Supply chain 2010 ... are you ready?

How will companies drive down supply chain costs in the future while shipping exponentially more product?

By John R. Johnson

Jim Kellso has a problem on his hands. Over the next five years, his company expects to increase sales five-fold. That's great news, but there's a catch. During that same period, the logistics budget will remain flat.

How does Kellso, manager of supply network research and supply chain master for Intel, meet this challenging corporate edict?

By planning ahead. Kellso and other logistics execs at Intel cleared their calendars for a two-day brainstorming session last month to address that very issue. It's only the first of many meetings to determine how to drive down supply chain costs in the future while shipping exponentially more product. In fact, Kellso says that some of Intel's supply chain masters, as supply chain folk are called at Intel, will spend a good part of the next two years on this topic in order to have a solution in place well before the 2012 deadline for shipping a billion more CPUs.

"How do we create a supply chain system capable of handling five times more product coming out of Intel?" he asks. "How are we going to deliver the next billion units each year in addition to the 250 million we have now?"

Logistics managers need to be thinking about questions like those. What will your supply chain look like in three years? Five years? How about 10 years out? Those are tough questions when so many managers are preoccupied with putting out the daily fires. Who has time to think about next year? Or the year after?

But that very topic was the primary agenda at the MIT Center for Transportation & Logistics' Crossroads 2008 event, titled "Supply Chain, The Next 10 Years." During the day-long symposium, Kellso and others tried to provide a hint of what the future holds and how to deal with the rapid change on the horizon for logisticians.

Kellso notes that aside from an expected increase in volume, there are other obstacles to prepare for, such as changing locations for production. China will not always be the answer, he says. Inexpensive labor will give way to logistics costs as the top priority when $3.50-a-gallon fuel becomes $7- or $8-a-gallon fuel, he observes. In addition, as demand for technology increases in emerging markets, Intel must be ready to fulfill orders to remote areas of the world.

At the same time, buying habits continue to change. In the not-so-distant future, somebody watching an Internet-enabled TV show will be able to mouse over a product being advertised and buy it online. "The way people are buying things is changing constantly and it's all moving at a rate that's hard for us to keep track of," says Kellso. "That and the inability to predict demand will drive us to the need for speed and to be incredibly responsive."

John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
More articles by John R. Johnson

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