Dramatic supply chain management changes: industries at stake

As of the past decade, with the emergence of new supply chain management trends and technologies, expert David Kiger has identified several industries that are going to be subject to dramatic changes in the way they have been carrying out their supply chain management activities in the near future: the retail industry, with its multi-channel initiatives; health care, because of the uncertainty surrounding Care Acts regulations; and oil, because of the possible price fluctuations.

During the past seven to ten years, the retail industry has witnessed how e-commerce retailers, led by Amazon and eBay in particular, have been looting market share from traditional wholesale retailers and similar. Multi-channel is this new traditional retailers’ initiative to turn their businesses into something more competitive in the hopes of achieving a faster degree of fulfillment. The idea behind multi-channel is to enhance the connection responsible for integrating physical stores and e-commerce channels. Examples of this can be seen today: buy online, pick-up at the store; order online, receive at home; and the list keeps going as long as the imagination allows it —several other order fulfillment paths are definitely possible.

Such change has not gone unnoticed and has been, indeed, well covered by the media; however, what lies ahead remains uncertain, for determining whether these initiatives will succeed, or at least partially succeed is not possible yet —there are cases of well-established companies that have been very active in their multi-channel efforts and yet they fail to profit off of it.

With Trump’s election, the healthcare industry is certainly bound to a transformation, mostly driven by the uncertainty surrounding the Affordable Care Act and the ongoing increase in consumerism. Historically, healthcare providers have come up with prepaid plans where the costs were paid beforehand and up front, and the more procedures a hospital or a health facility did, the more they got paid for such services rendered. Such used to be the juncture of the healthcare industry; however, with Trump’s administration threatening to get rid of Obamacare, providers will need to put in practice the basics of supply chain management in order to compensate additional expenses and understand the total cost of particular procedures. Surely, the cost structure will change, and with change, health care providers and the industry as a whole will need to alter its functioning; however, as stated before, the future seems unclear. Time shall tell, but one can never be too cautious.

The oil industry, more specifically: the oil and gas industry is on the verge of a value chain transformation. The new breed of oil and gas production processes was elaborated by independent owners.  Major oil producers seemed to have fail to keep up the pace, on the other hand, independent owner-operators focused on developing shale oil, which is why they have spent a huge amount of time securing land rights and coming up with new high-tech, lean, clean production techniques.

As to shale oil, the hydrocarbon has been slowly turning the United States into a major producer of gas and oil; nonetheless, such bonanza comes with instability regarding the margins for individual oil and gas companies. Besides production growth —which is definitely a burden in the United States—, lowering production costs and the worldwide spread of shale gas and shale oil will definitely hamper any initiative to decline hydrocarbon prices in the near future. Such landscape, where oil producers often reach break even point near $83, has led to an upheaval of the oil companies stock prices.

Natural gas will also be subject to a drop in its price. Operational costs, specifically containing costs, will not portray a better framework: wells wear off rapidly; shale containers operate over rather broad and wide areas —which presupposes a rather long value chain in terms of planning and lead times—; and, last but not least, such chain is heavily dependant on outsourced services, however, third parties are normally badly integrated into the whole execution process.

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Image courtesy of Life Of Pix at Pexels.com

The aforementioned sheer array of difficulties has driven companies to come up with new ways of increasing margin, mostly because the shale oil and gas industry is bound to a staggering growth: integrated business execution processes are often understood under the concept of centric value chain; nevertheless, there has been an ongoing understanding of how to execute such processes in such centric-based industries while meeting planning demands. In centric industries it is often uncommon to see companies with a perfectly functioning supply chain without a heavy integrated business planning and business execution process behind it; such conditions have enabled the existence of extremely functional IBP processes in such industries, shale oil and gas included, for it has become a major game-changing differentiator.

In terms of transitions, the retail industry is perhaps way ahead in comparison to both healthcare and oil and gas industries; however, one thing remains certain: change is upon them.

* Featured Image courtesy of Unsplash at Flickr.com

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