Industry challenged by serious talent shortage, cost-cutting focus | Innovation will dramatically shape tomorrow’s supply chains

Wednesday, March 19, 2014

Supply chain executives want to invest in powerful new technologies and business innovations to improve their supply chains, but are hampered by a shortage of qualified talent and never-ending pressure to cut costs, according to a new study by MHI and Deloitte Consulting LLP titled “The 2014 MHI Annual Industry Report - Innovations That Drive Supply Chains.”
Key Study Findings Include:
The top two strategic priorities of executives are supply chain analytics and multichannel fulfillment.
The two major barriers preventing innovation in the supply chain are a talent shortage and a continuing focus on cost reduction.
Three emerging innovations are not yet top-of-mind for executives, but may be soon: sustainability, mobility/machine-to-machine technology and 3-D printing.
“For nearly 70 years, MHI has been working to improve global supply chains. This groundbreaking study helps continue those efforts,” noted George Prest, CEO of MHI. “The findings of this study have significant implications for how companies design and manage their global supply chains.” 
“Respondents clearly identified the need to rethink their approach to supply chain management,” said Scott Sopher, principal, Deloitte Consulting LLP and the leader of its Supply Chain & Manufacturing Operations practice. 
“In the past, organizations addressed supply chain challenges primarily through cost reduction and operational efficiency efforts. Today’s global supply chains require a new focus on technology and innovation as well as a willingness to invest in these areas for the long term. A true commitment to innovation will help organizations better prepare for the future, manage supply chain risks and stay ahead of the curve.”
Top Two Strategic Priorities:  Supply Chain Analytics and Multi-Channel Fulfillment
Supply Chain Analytics
As global supply chains become more complex and expansive, companies are keen to leverage analytics that produce insights to improve customer service and reduce costs and risk.
Nearly 80 percent of respondents said supply chain analytics is a “very important” or “moderately important” strategic priority.
Multichannel Fulfillment
Today’s consumers want it all. They want to shop for what they want, where they want, when they want – and then have all of their purchases delivered consistently and quickly, whether their timeline is next-day or even same-day. Although most retailers now do a decent job on the front end handling orders through their various channels – retail, wholesale, and online – many are still struggling to adapt their back-end fulfillment processes. 
Retailers we surveyed said they plan to make significant investments to build their multi-channel fulfillment capabilities:
Nearly three-fourths (74 percent) of retailers expect their investments in multi-channel fulfillment to increase over the next three years.
The Talent Shortage is the Biggest Barrier to Innovation
Companies need supply chain talent with the right skills, experience and mindset to harness the value of supply chain innovations.  Unfortunately, the right kind of supply chain talent is extremely difficult to come by these days.  
More than 65 percent of respondents indicated that process, technology and skillset gaps exist within their company.
The supply chain field is expected to add 1.4 million new jobs by 2018, according to MHI’s recently published report, “The U.S. Roadmap for Material Handling & Logistics.”
Focus on Cost Reduction Could Be Choking Off Essential Investments in Innovation
Cost reduction is still the No. 1 priority for many supply chain executives, according to our survey. 
More than 70 percent of respondents across industries said that controlling costs is a top priority for their companies and their customers. 
Emerging Innovations Offer Promise for the Future

The traditional focus on cost-cutting in the supply chain is squeezing out innovations in sustainability, even though executives believe these investments are important.
Nearly four out of five respondents (79 percent) felt that sustainability was at least “moderately important.”
More than 60 percent of respondents indicated that significant capability gaps exist in their companies and clients that may prevent them from effectively implementing sustainability programs. 
Mobility and Machine-to-Machine Technology
Mobility and Machine-to-Machine (M2M) technologies can improve responsiveness and customer service by providing supply chain workers with the information they need – whenever and wherever they need it.
Nearly three-fourths (73 percent) of respondents said their companies will continue to invest in this area, with nearly half planning to increase their investment over the next three years.
3-D Printing
Additive manufacturing – popularly known as “3-D printing” – is receiving significant attention as an innovation that could revolutionize production processes and have far-reaching future implications for product supply chains. But supply chain executives in our study did not see immediate potential for the innovation.
Only 17 percent of respondents view 3-D printing as a strategic priority.
70 percent of respondents said 3-D printing is not a key consideration.
About MHI
MHI is an international trade association that has represented the material handling, logistics and supply chain industry since 1945. MHI members include material handling and logistics equipment and systems manufacturers, integrators, consultants, publishers and third party logistics providers. The association also sponsors trade events, such as ProMat and MODEX, to showcase the products and services of its member companies and to educate industry professionals on productivity solutions provided through material handling and logistics.
About Deloitte
Deloitte’s leading Supply Chain and Manufacturing Operations practice helps clients address their most complex business problems and achieve tangible, measurable and sustainable results. Kennedy recently named Deloitte a global leader in Business Operations Consulting services based on the ability to execute and completeness of vision.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Mary Alyson Ammons

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