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Supply chains key to emerging markets

By Retail Technology | Friday July 26 2013

Gartner prepares to discuss future direction of supply chain to capitalise on explosive emerging market opportunity

Supply chain leaders will play a crucial role as companies capitalise on the explosive growth in emerging markets, according to technology analyst firm Gartner

Highlighting emerging markets as the primary business growth area for the next century, Gartner said that organisations with strong demand planning capabilities and segmented supply strategies would be better positioned to capitalise on market opportunities, as well as to mitigate risks.
Emerging markets present huge opportunities but come with unique characteristics and challenges due to the constant thrust for business growth, volatile demand and low maturity of supply chain processes, according to Mike Burkett, research vice president at Gartner. 

Serving emerging markets

"The ability to plan demand better is a tremendous advantage, as accurate demand plans help supply chain leaders align end-to-end supply chains correctly, and forecast predictable outcomes and profitable responses to demand," he said.
"Businesses are positioning to take advantage of the most explosive growth opportunity since the industrial revolution. That growth won't come from existing developed markets but from expanding into less-developed emerging markets," he added. "Defining the source of future growth was reflected in a recent worldwide Gartner survey of more than 390 chief executives and senior business executives. Respondents indicated concern about a continued recession in advanced economies. As business executives look to emerging markets for opportunity, the supply chain organisation will be tasked with serving that growth."
While chief executives recognise the critical nature of the supply chain to this global expansion, the Gartner research suggest that they are split on their view of its readiness. Half (51%) of executives surveyed saw globalised supply chains as more complex and brittle now, with the balance feeling that they were now more resilient than at any time in history. Gartner said the solution in both cases was to develop supply chains that can achieve global scale while reliably serving the unique needs of both developed and emerging nations.

Dealing with changing regulations
Although the emerging-market opportunity is compelling, the challenges are daunting to the supply chain organisation, and dealing with the risk of uncertainty is a common theme. A survey of 35 of the 100 companies listed by Gartner as among the top global supply chains found the most-cited supply chain challenge in emerging markets is dealing with changing rules, including regulatory or tax requirements. This was followed by building local talent or teams and adapting supply chains to local market needs.
Demand in these markets is often highly fragmented, with customers spread across many rural and urban locations. The infrastructure required to support both physical product and information flows is often unreliable, with poor transit systems hindering transportation, limited technology a barrier to communication, and local supply capabilities inconsistent. Political and regulatory instability impact market access and make long-term supply chain investment and partnering strategies a risky task.
Scarcity of both material and nonmaterial resources is a global concern, reinforcing the importance of sustainability and social responsibility in these supply chains. A Gartner survey of chief supply chain officers identified the nonmaterial resource of human capital as their top long-term resource risk concern. The ability to understand and manage local culture is a major challenge for most companies, with talent shortages and retention being significant concerns in the emerging markets.

Understanding different market needs
Despite these challenges, supply chain organisations are responding to the opportunity afforded by emerging markets by first working closely with their sales and product teams to understand the differentiated product and service needs of these markets. Leaders are designing the right supply chain organisations and networks to best serve these needs within a broader global supply chain strategy.
Additional information is available in the Gartner special report, Supply Chain Strategies for Emerging Markets. The report discusses how organisations with strong demand-planning capabilities and segmented supply strategies are better positioned to capitalise on market opportunities, as well as to mitigate risks. The special report can be viewed at the Gartner supply chain research page and includes links to reports and video commentary that examine the growth of emerging markets and the opportunities for supply chain leaders.
The Gartner Supply Chain Executive Conference 2013 will also be held from 23 to 24 September at the Lancaster London. For additional information about this conference, please visit the event website.

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