China, volatility of ecommerce affecting global supply chains


Although different industry experts will give varying opinions on what is happening in today's supply chains, they can all agree of one thing: Changes are under way. Therefore, smart supply chain managers will anticipate trends and make adjustments to their businesses as needed.

A recent Supply Chain Digital report highlighted several such trends that will arise this year.

1. VUCA - Volatility, Uncertainty, Complexities and Ambiguity


The macroeconomic environment has been changing for several years and will continue to do so through 2012 and beyond. As a result, overall and IT risk management programs will be more heavily threaded into the supply chain's goals and practices, the news source said.

"The challenge has become as companies have pursued these strategies, they have put themselves in the line of fire for problems," industry expert Jim Lawton said in the report. "We've seen much more complex supply chains with materials coming from a wide variety of different places. Supply chains are now dependent on this international, interconnected network of all these players."

2. China will have a bigger impact

Due to inflation and rising wages, companies have been aggressively outsourcing to help keep prices down while still meeting demand. As a result, China has been taking on a bigger role in the global supply chain.

However, Lawton said utilizing China as an outsourcing destination may not be the best option as labor conditions change within the country.

3. Evolving retail channels

Supply chain managers need to accept, adapt and cope with the growing presence of online and mobile environments. As more consumers look for services that meet their demands, businesses need to develop new strategies to remain relevant, Supply Chain Digital noted.

"I suspect if you ask Wal-Mart who their biggest competitor is, they wouldn't say Target or Kohl's. They would say Amazon," Lawton said in the report. "In terms of the impact of the supply chain, there's a very tactical and mechanical element. It's a different type of supply chain that you need to optimize for a different type of business, and we're clearly seeing that shift."

According to Global Industry Analysts, the worldwide retail ecommerce market will generate $1.6 trillion in revenue by the end of this year. Growth is being driven by the rising number of internet users, the increasing time spent on ecommerce sites and the growing reliance on mobile and web shopping.

For supply chains to be successful in 2012, they should plan accordingly with these trends in mind.