Supply Chain Frontiers issue #23. Read all articles in this issue
The wisdom of hindsight is more impressive if it’s based on observations you originally predicted. In 2004 the MIT Center for Transportation & Logistics (MIT-CTL) launched the Supply Chain 2020 research program to identify and analyze the factors that are critical to the success of future supply chains. The SC2020 team postulated a series of macro factors that it said would influence supply chains for years to come. These included economics, trade regulations, geopolitics, labor laws, green laws and demand trends. Fast forward to the present and these macro factors are indeed exerting a profound influence on the way supply chains are designed and managed.
“One of the charters of the Supply Chain 2020 project was to bring the future to the present,” said Larry Lapide, CTL’s Director of Demand Management, who managed the launch of SC2020. “The purpose of the macro factors was to tell the supply chain community what was coming down the line, so managers could prepare for the changes” he added.
That message is now hitting home. For example, the SC2020 track that Lapide chaired at the Council of Supply Chain Management Professionals annual conference in Philadelphia this October, was structured around six macro factors. Speakers from MIT-CTL, Chainalytics, Intel, Texas Instruments, Unilever, Limited Brands, P&G, Whirlpool and Johnson & Johnson talked about real-world supply chain responses to globalization, emerging markets, environmental concerns, and energy issues,
Tom Hellman, former Executive Vice President, Compliance Services, Limited Logistics Services, described how the company has launched a major project to qualitatively assess the environmental footprint of LimitedBrands’ products and operations, and to develop a strategy to reduce this footprint. The project’s scope extends from its use of raw materials to product end-of-life issues. Hellman explained that LimitedBrands has identified 21 issues across its value chain from the amount of water used in the production of cotton to solid waste recycling practices in its apparel business.
Companies such as LimitedBrands are responding to more stringent environmental regulation. Moreover, the regulatory regime is likely to become even tougher as global issues such as climate change and energy conservation increase the pressure on companies to be environmentally responsible.
Back in 2004 - when oil prices were a fraction of today’s levels - the SC2020 team flagged rising energy prices as an important influence on the future of supply chains. With the price of oil currently hovering around $100 per barrel, this observation seems particularly prescient. Many companies are now devoting considerable resources towards cutting their energy usage through various mechanisms such as leaner distribution networks and more fuel-efficient freight vehicles. One session in the SC2020 track had a panel discussing these issues. “The price of oil is back to what it was in 1980 in real terms, which was the recent high ” noted Lapide.
The SC2020 Project has now moved into its solutions phase. The project is focused on how companies can deal with uncertainty and changes in macro factors through better risk management. The team is also looking at techniques that help companies to anticipate change, such as establishing “sensors in the ground” that alert organizations to important trends. But the project’s original mission is as relevant today as it was when SC2020 was launched. “We wanted to get the supply chain community to understand some of the issues they would have to wrestle with in the future,” Lapide said.
For more information on the SC2020 Project, contact the project’s director Mahender Singh. For more information on the SC2020 CSCMP track, contact Larry Lapide.