The Point by Buyers Meeting Point
Book Review: Logistics and Supply Chain in Emerging Markets
Logistics and Supply Chain in Emerging Markets (Kogan Page, 2014) by John Manners-Bell, Thomas Cullen, and Cathy Roberson adeptly captures the interconnectedness of global economies and commercial activity while also studying a number of countries and industries independently.
This idea is key right from the outset, as the authors point out that the phrase ‘emerging markets’ assumes that these countries and markets are similar. Although they are often grouped together, they have different reasons for emergence and offer value to different trading partners and verticals. Groupings such as BRIC (Brazil, Russia, India, and China) or MINT (Mexico, Indonesia, Nigeria, and Turkey) are at different points in their commercial maturity and are being pulled up by different strengths. They also have varying levels of dependence on their Western trading partners demand and economic stability for their prosperity.
Definitions of emerging markets vary, as pointed out in the Introduction. The World Bank’s International Finance Corporation (IFC), who first used the label in 1981, “an ‘emerging market’ is applied to a country making an effort to improve its economy and to reach the same level of sophistication as nations defined as ‘developed.’” (p. 4) “The World Bank, meanwhile, defines emerging markets as those that have not yet reached the minimum Gross National Product (GNP) per capita of $9,656 associated with high income (developed) economies.” (p. 5)
The popularity of sourcing in emerging markets has (and will continue to be) a direct result of the optimization of costs, risks, and benefits in decision making. Any change in factors such as the global economy, interest rates, regulation, currency valuation or trade balances requires a recalculation. Each emerging market is also a moving target, as their internal momentum expands or fluctuates.
It would be impossible to discuss emerging markets without considering the associated risks. Like the markets themselves, sources of risk vary from distance to political instability, bureaucracy to corruption. At the end of the day, looking at emerging markets as strict low cost country sourcing puts the buyer in the colloquial position of getting what they paid for. Even improved infrastructure in these countries - whether logistical or technological – should not imply the same level of reliability seen in developed economies.
Many of those risks have contributed to the reshoring or near-sourcing trends of recent years, but these may not be quite what we think. According to the authors, reshoring is likely less about overseas costs (although labor rates are a factor) and more about building responsive supply chains. As certain elements are moved closer to consumers or other production facilities, processes are segmented differently to take advantage of low cost or high value activities.
The book concludes with a look into the future that is not without surprises. 3D is (necessarily) addressed, but the authors caution against overlooking the potential impact of robotics. This is especially true as developed economies may leverage them as a labor cost equalizer. Ecommerce is considered as well, in the fascinating case of Alibaba, who has had to build a logistics network in China to fuel its growth as opposed to Amazon that was able to leverage existing channels. Payment becomes a topic of interest as well, as countries have different regulations about payment methodology and connectivity.
Ultimately, Emerging Markets is a timely, compelling, and comprehensive guide to business activity in emerging markets that offers actionable value for logistics, supply chain, and procurement professionals in a range of industry sectors.