Frustrated by the sluggish rebound to the economy, U.S. manufacturers are looking to emerging markets for growth opportunities. These opportunities, according to Mike Burkett, research vice president at analyst firm Gartner, are "huge and explosive," but there's a catch (there's always a catch): Taking advantage of these opportunities will require supply chain capabilities that some companies do not currently have.
"Emerging markets come with unique characteristics and challenges due to the constant thrust for business growth, volatile demand and low maturity of supply chain processes," Burkett explains.
In a recent Gartner study on emerging markets, slightly more than half of the respondents (51%) say they see globalized supply chains as being more complex and brittle. The study, which includes responses by 35 of the 100 companies on Gartner's list of the top supply chains, indicates that the biggest challenge for companies entering emerging markets is dealing with often-changing regulations and tax requirements. Developing local talent is also of concern, as is the typically inadequate logistics and transportation infrastructure in these countries.
Another challenge for global supply chain managers is having visibility to their far-flung suppliers; 93% of U.S. manufacturers admit they do not have complete supplier visibility, according to a study of senior-level manufacturing executives conducted by consulting firm KPMG. The irony of that situation is that having real-time supply chain visibility can help manufacturers increase speed-to-market, reduce capital expenditures and manage risk, but these companies are not investing in the technology that would make this kind of visibility possible.
Almost half (44%) of the executives surveyed say they use e-mail, fax and postal mail as their main tools to communicate issues about demand throughout their supply chain. "Moving toward a demand-driven supply chain is probably the single most important step a global manufacturer can take today," states Jeff Dobbs, global sector chair, Diversified Industrials with KPMG. But taking that step is going to be challenging at the very least if the supply chain technology being used is outdated.
"The winners will be the ones who can network real-time across their entire supply chains, reducing the information lag that costs companies significant time and money," Dobbs points out. Burkett echoes that call for supply chain technology by adding, "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."
One possible reason for the resistance to investing in more sophisticated technology is the increased interest in reshoring, bringing sourcing activities back to the U.S. or nearby countries. Operating on the strategy that it's easier to keep an eye on suppliers if they're (relatively speaking) in your backyard, nearly 90% of U.S. companies in the KPMG study say they plan to increase sourcing in the U.S. in the next two years, and another 18% say they're going to increase sourcing in Canada.
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"Mitigating the challenges of collaborating with partners is complex," says Dobbs. "Close familiarity with who your suppliers are and how they operate will certainly help optimize performance."