Executive Briefings

Forging Your Supply Chain for Emerging Markets

The companies that have been most successful at breaking into emerging markets have been those that focused on the problem of infrastructure, says Randall Weston, principal research analyst with Gartner. Many parts of India, Africa and Latin America are severely lacking in the roads, ports and airports that are needed for getting product to market. Merchandisers have sought to make up for the disadvantage by localizing their supply chains as much as possible. Unilever, for example, has been in Ghana since 1947, largely through a strategy that emphasizes local sourcing. The approach "stimulates the [local] economy and allows them to not have to deal with issues of importing," says Weston. Taxes, too, are much lower for companies sourcing close to local markets. The savings can then be directed into the construction of roads to strengthen supply lines.

Working with local logistics partners is another way of cementing ties to consumer markets in emerging countries. TNT and UPS are among the global transportation providers to have collaborated with domestic carriers to handle the "last mile" of a shipment - a segment that can be especially difficult to serve in remote rural areas.

Makers of consumer goods must adapt their products to meet the needs of local markets. The large containers that dominate big-box retailing in the developed world aren't suitable for many communities in emerging economies. Similarly, the retail outlet needs to be tailored to local tastes and customs. In Africa, products might be sold from vans driven to the marketplace, or at kiosks located at the crossroads of villages. "You have to think very differently about the customer," says Weston.

He refutes the notion that such efforts by multinationals will result in inadequate payback. Big consumer-products companies that make early inroads into emerging nations are in the best position to capitalize on future growth in local consumer markets. In fact, says Weston, emerging economies represent the highest growth potential for global manufacturers today.

To view video in its entirety, click here

The companies that have been most successful at breaking into emerging markets have been those that focused on the problem of infrastructure, says Randall Weston, principal research analyst with Gartner. Many parts of India, Africa and Latin America are severely lacking in the roads, ports and airports that are needed for getting product to market. Merchandisers have sought to make up for the disadvantage by localizing their supply chains as much as possible. Unilever, for example, has been in Ghana since 1947, largely through a strategy that emphasizes local sourcing. The approach "stimulates the [local] economy and allows them to not have to deal with issues of importing," says Weston. Taxes, too, are much lower for companies sourcing close to local markets. The savings can then be directed into the construction of roads to strengthen supply lines.

Working with local logistics partners is another way of cementing ties to consumer markets in emerging countries. TNT and UPS are among the global transportation providers to have collaborated with domestic carriers to handle the "last mile" of a shipment - a segment that can be especially difficult to serve in remote rural areas.

Makers of consumer goods must adapt their products to meet the needs of local markets. The large containers that dominate big-box retailing in the developed world aren't suitable for many communities in emerging economies. Similarly, the retail outlet needs to be tailored to local tastes and customs. In Africa, products might be sold from vans driven to the marketplace, or at kiosks located at the crossroads of villages. "You have to think very differently about the customer," says Weston.

He refutes the notion that such efforts by multinationals will result in inadequate payback. Big consumer-products companies that make early inroads into emerging nations are in the best position to capitalize on future growth in local consumer markets. In fact, says Weston, emerging economies represent the highest growth potential for global manufacturers today.

To view video in its entirety, click here