5 trends for 2010 and beyond
Deep takes a look back and a look forward.
As we close out on 2009, Equus Group has been talking to clients about 2010 and beyond and about what the top trends are, and so in this last column with American Shipper, I decided to share these with readers.
This year has been an interesting one, in terms of downturns, upswings, false starts, bankruptcies, marginal growth and global shifts in trade. I am on a plane returning from a trip to India as I write this column, where I was reviewing the markets and the latest economic and business trends. I will head to Panama once again, tomorrow, to do the same for Latin America.
Markets have behaved very differently in different parts of the globe, and these visits to India and Latin America have highlighted this vast disparity. These visits, in addition to watching the U.S. market closely through the eyes of clients, have helped to note these trends for the next year and some years to come.
When conceptualizing this article, the first thing I wanted to do is to go back to an article I wrote in the January 2008 American Shipper (pages 25-27) for the Top 10 trends for 2008 and beyond, to see which of these came to fruition and which were way off, to keep myself honest. I've included the list once again, with a report card on it (see chart).
Previous trends stand
I'll continue to stand by the trends discussed in 2008, and see some of them shifting positions.
The greening of supply chains (No. 10) will move up considerably, as governments and companies shift more focus and funding towards this area.
Supply chain risk management (No. 2) moves to No. 1 because companies are going to need to really examine their risk profile in order to capture market share during the inevitable upturn.
Outsourcing (No. 7) moves up as well, because it is becoming more of a necessity as opposed to an innovation in the business world. We are pioneering the outsourcing of core supply chain functions such as statistical sales forecasting and demand analytics with some clients.
No. 1 ' Latin America heats up
Tyler Bridges, of McClatchy Newspapers, mentioned, 'as economists survey the past year and look ahead, they can't help but marvel at how Latin American countries, after years of being lectured to get their fiscal houses in order, mostly managed to swerve around the global economic pileup precisely because they followed that advice.'
In spite of swine flu, economically influential countries and blocs such as Central America, Chile and Brazil, are looking up. Their economies have hardly been hit, when compared with the United States and Europe. Flights to Sao Paulo are packed (first-hand experience) and the number of routes have increased, mostly for business travel. Equus has seen its Latin American revenue grow significantly, and not due to emergency cost-cutting initiatives either, but for multiyear structured improvement programs.
Bridges further underscores, 'Before the crisis hit, the Economic Commission for Latin America and the Caribbean, a Santiago-based United Nations agency, expected Latin America to grow by 4 percent in 2009. Now it projects a 2 percent contraction. Indicating its faith in a turnaround, however, the group is now forecasting a 3.1 percent growth rate in 2010 for Latin America.'
No. 2 ' India looks bullish as well
While most countries are licking their wounds, India is poised for 6.5 percent year-on-year growth. The number of new shopping malls, arcades, new car sales, home construction and new companies emerging in India is chasing away any ghost of recession that may be headed its way. It was fascinating to see it at close range, shopping in Mumbai, and driving the crowded roads meandering through multiple construction sites for mega-apartment buildings, corporate parks and new shopping malls. Real estate in Mumbai is higher than Manhattan prices and this is after the bubble apparently burst. According to Business India magazine, there are more than 10 million new mobile phone connections per month. People are leapfrogging brick-and-mortar stages. Mobile banking is about to launch country-wide, so that people in rural areas don't even need to visit a branch. And farmers can actually turn on water pumps and irrigation gates through their mobile phones. Imagine the production and productivity increases that are imminent.
No. 3 ' Significant upheavals in the U.S. business structure
Besides the regular merger-and-acquisition activity, companies will 'shed' non-competencies even more, and start shedding some of what they consider their 'core' competencies as well.
Whereas we have seen this phenomenon in the high-tech industry, consumer goods companies such as Nike are truly ahead of their time. They have recognized brand-building as their core strength, and have made no bones about outsourcing everything else. However, this is not just plain vanilla cost-induced outsourcing. They have truly found a way to 'partner' with their vendors to create a seamless organization that can quickly respond to the marketplace.
We see multiple industry sectors such as consumer goods, chemicals, agri-products, and life sciences (including pharma and hospitals) going down this road.
No. 4 ' Supply chain expertise more necessary in health care
Who best to talk to about cost of delivery, cost to serve, customer service levels, order management, and opportunity cost tradeoffs than supply chain folks? U.S. health care is at a crisis point, and besides the policy-wielding politicians, grass-roots health care improvement can only be done through supply chain improvement. We're not talking about the cost of drugs, but the actual process of planning hospitals, number of beds, type of care, and systematizing this into coherent methodologies, with costs associated to it.
Insurance companies are looking at it through their accountants' lenses, but a supply chain specialist's lens is needed. Health care transforms into the demand and supply of health care, where health care is a product that must be delivered at the lowest cost, at the right time, to the right place and by the right people.
No. 5 ' Companies abandon U.S.
The United States has been the friend of business for many years, but the pendulum is swinging too far to one side, where government wants greater oversight. Companies have taken it so far but they too are going to lash out and move to other places such as Panama, where regulation is less stringent. We have learned of some companies who are strongly looking at options to base from other locations, and even setting up entire 'supply chain companies' to deal with the parent company through tax-efficient structures, where entire blocs of functions relocate to different countries to both avoid unnecessary and expensive scrutiny as well as be tax-efficient.
In summary, new trends are emerging that call for action on the part of the logistics industry, to cope and change with, and perhaps head off or take advantage of these new trends. The previous trends continue to shape and form with every passing year, and these new trends are to be considered in addition, as we see countries, companies and the world go through a new economic beginning.
Deep R. Parekh is a partner with Equus Group LLC, a supply chain advisory services and management consulting firm based in New York and Sao Paulo, Brazil. He would like to thank Jorge Gonzalez from the Equus Team for his contribution on Latin America. Deep welcomes your feedback and comments at firstname.lastname@example.org, and can be contacted at (917) 940-7538. You can read more of his pieces at www.scstrategicview.blogspot.com