuts and bolts of the supply chain only turn in place. Companies want to be digital. There is a goal to improve agility and become more customer-centric, but a disconnect with current technology architectures.
In 2019, here are seven trends that I will be tracking:
Trend 1. The ERP Battle Is Over. Will We Ever See Value? What happens next? In the past decade, Infor consolidated the ERP assets of Agilysis, Baan, GEAC, Intentia, and Lawson while Oracle acquired JDE and Peoplesoft. In parallel, SAP launched technology platforms: NetWeaver in 2004 followed by HANA 2.0 in 2017. In simple terms, NetWeaver was a server technology while HANA improved database capabilities through the use of in-memory columnar store. The goal? While not explicit, the driver was to develop market share. The reality? The ERP battle is over. SAP won the fight, but ERP failed to make the desired mark on driving value in supply chain management. Slowly, as we enter into the bear market, the focus is shifting away from ERP-centric architectures. The flawed vision by Gartner of ERP II (the use of ERP as the backbone for supply chain management) is dead. The story will continue into 2020 as ERP vendors claw their way to market relevance. The question is one of value. Costs are high while the benefits are not clear.
Trend 2. The Battle For Analytics Is Waging. The winners are unknown. The potential for process capability improvement is great. Descriptive analytics is mainstream. Prescriptive and cognitive computing markets are at a tipping point for early adopters. Machine learning will redefine master data management. Best-of-breed technologies will pave the path for early adopters. These new analytic architectures will fit in between workforce productivity applications and alphabet soup legacy solutions like APS, SRM, CRM and ERP.
Trend 3. Planning Systems To Be Held Accountable For Driving Value. Three decades of implementation results are history. The value is not clear. Business leaders are questioning the value of planning labor. Technologists will be under the gun to build planning value dashboards. The question is “Does supply chain planning pass the litmus test?”
Trend 4. Shifting Technology Taxonomies. Technology capabilities are redefining the rule sets of the supply chains. These solutions have different names. Examples include allocation, available-to-Promise, and transportation routing. However, supply chains don’t play by hard-coded rules. In 2019, the combination of machine learning, Robotic Process Automation (RPA), cognitive computing and cloud-based deployments will coalesce to create a new software category for sense and respond rules management. Innovation from best-of-breed technologies drives this change. Traditional advanced planning technologies will scramble to keep up.
Trend 5. Digital Manufacturing Success. In the next two years, companies will make the most progress in the area of digital manufacturing. The combination of technologies for track and trace (an example is ThinkIQ), 3D printing, robotics, and wearables improves flexibility in operations. Company digital initiatives will have the most success in production operations.
Outside-in Transportation. Telematics and outside-in data redefines transportation. When companies find out that there is no place for outside-in data–telematics, GPS and status documents– in today’s transportation solutions, this will become abundantly clear as more-and-more people attempt to try to stuff new forms of data into traditional solutions. There will be growing tension between inside-out and outside-in transportation solutions resulting in a redefinition of supply chain execution making today’s transportation solutions legacy.
Trend 6. Good Clouds Gathering Over The Supply Chain. Cloud-based deployments of applications transform the relationship between technology providers and business leaders. In this transformation, traditional application consultants lose power. Indian system integrators will suffer the biggest impact As the value proposition of cloud-based deployments grows there will be fewer religious arguments over good and bad clouds. Instead, business leaders will put applications in all clouds to work. The focus will be on business leaders.
Trend 7. Building of Network Capabilities. With the growth of outsourced business relationships, business network architectures grow in importance. Between 2019 and 2020, a trading score will evolve that will rate trading partners on electronic capabilities. This ranking system (analogous to a credit score in your personal life) will give preferential treatment to companies with superior electronic B2B capabilities. ISO-8000 standards for B2B master data for company, location, and item will grow in importance.
Winners and Losers
The winners include small biotech companies and medical device companies investing in hospital manufacturing capabilities. Also, small and nimble consumer goods companies gain power over larger and less flexible consumer products companies. Best-of-breed companies driving innovation in blockchain, cognitive computing, and transportation real-time data will start to redefine technology taxonomies and will gain market share.
The losers include companies with big and inflexible manufacturing models and traditional retailers. (This includes JC Penney, K-Mart, and Sears.) Traditional supply chain planning companies will lose market share to best-of-breed companies, and large system integrators will fight over table scraps in the post-ERP era.
These are my thoughts. I look forward to hearing from you.