REPORT 2015

Author
Kevin O’Marah
Chief Content Officer, SCM World

Kevin leads SCM World’s Content team and cutting-edge, practitioner-driven supply chain
research. Kevin also co-chairs the SCM World Executive Advisory Board, a group of 15
C-level practitioners from the world’s leading brands dedicated to improving the practice
of supply chain management.

A research fellow at the Stanford Graduate School of Business, he helps to shape the
direction of supply chain teaching for the next generation of business leaders. Prior to
SCM World, he served as Group Vice President for Supply Chain at Gartner following the
2009 acquisition of AMR Research, where he was Chief Strategy Officer. In his 10-year
career at AMR, he created the Supply Chain Top 25, wrote over 400 published articles
and reports, and led a six-year dialogue with business leaders and luminaries such as
Bill Clinton, Colin Powell, Michael Eisner and T. Boone Pickens.

Kevin holds a Bachelor of Arts in Economics from Boston College, a Master of Science
in Industrial Relations from Oxford University and an MBA from Stanford University. He is
based in Boston and travels to London frequently.

This document is the result of primary research performed by SCM World. SCM World’s methodologies provide for
objective, fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted,
the entire contents of this publication are copyrighted by SCM World and may not be reproduced, distributed, archived or
transmitted in any form or by any means without prior written consent by SCM World.

© 2015 SCM World. All rights reserved.

CONTENTS

FOREWORD 4

EXECUTIVE SUMMARY 6

MEGATRENDS AND ACCOUNTABILITY 7

DISRUPTIVE TECHNOLOGIES FOR SENSE AND RESPOND 9

LOCALISATION OF THE GLOBAL SUPPLY CHAIN 11

THE NEED FOR LEVERAGE 13

SUPPLY CHAIN TALENT FOR THE FUTURE 18

CONCLUSIONS 20

ABOUT THE RESEARCH 21

FOREWORD
For the fifth straight year, SCM World has collected
over 1,000 responses from you, the supply chain
community, on the future direction of our profession.
The survey results share a view over the horizon of
supply chain management worldwide at a time of rapid
technological, social and economic change.
Disruptive technologies are allowing far more precise
delivery to customers even as the complexity of
products continues to increase. Dramatically better
tools and techniques for understanding demand are
increasingly matched by advanced technologies for
managing supply, production and delivery. Leveraging
this wave of innovation should be front and centre for
all forward-looking supply chain leaders.
At the same time, accountability for the safety,
sustainability and social impact of what we do in
supply chain is at an all-time high and is, if anything,
going to be under even more scrutiny going forward.
Our ability to minimise waste and collateral damage
is advancing quickly, but our ability to communicate
how this may change operations in the global supply
chain lags. Supply chain leaders of the near future
will need to sharpen their arguments in favour of
appropriate practices, especially where this means
investment and change.
And of course globalisation continues to advance,
which means that staying ahead of cultural and
geopolitical trends that impact our ability to work
4 Future of Supply Chain Report 2015
with partners and suppliers around the world will
determine winners and losers. Sourcing and selling
with respect, with cultural awareness and in innovative
new ways, are vital to ensure a prosperous business
future in global markets.
POWERING GROWTH WITH SUPPLY
CHAIN INNOVATION
It is an exciting time to be a supply chain professional.
Our roles have evolved from functional experts
working in isolation to business leaders who deliver
business innovation. As leaders of two of the world’s
biggest supply chain organisations, we both see an
opportunity to innovate for our business partners by
operating as unified, end-to-end supply chain teams.
The challenge ahead is how to create an environment
that fosters innovation and innovative thinking of all
kinds to support our goals with consumers, customers,
employees, suppliers and shareholders.
As we compare our future journeys, there are a lot
of similarities. First, a clear strategy that unifies the
organisation is an essential foundation to innovate.
Second, the talent strategy has to align directly to
this strategic vision. And, finally, we both want to
continuously push our respective organisations to
expand skills at all levels from functional expertise
to also include analytics, customer centricity and
business acumen.
TALENT IS THE GATEWAY TO Annette Clayton
THE FUTURE
Executive Vice President,
The number one enabler of successful implementation Global Supply Chain and Chief
of our strategic visions is talent. While Kimberly-Clark Supply Chain Officer,
and Schneider Electric are in very different industries, Schneider Electric
our talent challenges are actually quite similar. When
we compare our priorities, we share three common
objectives:

1. To expose functional leaders to cross-functional

knowledge so that our leadership group can operate
as a more unified team. Sandra MacQuillan

2. To expose our organisation to leading supply chain Senior Vice President and
insights regardless of the industry they stem from. Chief Supply Chain Officer,
Kimberly-Clark
3. To tailor our development approach across
management layers and to the unique needs of
each of the regions that we serve.

As a profession, we are facing a time of serious

challenge in defining our role as business and
functional leaders. What does it mean to be a great
supply chain executive? How does one work with
counterparts inside the business and outside it in the
extended value chain? How should we be organised to
be most effective?

These questions are essential to setting a course for

the future and ones that we hope you will begin to find
answers to in this report.

September 2015 5
EXECUTIVE
SUMMARY
THE SENTIENT SUPPLY CHAIN
Sentient comes from the Latin sentient-, “feeling”,
and it describes things that are alive, able to feel and
perceive, and show awareness or responsiveness.
New technologies, both upstream in manufacturing as
well as downstream at the point of sale and beyond,
are embedding themselves in business and society
faster than ever. The awareness and ability to respond
that these technologies make possible in supply chain
management is completely new. Supply chains of the
future will be almost sentient – able to feel, perceive and
react to situations at an extraordinarily granular level.
Data collected in our first ever Future of Supply Chain
field survey points to a time of heightened visibility to
demand, risk and business opportunity. It also shows
a well-developed sense of accountability not only for
financial or operational performance, but also long-
term impacts on the environment and world around us.
Among the most important structural trends evident in
the data is a rebalance to more localisation in supply
chain management. To some extent this is a response
to over-centralisation, but it also reflects the ability to
manage from a centralised hub with fewer resources
because of advances in technology and process
standardisation. Previous research has shown that
manufacturing footprints are rolling back from a
6 Future of Supply Chain Report 2015
China-based low-cost country model for production
and sourcing, and towards a regional model. New
data confirms this with a clear shift towards an even
more concentrated structure in which manufacturing
is the most decentralised of all functions, while
procurement is the least.
We are also seeing a big jump in the importance of
leverage in supply chain strategy. Procurement, above
all, has taken on a value-creating rather than cost-
cutting orientation. Along with strategy and information
technology, which are also centrally managed in most
organisations, procurement appears ready to play
the role of leverage architect, defining supply chain
platforms for business growth.
The talent mix needed to support this more
localised, accountable and leveraged supply chain
of the future is shifting quickly away from the technical
roots traditionally emphasised in most professional
certification training programmes. While the foundational
skills of plan-source-make-deliver are still considered
the most essential for supply chain executives to
succeed in 2020, communication and influence, and
business strategy are at the top of the list too.
Future supply chain leaders are business people able to
articulate operational questions in simple strategic terms.
MEGATRENDS AND
ACCOUNTABILITY
As of late 2015, world events are dominated by a
migrant crisis in Europe, an economic crisis in China,
and a global acceptance of imminent destructive
climate change. These are manifestations of
megatrends in demographics and natural resource
availability that are painfully obvious to supply chain
executives. Sustainability and social responsibility
have remained high on the agenda of supply chain
leaders. The future of supply chain may be defined by
how we handle the question of accountability.
HEALTH, HUNGER AND
ENVIRONMENTAL SUSTAINABILITY
This year’s survey opened with a question that might
have been laughed at 10 years ago: “What role
does your supply chain play in addressing each of
these global challenges?” The responses were both
heartening and somewhat surprising.
A majority of respondents, comprising more than
550 individuals, believe their supply chains play a
“substantial” role in ensuring long-term environmental
sustainability. This, of course, includes people working
in all industries, at all levels of their organisations and
in every region of the world. The message is clear –
supply chain owns sustainability.
1 | Higher purpose
What role does your supply chain play in addressing each of these global challenges?
7
39 54
Ensuring long-term
environmental sustainability
Substantial
September 2015
Research conducted with the SCM World community
this year on resource economics in supply chain found
that while concerns over energy and water dominate,
solutions are known and being implemented rapidly.
Just this year major public milestones were reached
by Unilever, Coca-Cola and IKEA in managing waste,
water and agricultural sustainability at the 100% level.
Similar initiatives are in place all over the world from the
chemicals industry (Dow) to apparel (Nike). And unlike
the dysfunction so common in government, most are
making massive strides.
Nearly as impressive are the high rates of accepted
accountability for human health and hunger.
Respondents asserting “substantial” roles for their
supply chains in these areas certainly align by sector
with healthcare, pharmaceutical and medical devices
owning health, and food companies owning hunger.
Outside of these groups, however, chemicals, logistics
and industrial company respondents stepped up to high
levels of accountability.
The future of supply chain clearly incudes a high level
of commitment to help solve these three great global
challenges. Leaders of the future will most certainly
need to demonstrate not only that they understand how
their operations affect the world and its people, but also
that they are accountable for what happens.
27 24
41 45
32 31
Providing accessible healthcare Feeding the world
Limited, but meaningful None
% of respondents
n=1,018
7
SUSTAINABILITY INITIATIVES
Among specific initiatives, only waste reduction is
cited by a majority as both the “right thing to do” and
something with a clear financial payback. This aligns
well with classical supply chain thinking in terms of
material efficiency and is mature in industries like
automotive, moulded plastics and food production.
Close behind are initiatives in sustainable water
and renewable energy, where almost half see a clear
financial payback. Examples seen in the SCM World
community over the past year include Google, whose
renewable energy initiatives work within the context
of a portfolio strategy to control costs and volatility in
prices, or PepsiCo, which like Coca-Cola has driven
aggressive water conservation targets with solid
business cases.
Another initiative worthy of mention is green products.
Consumers have demonstrated a lack of support
at retail, often passing on environmentally friendly
products for alternatives perceived to be cheaper. The
case of Procter & Gamble’s Tide washing detergent
illustrates how consumers tend to penalise the low-
carbon footprint concentrated offering in favour of the
big, cheap bottle of store brand. That companies like
P&G are willing to continue is a testament to their sense
of stewardship and accountability.
This view of the future sets the challenge for the
future of supply chain: how to deliver business results
while making the planet a better place. Our data
shows that the majority are already on this page with
environmental sustainability, while the broad range of
industries that see their role in improving health and
hunger is encouraging.

More interesting, perhaps, are the initiatives that score
high in terms of planned investment despite a weak
business case. Two that stand out are ethical sourcing
and fair labour standards. In both cases a clear majority
across industries are investing, but most do so simply
because it’s the right thing to do. Intel’s work on conflict
minerals is a case in point.
The remainder of this report outlines the technologies,
strategies and tactics that make this vision a possibility.
As was so clearly demonstrated in our field survey
and across the past few years of our research, the
right talent is the unifier across all of these areas. We
conclude this report with an updated view of the future
profile of a supply chain professional.

2 | Sustainability initiatives
Company approach during the next 18 months

Waste reduction 65 24 11

Sustainable water management 43 34 23

Renewable energy 41 26 33

Green products 37 44 19

Fair labour standards 35 49 16

Ethical sourcing 32 50 18

Carbon offsets 31 37 32

Circular economy 18 28 54

Invest because it’s the right thing Invest because it’s the right No plans to invest
to do and has financial payback thing to do
% of respondents
n=996

8 Future of Supply Chain Report 2015

DISRUPTIVE TECHNOLOGIES
FOR SENSE AND RESPOND
One of the survey questions we fielded this year
that was an exact repeat from 2014 focused on
disruptive technologies. Respondents were given a
randomly ordered list of nine different technologies
and asked to classify each as “disruptive and
important”, “interesting but of unclear usefulness”
or “irrelevant”. The rank order of importance is
little changed from 2014 to 2015, but the overall
assessment of disruptiveness jumped dramatically.
AWARENESS TECHNOLOGIES
The top-rated disruptive technology both this year
and last is big data analytics. Nearly all respondents
classified it as disruptive and important despite the
fact that few prominent use cases were seen in the
SCM World community over the past year. Among
the leading examples in our current library, Intel,
Cisco, BMW and Nestlé stand out. Big data may
appeal because it promises a way to make sense of
complexity and is a method for digesting demand
information, which is exploding in volume and urgency
with digital demand and omnichannel.
Also high on the list, and well up from 2014, are cloud
computing and the internet of things (IoT). Both of
these technologies are now viewed by a majority of
supply chain executives as disruptive and important.
Like big data analytics, both cloud and IoT offer
heightened awareness of what is happening in supply
chain. The need for visibility has always been a key
concern in supply chain. This group of technologies
look ready to combine into a sort of supply chain
nervous system, picking up and making sense of an
essentially infinite stream of sensory information.

3 | Disruptive technologies
‘Disruptive and important’ technologies with respect to supply chain strategy

77 64 71 49 64 45 56 33 38 27 36 31 20 17 11 16 8

Big data Digital supply Internet of Cloud Advanced Machine 3D printing Drones/ Uberisation
analytics chain things computing robotics learning* self-guided
vehicles

2015 2014

* Not included in 2014 % of respondents

n=1,018

September 2015 9
RESPONSE TECHNOLOGIES
Equally important, it seems, is the ability of a
supply chain to respond. The huge jump in supply
chain executives classifying digital supply chain as
disruptive and important indicates an understanding
of how technology can help to deliver customisation
electronically. “Shipping” software, digital content and
pure intellectual property has worked for supply chains
as diverse as Apple, Johnson Controls and Coca-
Cola. These examples are typical of a trend towards
customisation that takes place at, or even after,
the point of sale.
In addition, the much higher importance assessments
of robotics, 3D printing, Uberisation and even drones
suggests that supply chain executives see some
potential in using technology to deliver ever smaller
batches of physical product. Examples including
Invisalign, General Electric, Johnson & Johnson, British
Petroleum, and Costco have demonstrated successes
with one or more of these technologies.
Research conducted this year on smart manufacturing
has shown how combining technologies such as IoT,
robotics and big data analytics can radically alter the
economic viability of mass customisation. Among the
best examples is Harley-Davidson, whose integration
of several smart manufacturing technologies allowed
for cost-effective production of individual motorcycles
in a plant originally designed to produce longer runs of
identical models.
4 | Customer centricity tactics
Which of the following will you invest in over the next 18 months to help address demand volatility?
Demand/SKU segmentation
SKU optimisation analysis
Predictive analytics
Buy behaviour analysis (click
streams, point of sale, etc)
41
Social listening technology 23
Critical and worth investing in
10
The future of supply chain can, and likely will,
incorporate both technologies for deeper, more
customer-centric demand sensing and highly
customised small-batch production and delivery.
VOICE OF THE CUSTOMER
A new question asked this year focused on tactics for
improved customer centricity. Among the most favoured
in terms of plans to invest in the next 18 months is
predictive analytics. Like the high scores assigned to
big data analytics, this answer shows how urgently
supply chain executives want to better understand
customer needs. The other priority tactics are SKU
segmentation and optimisation. Combined, these
approaches offer supply chains a chance to position
inventory, factory capacity and distribution assets
appropriately to serve cost-conscious commodity
customers differently from service-sensitive premium
customers. Companies across industries including
Clorox, Dell and Schneider Electric are finding success
with these tactics.
Other tactics that show promise include social media
listening and clickstream or point-of-sale buy behaviour
analysis. Only a minority report plans to invest in these
areas over the next 18 months, but in both cases at
least two-thirds say they are under consideration. As
part of a clear trend towards building better awareness
in supply chains and across trading partners, these
tactics all contribute a future state that is dramatically
better connected than is true today.
62 26 12
61 25 14
60 30 10
35 24
43 34
Interesting but will wait and see No plans to invest
% of respondents
n=998
Future of Supply Chain Report 2015
LOCALISATION OF THE
GLOBAL SUPPLY CHAIN
Research we conducted with the SCM World community
in 2013 found that the era of low-cost country sourcing –
and in particular the “made in China” wave that defined
supply chain for the past two decades – was at an
end. Investments are still being made in China and in
huge volumes, of course, but much of that is targeting
domestic consumption instead of exports. In short,
sourcing skills from China is no longer about wages
but about needed local capability.
The data we collected this year not only corroborates
this shift, but also illustrates just how pervasively
the global supply chain is reforming itself as a
strategically leveraged network of local supply
chains. Reshoring is happening.
The United States, for instance, is adding two new jobs
for each one it eliminates, while Mexico creates jobs
at nine times the rate it loses them. China, meanwhile,
although still a net creator of new jobs, is now reducing
employment substantially with over 40 companies
saying they are cutting positions.

5 | Supply chain jobs – winners and losers

Where jobs in the supply chain organisation will be added/reduced in the next three years

152 United States 282

72 China 314

19 India 173

83 United Kingdom 56

43 Brazil 96

80 Germany 45

12 Mexico 101

86 France 17

18 Singapore 73

37 Canada 40

38 Australia 26

21 Malaysia 36

21 Netherlands 31

4 Vietnam 43

23 Japan 17

Respondents Respondents
planning reductions planning additions
n=730

September 2015 11
Elsewhere, big gains are clear in India, Brazil,
Singapore and Vietnam, which are adding up to 10
times the number of jobs they are eliminating. Even
among the biggest net losers like the United Kingdom,
France and Germany there are dozens of companies
creating new positions.
Globalisation may once have been more or less
synonymous with low-cost country sourcing, but today
it means leveraging valuable intellectual property,
including brands, designs and formulations with
local or regional supply chains.
intimately. Given tools like 3D printing, collaborative
robots and flexible machinery, many will learn to
make things when and where they are needed.
FACTORIES AT THE END, NOT THE
BEGINNING OF THE SUPPLY CHAIN
One of the new questions we asked this year
focused on organisational structure. In it we asked
whether the sub-functions comprising the end-to-end
supply chain are managed centrally, decentrally or
in some kind of matrix.

BENEFITS OF THE LOCAL
SUPPLY CHAIN
The benefits of manufacturing, sourcing and
distributing goods close to their end-use markets run
the gamut. Some like Airbus, which recently opened a
plant in Mobile, Alabama, want to be close to powerful
customers who desire easy access to suppliers’
worksites. The same applies to Boeing, which is
looking to open a new operation in China
targeting Chinese airlines.
In other cases, the rationale is some combination of
technical knowhow and market access, as in the case
of Novo Nordisk’s new operation in North Carolina’s
research triangle, which includes 691 jobs. Right
down the street one can also new find apparel jobs
offered by the Salt Life clothing brand of Delta Apparel
in Fayetteville, North Carolina, Prestige Clothing in
The data shows a clear preference for decentralised
management of manufacturing. The only functions that
are comparably decentralised are demand planning
and distribution/logistics. The common element among
these functions is proximity to the customer.
In practice, this implies that the traditional advantages
of huge-scale plants producing long runs of identical
products no longer dominate supply chain strategy.
For the business, this means decision making around
what to make and how customised it will be taken
closer to the point of sale. Manufacturing technology
trends are enabling this movement at the same time
that digital demand is driving complexity with surging
customer expectations.
6 | Organisation structure
Ratio of centralised to decentralised

Kentucky or Keer Group’s cotton mill, relocated from

China to South Carolina.

The phenomenon happens in Europe, too, with

examples like Bentley in Crewe, UK, hand-making
super premium cars or Twistlock reshoring 55 jobs
from China for cast metal parts. The unifying thread
is that making money does not necessarily equate to
ever-cheaper sourcing.

Emerging technologies to better understand 6.1 5.7 4.4 2.2 2.0 1.4 1.3 1.0
customer demand, combined with the tools of smart
t

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precisely make and deliver locally. In a world with

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social media listening, clickstream demand analytics

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% of respondents
and smart retail fixtures, we’ll know each customer n=1,008

12 Future of Supply Chain Report 2015

THE NEED FOR
LEVERAGE
The same organisational structure question identified 7 | Procurement tactics
one of the most important takeaways of our entire How sourcing/procurement is expected to generate the most
business value over the next 18 months
survey – namely, that procurement holds the key to
strategic leverage in the end-to-end supply chain.
Consolidate volumes to
While manufacturing is more decentralised than increase negotiating power 1.26
even distribution or demand planning, procurement
Enhance supplier collaboration/
is even more centralised than strategy or information relationship management 1.16
technology. The implication for the future of supply
chain is that an enlightened procurement strategy can Early involvement in product/
service design and development 0.76
serve as a platform for growth and innovation.
Improve performance of
existing suppliers 0.74
Centralised procurement has obvious natural benefits
associated with consolidated spend and therefore Develop new sources of supply
buying power upstream. Even the most basic to facilitate business growth 0.52
sourcing strategies depend on developing category
Greater use of low-cost
management expertise to ensure lowest cost. Knock-on country sourcing 0.41
benefits include standardisation of material and process Internal demand management
specifications, which should improve quality as well as (eg, downgrading specifications, 0.35
reducing purchases)
working capital efficiency.
Increase spend under
management/contract 0.32
These benefits, however, are easily lost when
procurement works in a functional silo focused on Seek to renegotiate pricing/
terms mid-contract 0.27
narrow success metrics like average discounts or
savings against budget. Truly strategic procurement
professionals are those who use their leverage to Extend supplier payment terms 0.22
collaborate rather than bludgeon trading partners
Weighted average score, 0-3 (where 3=maximum)
or internal constituents.
n=915

One question in the survey asked respondents to rank
their top three tactics for how procurement will deliver
value to the business in the next 18 months. Three of
the top four emphasise collaborative value creation
either with suppliers or internal product development
colleagues. The bottom of this list includes many of
the more combative tactics like extended payment
terms, mid-contract renegotiation and downgrading of
specifications. The future of supply chain looks to be
built on partnerships more than beating up suppliers –
a trend that aligns with previous research.
In terms of enhancing leverage, this data shows
how tightly linked strategy, information technology
enablement and supplier management are in providing
a basis of competition, innovation and growth for the
business. Take as a proof point the increasingly co-
dependent value chain in advanced aerospace where
collaboration between Raytheon as a prime contractor
and General Dynamics as a subcontractor was the key
to a big contract win in radar systems.
The future of supply chain will include many more such
deep partnerships as technology roadmaps and huge
development costs in industries from semiconductors
to drugs demand deep, early collaboration between
companies. Co-developed technologies, channels or
even content and service networks, as in the case of
Apple and AT&T, look less like buying parts and more
like building platforms. Maximum leverage can only be
had with a lock on vital supply.

September 2015 13
TACTICS FOR THE FUTURE
SUPPLY CHAIN
Long-established tactics such as lean and
collaborative planning continue to add value in
supply chains everywhere. They are, however, being
supplemented or even overshadowed by other
initiatives that more closely fit the emerging supply
chain models of the future. Leverage upstream and
localisation downstream are increasingly required to
remain competitive in the digitally empowered
markets of the 21st century.
To see which are most widely in use among this set
of emerging tactics we asked respondents about
what is in place today, what is planned in the next
18 months and the degree to which technology has
been applied to automate the work. The top three
are network optimisation, cost-to-serve analysis and
supply chain segmentation. Each of these is active
with at least some technology support in at least
half of supply chain organisations.
The common trait among these initiatives is the intent
to enable localised competitiveness while taking
advantage of leverage upstream in the supply chain.
For example, Clorox’s supply chain strategy makes
common use of brands, R&D and distribution assets
across four segments of its business that require
completely different service levels and prices to
meet the retail customer’s need. Nike uses network
optimisation to model its supply network regularly in
search of tweaks that save money or enable cost –
effective marketing initiatives.
S&OP AND THE APPLICATION OF
LEVERAGE
No topic in the realm of supply chain management is
more consistently relevant than sales and operations
planning. And yet to many the discipline feels stagnant,
having progressed little from its early days. We asked
respondents to bluntly assess their satisfaction with
S&OP and found somewhat tepid support. Few were
willing to go so far as to say their S&OP processes
had “no value”, but a third of those with active S&OP
programmes deem them a “necessary evil”.
A slight majority overall feel that S&OP is “effective
and impactful” in their organisations, with a significantly
higher score for the overall process than for any of the
sub-processes. There is also a sizeable group that say
technology support is non-existent.
One interpretation of this data is that S&OP, while
firmly established in the lexicon and habits of supply
chain professionals nearly everywhere, is stale. The
lack of technology support suggests a missing design
element that could, if identified, begin to leverage
some of the new tools beginning to impact supply
chain performance elsewhere.

8 | Supply chain initiatives

Approach that companies will take in the next 18 months

Network optimisation 12 50 25 7 6

Cost to serve analysis 11 46 27 6 10

Supply chain segmentation 10 40 34 8 8

Product lifecycle analysis 9 40 35 7 9

Global trade optimisation 9 34 29 9 19

Fully automated Regular, semi- Repeated manual One time manual No plans
automated analysis exercise initiative
% of respondents
n=1,008

14 Future of Supply Chain Report 2015

9 | The state of S&OP
Views about current S&OP/integrated business planning process

Overall process 58 31 5 6

Executive S&OP meeting 54 29 6 11

Follow through 52 33 6 9

Preparation 47 42 5 6

Enabling technology 42 33 7 18

Effective and Necessary evil No value Doesn’t exist

impactful
% of respondents
n=996

The other question is whether traditional S&OP can
keep pace with the complexity and subtlety of supply-
demand balancing in today’s business environment.
As for the future supply chain, it seems S&OP is in
need of an overhaul if it is going to help leaders apply
leverage while still meeting customers’ local needs.
STANDARDISATION FOR LEVERAGE
A common dynamic in business strategy is the
pendulum swing back and forth between total
standardisation, with benefits arising from scale-driven
cost savings, and process freedom, with benefits
based on giving customers exactly what they want. We
asked a question around this philosophical issue to try
to understand where leverage lives in supply chain.
Respondents were offered two statements and the
choice to agree, disagree or dismiss as neutral each
one. The takeaway was absolutely decisive. While
a minority agreed that “process standardisation
constrains agility”, there was nearly unanimous
agreement to the counter statement: “process
standardisation is essential”.

10 | Process pros and cons

How do you feel about process in enabling a high-performance supply chain organisation?

12
27
39

86
34

Process standardisation Process standardisation

is essential constrains agility

Agree Neutral Disagree

% of respondents
n=1,018

September 2015 15
The findings are true across all industries and all
levels of seniority. The only interesting anomaly in the
data, in fact, is that Americans are significantly more
likely than Asians or Europeans to agree that “process
standardisation constrains agility”. The reason for this
difference may well be cultural, since all three regions
had nearly identical levels of agreement to the counter
notion that process standardisation is essential.
Americans, it seems, like the idea of freedom but
readily accept that rules are needed.
The meaning of this data aligns well with what the
technology and organisational structure data tells us.
Supply chains of the future will have to handle extensive
local customisation requirements, and therefore will
need to be built on extensible stable platforms. This
means master data, process predictability, reliable
supply partnerships and stable, interlocking metrics.
Only with such a foundation can intangible assets like
patents, brands and alliances deliver maximum value
to shareholders. Such a foundation is also critical to
supply chain leaders intent on being accountable for
their impact on the wider world.
SUPPLY CHAIN RISK
Accountability also extends to keeping an eye out
for risks that may threaten the health of the business.
Among the most concerning risks supply chain
executives foresee in the coming three years, commodity
price volatility is top. This reminds us that the chief
overall responsibility of supply management is assuring
the availability and affordability of essential inputs.
An interesting finding from our research on resource
economics is that much of what is done to serve
environmental sustainability goals also contributes
to dampening commodity price volatility. Examples
include work by General Mills and Land O’Lakes in
supporting their upstream agricultural partners with
technology and market support, or Google’s energy
portfolio management strategy.

11 | Risk concerns
Supply chain risk concerns over the next three years

Commodity price volatility 59 36 5

Safety/quality issues 46 44 10

Legal/regulatory issues 46 44 10

Supply shortage of materials/

components 40 49 11

Data security/IT incidents 39 49 12

Shipping/logistics disruptions 38 53 9

Geopolitical incidents 30 56 14

Breach of IPR/counterfeit
products 25 49 26

Supplier financial health 25 60 15

Production disruptions
(eg, strikes, fires) 21 62 17

Natural disasters 17 63 20

Major concern Minor concern Not a concern

% of respondents
n=920

16 Future of Supply Chain Report 2015

Other important risks include safety and quality 12 | Risk management capabilities
incidents, which traditionally rate highly, especially Resources/capabilities to manage and mitigate supply chain risk

in heavy industries like chemicals, oil & gas and

industrial manufacturing. Also included in this risk
factor are quality problems that may have a negative 22 25
impact downstream – one visible example being 42 38
vehicle recalls in the automotive industry. This risk
factor may also grow in importance as social media 19 20
and the potential for explosive negative brand impacts 17 17
threaten consumer businesses.
Global risk monitoring and Dedicated supply chain risk
command centre/control tower management team
The biggest single rise this year over past years is the
risk of data security and IT incidents. Last year saw
a steady stream of major security breaches at both
21 19
companies and government entities. The danger for
34 39
supply chain includes not only the possibility of lost
customer data, but also upstream threats to data shared
20
with suppliers and even damage to physical facilities. 26
19 22
Strategies for handling supply chain risk have evolved
Real-time alerts across your Data scientists in the supply
quickly in recent years. Over half of all respondents
supply network chain organisation
say they have dedicated supply chain risk teams,
most of which include a global risk monitoring control In place today Currently piloting

tower. Third-party risk monitoring services are usually Plan to use in the No plans to use
included in the operation of these centres, the best next 3 years

of which include not only information systems but

% of respondents
ergonomically sophisticated work environments. n=911

September 2015 17
SUPPLY CHAIN TALENT
FOR THE FUTURE
With so much changing around it, supply chain
management is being forced to adapt with new skills.
We asked respondents to classify each of nine groups
of skill as they apply to a supply chain professional’s
ideal profile in 2020. With three distinct choices including
“essential”, “nice to have” and “not part of supply chain”,
the data points to an emerging business leader above all.
operations or competing demands for scarce resources.
It implies a person able to frame investment choices
across time horizons and variable risk profiles so that
finance, engineering or sales leaders can understand
the implications of what they’re doing. It aligns with an
S&OP process that helps the business make its targets
even as conditions change and problems arise.

While foundational knowledge of plan-source-make-
deliver tops the list of “essential” skills, this is just one
percentage point higher than communication and
influence. This is a far cry from the classical shipper/
receiver isolated in a warehouse or purchasing manager
administering contracts. It speaks to an individual
capable of negotiating solutions between customer-
facing elements of the business and constraints in
Just below the need for great communication skills is
business strategy. This bundle is in some ways the
current recipe for a successful senior vice president
of supply chain. Such leaders have full command of
the mechanics of supply chain, and can apply it to
competitive strategy as it might be taught at Harvard
Business School.

13 | Supply chain skills

Supply chain executive’s skill profile in 2020

Foundational knowledge of core

supply chain functions (plan, 91 8 1
source, make, deliver)

Communication and influence 90 9 1

Business strategy 87 12 1

Change management 84 14 2

Financial acumen 72 26 2

Analytics 71 28 1

Customer service/sales 64 33 3

Technology enablement 58 40 2

New product development

and launch 48 44 8

Essential Nice to have Not part of supply

chain
% of respondents
n=999

18 Future of Supply Chain Report 2015

MARKERS OF SUPPLY CHAIN
TALENT: THE UNIVERSITY BRAND

This decisive shift in skill profiles away from technical
and towards business is also reflected in a very different
looking list of the top 20 universities viewed as “markers
of supply chain talent”. This question has been asked
before with results favouring programmes formally
dedicated to supply chain education, and generally
based on engineering or technical traditions. This year’s
list looks different.
The most telling changes are in the high placement of
some elite business programmes that have traditionally
not had a strong voice in supply chain. This is especially
true for Harvard Business School, which ranked fourth
this year having never been higher than ninth in the
past, and Cambridge University, which came ninth after
being essentially invisible in previous surveys. The trend
is clearly towards a supply chain executive of the future
who has every chance to become CEO. This may reflect
the recent successes of supply chain leaders like Tim
Cook at Apple, Brian Krzanich at Intel and Mary Barra at
General Motors, all whom rose from supply chain roots
to the CEO position.

14 | Top 20 universities
Universities/business schools as markers of supply chain talent

RANK UNIVERSITY SCORE* TOTAL VOTES

1 Michigan State University 340 148

2 Massachusetts Institute of Technology 311 138

3 Penn State University 224 112

4 Harvard Business School 175 81

5 Arizona State University 153 71

6 Cranfield School of Management 130 61

7 Stanford University 118 61

8 Georgia Institute of Technology 106 50

=9 Cambridge University 92 45
=9 INSEAD 92 41

11 University of Tennessee 88 43

12 University of Michigan 48 25

13 Indian Institute of Management 47 20

= 14 The Ohio State University 46 22
= 14 Bocconi University 46 20

16 Purdue University 43 21

17 IMD 41 20

18 Eindhoven University of Technology 40 21

19 London Business School 39 22

20 University of Wisconsin–Madison 35 14

*3 points for #1 rank, 2 for #2, 1 for #3

n=719

September 2015 19
CONCLUSIONS
The future of supply chain is upon us now. Technology
disruptions are fast retiring the linear, functionally driven
supply chain organisation of the past. Megatrends in the
environment and society are adding pressure to supply
chain leaders tasked to serve new, more accountable
businesses. Fortunately, the very technologies that are
driving so much complexity are also providing a new set
of tools to increase our awareness of what’s happening
in the value chain and improve our ability to respond.
The most important takeaways for supply chain leaders
include rethinking structure to maximise leverage,
with intelligent centralisation of procurement, strategy
and IT while localising execution with decentralised
manufacturing, logistics and demand planning. This
approach will deliver customer-specific benefits at the
point of demand from a stable and extensible platform
managed close to the centre.
20
Traditional tactics – particularly sales and operations
planning – are in need of a refresh with more business-
focused decision support. Enablement of this kind
of business-driven operational planning looks set to
benefit from more use of network optimisation, cost-
to-serve analysis and supply chain segmentation.
In addition, emerging techniques for customer
centricity look promising in terms of more precisely
understanding demand.
Finally, and most important of all, a new set of skills
are required for the next generation of supply chain
leaders. High on the list is a need for communication
and influencing skills, which are vital to sharpen well-
established but somewhat stale practices, including
S&OP and procurement. The training ground for
this next generation looks more business strategy
orientated than ever before.
Future of Supply Chain Report 2015
ABOUT THE
RESEARCH
In September 2015, invitations to complete an online Job function
survey were sent to members of SCM World and to a
wider group of practitioners in supply chain and other
Supply chain 47
functions globally. In total, 1,018 completed responses Purchasing/
procurement 11
were received during the survey period.
Logistics/transport &
distribution 9
Key demographics are as follows (all figures represent
Operations 7
% of respondents):
Manufacturing/
production 7
Industry sector
General management 4
Hi-tech 14
Engineering 3
Industrial 13
Sales/marketing/
Food & beverage 11 business development 2

CPG 10 IT/IS/technology 2
Chemicals 8 Academic 2
Healthcare & pharma 7 Other 6
Utilities & energy 7
Logistics & distribution 6
Retail 5
Company size
Automotive 3
Fabric & apparel 2 13 Less than $1bn
19
Academic 2 $1bn-$5bn

$5bn-$10bn
Media & telco 2 26 16 $10bn-$25bn
Paper & packaging 2 $25bn plus
Medical equipment
11
2 15 Undisclosed
& devices

Other 6

Job level Personal location

1

13 11
SVP/EVP/Board level Europe, Middle East
VP/director 36 & Africa
43 Asia & Australia
37 Manager/head
North & South America
39 Other
Rest of the World
20

September 2015 21
ABOUT SCM WORLD

SCM World is the supply chain talent development partner for the world’s leading companies, empowering professionals
with the capability, commitment and confidence to drive greater positive impact on business performance and help solve
three of the world’s fundamental challenges: health, hunger and environmental sustainability.

The SCM World community accelerates collective learning and performance by harnessing the knowledge of the most
forward-thinking supply chain practitioners, shared through industry-leading research, best-practice exchanges, peer
networking and events. Over 150 companies participate in and contribute to the SCM World community, including P&G,
Unilever, Nestlé, Samsung, Lenovo, Cisco, Merck, Caterpillar, Nike, Raytheon, Chevron, Shell and BASF.

For more information about our research programme, contact:

Geraint John
Senior Vice President, Research
geraint.john@scmworld.com

2 London Bridge, London 51 Melcher Street, Boston,

SE1 9RA, United Kingdom MA 02210, USA

+44 (0) 20 3747 6200 +1 617 520 4940

scmworld.com

22 Future of Supply Chain Report 2015

September 2015 23
London Office
2 London Bridge
London SE1 9RA
UK

Boston Office
51 Melcher Street
Boston MA 02210
USA

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