China’s Growth Is Slowing – 4 Ways to Find Opportunity Among Global UncertaintyNovember 17, 2014The honeymoon is over. Reports by the IMF tell us that growth in China and other emerging markets will wane over the next several years. Meanwhile, emerging markets as a whole have become dominant players, accounting for over half the world’s GDP this year based on purchasing power. Global commerce relies heavily on emerging regions to consume and supply goods. What will the slowing growth of emerging markets mean for supply chains?
Pinned Hopes and Great ExpectationsAccording to a recent Accenture study, leading companies with successful supply chains have, until now, enjoyed growth of up to 20% in emerging markets. The majority of businesses, however, have struggled – only 4 in 10 say their supply chain organizations are exceeding expectations in emerging markets. Now, with declining growth on the horizon, prospects will be even shakier. Still, emerging regions appear tempting – the study notes that 68% of executives plan on investing at least $20 million in emerging markets over the next 2 years. For that kind of investment to pay off, it’s crucial companies learn to deal with changing market dynamics.
Be Prepared for VolatilityIt’s important to develop a supply chain robust enough to handle shocks and unpredictable events, whether they come in the form of political conflicts, natural disasters, or volatile markets. Executives questioned in the Accenture study cited “high variability in demand” as a top factor for why their supply chain organizations have struggled in emerging markets. The other key factors were lengthy, difficult to manage supply chains and the misalignment of expectations due to cultural differences. How did leaders manage to enjoy growth in the face of such odds?
The study showed leaders do four things well:
- Use a mixed approach to support the supply chain. Leaders were able to leverage their existing operations to their advantage, invest in regional assets, and hire local talent to oversee operations.
- Focus on quality and market knowledge. Understand a market’s culture and ways of doing business first. Then make differentiated quality a key metric to drive operations.
- Invest in technology that can increase efficiency, flexibility, and improve decision-making. 73% of leaders use technology extensively to support their efforts in emerging markets while 57% plan to invest in analytics and intelligence over the next two years to continue success.
- Invest aggressively in constantly improving supply chain operations to keep up with market dynamics. Market leaders were more likely to invest more than $40 million over the next two years to drive operational excellence and expand their physical infrastructure.
What these actions boil down to is staying ahead of volatility by being actively invested in your supply chain operations. Businesses that don’t leverage easily accessible and deployable technology that can provide detailed insight into their supply chains will find themselves particularly vulnerable to shocks in a slowing global economy. Companies will need visibility and rapid communication across the entire supply chain to adjust quickly to sudden changes in market demand. Cloud technology platforms are the best way to maintain competitive advantage while reducing infrastructure costs. While it’s true that you can’t always dictate outcomes, you can control how you respond to a situation. For businesses seeking success in emerging markets the honeymoon might be over, but the long-haul marriage can still be completely worth it.