supply chains – Page 8 – The OM Blog by Heizer, Render, & Munson

Good OM Reading: The State of Sustainable Supply Chains

Building and maintaining resilient supply chains is a key success factor for business in a globalized and fast-changing world. Over the past few years, sustainability has been added to the procurement and sourcing criteria for many companies. Workforce health and safety incidents, labor disputes, world conflicts, raw materials shortages, environmental disasters and new legislation in areas like modern slavery have contributed to the growing awareness of supply chain risks.

Many companies still do not have an understanding of the performance, risks and sustainability impacts of their supply chain. This new 48 page Ernst & Young study explores the current state of sustainable supply chains by interviewing more than 100 global supply chain executives. The study shows that by improving performance throughout their supply chains, companies can enhance processes, save costs, increase labor productivity, uncover product innovation, achieve market differentiation, and have a significant impact on society.

Companies do vary significantly in their approaches to supply chain sustainability. The interviews revealed that the approach to creating sustainable supply chains can be categorized in 5 major groups: basic, improving, established, mature, and leading. Most companies are in the improving or established categories. An improving program is characterized by a minimum level of expectations with a focus on risk and compliance, and basic auditing of high risk suppliers.

As a program becomes more established, companies set clear expectations for suppliers and develop processes to select and manage suppliers against those expectations. Companies with a mature program focus on integrating these processes, requiring suppliers to work with their 2^nd and 3^rd tier suppliers to improve performance. Mature companies also address their own sourcing processes, rather than simply relying on suppliers to achieve sourcing goals.

The report draws 6 conclusions: (1) supply chain sustainability can no longer be ignored; (2) companies are predominantly risk-driven; (3) companies tailor their approaches to create sustainable supply chains; (4) leading companies are establishing a shared commitment with suppliers; (5) technology enables visibility and influence beyond tier 1; and (6) collaboration is critical for companies to achieve greater impacts.

Guest Post: Critical-to-Time (CTT) in Today’s Supply Chain (“Playing for Time”)

Today’s guest Post comes from John P. Bowler, who is Visiting Professor at the Keller Graduate School of Management and DeVry University’s College of Business & Management. John has 40+ years of operational supply chain management experience.

The ”time-driven” supply chain has necessitated industry leaders shift their focus from the Wall Street perspective of “cost as king” to the critical-to-customer characteristic of “time.” The expert application of time is now absolutely critical to transforming a business’s current competitive advantage into a sustainable competitive advantage. As such, time should be the primary measuring stick of the effectiveness of all actions which align the voice of the business (VOB) with the voice of the customer (VOC).

Hearing the voice of the customer is one thing. However, satisfying the needs of the client is another. Given today’s market landscape, this is not an easy task. Shorter product life cycles, increasing consumer expectations, and the immediacy of the Internet of Things (IoT) economy all create challenging hurdles. In order to sustain itself, the firm’s business strategy, product/service life-cycle management (the innovation cycle), and risk management practices must each align internally within the firm and externally with the customer.

The traditional “vital few” critical-to-customer characteristics are cost, quality, and time. Cost advantages come and go. Someone can always do it cheaper. Case in point is the ASUS TEK and Dell computer debacle. Top quality is not only expected, but it is also a given. Any firm providing a defective product or service faces both monetary and reputational (the slings and arrows of social media) repercussions. Additionally, the boundaries between relative cost and quality niches are now blurred. Amazon.com is one such example. All things being equal in the market segment, time is the prime differentiator.

Time is now the “vital one” among the “vital few.” Organizations focusing on the “vital one” critical need of the customer ensure maintaining a sustainable competitive advantage.

OM in the News: Chipotle’s Battle for Quality Control

At lunchtime, people peered into a Chipotle in Washington, one of the stores that closed on Monday. — At lunchtime Monday, people peered into a closed Chipotle

Chipotle Mexican Grill closed its more than 2,000 restaurants for 4 hours this past Monday to hold a “virtual” town hall meeting with its employees about steps it said it was taking to improve food safety and regain consumers’ trust. The firm also announced a $10 million program to help small farmers who are Chipotle suppliers shoulder the costs of putting in place the company’s new food safety system, which will require them to do more rigorous testing.

Chipotle has experienced 6 food safety failures involving norovirus, salmonella and E. coli since July, with more than 500 customers reporting that they fell ill afterward, reports The New York Times (Feb. 9, 2016). But “it’s going to take significant meaningful action that goes beyond telling employees to be more careful and, unfortunately, some time before consumers start to believe it,” says an industry expert. The best example of a company regaining consumer trust was of Tylenol in 1982 when 7 people died after taking medicine that had been tampered with. Johnson & Johnson moved quickly to recall the product and establish ties with the police and the FDA. Tylenol’s market share crashed, but J&J introduced new tamper-proof packaging and heavily promoted the brand. Today, Tylenol is a best-selling over-the-counter analgesic.

The norovirus contaminations that caused the greatest number of illnesses were introduced to the restaurants by sick employees. Since the outbreaks, the company has instituted paid sick leave for employees in an effort to encourage them to stay home. A salmonella outbreak that sickened more than 60 people was linked to chopped tomatoes. The company now washes, dices and tests tomatoes in its central kitchens and then ships them in sealed bags to restaurants. As for the most serious contamination, 2 different types of E. coli that sickened 60 people after they ate in Chipotle restaurants in 14 states, neither Chipotle nor the C.D.C. had been able to determine the exact cause.

Classroom discussion questions:

Why is Chipotle’s supply chain a major issue here?
What other firms faced similar problems and what did they do to win back market share?

OM in the News: Chipotle’s Toxic Supply Chain

My family is the perfect customer unit for Chipotle Mexican Grill. We eat organic, prefer range fed animals, and select local fresh vegetables and fruit. For a long time, the chain of 1,900+ locations has reminded customers that its fresh ingredients and naturally raised meat are better than rivals’ and better for the world. The implication: If you eat Chipotle, you’re doing the right thing, and maybe you’re better, too. But fewer people associate Chipotle with “healthy” today, reports BusinessWeek (Dec. 28, 2015-Jan.10, 2016). Almost 500 people around the country have become sick from their food since July. And food-safety experts say they believe the total number affected is at least 10 times the reported number.

The company has always urged customers to think about its supply chain. Now they are. And so is Chipotle, which has blamed the outbreak on its supply chain’s use of local farmers and growers. To respond to the crisis, it will shift more food preparation out of restaurants and into centralized kitchens–doing things more like the McDonalds type of chains it’s long mocked.

Chipotle has about 100 major suppliers for its 64 ingredients–plus many more local farms, which supply 10% of its produce. More food will be prepared ahead of time, out of sight at commissaries, and transported to 19 distribution centers and then to restaurants. “They’re sort of in a bind,” says a Boston U. prof. “They want to have this local, fresh image, and making food in a commissary and shipping it all over the country takes away from that.”

Before it’s harvested, produce will be screened for pathogens using DNA-based tests. Meeting these higher standards will be expensive for smaller farms: There’s the cost of the testing itself and of discarding rejected vegetables and herbs. From there, it will be sent to the commissaries, to be washed, sanitized, and retested. The commissaries, rather than the restaurants, will be responsible for cleaning and packaging the cilantro, shredding the lettuce, and dicing the tomatoes.

Classroom discussion questions:

Compare Chipotle’s supply chain to that of Darden’s, described in the Global Company Profile in Chapter 11.
What are the advantages and disadvantages of using locally grown supplies?

OM in the News: UPS Tries On 3-D Printing

At its hub in Louisville, Ky., UPS just rolled out 100 industrial-grade 3-D printers to make everything from iPhone gizmos to airplane parts. UPS wants to find out if 3-D printing centers could shorten supply chains and cut into its $58 billion-a-year transportation business—or give it a leg up in a potentially emerging market for local production and delivery. The difference could be existential. It doesn’t want 3-D printing to disrupt its business the way the Internet pulled the rug out from overnight document deliveries more than a decade ago. The company, writes The Wall Street Journal (Sept. 19-20, 2015), plans to expand next year with another 900 printers, and is looking at opening “print factories” outside the U.S. (Sales in the 3-D printing industry have risen 34% annually for the past 3 years).

UPS isn’t the only delivery company exploring the printing business. FedEx is examining the field, while Amazon.com has filed a patent for a 3-D printing truck, aimed at creating an on-demand system printing goods from inside delivery vehicles. UPS expects more companies will migrate some production to 3-D printing from traditional manufacturing on an aggressive growth curve.

In Louisville, UPS has used its own service. The company needed to develop a replacement floor beam support bracket for its fleet of Airbus A300 aircraft, which are out-of-production. 3-D printers made the part within hours and workers walked it across the runway for testing in a UPS plane.

Classroom discussion questions:

Why is UPS so interested in 3-D printing?
What are the shortfalls of 3-D printers?

OM in the News: Wendy’s Blackberry Supply Chain Troubles

It will have taken three years and a search involving more than 30 growers for Wendy’s to procure enough blackberries for a new salad it plans to offer next summer, reports The Wall Street Journal (Aug.19, 2015). “It’s been a slow, painful journey for us,” says the head of procurement. “We spent 14 months scavenging around the industry, looking at more suppliers than we ever have.” Wendy’s quest for the nearly 2 million pounds of blackberries it will need to embellish a seasonal salad at its 6,500 North American restaurants illustrates the challenges large chains are trying to digest as they seek to keep up with growing demand for fresh ingredients.

Wendy’s installed salad bars in restaurants in 1979, but the toppings have grown from simple tomatoes and croutons to include strawberries, blueberries, almonds and edamame. And it has accelerated the pace of product introductions, with seven new salads in the past two years. Fresh ingredients present a challenge for big chains because of their sprawling supply chains and rapid, repeatable preparation processes.

Adding blackberries posed Wendy’s most difficult supply-chain challenge ever. Most blackberries are sold to grocery stores, leaving little supply for restaurants. To meet Wendy’s needs, growers had to plant extra bushes, which take three years to produce mature fruit. Wendy’s normally reviews two to five suppliers for each type of produce it uses, but the company went through more than 30 before finding a pair that could supply enough blackberries. To maintain consistency, Wendy’s sends franchisees instruction cards dictating how the berries should be washed, cut and placed on the salads. Restaurants also need to ensure worker safety for all the slicing fresh produce requires—workers must wear chainmail mesh gloves—and to ensure the added prep work doesn’t slow service.

Classroom discussion questions:

Are other fast food chains facing similar supply chain issues?
Why are fruits and vegetables so important in fast-food restaurants today?

OM in the News: Your Cat, Slavery, and the Seafood Supply Chain

Living quarters on the boats are hot and cramped, with crew sleeping just 2 hours between shifts

If your cat eats Meow Mix, Fancy Feast, or Iams, there is a good chance you are supporting “sea slaves”, men and boys put in forced labor in Thailand for cheap fish, reports The New York Times (July 27, 2015) in a front page expose. The U.S. is the biggest customer of Thai fish, and pet food is among the fastest growing exports from Thailand. The average pet cat eats 30 pounds of fish per year, double that of a typical American.

Though there is growing pressure for more accountability in seafood companies’ supply chains, virtually no attention has focused on the labor that supplies the seafood that people and pets eat. Much of the catch is destined for canneries such as Thai Union Frozen Products, that country’s largest seafood company, which shipped 28 million pounds of pet food to the U.S. in 2014.

The misery endured by sea slaves is not uncommon in the maritime world. Labor abuse at sea can be so severe that its victims might as well be captives from a bygone era. Those who fled recounted horrific violence: the sick cast overboard, the defiant beheaded, the insubordinate sealed for days below deck in a dark, fetid fishing hold. The harsh practices have intensified in recent years because of lax maritime labor laws and an insatiable global demand for seafood.

Officials point to a greater reliance on long-haul fishing, in which vessels stay at sea, sometimes for years, far from the reach of authorities. Government intervention is rare. While the U.N. prohibits forced labor, Thailand does little to counter misconduct on the high seas. U.N. and rights organizations accuse Thai officials of taking bribes from traffickers, and migrants often report being rescued by Thai police from one smuggler only to be resold to another.

Classroom discussion questions:

1.Why can’t pet food makers like Purina eliminate this worker abuse?

2. Describe the pet seafood supply chain.

Good OM Reading: An MIT Case Study of Hospital Efficiency

American health care is undergoing a data-driven transformation. This MIT Sloan Management Review (June 25, 2015) case study examines the data and operations analysis culture at Intermountain Healthcare, a Utah-based company that runs 22 hospitals and 185 clinics. Data-driven decision making has improved patient outcomes in Intermountain’s cardiovascular medicine, endocrinology, surgery, obstetrics and care processes — while saving millions of dollars in its supply chain. Here are just two examples from this lengthy, but very readable study, one worth sharing with your class.

SURGERY: When data showed Intermountain’s chief of surgery that surgical infection rates at the hospital were in line with national norms, he presented the findings to the surgeons there. He said, “You think you’re great, but compared to other hospitals in the country, you’re not above average.” So a committee of clinicians spent a year developing a list of 30 possible causes, then whittled it down to 5 and made recommendations of changes. Doctors hated some, like having to give up bringing personal items into the operating room, including fleece jackets they would wear to keep warm. But in fact, after a 6 month trial, infection rates fell to half the national standard.

SUPPLY CHAIN: Supply costs will exceed hospitals’ top expense–labor–by 2020. The challenge is that a lack of price transparency and no system for sharing cost information with unaware doctors. So Intermountain started a supply chain organization–facing 12,000 vendors, $1.3 billion in expenses, and a culture that ceded much purchasing authority to doctors. One challenge was finding a way to reduce expenses for physician preference items (PPIs)–the devices that doctors request because they prefer them to comparable products. PPIs consume as much as 40% of a hospital’s supply budget. Intermountain launched a system designed to reduce costs by tracking its 50 highest-volume procedures and presenting information to surgeons on their supply options. One thing it found was that some coronary surgeons used sutures that cost $750, while others used sutures that cost $250. The analytics revealed no appreciable difference in patient outcomes. Doctors had no idea that the things they were using cost so much.

OM in the News: A Radical Idea–Own Your Supply Chain

Ashley's plant in Arcadia, Wisconsin — Ashley’s plant in Arcadia, Wisconsin

Most manufacturing companies long ago outsourced their truck deliveries in the belief that outside experts could do the job more efficiently, reports The Wall Street Journal (April 30, 2015). But Ashley Furniture, the largest U.S. maker and retailer of furniture, has resisted that trend. It owns and operates about 800 trucks and delivers the vast bulk of its own products from factories to stores. “We think it is a core competency,” says the CEO.

Ashley employs about 3,000 people in transport and warehouse functions in the U.S., 1/4 of its U.S. head count. Its distribution centers feature racks specially designed to speed loading, and its managers arrange for trucks returning after they deliver their furniture to carry loads for other companies for a fee. About 80% of Ashley’s trucks are filled with other firms’ goods on the way back but Ashley aims to increase that above 90%

It has become very unusual for manufacturers to own transport fleets. Typically, switching to a third-party transport service leads to greater reliability and savings of at least 10%.

Trucks in Ashley’s fleet, from Volvo and Kenworth, average about 2.5 years old. The industry average is about 6 years. Providing drivers with comfortable seats, beds inside the cab and other amenities helps keep them loyal. Ashley also tries to keep drivers happy with predictable schedules allowing them to sleep at home frequently. Its drivers, dubbed Ashley Ambassadors, are also charged with building customer relations. In terms of delivery times and reliability, “they’re unbeatable,” says one furniture store owner.

Classroom discussion questions:
1. Why does Ashley control its own delivery supply chain?

2. What are the advantages of outsourcing instead?

OM in the News: Hunger for Organic Foods Stretches Supply Chains

Last year, organic cereal maker Nature’s Path Foods grew so frustrated with organic-grain shortfalls that it took a radical step: It bought a farm. In this example of backward integration, the Canadian company plunked down $2 million for 2,800 acres of Montana cropland. Its goal was to seize greater control of its supplies of wheat, oats and other ingredients. Nature’s Path is among a number of organic-food purveyors taking steps to tackle supply constraints that are hampering the growth of one of the hottest food categories, reports The Wall Street Journal (April 3, 2015). Companies including soup maker Pacific Foods and burrito chain Chipotle are digging deeper into the supply chain with such moves as financing farmers, offering technical training and hiring headhunters to recruit organic growers.

The efforts are aimed at ramping up organic-food output that has failed to keep pace with surging consumer demand, due in part to the significant costs and risks that farmers face in converting from conventional to organic farming. High land costs, for example, make starting an organic farm expensive, and switching to one is onerous. Conventional cropland and dairies can become certified as organic after a 1-3-year transition period in which farmers eschew pesticides, genetically modified seeds, and synthetic fertilizers and hormones. Organic farmers also have greater trouble securing bank loans, and organic crops don’t have forward or options markets, which ease the risks of wide swings in prices for many conventional farmers.

Nature’s Path began wrestling with acute supply shortages in the late 2000s that forced it to import some ingredients on short notice from Sweden, driving up its costs. It plans to dedicate at least $2 million each year to purchase additional conventional farmland that it can then convert to organic production in order to fill 1/4 of its grain needs over the next decade. Two years ago, Chipotle, which said it seeks to purchase as many organic ingredients as practical, began providing financial incentives to help farmers of black beans transition from conventional to organic production. Pacific Foods, worried its organic chicken supply could run short, started building its own chicken-raising sheds.

Classroom discussion questions:

1. What is backward integration– give other examples of it in industry.

2. Why is the organic food industry more complex than conventional production?

OM in the News: West Coast Port Disputes and Global Supply Chains

Some ships are anchored offshore because of West Coast port delays

“Shipping companies say West Coast ports could shut down if a new contract isn’t reached with dock workers,” writes the Los Angeles Times (Feb. 14, 2015). A flotilla of ships — filled with cars, electronics and clothes from Asia — have anchored off the coast waiting for the docks to clear. Both sides blame each other for the severe traffic jam. A shutdown promises to delay numerous products from Asia including furniture, cars, toys, clothes and electronics. About 12.5% of U.S. gross domestic product is tied to goods that flow through the 29 West Coast ports. The ports of Los Angeles and Long Beach together handle 40% of the nation’s incoming container cargo. The dispute centers on a new contract for roughly 20,000 dock workers at the ports.

Businesses that rely on the ports for their goods are likely to face rising costs from delays and possibly lost sales. The last time the ports closed, in 2002, some manufacturing plants were idled because they relied on timely shipment of parts. Businesses can re-route some products by air or to East Coast ports. But that’s costly. If customers ordered Asian-made electronics or other goods, they probably won’t receive them as quickly if they have not already arrived in the country. If the products did arrive, however, but are stuck on the docks, customers may have to wait even longer.

The impact on supply chains is massive. Honda and Toyota are cutting back production at several North American plants. Honda reduced production at plants in Ohio, Indiana and Ontario as the labor tension has slowed delivery of critical parts to keep the production lines running smoothly and efficiently. Parts such as electronics and transmissions are in low supply. Honda has been working to maintain the flow of parts to North American plants utilizing alternative means of transportation.

Classroom discussion questions:

1. What are the impacts on supply chains?

2. Why are the shipping alternatives limited?

OM in the News: Honda’s Rigid Parts Sourcing Leads to Massive Recalls

About 12 million cars have been recalled for defective airbags over the past 6 years and at least 2 people have died

Honda is re-evaluating its relationship with Japanese air-bag maker Takata, which is behind Honda’s biggest series of safety recalls, reports The Wall Street Journal (Oct.2, 2014). The moves follow the discovery that defective air bags from Takata—some dating to the early 2000s—could send metal pieces into a car’s cabin, injuring drivers and passengers. Car makers are only now considering a change in how and where they buy their air bags, highlighting how entrenched and inflexible some automotive supply chains are, with a few companies supplying large swaths of the industry. Honda declined to disclose specific information about any of its supplier relationships, saying that such information is proprietary.

At issue is the inflater component. Takata’s inflater uses a different propellant than most of its rivals, which is cheaper but can be particularly volatile. Takata said it makes the safest and most environmentally friendly products available. Honda is now ordering some of its inflaters from Daicel Corp. instead of Takata. But switching parts suppliers in the middle of an automotive production run is difficult and costly.

Honda also holds a 1.2% stake in Takata, which now has about 36,000 employees and 46 factories in 17 countries. To serve its far-flung customers, many of whom had shifted to JIT parts delivery to limit inventories, Takata kept plants in locations ranging from Malaysia to Morocco to Uruguay. It struggled to integrate those far-flung operations, and communication between the Japanese, European and North American divisions was poor.

Classroom discussion questions:

1. Why is it hard to switch airbag (or other auto parts) suppliers?

2. What tier suppliers are the inflater manufacturers?

OM in the News: Is T.J.Maxx the Best Retailer in the U.S.?

T.J. Maxx (the TJX company) is the “black box” of retailing–one of the most secretive retailers around– writes Fortune (Aug. 11, 2014). With over 3,200 stores in the U.S., the TJX off-price business is a volume game: selling a ton of goods and selling them fast. The measure of speed here is how quickly a company turns over its inventory: TJX does that every 55 days, vs. 85 for its peer group. Indeed, the company is structured to whisk items through its distribution centers and stores: TJX shipped some 2 billion units to its stores in 2014, up from 1.6 billion in 2010.

The stuff moves so rapidly that merchandise is often sold before TJX has paid its vendors for it. The busiest stores can take daily delivery of product, which employees put out on the floor right away—a “door to floor” approach that cuts down on the amount of space needed for backroom storage. Items typically go on markdown if the turn rate is slower than about 7 weeks, which also contributes to the rapid flow.

TJX’s supplier relationship is so strong partly because of the adversarial relations department stores have with the same suppliers.“A lot of buyers beat up people in the market to try to get what they want, as if they’re making a one-time car buy and they’re never going to go back,” says a former TJX buyer. Department stores want concessions for advertising and markdown allowances. They want money for delayed deliveries and returns.

By contrast, the buyer-supplier relationship with TJX has historically been more of a partnership. TJX buyers are taught to make the vendor feel like it’s a win-win and to leave the door open if they can’t come to an agreement this time around. They will make a deal with a vendor they know isn’t a great deal to maintain or establish a relationship with a brand they know is important. TJX also pays on time, which seems like a given, but suppliers can go out of business because they don’t always get paid.

Classroom discussion questions:

1. How does TJX manage its inventory?

2. Describe TJX’s relations with suppliers.

OM in the News: From Navy Oil Tankers to Amazon’s Diapers

8 ships returning to Caroline Islands anchorage, 1944

Amazon’s online diaper sales and the U.S. Navy’s refueling protocol for World War II appear unrelated and worlds apart. Nevertheless, they are both answers to an identical logistics problem: how can an organization shorten the time between a customer’s order and a supplier’s response?

Amazon is seeking a way to decrease its response time to online buyers. In the case of diapers, this means encouraging a supplier such as P&G to relocate its operations adjacent to Amazon’s warehouses. With co-location, both firms presumably can reduce their shipping costs, better manage their inventories, and speed up deliveries.

The Navy experienced a similar logistics problem during World War II, writes The Wall Street Journal (Nov.25, 2013). In the early months of the war, the Pacific fleet engaged in hit-and-run tactics; it had to return to Pearl Harbor, where its oil supply tanks were located. When the Navy launched a 1943 offensive in the central Pacific, the geographical distance between consumer (fleet) and supplier (Hawaii) widened. Refueling consumed a precious commodity—time.

One logistic solution: seize an enemy-held island, convert the island into an advanced base and construct oil storage facilities for the fleet. That worked, but as the Navy accelerated its offensive, it outran the advanced base network. By 1944, the Navy introduced floating bases at Pacific anchorages. Commercial tankers delivered fuel oil to the anchorage, storing oil in barges. A gap, though, between oil demand and supply still persisted.

Then the Navy turned logistics on its head, dispatching 36 oilers to meet carrier task force units at prearranged locations in the forward area. Oilers now refueled fleet units on the move in “underway replenishment.” The results were dramatic. A carrier task force could remain free from a fixed base for 3 months. Fleet Admiral Nimitz termed the Pacific just-in-time supply chain as his “secret weapon.” Naval historians would describe Nimitz’s logistic plan as a “fleet within a fleet.” Amazon’s co-location has been called a “plant within a plant.”

Classroom discussion questions:

1. How is co-location used in the auto industry?

2. What are the supply chain problems for the US military in the Afganistan war?

Guest Post: Trends and Strategies in Logistics and Supply Chain Management

Our Guest Post today comes from Andreas Wieland (http://scmresearch.org/) and Robert Handfield (http://scm.ncsu.edu/blog/). Andreas heads the Kühne Foundation Center for International Logistics Networks at the TU Berlin. Rob is director of the Supply Chain Resource Cooperative at North Carolina State University.

Some months ago, BVL International engaged us to find the most important trends that are currently going on in logistics and supply chain management and also the most powerful strategies to cope with these trends.

Our general observation, derived from both over 60 interviews and the analysis of over 1,700 international survey responses, is that complexity in the form of consumer demands for customized solutions, increased product variations, and fragmented channels has increased. We found that high customer expectations, an increasingly networked economy, intense cost pressure, as well as ongoing globalization, shortage of talents, and pronounced volatility are dominating trends in logistics and supply chain management. Other important trends are sustainability, risks and disruptions, and new technologies.

How should organizations prepare themselves to deal with these emerging trends? The top performing companies are not only preparing themselves for these trends; they are even seeking to exploit them for advantage. First, people are the core of any organization, and strategies to find and keep talented logistics managers and warehouse/transportation workers are crucial. Second, a strong core set of processes is needed, and these processes should be adaptive and flexible to accommodate different local and regulatory conditions. Third, technology must be leveraged to provide insights, visibility, and promote an action-oriented culture. Fourth, end-to-end integration will become an increasingly important logistics and supply chain strategy in the next five years. Finally, to pursue ethical, social and ecological standards, organizations will increasingly need to work both vertically and horizontally with suppliers, service providers, local agencies, and governments.

Our report, coauthored by Drs. Frank Straube and Hans-Christian Pfohl, “Trends and Strategies in Logistics and Supply Chain Management,” is available on BVL’s website.