2018: What Will It Look Like?

I hate prediction articles. However, this morning over coffee, my fingers hunger to write this post. I am not sure why. It may be that I am growing tired of hubris and market hype.

I writhe in my seat at most conferences and count the number of times the word “digital” is used in presentations. I am often uncomfortable. Consultants and technology leaders are rebranding under a “digital umbrella” without clear definition. It is bandied about like popcorn flying in the air at a movie concession stand. For me, most of the time, it feels like a lion in sheep’s clothing. The untethered exuberance reminds me of the race for Y2K, the futile experimentation with trading exchanges in 2001, or the race for e-commerce. It feels a bit like tulip mania.

For the purposes of clarity, in this article, the term digital supply chain is the transformation of the atoms and electrons within the supply chain to unleash new levels of value. This includes the convergence of the technologies shown in Figure 1 to define the autonomous supply chain; drive the availability of data at the speed of business for decision-making; the evolution of learning systems to sense, act and learn; and the building of outside-in processes/the automation of B2B value networks. We are moving out of the era of functional integration of transactional workflows.

Figure 1. Confluence of Technologies

Here are my predictions for 2018:

Supply Chain Excellence as We Know It Is Redefined. Supply chain excellence definitions evolve as companies explore the Art of the Possible. This includes SCOR, APICs, Gartner Top 25 Supply Chains, Gartner Hierachy of Metrics, etc. New models evolve based on the Art of the Possible.

Realization that Integration Is a Mistake. Companies will begin to realize that “an Integrated Supply Chain” is not a desirable end state. The reason? The traditional definition is too rigid. New approaches –using the confluence of new technologies along with innovation in analytics– will drive a more agile supply chain response.

Figure 2. Analytics Approaches

Retail Value-Chain Collaboration Takes a Nose Dive. As Amazon gains market share, small retail players start selling point-of-sale data to drive revenue. The net result? There will be a decline in data sharing and collaboration. Fines and penalties will increase. The dream of building value networks experiences a setback.

E-commerce Shifts to Solution-Based Business Models. One of the impacts of the swirl of WalMart buying Jet.com, Petsmart buying Chewy.com, and Albertson’s focus on packaged meals (Plated), is signaling the trend. Manufacturers and retailers are bundling goods and services to drive solutions. The focus will be on outcomes. The differences between retailers and manufacturers will continue to blur.  Examples include Bark Box, Dollar Shave Club, and Blue Apron.

Supply Chain Planning Redefined.  The market for supply chain planning using linear optimization fades as companies start to replace current APS systems with prescriptive and cognitive analytics. The uncertainty around SAP’s APO strategy will drive the need for replacement earlier, pushing companies to test-and-learn with deeper and more meaningful engines. Traditional companies like Adexa, E2open, JDA, Logility, Kinaxis and OM Partners will play catch-up as new startups like Aera, Anaplan, BlueCrux, Enterra Solutions, Lokad, Solvoyo, ThinkIQ, and ToolsGroup define new capabilities for machine learning/cognitive computing. IBM Watson will not be able to mobilize fast enough to make an impact.

The Supply Chain Moves to Non-ERP-Centric Architectures. Cloud and machine learning enables applications to be less ERP-centric. While IT organizations will hold onto monolithic ERP instances as the platform of record for supply chain, companies will start to move to schema-on-read applications that are not dependent on relational database technologies. The focus will be on systems of differentiation. Leaders will stabilize ERP investments and rethink traditional integration techniques. Laggards will hold onto ERP like Linus holding his blanket.

Small Agile Sprints, Using Design Thinking, Replace Traditional IT Methodologies. Large system integrators will struggle to be competitive as the IT landscape shifts to innovative best-of-breed deployments based on agile sprints. Projects will be smaller and more specialized. Companies will test-and-learn and fail forward. Traditional consultants will struggle with agility.

Digital Mania. The market enters a period of digital mania, of hype and emotional exuberance. CIOs become digital transformation officers, and digital practices within consulting firms spring up like mushrooms. With more energy than definition, the market will be overhyped.

Business Process Outsourcing (BPO) Slows. With the shifts in labor costs and technology, the BPO market slows. With digital innovation, the focus shifts from IT as a cost center to IT to drive digital innovation. The global labor arbitrage market for IT talent swings back with a focus to build IT capabilities within the enterprise.

Pressure on Maintenance Spending. With the shift to new architectures, more and more companies will put pressure on technology providers to redefine license maintenance programs, to reduce costs and improve value. Legacy maintenance fees becomes a choke point, and an opportunity cost, to fund digital innovation.

Blockchain Starts to Redefine B2B. Blockchain as a technology begins to redefine B2B and becomes the system of record for the extended value network. Cryptocurrency is adopted for bifurcated trade (price and promotion) and transportation in emerging markets. Supply chain finance is redefined.

The winners are best-of-breed innovators and speciality, boutique consulting companies. The losers are large ERP companies and traditional consulting models.

These are my thoughts. I welcome yours.

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