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Study reviews supply chain prophesies

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Long-range business forecasts are notoriously uncertain, but that does not stop pundits from attempting to divine the future. An extensive review of predictions about the supply chain revealed some agreement on the future shape of supply chains, but also raised many questions.

Supply Chain 2020 is a multiyear effort to identify and analyze the factors that are critical to the success of supply chains up to the year 2020. As part of the project, Mahender Singh, a research associate at MIT's Center for Transportation and Logistics, analyzed predictions about the future of the supply chain.

"There seems to be a consensus that different organizations will gel together to form virtual organizations that will ramp up or down to meet demand as needed," Singh said. In this scenario customers take total control over the creation and delivery of services, and there is a "presumed environment of total trust and commitment from all involved in the creation of such alliances." Singh also observed "an unspoken assumption" that national boundaries will disappear to make way for unfettered trade, and the emergence of mature economies around the globe will "enable frictionless trade."

He believes this to be a utopian view. "It is difficult to imagine a supply chain that will share risks and rewards objectively among its constituents," he said.

Also overly optimistic are the predictions of free-flowing, borderless trade. In the current political environment the trend is in the other direction--to introduce more restrictions on the movement of goods and people to counter the threat of terrorism and instability. Moreover, there is a tendency to form regional alliances as a protective measure against the economic dominance of the United States, Singh pointed out. Although he anticipates tremendous advances and more efficient supply chains, "the concept of total connectivity will likely be present only in spirit," he said.

The rosy predictions also contain contradictions that strike at the heart of how businesses compete and grow today. "Many visions predicted or assumed complete sharing of information or knowledge," he explained. However, sharing these resources could be problematic given that future competition is expected to rest on information-based strategies.

Given these shortcomings, is prophesizing a worthwhile activity? Singh believes it is, because it helps companies prepare for change. Further, the future of supply chains is shaped by macro factors such as geopolitical shifts and changing energy costs, and modeling these trends--even though the models are inaccurate--illuminates possible strategies.

The key is to avoid point forecasts that are inherently unreliable, and instead, present the future as a set of multiple likely scenarios, Singh advises. (The Shell energy company originally developed this approach, called Scenario Planning.)

Singh, who is also affiliated with MIT's Engineering Systems Division, found the predictions through a search of library catalogues and web-based resources including books, journal articles, white papers, industry presentations, research studies and commentaries. Filtering the material for relevance and importance pruned the list down to 70 publications. A second review yielded a final set of 46 publications.

His working paper, "A Review of the Leading Opinions on the Future of Supply Chain," is available online through the CTL web site.

A version of this article originally appeared in the Dec. 28 issue of the online newsletter, "MIT Supply Chain Frontiers."

A version of this article appeared in MIT Tech Talk on February 2, 2005 (download PDF).

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