Emerging marketplaces are countries with public or business activity in the process of rapid development and industrialization. Facing pressures to cut costs, especially labor and materials, companies have been turning to emerging market segments for facility locations. As a result, the source chains have grown to be increasingly global and complicated, creating risk at every level of product development, creation, and distribution. The situation is situated not with capacity, but with protection of intellectual property rights, preserving component quality and compliance with international trade polices. Emerging markets may bring a company closer to suppliers and recycleables, trimming transit time but breaking into new markets in countries with little experience of developing the components required is the best obstacle for a source chain administrator.
Greater flexibility and forecasting capability
Sophisticated knowledge of emerging markets
Ability to assess and deal with both dangers and opportunities
A number of colleges and business classes have performed research to study and understand various areas of Emerging Markets. It is difficult to
make a list of emerging, producing and developed market segments; the best guides have a tendency to be investment information like The Economist or market index creators (such as Morgan Stanley Capital International). FTSE Group, a professional of economical and financial data, distinguishes between various markets based on their nationwide income and the development of their market infrastructure and assigns the market position of countries on the basis of their monetary size, riches, quality of marketplaces, depth of marketplaces and breadth of market segments.
Many companies want to benefit from emerging marketplaces sourcing but often don't build included business processes to control the added complexity in the source chain, and neglect to connect various commercial functions in handling both short-term and long-term business needs.
Integrated Supply String Planning
Coordinating product development, source string and sales and marketing activities that are oceans and time zones apart is becoming more challenging as supply chain operations are more fragmented with extended globalization. A built-in approach to source chain management is going a long way in overcoming the down sides. Integrated Supply String Planning is the coordinated planning of activities that occur over time in order to forecast, procure, manufacture and spread goods across the extended supply string, from company to consumer. Shape 1 shows various components of integrated supply chain planning at strategy, tactical and execution levels.
Figure 1 - Source: Meeting Table Webcast - The Infinite Search for Advantages: Supply Chain in Emerging Markets, October/November 2010
Management Issues in Rising Markets
Supply chain management in emerging markets presents a number of management problems generally not faced in domestic marketplaces. Table 1 lists various management problems faced in appearing markets. These difficulties have been grouped as communication, ethnical, safeness & security, corruption, delivery, financial and quality.
Language distinctions and understanding
Expertise variations and nomenclature
Time area differences
Timing of Holiday's and needing to conduct business
Understanding of social nuances; Degree of urgency
Infrastructure(roads, slots, telecom, energy availability)
Safety & Security
Government requirements, Slot safety
Personnel safety; Felony element
Fire safeness and response
Raw Materials Safety
Patent and IP protection
Bribery, insidious inside activity
Law enforcement issues; Legal ramifications
Suppliers who become competitors
Vendor compliance; stability vs. culture
Manufacturing, travel lead-times and reliability
Amount of embedded transit time
Foreign exchange effect on Supply Chain
Mobility of herb assets
Table 1 - Source: Meeting Mother board Webcast - The Never-ending Search for Benefits: Supply Chain in Emerging Marketplaces, October/November 2010
Among US companies over $1 billion, 73% experienced supply chain disruptions within the last 5 years (2009 Center for Supply String Research).
Key Dangers in Managing Source Chains in Growing Markets
Global businesses, while helping to achieve cost benefits and market penetration, certainly are associated with risk. Source chains in appearing markets, in which a whole series of risks are present, are specially challenged to plan, design and put into practice sophisticated ways of take care of and mitigate risk. Source chain risk is a complex equation of risks a business encounters between raw material extraction and final product delivery. From dealer selection, to paying customs charges, to hiring or firing, resource chain managers should consider all aspects of risk while deciding emerging marketplaces.
Trade Risk - Trade hazards include regulatory compliance, specifically coping with the export and transfer of goods. Trade risk factors include traditions valuation, trade restrictions, anti-dumping, free trade agreements and export licensing.
Political Risk - Political risks include politics instability, religious tensions, bureaucracy and inter-state conflict.
Economic Risk - Inflation can adversely affect the supply chain in lots of ways; rising prices in petrol incur higher vehicles costs, increasing food prices cause labor prices to go up, and both can compound to rot the financial health of procedures in emerging markets.
Operational Risk - Operational dangers occur in the day to day execution of the business, including labor, intellectual property, source disruptions, product price volatility, inside product failures, and energy costs.
Geophysical Risk - Source chains are exposed to several types of risks. Poor infrastructure and high degrees of congestion can impede syndication and natural disasters can result in significant disruptions in sourcing operations.
Risk Management Considerations
Social conformity and responsibility
Intellectual property management
Management of multi-cultures and multinationals
Internal stakeholders/clients proposal skills
On program quality delivery
Disaster recovery plans
Alternative manufacturing sites
Table 2 shows potential mitigation options for various risk areas.
Potential Mitigation Options
Limited infrastructure, creating potential delays in moving materials / products in and out of a market.
Create partnerships with Logistics providers who understand the neighborhood marketplace.
Appropriate inventory opportunities to compensate delays.
Reduced (reduction) of inventory awareness to in-transit raw materials and / or finished product.
Create a Supply String management strategy that aligns companions to generate inventory presence.
Invest in technology to create the required visibility.
Create bonuses for suppliers to meet your expectations.
Significant fluctuations in demand
Use technology to create baseline forecasts and adjust to local market knowledge.
Appropriate inventory investment funds to protect against significant delays in product arriving in market.
Aggressive response to market entry by your competitors.
Expect a reply - Game potential competitive reaction to your access. Take appropriate action.
Understand your vulnerabilities and take require actions to mitigate.
Table 2 - Source: Conference Plank Webcast - The Endless Search for Advantage: Supply Chain in Emerging Marketplaces, October/November 2010
Global Logistics for Strategic Edge in Emerging Markets
To leverage opportunities in rising markets, companies must change or increase from managing logistics in a restricted range of local geographies to taking care of them in growing market geographies worldwide - in an exceedingly effective, agile manner that helps the responsiveness and versatility associated with an on-demand Business.
Companies can leverage specific approaches to changing their global logistics capabilities and better support the business enterprise goals of lower cost sourcing or fulfillment by firmly taking advantage of emerging market jurisdictions.
In changing logistics businesses, companies have gained performance advantages from a strategic give attention to logistics. The features developed during transformation effort enables them to understand benefits with rising market businesses.
In order to handle the challenges of leveraging rising markets as a cost reducing, and eventually, a profit-boosting strategy, companies have found that they need to develop a technique for taking care of logistics that can support multiple service-level requirements. As one component of such a logistics strategy, companies need to determine how, where also to what magnitude the services of logistics suppliers should be engaged.
There are several logistics management options to consider before going into a fresh or emerging market. One end of the spectrum consists of developing extensive multifunction logistics talent within the business, and then controlling specific tactical activities and numerous deals with logistics suppliers offering narrowly identified services within a particular region or country. Pitfalls include the time it requires to build up or recruit the necessary degree of logistics talent and leadership and the administrative cost of managing dozens, if not hundreds, of logistics suppliers.
The key to managing global logistics is to permit the company's source chain with the ability to efficiently unplug from one location or operating scenario, and enter a new or emerging market location. This capacity will be both a strategic need and a competitive advantages, as long as worldwide business, financial and socio-political factors remain dynamic.
Enabling this proper ability requires cross-function process design, technology integration, and subject matter expertise ranging from network search engine optimization, logistics contract and functions management to global trade and compliance management. This degree of orchestration and cooperation is very scalable when merged seamlessly with a worldwide governance model and strategically oriented leadership.
Competitive edge can be realized as the logistic change can prevent increasing costs and complexities from eroding the great things about global sourcing strategy. The advantages of a strategic approach to logistics are wide-ranging and can result in a significant increase in shareholder value. In fact, controlling logistics costs, service-level lead times and overall resource chain security is crucial to market place competitiveness.
Greening the Supply Chain in Emerging Markets
The term "Greening the Supply String" has emerged to describe a multitude of actions that companies are taking to accomplish better performance rigor and operational control over expanded resource chains. Greening the Supply Chain initiatives in growing market segments are part of an activity for employing a lasting development plan aimed at achieving upgraded environmental performance; increasing efficiencies in the utilization of energy, water, other natural resources or recycleables; reducing environmentally friendly and societal impact of business operations upon local neighborhoods and globally; and expanding economic and quality of life improving opportunities that result from the business enterprise activities.
Mitigation of business dangers - Reducing hazards to the business from current environmental factors or giving an answer to expectations of future handles on carbon emissions or other substances can both progress learning and improve the operational integrity of business processes across the supply chain to make business value.
Reduction in costs - At the same time of growing costs from energy consumption and other resource and raw materials inputs, companies have more direct incentives to increase the efficiencies of a number of operating processes.
Motivation of suppliers - Implementation of sustainability initiatives creates an possibility to further emphasis and rationalize resource chains by eliminating low performers and focusing on a fewer volume of suppliers that can meet more demanding sustainability performance conditions while meeting the needs of industry.
Preservation of business continuity - Inexperienced supply string initiatives that concentrate on energy efficiency and other areas of sustainability can buffer business functions from such disruption while contributing to emission reductions.
Market access enlargement - Companies seeking to take care of their demand for resources e. g. drinking water, food source etc. while reconciling the needs of contemporary society will obtain greater long-term control over their business strategy by merging business process invention with solutions to societal problems.
Success Factors - Supply String Management in Rising Markets
Developing business techniques to incorporate the needs of an integrated supply chain
Developing a strategy to protect intellectual property and getting together with the needs and prospects of customers
Performing extensive homework while choosing suppliers
Considering total cost of possession and not only material cost
Developing a company continuity plan
Making logistics management in growing markets a proper component of the business strategy
Selecting leading logistics providers who can effectively combine functions, procedures, and business partners
As companies look to mitigate supply chain risk, they must combine both non-economic and economic factors into their decisions. Assessing the risk, attaching a financial impact to potential disruptions, and creating a specific strategy that addresses resource chain risk will placed the guidelines for selecting
a location in an rising market. Country evaluation should be an ongoing process, using both up-to-date figures and historical tendencies.
Emerging marketplaces sourcing targeted at cost-cutting only is something of the past. Quality, efficiency and efficiency of global sourcing businesses now differentiate challengers. But, profitability is being squeezed by unprecedented cost stresses from customers with the own features and suppliers facing higher costs. To succeed in emerging markets sourcing, it is important that the methodology taken be made a core area of the overall corporate and business strategy. To achieve the best overall resource chain performance and success in competitive global market place, companies need to address capabilities of individuals, operations and technology areas and incorporate all elements of the extended resource chain.
About This Report
The materials in this report is based on discussions and presentations from a meeting of The Convention Board Asia-Pacific Resource Chain Council that occurred in Shanghai in-may 2010 plus the Conference Panel Webcast on "The Limitless Search for Gain: Supply String in Emerging Marketplaces" which occurred in October and November 2010.
About The Author
Vipin Suri is program director for The Seminar Board Supply Chain Council along with the Conference Table Functional Brilliance and Shared Business Services Council in the Asia-Pacific region. Being a management specialist in shared services for days gone by nine years, he has aided several companies in Asia-Pacific and THE UNITED STATES in reviewing the potency of their business support functions and putting into action shared services. Prior to becoming a management consultant in 2002, Suri was Vice president, distributed business services for BHP Billiton in Australia. Prior to that he had held several older positions in M&A, customer support, network services and advantage management, and distributed services during his 26 years at Ontario Hydro in Canada. Suri is a doctoral level candidate in distributed services at the School of Twente in holland.
About The Discussion Board
The Conference Mother board is a worldwide, independent business regular membership and research association working in the general public interest. Our mission is unique: to provide the world's leading organizations with the practical knowledge they have to improve their performance and better serve society. The Convention Mother board creates and disseminates understanding of management and industry, conducts research, convenes conferences, makes forecasts, assesses developments, publishes information and examination, and brings executives together to study from each other. The Conference Mother board is a not-for-profit business retaining 501 (c) (3) tax-exempt status in the United States.
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