Robert J. Trent, Ph.D. Supply Chain Management Program Director Lehigh University EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… Increasingly be accountable for contributing to corporate-level financial metrics – revenue, ROI, ROA, ROIC, ROSMA, IRR, working capital, cash flow (finance as our new best friend) Supply chain managers speaking the one true language of business EMERGING TRENDS IN SUPPLY CHAIN MANAGEMENT

Return on Invested Capital Lower Invested Capital Better Profits Cash Flow Improves Enhances Copyright 2004 Greybeard Advisors, All Rights Reserved Reprinted with Permission. SUPPLY MANAGEMENTS IMPACT ON ROIC REVENUE related: Faster new product design & development Optimum & reliable parts & raw materials suppliers Excellent transportation service providers Innovation sourcing with suppliers COST related: Reduce freight costs & claims Reduce material costs Reduce indirect materials/services costs Reduce manufacturing variability WORKING CAPITAL related: Improve payment terms with suppliers Utilize inventory programs with suppliers CAPITAL EXPENDITURE related: Improve redeployment of used assets (asset recovery programs) Reduce total costs associated with capital spending

Supply Management professionals will… Increasingly apply financial thinking and analysis to Supply Management activities Example – supplier development presented as an investment rather than an expense, managing inventory in terms of working capital management EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… Become involved extensively and early in capital expenditure projects and energy management (the ever broadening domain) EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… Wage a serious battle against supply chain complexity (the next generation of Lean?) EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… Better understand supply chain costs, including supplier switching costs, transaction costs, and TCO EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… Better understand how to become a preferred customer with suppliers (and why becoming a preferred customer is important) EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… Understsand where and how to stress true supply chain collaboration EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… Focus on talent management as a response to demographic and competitive demands EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… Focus on top line or innovation sourcing within supplier management rather than simply cost management EMERGING TRENDS IN SUPPLY MANAGEMENT

Supply Management professionals will… View supply chain management and risk management as largely overlapping in their focus Understanding mega-trends Risk-sharing with suppliers Viewing predictive analytics as the next big thing! EMERGING TRENDS IN SUPPLY MANAGEMENT

EXAMPLE OF PREDICTIVE ANALYTICS 2012 SUMMER OLYMPICS (WSJ) Predicted Medals (Gold): USA108 (40) China92 (38) Russia83 (29) Great Britain66 (22) Germany49 (16) Australia42 (13) Japan39 (13) France31 (9) Italy30 (9) Korea24 (7)

Predicted Medals (Gold):Actual (Gold): USA108(40)104(46) China92(38)87(38) Russia83(29)82(24) Great Britain66(22)65(29) Germany49 (16)44 (11) Australia42 (13)35 (7) Japan39 (13)38 (7) France31 (9)34 (11) Italy30 (9)28 (8) Korea24 (7)28 (13) EXAMPLE OF PREDICTIVE ANALYTICS 2012 SUMMER OLYMPICS (WSJ)

SUPPLY CHAIN RISK MANAGEMENT PREDICTIONS P1: Companies will increasingly understand, and at times be willing to increase their risk appetite. P2: Risk management will become an embedded part of supply management. P3: The need for effective risk management will force companies to look past tier one suppliers. P4: Supply chain risk metrics will shift from reactive to predictive indicators. P5: Companies will transition from a pockets of excellence risk management model to an enterprise-wide excellence model.

SUPPLY CHAIN RISK MANAGEMENT PREDICTIONS P6: Total cost of ownership (TCO) models will increasingly become part of the risk assessment process. P7: Risk management tools will become increasingly sophisticated. P8: Risk categories and specific kinds of risk will continuously evolve and change. P9: Risk management approaches will rely more on prevention and less on mitigation.

SUPPLY CHAIN RISK MANAGEMENT PREDICTIONS P10: Companies will increasingly benchmark their risk management practices against other companies. P11: Supply chain risk will increase as companies pursue growth opportunities in emerging markets. P12: Continuous improvement of risk management capabilities will be a major corporate priority. P13: Risk management will expand vertically and horizontally.

SUPPLY CHAIN RISK MANAGEMENT PREDICTIONS P14: Companies will increasingly appreciate the interrelationship between enterprise and supply chain risk. P15: An emphasis on supply chain risk management will affect a companys culture. P16: Effective risk management strategies will help achieve a competitive advantage rather than simply providing a defense against unwanted events. P17: Transparency and real-time data updates will increasingly replace reactive and batch-data updates.

Thank you! Any questions or comments?