Some Caution Advised on Emerging Markets

While Gartner, Inc. builds a compelling argument for entering emerging markets, its latest report also addresses the possible downside of hasty penetration.

The challenges are daunting to the supply chain organization, says Gartner, 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.

Despite these challenges, supply chain organizations 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 organizations and networks to best serve these needs within a broader global supply chain strategy.

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