SC247    Topics     Supply Chain    Blogs    Logility

The Biggest Challenges Supply Chain Leaders Will Crush in 2016

To be fair, it’s nearly impossible to predict what will turn out to be the biggest challenges supply chain leaders will encounter in the year ahead.

Millions of supply chains face unique challenges that vary across industries, geographies and business strategies.

A host of unpredictable factors will certainly arise, such as geopolitical conflict, social and economic upheaval, natural disasters, and more.

But despite the difficulty factor, let’s gaze into a crystal ball and make a few predictions about the challenges supply chain leaders should be preparing to face in 2016.

1. Increased Disruptions
It is not a matter of if disruptions will take place, but rather when and where. Today’s supply chains are characterized by complexity, volatility, unpredictability, and instability. Their many links span a wide geography, which increases the probability of disruption.

Earthquakes, hurricanes, tidal waves, and wars lead to massive consequences that require extensive mitigation efforts, but even smaller factors like adverse weather, accidents, and power outages can create a bullwhip effect that ultimately impacts a company’s ability to service customers.

The discipline of supply chain risk management has emerged over the last decade to promote creation of mitigation plans for when disruptions occur. In 2016, more supply chain teams will invoke scenario planning to determine what actions to take in the face of potential disruptions. Greater supply chain visibility also enables faster response to supply chain disruptions, and supply chain systems will be called upon to increase both inbound and outbound product visibility.

Advice from the pros:
Give Portfolio Review prominence in the S&OP process, as often the success of S&OP hinges its effectiveness. Employ advanced techniques such as attribute-based planning, which allows a company to accurately forecast new products even when no direct prior sales history exists.

Technology enablers: Logility’s supply chain optimization solutions provide customizable views to review plans for new product introductions (validate sales projections, expected launch dates, consumption forecasts, pipeline fill), and for products that are phasing out (manage the depletion of inventory, transition to new products). Leverage Logility’s cluster and Lifecycle Planning functionality to develop forecast profiles based on aggregate new product launch history.

2. Supply Chain Cost Reductions
Fuel price drops reduced overall transportation costs in 2015, but it’s unclear whether lower fuel costs will continue. Certainly interest rates will rise, which will drive up the cost to hold inventory. The cost to hire and retain qualified talent will rise - perhaps sharply, if current trends continue. Raw material prices are on an upward trend as well. But regardless of what is happening to resource and labor prices, senior management will expect the supply chain team to continue lowering total cost.

In 2016, there will be increased adoption of supply chain planning, optimization, and execution technology to automate supply chain processes and manage by exception. This will result in more time for value-added activities like scenario analysis, process reengineering and developing value added differentiating services.

3. Customer Service Expectations
Customers have more information available to them than ever before and they use this information to demand larger product variety at a lower price whether shopping on-line or in a store. In 2016, supply chains that support on-line, catalog, brick & mortar, and wholesale channels will need to be fully synchronized to meet customer requirements efficiently. With Amazon and other on-line retailers setting high availability and delivery expectations, supply chain managers will have to take stock in 2016, and understand their customers’ expectations.

Companies will need integrated supply chains to meet the requirements of each unique sales channel, with an integrated management team supported by a shared end-to-end supply chain planning and execution solution.

4. Demand Unpredictability
Supply chain growth over the last few years has gone hand-in-hand with growing demand uncertainty. In 2016, more supply chain teams will need to upgrade their planning and optimization capabilities to plan for both short and longer term demand variability.

The disciplines of demand planning and sales and operations planning (S&OP) have been around for many years, but recent advances in supply chain management technology have enabled integrated planning and optimization over short, mid, and long term horizons. In 2016, companies will accelerate their adoption of supply chain software solutions that are easy to use, powerful, and provide collaborative and mobile capabilities.

Step 1 - Innovation and Strategy Review

An important consideration for any company is managing product lifecycles.

  • What products should we introduce to the market place?

  • When should we introduce them?

  • What products should we sunset or discontinue?

These are all critical questions to answer and the impact on sales, production, inventory, and finance must be understood.

Introducing new products is a key aspect of the innovation and strategy review. NPIs can significantly impact the well being of a company including inventory and lost sales. The ability to predict sales on NPIs, where there is no sales history to model, can be difficult. Traditional time-series forecasting tools that utilize history will not work effectively for NPIs. To overcome these challenges, more advanced techniques must be employed.

Companies that have been successful in managing NPIs utilize advanced techniques such as attribute-based forecasting which generates demand profiles for new products based on existing product demand tied to identifiable attributes such as style, color, season, material type, etc. A well-designed attribute-based forecasting system will continually monitor demand signals, quickly recognize any deviation from the forecast, and adjust the assumptions and forecast to match the actual demand signals.

So how do you meet all of these challenges?

  1. Don’t try to go it alone. Get input from peers and advisors. Get involved with professional organizations. Engage a third party. Take advantage of an abundance of on-line thought leadership.
  2. Take a systematic approach. List all the challenges you may face in the next several years. Prioritize this list and identify the top three to five actions to be tackled in the next 18 months.  Brainstorm ideas on how each challenge could be met (people, process, technology). Determine a logical order for how challenges should be addressed. Develop a high-level project plan.
  3. Build ROI business justifications. Socialize improvement projects with key executives and stakeholders. Reevaluate priority and sequence based on feedback, alternative priorities, business impacts, etc. Develop a compelling business case for supply chain management improvement.
  4. Engage technology solution providers early. Supply chain management vendors are good sources of advice on best practices and process improvement. A good solution provider will partner with you and help build your business case for making the improvements.
  5. Get started. How do you eat an Elephant?

What do you think will be your biggest supply chain challenges in 2016?

Related White Papers

Successful Sales and Operations Planning in 5 Steps
Armed with the right information, the S&OP team can fully understand the range of considerations that must be included in their decision making and make the tough choices that ultimately determine how well the company performs. Download Now

The Practical Approach to S&OP
This paper details S&OP best practices to achieve game-changing S&OP benefits with repeatable S&OP process that drives outstanding results when implemented through an easy-to-use technology platform.
Download Now

Article Topics

Logility News & Resources

Logility makes entrance into supply chain-focused AI, with acquisition of Garvis
Logility Acquires Generative AI Supply Chain Planning Firm Garvis
Supply chain software platforms help to level the playing field
Logility to acquire supply chain network optimization vendor Starboard Solutions
Logility partners with Körber to expand capabilities
How Does IKEA’s Inventory Management Supply Chain Strategy Really Work?
This is Not Your Father’s Inventory Optimization
More Logility

Latest in Supply Chain

Investment Triggers a Manufacturing Supercycle
Supply Chains Struggle to Access Reliable Emissions Data from Suppliers
Artificial Intelligence to Drive M&A Activity in Supply Chain
Cleo Announces New Supply Chain Management Tools for Integration Cloud Platform
ASCM Honors Supply Chain Management Leaders with Awards of Excellence
US Container Traffic Boosted by Back-to-School Rush
Bank of America Introduces Digital Supply Chain Finance Platform
More Supply Chain
Optimize Service Levels

With more than 1,300 customers worldwide, Logility is a leading provider of collaborative supply chain optimization and advanced retail planning solutions that help small, medium, large, and Fortune 500 companies realize substantial bottom-line results in record time. Logility Voyager Solutions™ is a complete supply chain management and retail optimization solution that features advanced analytics and provides supply chain visibility; demand, inventory and replenishment planning; Sales and Operations Planning (S&OP); Integrated Business Planning (IBP); supply and inventory optimization; manufacturing planning and scheduling; retail merchandise planning and allocation.

View Logility company profile


Featured Downloads

Becoming a Shipper of Choice
Becoming a Shipper of Choice
C3 solutions' scheduling software streamlines the shipping process.
Thinking Differently About Supply Chain Planning
Thinking Differently About Supply Chain Planning
Political landscapes shift overnight, global trade is constantly changing, consumers demand increasingly personalized service and smaller day-to-day challenges hit without warning. If...

Rapidly Improve the Performance of Your Warehouse Logistics
Rapidly Improve the Performance of Your Warehouse Logistics
The Rapid Performance Evaluation identifies opportunities and potential improvements in every aspect of warehouse logistics operations; performance, productivity, service, quality, and systems.
Resource Management System (RMS): How to Effectively Leverage Your Assets
Resource Management System (RMS): How to Effectively Leverage Your Assets
This guide provides an in-depth analysis of the potential of various resources available in a warehouse and how they can be utilized...
Sustainable Supply Chain Insights From PITT OHIO
Sustainable Supply Chain Insights From PITT OHIO
A whitepaper on supply chain insights gleaned at the LEED-certified gold Cleveland transportation and sustainability summit.