NEW YORK – Despite the vital role that technology plays in helping companies manage the complexity and volatility in global operations, only 48 percent of the more than 1,000 global companies surveyed for a new Accenture (NYSE: ACN) study use technology extensively in their emerging market supply chains.
Furthermore, 45 percent of the companies from 10 industry sectors sampled for the study, “Supply Chain Success Factors in Emerging Markets,” make only moderate use of technology, automating some essential activities but supporting them with manual processes. The Accenture research also identified ‘supply chain leaders’ from the sample and found that 73 percent of them use technology extensively in the supply chains that support their emerging market presence, versus only 31 percent of lower performers. In fact, nearly three-quarters of the leaders said they had made heavy investments in such automation tools as manufacturing systems, ERP and supply chain systems.
The commitment to technology by supply chain leaders is significant as the study revealed that companies with leading supply chains are more likely to generate stronger growth in emerging markets than those with average or low-performing supply chains. They are more than twice as likely as other respondents (58 percent versus 22 percent) to have achieved growth of 20 percent or more in their priority emerging markets in the past two years.
“Volatile conditions continue to complicate growth and production in emerging markets, and the strategic use of digital technologies in supply chains, particularly big data analytics, can be instrumental in providing the up-to-date information needed to make decisions and respond rapidly,” said Mark Pearson, senior managing director, Accenture Strategy, Operations. “Supply chain leaders make extensive use of technology in their operations and show that enhanced agility turns uncertain market conditions into a source of competitive advantage.”
Of the industry sectors that were studied, electronics & high tech companies appear to be the most aggressive in using technology within their supply chain organization to support their emerging market strategies.
Other practices that supply chain leaders apply in emerging markets include:
- Differentiating themselves by complementing a low-cost structure with a greater focus on quality and market knowledge.
Recognizing that success requires value as well as a lean cost structure, supply chain leaders are more than twice as likely as non-leaders (17 percent versus 7 percent) to differentiate themselves on the basis of quality rather than cost as a primary measure of supply chain success in emerging markets. By contrast, non-leaders are more often focused on profitability or constructing a competitive cost structure.
- Leaders apply a broader range of supply chain models in emerging markets.
Supply chain leaders are more inclined to invest in the full range of options available to them, including plants, distribution centers, and suppliers in the region; established operations in the market; or hiring local talent to help manage the supply chain.
However, acquisitions, which can be complex and time-consuming, were only used by 36 percent of all respondents as a means of serving their priority emerging markets while 47 percent have set up joint ventures or partnerships with local organizations as they seek to create flexible operations capable of responding to unexpected market changes.
- Supply chain leaders invest more aggressively.
To help them achieve their growth goals in emerging markets in the next three years, leaders plan to invest aggressively in their operations, with 22 percent of them planning to invest more than $40 million in their supply chain. Interestingly, banking respondents (29 percent) had the greatest propensity to say they plan to invest more than $40 million to build supply chain capabilities.
Leaders (66 percent of them) are more likely to invest in capabilities to improve the operational excellence of their supply chain execution by standardizing, streamlining and automating processes, using shared services and modernizing IT systems. They also are more likely than lower performers to prioritize investments in their physical infrastructure, (e.g. manufacturing facility expansion and wider warehouse networks) and customer analytics.
“The leaders in our study have created supply chains that exceed their expectations by focusing on quality that their emerging market customers value, not just on costs,” said Pearson. “They recognize that supply chains are not just about efficiency, but also about creating value and differentiation in the market. This allows them to take on established local companies with strong brand recognition as well as expansion-minded peers who are also pursuing the same emerging markets.”
More from MBTMag.com
Nevada Governor Enacts Tesla Tax Break Package
HP Fined For Bribery Of Russian Officials
Following Annie's Acquisition, Expect More Deals