Supply Chain Forecast for the new year – Lots of ground to make up!! [Prediction]

 

With the year 2009 coming to a close and everyone speculating about what the new year is going to hold in store, let us take a look at what we can expect from a Supply Chain perspective. Predictions like this are tougher than usual because of the unpredictable nature of the economy. The ISM Report on Business talks about economic recovery. But this should be taken with a grain of salt. The economy is at a point where it could go both ways. An upswing in economic factors is impending. But whether it will take place in early 2010 or sometime later is open to speculation.

Plastics Today talks about ISM’s supply chain forecast in 2010.

The projections, which result from a survey done by the Institute for Supply Management (ISM; Tempe, AZ), are less optimistic for the non-manufacturing sector, whose respondents predict only a 1.3% increase in overall revenue. Manufacturing sector respondents were optimistic about the first half of 2010 and still more so for the second half.

Manufacturing purchasing execs say they are operating at 70.1% of normal capacity, up from 67% in April 2009, and that they will reduce inventories to improve their inventory-to-sales ratios in 2010. They predict strength in both exports and imports in 2010, despite an expectation that the U.S. dollar will weaken against the currencies of its major trading partners.

Manufacturing respondents to the ISM survey said they expect the prices they pay to rise 0.2% during the first four months of 2010, and an additional 2.4% for the rest of the year.

Source: PlasticsToday article

 

And ISM themselves have forecast an improvement in the numbers for the manufacturing sector in early 2010. I found their Semi-Annual forecast of Dec 2009 (for the first half of next year) and found some interesting predictions. Hit the jump for the whole forecast.

Main Predictions:

ECONOMIC RECOVERY CONTINUES IN 2010

Manufacturing Growth Expected in 2010
Revenue to Increase 5.7%
Capital Expenditures to Decrease 4%
Capacity Utilization Currently at 70.1%

Non-Manufacturing to Maintain Slight Growth
Revenue to Increase 1.3%
Capital Expenditures to Decrease 6.7%
Capacity Utilization Currently at 81.3%

Manufacturing Sector:

Expectations for 2010 are positive as 60 percent of survey respondents expect revenues to be greater in 2010 than in 2009. The panel of purchasing and supply executives expects a 5.7 percent net increase in overall revenues for 2010, compared to a 10.7 percent decrease reported for 2009. The 13 manufacturing industries expecting improvement over 2009 — listed in order — are: Transportation Equipment; Nonmetallic Mineral Products; Printing & Related Support Activities; Computer & Electronic Products; Paper Products; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Chemical Products; Machinery; Miscellaneous Manufacturing*; Textile Mills; and Fabricated Metal Products.

Complete ISM Report here.

Personally, I think an important number to watch is going to be the oil prices per barrel. Our friends in the Trucking/Logistics space will have an eye on this especially during the summer of 2010 (I doubt they can forget the summer of 2008).

Any counter predictions are most welcome in the comments.

Creating a Krafty supply chain

 

Kraft Foods as you might be able to imagine, has a mighty complex supply chain. The company prided itself in maintaining a high degree of supply chain efficiency and best practices right from 2003 when a lot of companies were still struggling with the term. The following is an article about the process improvement actions undertaken by the company during that period. It reflects the company’s drive to excel.

Let us do a brief background study of the company itself.

Kraft traces its origins to the early 1900s when J.L Kraft launched a successful Chicago cheese distributorship. Kraft's vision for the company was to bring to retailers a variety of cheeses of consistent quality with longer shelf life. In fact, one of the company's earliest contributions was the development of processed cheese in 1916.

Kraft was acquired by Philip Morris in 1988, and following an $8.4 billion initial public offering (IPO), began trading as a public company on June 13, 2001. With 18 U.S. dairy plants, Kraft reaped some $4.1 billion in dairy sales in 2002.

With 100 years of innovation under its belt, Kraft's core business strategies have included accelerating growth of its brands; driving global category leadership and world-class productivity, quality and service; and building employee and organizational excellence. By creatively focusing on new product development in response to consumer demand for convenient meals, on-the-go snacking, and health and wellness, Kraft has captured its fair share of some of the fastest-growing distribution channels worldwide. The company has also developed customized products and marketing to reach rapidly expanding demographic segments such as the African-American and Hispanic populations in the United States.

Copyright: 2003 Stagnito Communications

With its stock now at just a fraction of what it was in the years ensuing this change, especially combined with its hostile bid to take over Cadbury, Kraft Foods entered 2009 looking for creative ideas to drive down costs and drive up profits. It is a fact now that in 2009, Kraft Foods has cut down 50 million Truck miles from its distribution network, thereby drastically reducing fuel costs and also keeping a tab on maintenance.

The $42 billion manufacturer of products from Kraft cheese to Maxwell House coffee to Oscar Mayer meats chopped the highway miles over the past four years using alternatives to trucking, and rethinking its distribution network on a broad scale.

Some of its inbound and outbound freight shifted from highways to rail and to waterways, the company said. It also streamlined distribution, repositioning hubs and other facilities to reduce the number of trucks it needs and the number of miles they travel.

"We think about miles, piles and idles when moving our product," Steve Yucknut, vice president of sustainability at the Northfield, Ill.-based company, said last month. "We're finding ways to drive fewer miles, reduce inventory piles and eliminate idling trucks."

In Ohio, the company switched 10,000 truck shipments to barge to deliver wheat to its Toledo flour mill. That saved more than a million miles and 2,000 tons of carbon dioxide emissions, the company said. It is testing hybrid trucks in direct store delivery service.

Its 20 largest plants and distribution centers in North America also are using transportation and warehouse optimization software to maximize the amount of product shipped per truckload, taking the equivalent of 1,500 trucks off the road. Kraft also used transportation management software from Oracle to cut more than 500,000 empty miles from its private fleet trips last year.

The company's top 50 for-hire motor carriers use the software as well, the company said. Kraft is also among the shippers pushing Congress to allow heavier trucks on U.S. highways, claiming the use of trucks weighing up to 97,000 pounds would reduce fuel use and carbon emissions and allow shippers to move freight in fewer trucks.

Source: Journal of Commerce Article