Supply Chain Management in Emerging Markets

bestow chemical twine instruction in rising Markets emerge grocerys ar nations with social or work action at law in the process of rapid growth and industrialization. Facing pressures to cut tolls, curiously labor and materials, companies have been turning to uphill markets for facility locations. As a result, the al blue for bowed stringed instruments have become increasingly global and tangled, creating venture at every level of product ontogeny, manufacturing, and distri neverthelession. The problem lies not with capacity, scarcely with shelterion of intellectual property rights, maintaining comp atomic number 53nt quality and conformism with global trade regulations. Emerging markets gage bring a company close- caboodle(prenominal) to suppliers and rough materials, cutting pass through time but breaking into bare-ass markets in countries with little experience of manufacturing the roles required is the ultimate challenge for a provision twine spotr. The International Financial Corporation coined the emerging market term (more specifically Emerging Financial Markets) in 1981, to describe true countries. The term has expanded in meaning to reflect vexation opportunities in countries with social or business activity in the process of fast growthIndustrializationIn pursuit of new opportunities and lower live trading operations, companies are creating complex global networks. Impact on tot mountain range protrudening and attention has been earthshaking. Increased volatility and uncertainty of come forth arrange requireGreater flexibleness and forecasting mental abilitySophisticated intellect of emerging marketsAbility to assess and manage some(prenominal) perils and opportunitiesA turn of universities and business schools have undertaken research to study and understand respective(a) aspects of Emerging Markets. It is tall(prenominal) tomake a list of emerging, lifting and developed markets the take up guides t w indup to be investment information like The Economist or market index makers ( much(prenominal) as Morgan Stanley Capital International). FTSE Group, a provider of sparingal and financial data, distinguishes between various markets on the basis of their national income and the emergence of their market infrastructure and assigns the market spatial relation of countries on the basis of their economic size, wealth, quality of markets, depth of markets and breadth of markets.Many companies want to benefit from emerging markets sourcing but often neglect to build combined business processes to manage the added complexity in the supply image, and fail to connect various incarnate functions in managing twain short-term and semipermanent business postulate.Integrated tot up Chain PlanningCoordinating product development, supply reach and gross sales and marketing activities that are oceans and time z adepts a dispel has become more difficult as supply chain operations become more fragment with continued globalization. An integrated approach to supply chain management leave go a long way in all overcoming the difficulties. Integrated yield Chain Planning is the coordinated planning of activities that occur over time in order to forecast, procure, manufacture and distribute goods across the extended supply chain, from supplier to consumer. Figure 1 shows various elements of integrated supply chain planning at strategy, tactical and execution levels.Figure 1 beginning Conference plank Webcast The Endless hunt club for Advantage contribute Chain in Emerging Markets, October/November 2010Management Challenges in Emerging Markets planning chain management in emerging markets presents a number of management challenges slackly not faced in domestic markets. Table 1 lists various management challenges faced in emerging markets. These challenges have been categorized as communication, cultural, safety security, corruption, delivery, financial and q uality.CategoryManagement ChallengesCommunicationLanguage differences and understandExpertise differences and nomenclatureSystems compatibilityTime zone differencesCulturalTiming of Holi daylights and needing to necessitate business pull ining of cultural nuances Level of urgencyInfrastructure(roads, ports, telecom, energy availability) golosh SecurityGovernment requirements, Port safetyPersonal safety personnel department safety Criminal elementFire safety and result newfangled Materials SafetyCorruptionPatent and IP protectionBribery, insidious in spite of appearance activityLaw enforcement issues Legal ramificationsSuppliers who become competitorsDeliveryVendor accordance reliability vs. cultureManufacturing, transport lead- generation and reliabilityAmount of embedded transit timeFinancialForeign exchange effect on total ChainMobility of plant plussSupplier stabilityQualityProduct scrutinyTable 1 Source Conference gameboard Webcast The Endless hunt for Advantage Supp ly Chain in Emerging Markets, October/November 2010Among US companies over $1 billion, 73% experienced supply chain disruptions in the net 5 years (2009 C encrypt for Supply Chain Research).Key guesss in Managing Supply Chains in Emerging MarketsGlobal operations, firearm circumstances to get through cost savings and market penetration, undoubtedly are attended by insecurity. Supply chains in emerging markets, where a upstanding series of put on the lines are present, are specially challenged to plan, design and implement forward-looking strategies to manage and mitigate risk. Supply chain risk is a complex equation of risks that a business encounters between raw material decline and final product delivery. From supplier selection, to paying customs charges, to hiring or firing, supply chain managers should consider all aspects of risk while considering emerging markets.Risk is defined from a practitioners standpoint as having specific financial impact. in that location often exists a distinct boundary between supply chain risk and financial risk in decision making processes, however the two go away naturally impact one another. Key supply chain management risks intromitTrade Risk Trade risks include regulatory compliance, specifically dealing with the export and import of goods. Trade risk factors include customs valuation, trade regulations, anti-dumping, free trade agreements and export licensing. policy-making Risk Political risks include political instability, religious tensions, bureaucracy and inter-state conflict. economic Risk Inflation commode adversely affect the supply chain in many ways rising prices in fuel incur higher transportation cost, rising food prices cause labor prices to rise, and both can compound to erode the financial health of operations in emerging markets.Operational Risk Operational risks occur in the day to day execution of the business, including labor, intellectual property, supply disruptions, commodity p rice volatility, midland product failures, and energy costs.Geophysical Risk Supply chains are exposed to some(prenominal) kinds of risks. Poor infrastructure and high levels of congestion can impede distribution and natural disasters can result in significant disruptions in sourcing operations.Risk Management ConsiderationsThere are many risk management considerations when entering emerging markets. The ability to effectively manage these risks today impacts success of supply chain strategy implementation. Some of these considerations are social compliance and responsibilityIntellectual property managementManagement of multi-cultures and multinationals interior stakeholders/clients engagement skillsOn schedule quality deliveryDisaster convalescence plansAlternative manufacturing sitesTable 2 shows potential mitigation options for various risk areas.Risk AreaPotential Mitigation OptionsLimited infrastructure, creating potential delays in moving materials / products in and out o f a market.Create partnerships with Logistics providers who understand the local anesthetic marketplace. conquer inventory investments to compensate delays.Reduced (loss) of inventory visibility to in-transit raw materials and / or finished product.Create an integrated Supply Chain management strategy that aligns partners to take inventory visibility.Invest in technology to create the required visibility.Create incentives for suppliers to witness your expectations.Significant fluctuations in demand function technology to create baseline forecasts and ad safe to local market intimacy.Appropriate inventory investments to protect against significant delays in product arriving in market. war-ridden response to market entry by your competitors.Expect a response Game potential emulous response to your entry. Take appropriate action.Understand your vulnerabilities and take require actions to mitigate.Table 2 Source Conference Board Webcast The Endless Search for Advantage Supply Cha in in Emerging Markets, October/November 2010Global Logistics for Strategic Advantage in Emerging MarketsTo leverage opportunities in emerging markets, companies must transition or expand from managing logistics in a limited number of local geographies to managing them in emerging market geographies worldwide in a very efficient, agile manner that delays the responsiveness and flexibility associated with an on-demand line of merchandise.Companies can leverage specific approaches to transforming their global logistics capabilities and better support the business goals of lower cost sourcing or fulfillment by winning favour of emerging market jurisdictions.In transforming logistics operations, companies have gained performance benefits from a strategical focus on logistics. The capabilities developed during transformation effort enables them to realize benefits with emerging market operations.In order to denotation the challenges of leveraging emerging markets as a cost reducin g, and eventually, a profit-boosting strategy, companies are finding that they need to develop a strategy for managing logistics that can support multiple service-level requirements. As one element of such a logistics strategy, companies need to determine how, where and to what extent the serve of logistics suppliers should be engaged.There are several logistics management options to consider sooner entering a new or emerging market. One end of the spectrum involves developing extensive multifunction logistics talent within the company, and then managing specific tactical activities and numerous contracts with logistics suppliers that provide narrowly defined services within a specific region or country. Pitfalls include the time it takes to develop or recruit the necessary level 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 enable the companys supply chain with the capability to efficiently unplug from one location or operating scenario, and enter a new or emerging market location. This capability will be both a strategic requirement and a competitive expediency, as long as worldwide business, economic and socio-political variables remain dynamic. enabling this strategic capability requires cross-function process design, technology integration, and subject matter expertise ranging from network optimization, logistics contract and operations management to global trade and compliance management. This level of orchestration and collaboration is very scalable when merged seamlessly with a global governance model and strategically oriented leadership.Competitive advantage can be realized as the logistic transformation can prevent rising costs and complexities from eroding the benefits of global sourcing strategy. The advantages of a strategic approach to logistics are broad and can result in a significant increase in shareholder value. In fac t, managing logistics costs, service-level lead times and boilers suit supply chain security is critical to marketplace competitiveness. green the Supply Chain in Emerging MarketsThe term Greening the Supply Chain has emerged to describe a wide variety of actions that companies are taking to achieve greater performance rigor and operational control over extended supply chains. Greening the Supply Chain initiatives in emerging markets are part of a process for implementing a sustainable development plan aimed at achieving improved environmental performance increasing efficiencies in the use of energy, water, other natural resources or raw materials reducing the environmental and societal impact of business operations upon local communities and globally and expanding economic and quality of life enhancing opportunities that result from the business activities.To maximize effectiveness, Greening the Supply Chain initiatives should not exist separate from the mainstream activities of t he business. Rather, they should be fully integrated with and reflect the core value proposition of the business strategy. They should yield measured results that are part of an integrated business-sustainability plan. The business value propositions for seeking to achieve a greener supply chain in emerging markets include the hobbyMitigation of business risks Reducing risks to the business from current environmental factors or responding to expectations of future controls on carbon emissions or other substances can both advance learning and increase the operational integrity of business processes across the supply chain to create business value.Reduction in costs At a time of rising costs from energy inlet and other resource and raw material inputs, companies have more go incentives to improve the efficiencies of a variety of operating processes.Motivation of suppliers Implementation of sustainability initiatives creates an opportunity to further focus and rationalize suppl y chains by eliminating low performers and focusing on a fewer number of suppliers that can meet more rigorous sustainability performance criteria while run into the needs of the marketplace. rescue of business continuity Green supply chain initiatives that focus on energy efficiency and other aspects of sustainability can buffer business processes from such disruption while contributing to emission reductions.Market access sweetening Companies seeking to manage their demand for resources e.g. water, food supply etc. while reconciling the needs of society will obtain greater long-term control over their business strategy by combining business process innovation with solutions to societal problems.Success Factors Supply Chain Management in Emerging MarketsFor managing supply chains in emerging markets successfully, it is desperate that the approach taken be made an integral part of the overall corporate strategy. An opportunistic, price driven approach will capture low-hanging fruits but a structured approach will deliver results on a sustained basis. Here is a list of factors to succeed in managing supply chains in emerging marketsDeveloping business processes to integrate the needs of an integrated supply chainDeveloping a strategy to protect intellectual property and meeting the needs and expectations of customersPerforming extensive payable diligence while choosing suppliersConsidering total cost of ownership and not just material costDeveloping a business continuity planMaking logistics management in emerging markets a strategic component of the business strategySelecting leading logistics service providers who can effectively integrate functions, processes, and business partnersAs companies look to mitigate supply chain risk, they should incorporate both non-economic and economic factors into their decisions. Assessing the risk, attaching a financial impact to potential disruptions, and establishing a clear strategy that addresses supply chain risk will set the parameters for selectinga location in an emerging market. Country analysis should be an ongoing process, using both up-to-date statistics and historical trends.Emerging markets sourcing aimed at cost-cutting alone is a thing of the past. Quality, efficiency and effectiveness of global sourcing operations now differentiate competitors. But, profitability is being squeezed by unprecedented cost pressures from customers with their own capabilities and suppliers facing higher costs. To succeed in emerging markets sourcing, it is imperious that the approach taken be made a core part of the overall corporate strategy. To achieve the best overall supply chain performance and success in competitive global marketplace, companies need to address capabilities of people, processes and technology areas and integrate all elements of the extended supply chain.About This embraceThe material in this report is based on discussions and presentations from a meeting of The Conference Boa rd Asia-Pacific Supply Chain Council that took place in strike in May 2010 and The Conference Board Webcast on The Endless Search for Advantage Supply Chain in Emerging Markets which took place in October and November 2010.About The AuthorVipin Suri is program director for The Conference Board Supply Chain Council and The Conference Board Functional Excellence and Shared Business Services Council in the Asia-Pacific region. As a management consultant in shared services for the past nine years, he has assisted several companies in Asia-Pacific and North America in reviewing the effectiveness of their business support functions and implementing shared services. Prior to becoming a management consultant in 2002, Suri was Vice president, shared business services for BHP Billiton in Australia. Prior to that he had held several senior positions in MA, customer service, network services and asset management, and shared services during his 26 years at Ontario Hydro in Canada. Suri is a doc toral degree candidate in shared services at the University of Twente in the Netherlands.About The Conference BoardThe Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique to provide the worlds leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board creates and disseminates knowledge about management and the marketplace, conducts research, convenes conferences, makes forecasts, assesses trends, publishes information and analysis, and brings executives together to learn from one another. The Conference Board is a not-for-profit organization holding 501 (c) (3) tax-exempt status in the United States.