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

Emerging markets have been identified as the primary business growth area for the next century, and Gartner says that organisations with strong demand planning capabilities and segmented supply strategies are 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,” says Mike Burkett, research vice-president at Gartner.

“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.
“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,” says Burkett.

“Defining the source of future growth was reflected in a recent worldwide Gartner survey of more than 390 CEOs 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 CEOs recognise the critical nature of the supply chain to this global expansion, they are split on their view of its readiness. Fifty-one percent of executives surveyed see globalised supply chains as more complex and brittle now, with the balance feeling that they are more resilient than at any time in history.

Gartner believes the solution in both cases is to develop supply chains that can achieve global scale while reliably serving the unique needs of both developed and emerging nations.

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.

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.