Gartner Announces Predictions for Global Logistics Organizations

Gartner, Inc. has published four predictions expected to affect global logistics organizations over the next four years, covering environmental issues, risk and compliance, international flow optimization and supply chain execution convergence. These predictions will affect most logistics organizations, however the impact will depend on how prepared they are to adapt to these events, analysts said.

Curiously, more than 60 percent of surveyed companies view logistics as “nonstrategic.” At the same time, however, expectations for near-perfect performance are placing increasing stress on global logistics organizations.

“While logistics operations might be out of sight, out of mind, logistics is under significant pressure to deliver near-perfect performance, while business conditions continue to become more complex, risky and difficult,” said C. Dwight Klappich, research vice president at Gartner.

Klappich made a similar observation at Gartner’s Supply Chain Executive Conference held earlier late last month in Palm Desert, California.

Gartner’s top predictions for global logistics organizations include:

1) By 2016, more than 50 percent of Global 1000 logistics organizations will be required to systematically report verified emissions and environmental data
The shift from aspirations and feel-good platitudes about sustainable logistics to verified requests for accurate environmental and greenhouse gas (GHG) emissions information and actual performance outcomes is being catalyzed by industry groups, market expectations and regulations.

Recognizing this as a significant driver of behavior change, Gartner predicts that by 2016 more than 50 percent of Global 1000 logistics companies will be required to increase focus on sustainable logistics services and report verified environmental data.

“Governments are set to continue to enact environmental legislation that has a profound impact on logistics operations,” said Klappich. “In Asia Pacific, Australia will soon introduce a carbon tax; China is moving to pilot an emissions trading scheme; and New Zealand and India have schemes in place. Over time, regulations will become increasingly tighter.”

2) By 2016, less than 10 percent of logistics organizations will have a chief compliance and risk management officer

As supply chain complexity and risk grow, only 14 percent of companies are positioned to effectively exploit risk, and few, if any, have yet seen fit to elevate compliance and risk management to an executive-level position in the supply chain management (SCM) organization. While compliance, risk management and security are all issues SCM organizations deal with today, few have formalized even one of these. While government mandates have an increasing impact on SCM organizations, responsibility for understanding and managing these is scattered across their business.

3) By 2016, 20 percent of SCM organizations will adopt a supply chain execution convergence application strategy

Thirty-five percent of businesses recently surveyed by Gartner identified the inability to synchronize end-to-end business processes as an issue, which will increase demand for SCM application convergence. Most SCM organizations struggle with functional and application silos that make orchestrating and synchronizing business processes across their organizations nearly impossible. Application portfolio fragmentation is caused by many factors, such as buying stand-alone applications over time, as well as how companies have been structured, mergers and acquisitions and outsourcing. This is where supply chain execution convergence will play a role in helping SCM organizations adopt a platform that allows them to model, orchestrate and synchronize end-to-end logistics processes.

4) By 2016, slower global trade growth will force shippers to adjust from proliferation to optimization of international flows

After peaking late in the last decade, global trade as a percentage of global GDP will continue trending downward. As cross-border trade growth slows, supply chain organizations will be forced to adjust from proliferation to optimization of international flows. Shippers will evaluate global sourcing options more carefully and more comprehensively manage the risks involved. Gartner estimates that 60 percent of current multinational manufacturers will organize to manage logistics globally in order to gain economies of scale, visibility and manage risks associated with volatility in currency exchange rates, taxes and margins. By managing logistics globally, companies can gain economies of scale through centrally negotiated and managed contracts for sea and airfreight, a sharper focus on the efficiency of the global network, switching transport mode and using postponement strategies and near-shoring. To improve efficiency and lower costs, companies will focus attention on the execution elements of the supply chain:

• Network and inventory optimization

• Warehouse and inventory management systems

• Transport management systems (TMSs)

Additional information is available in the report: “Predicts 2012: Global Logistics,” which is available on Gartner’s website.

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