So what’s next? (The golden age of Supply Chain Management?)

Well, the recession is over, or at least, we can now talk about “green shoots”, “light at the end of the tunnel” or use any metaphor describing the start of the economic recovery without putting ourselves in a political danger-zone. But does this mean that we are going to be operating in a business-as-usual environment or will we be operating in a new equilibrium? And where does Supply Chain Management fit into this?

It certainly seems unlikely that it will be business-as-usual. Lets take a look at the macro economic situation. One of the main contributors to the 2008/9 recession was the lack of savings in the western world. Sure, it all got triggered with the failing banks but the underlying problem was and is the lack of savings. The Economic expansion of US and Europe has been debt fueled, leaving us in the paradoxical situation that we now need to spend even more to get us out of the recession through bank bailouts and quantitative easing. In the US alone, the cost of the credit crunch amounts to $3 trillion. An amount only match by the monetary cost of World War II with $3.6 trillion in inflation adjusted terms[1]. Somebody has to pay for this eventually, which of course is going to be you and I, the tax payers. The likely effect of all this is that we will see a lower trend of growth in the west for the foreseeable future.

Another major trend is the demographic change. Let’s take the UK as an example. The old age support ratio, the number of people of working age for each person of pensionable age, in 1971 was 3.6, in 2006 it was 3.3 and in 2051 is predicted to be 2.0[2]. And the situation in, for example, Italy or Germany is even worse due to lower birth rate and stricter immigration rules. This has some obvious implications; or we need to save more or we need to work longer. The fact that we as tax payers have some government debt to pay off probably means that we will be working longer. Or is there another way?

Well, one of the strengths of the Western Economies has been its historically high productivity levels and the ability to continuously increase it. For example the nonfarm business level in the US in 2008 is 3.85 times higher than it was in 1947. I suggest that the trick will be to push the productively levels to even greater heights in the coming years. And I believe that Supply Chain Management will play a key role in this.

Supply Chain Management is the only discipline that takes a total view of, not only a company but of the full environment a company operates in. The efficiencies and growth opportunities that this discipline can provide are virtually untapped. Supply chain collaboration, supply chain optimization, 3D Concurrent engineering, Sales & Operation planning are but a view of the components under the Supply Chain banner which will help transform whole industries in becoming even more efficient and help them extent into new territories, both geographically and in products and services . Due to its importance, I believe that Supply Chain Management will propel even faster up the organizational tree and find more permanent and prominent place on the Boards agenda.

Is the golden age of Supply Chain Management upon us? Well, we certainly have plenty to get on with……

All the best
Richard van der Meulen

[1] Source: CLSA, Bits & Pieces, 2009
[2] Source: http://www.statistics.gov.uk/downloads/theme_compendia/pensiontrends/Pension_Trends_ch02.pdf.