In our Supply Chain Top 10 Predictions for 2010, we talk a lot about manufacturing companies fundamentally shifting their supply chain structure from a fixed-cost-driven network to a variable-cost-driven one. Certainly, in many segments some form of this has been going on for years, but it is our view that the uncertainty around global economic recovery (what is the ‘new normal’?) will speed the trend considerably. One pretty clear implication of moving from fixed to variable cost structur
The prediction goes on to say that:
· At IDC Manufacturing Insights, we had talked about 2009 as the year that manufacturers really got serious about risk management in the supply chain — didn't happen! Certainly, supply chain network complexity continues to grow, but OK, we had this little economic slowdown, and all of a sudden cost reasserted itself as king and risk management initiatives went the way of the Dodo bird. Even though manufacturers talk about better managing risk, they still don't seem to be willing to directly invest in risk mitigation as attention remains focused on recession survival and cost management.
· Although we don't see large investments in risk management in 2010, we do hear increasing interest in risk-related capabilities in applications like supply and demand planning and optimization tools that can bring focused risk management capabilities, including faster contingency planning.
· Regardless of the broader economic conditions, leading manufacturers continue to find ways to develop the right combination — risk awareness and early detection, followed by rapid response, but for now, with minimal new IT investment.
Clearly supplier risk was high on the priority list for procurement professionals in 2009 as many key venders teetered on the edge of insolvency, and that experience will not be quickly forgotten. So, as manufacturers move forward and drive higher levels of outsourcing, it will be important to re-assess the inherent risk from the supply network and decide what steps to take to address that risk.
But, what will ‘addressing’ the risk look like. Will it be, as we suggest in the prediction, focused around risk awareness and understanding, or will we see more significant risk mitigation investments as part of the overall outsourcing process? We would love to hear your opinions.