Supply Chain Trends: 2007 to 2010 (Part 1)

1. Sustainable Supply Chain practices: Domino Effect

o Corporate HQ's in advanced countries will no longer be immune to non-compliance with green regulations by their outsourced vendors in low cost economies. In other words, companies will increasingly have no choice but to conduct the necessary due diligence on the supply chain practices of all their vendors and suppliers! This is being taken very seriously by companies such as IBM, which insists on each of its suppliers providing an extremely detailed Product Content Declaration to establish compliance with environmental requirements. Paradoxically, the e-waste scorecard published by Greenpeace in August 2006 ranked Lenovo the lowest on meeting environmental concerns (though of course, Lenovo did not fare as badly in the second version of the score card released recently, while Apple had moved to the bottom of the heap!).

o To avoid consumer displeasure, companies will be anxious to demonstrate environmental responsibility (if they don't want to see sharp drops in their share prices, that is). For instance, a global cola brand had to shut down its bottling facility in the Indian state of Kerala as a result of public protests over over-exploitation of the ground water, as well as for polluting the same with toxic heavy metals such as cadmium and lead. Besides environmental responsibility, supply chain Corporate Social Responsibility (CSR) will extend to healthy environment and worker and occupational safety as well.

o Green concerns will increasingly extend from manufacturing practices and packaging to end of life-cycle disposal of products (specifically products that will release hazardous substances into the environment on their disposal). This will include end of life-cycle disposal of electronic products ('e-waste'), which are causing a major concern in Asian countries such as China, where not only are over 150 million home consumer appliances discarded every year, but which is also alleged to be the destination of a major percentage of the global e-waste. Greenpeace estimates that a huge proportion of global e-waste is illegally exported to third-world countries. In fact, the compliance costs related to recycling at the end of the product life-cycle might well become mandatory to factor in while taking decisions on the initial set-up of the manufacturing plant.

2. Regulatory Compliance: Seemingly Unmanageable Complexity

o The cost of goods crossing international borders – in terms of Regulatory compliance - will rise dramatically. At the same time, the consequences of non-compliance will turn increasingly draconic!

o Restrictions on hazardous materials will become tighter across the supply chain. So also will the export controls on civilian goods with potential military use ('dual use' goods). Export enforcement will become tighter in a bid to reduce the risks of the diversion of controlled commodities and technologies to persons and organizations listed on different denied trade party lists.

o Owing to increased Regulations based on local concerns, it will become more and more complex to manufacture products that are simultaneously compliant with the regulatory requirements of different countries. In fact manufacturers may need to vary their production process based on the country they are exporting their products to (though of course, they would try to arrive at a least common configuration to base their process on).

3. Technology Solutions: Out with the Old...

o RFID data will enable new levels of functionality in applications; the empirical evidence of ROI from early adopters in Retail and Pharma will influence increasing expansion of RFID across other verticals. At the same time, the increased use of RFID in areas such as passports and the possibilities of 'secret tagging' of consumer goods, will trigger increasing concerns regarding consumer privacy, data security, 'informed consent' as well as some concerns on the possible threats due to constant UHF radiation in supermarkets!

o Integrated architectures will be forced to make way for common platforms and Internet-based modularity. Customers will demand totally configurable chaos-resilient SCM solutions to accommodate their rapidly changing needs. On-demand software solutions will continue to reduce the cost of ownership of software, and raise the level of technology implementation by the SME's.

o At the same time, there could be a certain level of disillusionment with existing Technology, as people try to manage their supply chains through their legacy ERP systems, which will prove to be too unresponsive or slow compared to the constant changes occurring up and down the supply chain. This will be a window of opportunity for a new breed of solution providers!