Will 2015 Be a Good Year for Supply Chain?

December 30, 2014

By Jim Tompkins
CEO, Tompkins International

2015 has the potential to be a great year for the supply chain. There’s good news and there’s bad news, but it’s how companies approach strategy that will determine supply chain success in the coming year.

The Good News:

• The Consumer Confidence Index (via The Conference Board) peaked to 93.5 this December, which is the second highest level in 7 years.
• The University of Michigan’s Consumer Sentiment Index was up to 93.6 in December 2014. This is a great improvement compared to prior years.
• Employment is on the rise, gas prices are down, and the majority of business leaders are optimistic about 2015.
• The economy is more stable than the last 5 years and businesses are confident about 2015 growth.

The Bad News:

• Promotions were over the top for Holiday 2014; this will impact profitability going forward.
• E-commerce/private label shifts continue, and the future is very different from the past.
• The consumer is being trained to expect a level of customer service that does not beget company profitability.
• Amid a segmented economy, more than 65% of all families are in a “survival mode.”
• Global risks are high and the chances of international supply chain disruptions have increased, from regional conflicts to weather emergencies.

Supply chain leaders are entering 2015 with many of the same thoughts as the past. I hear a lot of folks discussing the same supply chain challenges, such as: customer focus, cost reduction, agility and flexibility, improving inventory turns, operations efficiency, and network planning.

These are all important, of course, but they are all about structure and execution. The reality is that structure is the second step of supply chain excellence and execution is the thirdstep. Unfortunately, pursuing structure and execution before fully grasping strategy will result in a poor 2015 for the supply chain. Strategy must come before structure, and structure must come before execution.

For 2015 to be a great year for supply chain, strategy must come first. You must lay the foundation with strategy. Most importantly, to optimize your supply chain in 2015, continue to ask yourself (and establish the answers to) these questions:

• What are you going to do about marketplaces?
• What are you going to do about Asia?
• What are you going to do about promotions?
• What are you going to do about omnichannel?
• What are you going to do about getting local?
• What are you going to do about channel management?
• What are you going to do to grow?
• What are you going to do to provide benefits to your costumers?
• What are you going to do to beat marketplace expectations?

Please don’t jump into the “structural trap” of the past. Answer the strategic questions listed above and then with this strategy move on to structure.