It is a publishing rite - the annual look ahead to see what awaits in the new year. When it comes to the global supply chain, looking within the crystal ball can be particularly challenging. Why? Because there are so many different elements to consider-corporate organization, manufacturing processes, transportation, security, and infrastructure capacity.

We've chosen our panel of 'clairvoyants' with attention to this range of complexity. There are predictions below from a diverse group ranging from manufacturers to tech gurus, big companies and small.

If there's one thing that underscores all their comments, it's how central the global supply chain is becoming regardless of the particular slice of the business marketplace. Specific comments vary according to points of view, but they share a sense of immediacy and action. -Neil Shister, Editorial Director

Sue Welch
President & CEO
TradeStone Software

"The biggest opportunity is the merger of international and domestic supply chains for those companies that are going global. At the same time, companies should establish a supply chain that's not based on traditional trade lanes or countries because then you lose the opportunities that exist in other geographical areas, such as Africa. Supply chains really need to be more agile and responsive relative to geography and changing market conditions."

"For example, many apparel manufacturers shifted their production to China when quotas were lifted, but quotas were re-imposed for some categories. There are other variables too, like tsunamis, hurricanes, and terrorists."

"Meanwhile, I see great potential to marry Planning and Execution technology. It hasn't been done yet, but it promises to result in a supply chain that starts with a concept and goes all the way through to delivery."

"Customers will be more willing to spend on software and IT again in 2006. But, I think that software companies really need to get away from thinking that every deal is a seven- or eight-figure deal. At TradeStone Software, we look at the marketplace and say that every deal should be a 90-day deal. In other words, give the customer success in 90 days, and they'll come back. When customers start to see that they can get quick value, they're more willing to go onto the next project."

Martha Cooper
Professor of Marketing and Logistics
The Ohio State University

"Companies are working at breaking down the silos: marketing, sales, production, logistics. The key is how people are rewarded. A true supply chain metric goes across companies to figure out who in the chain should share rewards and costs. At Ohio State, we call this supply-chain management performance measurement."

"The traditional way is to reward marketing for new styles and colors, reward sales for increased volume, reward manufacturing for running full-out, reward transportation for increased timing. Those put stresses on the system. You end up with most of the goods moving in the last week of the quarter, so you pay for premium transportation freight. You may end up with not the right product or too much of the right product, so the salespeople are left to sell it. You can ship full truckloads and still be out of stock of what the customer wants."

"To stay in business for the long run, you have to satisfy the customer in a coordinated way. Hopefully transportation talks with warehouse. Hopefully marketing remembers that that there are manufacturing and logistics costs to having lots of different products. Everybody wants their company to be successful, but we have to set up the rewards right."

"For example, in a company that made building materials for Wal-Mart, their plants are rewarded across shifts and regardless of whether production is affected by weather or maintenance. It forces everybody to work together and not push things onto another shift. In other companies, part of each team's evaluation comes from a cross-functional team and part by their normal management. They have to work together to make their bonuses."

Adrian Gonzalez
Director
ARC Advisory Group

"Supply-chain risk management is something that we see as a trend. There are many factors fueling this: September 11, the port strikes, more congestion. Globalization and outsourcing, by their very nature, introduce more complexity into supply chain, which leads to more risk. Another factor is Sarbanes-Oxley, whose bottom-line is forcing C-level executives to have more timely, accurate, and complete information on their operations and any events that could impact their company's financial performance. Not enough companies have a coherent and well-defined risk management strategy in place."

"At a high level, risk management is being able to identify what risks are internal and what are external, what are controllable and what are not controllable. Then it's having a process that helps formulate a response to each of these risks. In some cases, you may decide to ignore the risk. In other cases, you may decide to shift the risk to somebody else-maybe a supplier. In your other cases, you may decided to deal with it directly by adding, for example, redundant capacity or additional product sources."

"All this is serving as a catalyst for executives who historically have had a limited understanding of supply chain and logistics to better understand the role of supply chain management as it relates to potential risk."

C. John Langley Jr., Ph.D.
Professor of Supply Chain Management
Georgia Institute of Technology

"Companies that manufacture in China are spreading their risk. They're looking at other countries in Asia-Malaysia and Korea and Vietnam, for example-and they're looking outside Asia. You can manufacture all day long in China, but your product is still 10,000 miles away from your market. All kinds of things can disrupt your supply chain-port congestion or unavailability of containers, for example. You get a big retailer that locks up a huge percentage of your ocean shipping capacity, what does everybody else do? They fight for what's left. Such pressures are forcing companies to manufacture some of their product closer to the market."

"It's one thing to manufacture in China-for most products these days you almost have to have some presence-it's another to manufacture exclusively in China. One of the major high-tech chip manufacturers is moving some of its manufacturing outside of China just to spread the risk. Even though the Chinese are pretty good at manufacturing things, as with anything you manufacture, you don't want just one supplier."

"When you diversify, it may lead to somewhat higher labor costs, perhaps somewhat higher transportation costs. The benefit is better, more consistent product availability in the marketplace. Companies have a natural inclination to not want to spend more. They have to overcome that to realize the benefits of a better-functioning supply chain. It's worth paying more for that promise."

Dave Cooper
VP, Global Program Management and Supply Chain Solutions
Solectron

"There is a significant opportunity for companies and their partners to implement a pull system to link the entire supply chain to the actual demand signal-point of sale data for example. This is difficult to do and will probably take several years, but it's worth the effort. Staying with the status quo reliance on forecasting to drive the supply chain will deliver status quo results. Linking operations to a pull signal will accelerate the supply chain to levels never imagined possible."

"Forecasts reliably fail to predict the future, often off as much as 70 percent. Demand for the original iPod was 40 times greater than Apple's forecast. Imagine how much material, assembly capacity, and trained operators had to be secured quickly for Apple to ramp up to actual demand. For another company that over-forecasts demand, imagine how much excess and obsolete material, assembly capacity, and trained operators sit around costing the company money."

"Costs are a critical yet difficult part of this equation. When you look at processes associated with the production of goods and services, typically 90 percent or more of their costs deliver zero value to the customer. This has been proven time and time again by lean manufacturing experts. So why do companies spend the majority of their time focusing on the top 10 percent, such as material costs and machine efficiency? The savings from waste elimination deliver greater bottom line profits for all supply chain partners."

Harry Fraser
Chief Executive Officer
Thos. Moser Cabinetmakers

"The customer today is becoming much more quality focused. That's the niche we're playing in and niche businesses have to be changing constantly. When I say change, I don't just mean what products we build, but how we build it and how we serve their customers."

"We train our employees as craftsmen. Our purchasing person has to be very picky. Our suppliers have to be very picky. Understanding how to make aesthetic decisions has to be embedded in the employees. That's what we have to nurture that to get this niche-product built."

"We deliver all of our own product across the United States. We don't use common carriers because we believe that any opportunity to be in front of the customer should be with someone very close to the company. It's a white glove delivery. We set it up in their home. If anything goes wrong with the piece for the life of the purchaser, we'll come and pick it up and fix it and return it. That warranty requires us to engineer our furniture to a really high level so that we don't get things back."

"To survive in a niche, you don't have to be perfect, you just have to be one step ahead of the competition. It's like being chased by a bear. If someone else is behind you, you can stop to tie your shoes-they'll be captured, not you."

"The company is thirty-five years old. We're surviving and we're doing okay by staying that one step ahead."

Tim Carroll
Vice President, Supply Chain Operations
IBM Integrated Supply Chain

"Uncertainty in IBM's supply chain keeps me and many of my colleagues up at night. Whether it's from a natural disaster or a terrorist threat, anything that can affect a client's order is of huge concern. The recent ratification of the World Custom Organization's (WCO) Framework to Facilitate Global Trade, which involves 168 countries, is a huge step in addressing global trade security, but the hard work is just beginning."

"The implementation of the Framework is tricky, because each country not only has to comply with the parameters of the Framework, but they also have to abide by local laws. The lynchpin for many countries is the ROI, because this is going to require a budget and a lot of time and effort. So there has to be a balance. If supply chain security is going to have any kind of broad support, it must prove to have viable economic benefits and IBM is working with several universities to help demonstrate this. This is also why IBM has been meeting with the customs administrations for the top 20 countries that are integral to our supply chain to encourage them to be early adopters of the Framework. We believe that if these countries take a leadership role they will be able to share their best practices and experience with the smaller countries."

"But the point is we need a predicable and secure end to end global supply chain. Anything less than 100 percent cooperation is an opportunity for disaster."

Mark Najarian
Vice President of Sales and Marketing
American Airlines Cargo

"Energy costs will continue to have a significant impact on the supply chain. Fuel as a total expense is growing and growing. From 2003 to 2005 our fuel bill will have increased $2 billion. You take an industry that works on the edge to begin with and you add $2 billion to its expense ledger, it's going to put some people over the edge. Forty-eight percent of the U.S. airline industry capacity is in bankruptcy. The only way they're going to be profitable is by reducing capacity. That's going to put pressure on the supply chain."

"We've raised our fuel surcharge six times this year. Once, if it moved every eight or nine months it was a big deal. Now it's six times in one year and nobody knows where it's going to go. Companies are saying I can't afford airfreight for this. Then they can't reduce their cycle times. And, they can't carry a bigger inventory to overcome those incremental fuel costs because it becomes distressed goods. Furthermore, as manufacturing keeps moving south and moving west, airfreight becomes really the only viable option to get products moving."

"We're charging more than we did six months ago because our fuel costs are higher. Then the truckers are charging more than they did six months ago because their fuel costs are higher. The effect has to be higher product costs or the companies spending the extra money will absorb it in their own margins."

Glen Pettit
Vice President of Supply Chain
Mizuno USA, Inc.

"Mizuno's first step this year was to improve our supply chain organization talent and to build service level agreements with our internal business units. For 2006, we plan to continue this transformation by implementing the following strategies: Improve and leverage our Sales & Operations planning process; develop vendor scorecards that measure cycle time, quality, and on time performance, and lastly implement an improved forecast technology solution."

"For example, we will improve the flow of goods (increase full containers and reduce less-than full containers), increase transportation information accuracy and timeliness to the rest of the enterprise and to our customers, and build new factory capabilities (ticketing and hanging of apparel)). Much of this improvement will come from our new supply chain partnership with UPS."

"Mizuno has begun to look at global product flow opportunities and in 2006 we will continue to look for efficiencies in our movement of goods from factory to our worldwide customers. We are analyzing our factory capacities throughout the world and will adjust factory locations as those origin demographics, wages, and government regulations change."

"Regarding infrastructure, my expectations are for continued strain of both port and highway infrastructure. Transportation (ocean, rail) companies are adjusting to increasing import volumes and port congestion by investing in 2nd tier port infrastructure and capabilities. Mizuno will continue to leverage these 2nd tier ports to ensure timely receipt of import goods. Despite the new highway bill, we expect continued increased costs for carriers due to fuel, congestion, and taxes."

"Furthermore, the U.S. government must stabilize import regulations with China. Apparel quotas continue to challenge our supply chain execution. We hope to see continued business-government partnership approaches to trade security. Mizuno has worked closely with U.S. Customs with programs like C-TPAT and ISA (Internal Self Assessment). Port security funding for 2006 of $175 million should help strengthen our ports, but more funding could be required."

Marian Duntley
Corporate Customs Manager
Toyota Motor Sales, U.S.A., Inc.

"Toyota is working hard to improve the efficiency of its supply chain, including partnering with governments to eliminate unnecessary or redundant processes. In the U.S., that will mean opportunities to partner with U.S. Customs and Border Protection (CBP) on defining further benefits for C-TPAT (Customs-Trade Partnership Against Terrorism) validated companies such as Toyota. Opportunities may also be available in other countries to identify processes that are inefficient and to encourage cooperation between foreign customs services and CBP. However, one concern is that the continued focus on supply chain security and the physical facilitation of goods by CBP will result in diminished responsiveness to customs compliance issues."

"At the same time, Toyota is re-engineering its supply chain to make it more customer focused. Specifically, we are striving to improve quality through damage reduction and strategic application of packaging materials, including use of materials that are good for the environment."

"I believe that going forward, increased cooperation between governments and mutual recommendation of security standards using the WCO (World Customs Organization) model should be explored to maximize resources globally. For example, CSI (Container Security Initiative) ports could be staffed with internationally recognized experts who could perform a number of the functions currently handled by C-TPAT validators, manifest review units and the CSI port staff themselves. This would require that governments trust each other to screen exporters and goods in the foreign country."

Jose Mejia
President, Supply Chain Networks
Lucent Technologies

"Our biggest opportunity next year for our supply chain is simplifying how we do business. By simplifying our systems, processes and policies, we expect to be able to create greater operational efficiencies with fewer handoffs and to more tightly control costs. We see that as one of the greatest opportunities to improve overall performance."

"Simplification is actually a corporate-wide initiative, but it starts with our supply chain. Over the past five years, we moved from a largely manufacturing-based business to a virtual manufacturing model. Most recently, we have reduced the number of electronic manufacturing service providers we use from four to two. This will enable us to work even more closely with two very capable manufacturers to ensure shorter lead times and high product quality and reliability."

"In addition, we are taking a 'SWAT team' approach to eliminating process complexities that slow our speed of delivery and time to market. We refer to these as 'Quick Wins' because we expect to introduce a simplified solution within 90 days. Whenever you are simplifying an operating model, you must also simplify your Information Technology architecture, which supports your operations. Therefore, we are closely partnering with Lucent's IT team."

"By removing the cost of complexity from our business, we are working more efficiently and with greater focus to ensure we remain the partner of choice for our customers, suppliers and business partners."

Jeffrey H. Schwartz
Chief Executive Officer
ProLogis

"In a future of supply-chain bottlenecks, scale matters-and flexibility is key."

"We've seen a steady stream of disruptions to the supply chain over the past several years-from the September 11 attacks and the 2002 West Coast port lockout to railway labor shortages and Hurricanes Rita and Katrina. Meanwhile, retailers have grown more, not less, demanding about timely, reliable delivery of the goods they sell to consumers. As we move into 2006, the key question is not so much about how to prevent bottlenecks but how to build in operational flexibility that mitigates problems when they occur."

"The hard truth is that, given the remarkable pace of growth in world trade, we can expect the bandwidth of the global supply chain to increase only incrementally going forward. Increasingly, supply chain customers and participants will demand that their partners and vendors offer them flexibility, through scale and broad geographic coverage."

"This is true for virtually every layer of the chain-from distribution facility providers like ProLogis to 3PLs to shippers and transportation companies. Recent consolidation in the logistics industry offers concrete evidence of that trend-as do current moves by major shipping companies to integrate more vertically and begin offering logistics services to the market."

"Companies who can't offer their customers flexibility and global scale will risk marginalizing themselves as world trade expands and supply chains lengthen. Those who can, however, hold the promise of reaping future opportunities."

James Welch
President and CEO
Yellow Transportation

"As the quantity of imports continues to rise, the United States will experience fundamental changes in how goods move through the country."

"In their ongoing search for efficiencies, companies are escalating the migration of manufacturing to different parts of the world. China is currently a significant beneficiary of this shift, but increases in manufacturing are not limited to the Asia Pacific region. This shift in product sourcing, and the accompanying increase in importation, is putting pressure on U.S. ports. For example, while Southern California will continue to be hugely important to supply chain and distribution, it is not capable of handling this burgeoning demand. Therefore, we see new ports emerging, like Houston, Charleston, and the Port of Seattle, and becoming increasingly important."

"While where goods come into the country is changing, an equally dramatic change is in the distribution flow within the United States. New ports of entry mean new distribution management requirements and shifts in transportation networks. An example is the growing importance of Baytown, Texas to the Wal-Mart distribution process and the resulting impact on transportation. To manage this, companies must place a greater emphasis on intertwining their entire distribution process with their manufacturing activities, both here and outside the United States."

Nancy W. Hiromoto
Director, Import/Export and Facilities Management
Citizen Watch Company of America, Inc.

"Security continues to play a major role in the supply chain, so there are still be opportunities for various security service companies. I envision an abundance of varied security services offered to the trade, including specialized consultation, electronic surveillance devices and guarded transportation, both overseas and domestic."

"As an importer and a certified C-TPAT (Customs-Trade Partnership Against Terrorism) participant, the focus remains on ensuring that our internal supply chain security meets the highest standards. It is critical for executives to stay engaged and understand that the process is continuous."

"The Information Technology industry already has its hands full in securing the integrity of its data, but it also remains to be a target threat area in the international supply chain. Public and private industries must work together to ensure that development of new software will ease the trading process while meeting security standards."

"Regarding infrastructure and transportation, airfreight space will reduce as demand increases for products from China in a just-in-time manner. Meanwhile, programs similar to PierPass at the LA/LB port may began to spring up at different ports around the country."

"If I could create a magic bullet to improve the supply chain next year, it would be one that would improve communication and coordination between U.S. importers and overseas suppliers in terms of security requirements in the U.S. The U.S. Government should conduct more exchange with foreign governments to establish partnership and educate overseas private sector as to safe and secured supply chain practices."