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The Turning Point for the BRICS Supply Chains

Analyst Insight: Economic growth has recently slowed in the BRICS countries, causing concern among both global and domestic investors. In many industries, the time for reaping quick rewards from investment has passed. If companies want to continue succeeding in the BRICS markets, they need to increase their focus on creating competitive operational models, with a major emphasis on improving supply chain management. – Viktoria Sadlovska, Managing Director, Prameya Research, & Lead Author of the Pragmatic Value Chains Blog

The Turning Point for the BRICS Supply Chains

Over the past decade, Brazil, Russia, India, China and South Africa – the BRICS economies – have become leaders among emerging markets, those markets that have exhibited high levels of growth and made major leaps forward in their economic development, now occupying significant place in the interconnected global economy. However, with the BRICS economic growth rate slowing in the past couple of years, attention has turned to the need for deeper reforms in these countries, which are necessary to ensure future development and prosperity.

One of the areas that the BRICS countries need to pay special attention to is revamping their value chain management. First of all, there needs to be a shift from thinking about “supply chain management”, i.e., of how to deliver the right product to the right customer at the right time, to “value chain management” , i.e., how and where to position and use companies’ limited resources to create the most value for the customers. This includes taking a more strategic and all-encompassing look at supply chain management.  Improving value chain management is where emerging market firms have an opportunity to differentiate themselves, especially considering tough infrastructure challenges in these countries that hinder their competitiveness.

Industry leaders in many sectors of the BRICS economies have already embraced supply chain optimization. A recent article on the Pragmatic Value Chains blog –  Indian Retail Industry Leaders Become Supply Chain Experts – highlights the journey undertaken by Future Group, a large Indian business conglomerate whose retail business serves 300 million customers annually. To address the lack of supply chain management capabilities both within its own organization and the industry as a whole, the company formed its own supply chain services subsidiary – FSC (for Future Supply Chain Solutions Limited). After a few years, FSC has become a major provider of logistics, brand distribution and supply chain optimization services for the Indian marketplace, distributing third-party consumer goods for several major retail chains in the country. By creating FSC, Future Group has increased its own supply chain competency, as well as added valuable supply chain management services to the industry as a whole.

There has been rapid development in many areas of supply chain management in the BRICS markets. Importantly, companies have become more aware of the role that supply chain management plays in their market success. Many firms have realized that automating supply chain management processes like transportation, fulfillment and warehouse management can help reduce costs and increase efficiency in relatively short time. The growing realization among the BRICS firms that they need to improve supply chain management, coupled with expanding economies, have led to increased demand for services of third-party supply chain and logistics providers (3PLs) in these markets.

                                                          The Outlook

To reach the next level of growth and development, BRICS companies, and their governments, must prioritize value chain management and become more strategic about designing, managing and marketing their global value chain networks. Improving value chain management is a necessity for the BRICS nations and other emerging market economies that want to achieve long-term sustainable economic growth.

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