12 March 2010

All possible worlds

Published:: 01 April 2008

What''s your supply chain model? Are you trying to be agile, lean, extended, global, customer-centric…? Do these words represent the direction you should be travelling in or are they literally last year''s model.

That was the worrying question raised by Dr Larry Lapide from the Massachusetts Institute of Technology, delivering a keynote speech at the recent Supply Chain Standard-sponsored Extended Supply Chain conference in London. Most current supply chain thinking makes a number of assumptions - that globalisation will continue, that trade barriers will if not fall at least not be newly erected, that supply chains will have a universal language, not just in the sense of using English but also in an increasing commonality of outlook, methods and processes.

All this will help ever more extensive supply chains to seek out value wherever it exists, and deliver it ever more efficiently to a growing consumer demand base. One day, every one of the world''s population will have the outlooks and expectations of a Western liberal consumer, and our supply chains will serve that need.

This Lapide reckons to be a fairly risky bet, based on little evidence. Indeed, he sees many macro-economic factors that could blow this model apart, and if he''s only partially correct, we need to be thinking about the issues now.

For example, the developed countries have rapidly ageing populations. We are going to be short of labour and long on demands for personalised products, for total (product plus service) offers, for home deliveries, for healthcare and maybe for in-home automation, from smart fridges to health monitoring.

And the supply chains serving these needs (which sound pretty labour-intensive) will have a scarce workforce, an older workforce or one without language skills or with the physical and mental penalties of age. Will we, Lapide asks, need to configure supply chain systems, particularly at the knowledge-based end, around the semi-retired? Will national policies allow the immigration we need to supply physical labour?

And then there''s oil. A lot of our processes are based on cheap oil. But cheap energy doesn''t look like a given any more, and this affects not just transport but also material, operating and packaging costs.

At the same time, there''s already a marked shift of economic and industrial power, and indeed of markets, towards India, China and probably also South America. These areas will out-produce the old West not just in terms of manufacturing but also in the production of scientists and engineers and generating new consuming classes. They will compete successfully for the allocation of scarce global resources.

This could mean, Lapide continued, the rise of new trading blocs - perhaps three or four - with few internal barriers but high external ones, and trading largely within the bloc.

At the same time those in the old liberal West, will continue to demand higher standards on so-called green issues, perhaps reinforcing a trend towards mutually exclusive trade blocs.

And even all-pervasive technologies such as the internet may not be immune. Lapide conceives that the web itself may fracture - there could be Chinese, Muslim and other fragmentations, with a trend towards mutual incomprehension.

What does all this mean? There are a number of possible scenarios, according to Lapide. We might get Synchronicity - essentially the one-world global environment that most supply chain assumptions assume we are heading towards. At the other extreme we may see Alien Nations - trading blocs and countries internally focussed and to a greater or lesser extent, mutually antagonistic. Somewhere in the middle we could find ourselves in Spin City, a confused world of constant change where the devil takes the hindmost.

Like most of us, Lapide hopes that Synchronicity will prevail and continue to deliver more of the benefits that our supply chains are beginning to deliver.

But you wouldn''t want to bet the farm on it. Any major supply chain needs to be thinking about plans B and C right now.

And there''s no reason why we should be passive spectators. These futures will be built by complicated interactions between governments, businesses, and communities. We believe business delivers benefits to the other two partners so we should be active in shaping the future we want.

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