BRIC Plus. Uncovering economic and supply chain success in the new emerging economies. David Jacoby. (1)

Transcription

1 BRIC Plus Uncovering economic and supply chain success in the new emerging economies David Jacoby (1)

2 Agenda BRIC and Other Country Clusters The Next Generation Emerging Stars Supply Chain Risks Risk Mitigation Measures Cost/Benefit of Operating in Emerging Markets

3 Country Clusters Over Time Asian Tigers Hong Kong, Singapore, South Korea, Taiwan Eastern Europe Hungary, Romania, Czech Republic, Poland Central and South America NAFTA Southern Cone

4 BRIC, or Really, CIBR Projected Annual GDP Growth Rate Size vs. Projected Growth Rate for 15 Emerging Economies 16% 14% 12% 10% 8% 6% 4% 2% 0% India Russia Brazil China GDP (2010, $b) analysis based on Economist Intelligence Unit projections.

5 Economic Similarities, Differences Brazil Russia India China Vs. USA Population (m) ,184 1, GDP ($b) 2,087 1,479 1,728 5,878 14,660 GDP Growth 7.5% 4.0% 8.8% 10.3% 2.9% GDP per Capita $11,388 $10,440 $3,534 $7,774 $47,256 compilation of data from Economist Intelligence Unit.

6 Does BRIC Logic Still Apply? Old Success Factors Manufacturing / export basis Few leading countries GDP-centric Steady incremental growth New Success Factors Services, solutions More distributed opportunity, growth Environmental, technological leaders Some major, rapid advances

7 Growth and Leadership Post-BRIC From: GDP Growth Physical infrastructure Skilled labor Internal market size Open trade To: Geopolitical Influence Internet access Higher education Institutional stability Open market (funds, info, products)

8 Emerging Economic Powers Size vs. Projected Economic Power of 14 Emerging Economies 1.4% 1.2% India Projected Absolute Economic Growth Expressed as Percent of 2010 World GDP 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Argentina Malaysia Saudi Arabia Indonesia Nigeria Venezuela Vietnam South Africa Turkey South Korea Mexico Russia GDP (2010, $b) analysis based on Economist Intelligence Unit economic projections. Brazil

9 Success Factors in the New World Hard Infrastructure Transport and logistics infrastructure Supply base Internet access Large internal market Soft Infrastructure I.P. protection Legal institutions Educated workforce Open market (funds, info, products) Political stability Balanced economy

10 Biggest Concerns are Soft Risks Risk Index Soft Risk Supply Chain Risks by Country Soft Risk Soft Risk Soft Risk Soft Risk Highest Risk Countries Lowest Risk Countries Hard Infrastructure Risks Soft Institutional Risks analysis

11 Top Risks: Local Labor & Supply, IT Average Supply Chain Risks in 14 Emerging Countries Skilled Labor Unvailability Local Supplier Advantage Insufficient I.T. Infrastructure Trade Restrictions Reverse Engineering Poor Logistics Infrastructure Risk Index (1=Low, 10=High) analysis

12 Limited Technical Expertise and Supply Base Lack of professionally qualified labor Managerial talent for precision manufacturing Engineering for capital projects Local supplier preference or advantages Supply and Demand of Pipefitters for a Project in Malawi Capacity Margin (Millions of Hours Available) Supply and Demand Capacity Margin (left) Demand (right) Requirements (left) Capacity (right) Illustrative

13 Insufficient I.T. Infrastructure Poor phone connections Limited internet access Inadequate infrastructure Restrictions on content or VOIP Weak internet security Outdated or incompatible systems or software Etc.

14 Trade Restrictions and Reverse Engineering, I.P. Loss Bias Unenforceable Contracts No or late payment Reverse engineering Process replication

15 Antiquated Logistics Infrastructure Customs Infrastructure International shipments Logistics competence Tracking & tracing Timeliness Country LPI Germany 4.11 United States 3.86 Korea, Rep China 3.49 South Africa 3.46 Malaysia 3.44 Thailand 3.29 Turkey 3.22 Saudi Arabia 3.22 Brazil 3.20 India 3.12 Argentina 3.10 Mexico 3.05 Vietnam 2.96 Indonesia 2.76 Russian Federation 2.61 Nigeria 2.59 Source: World Bank. LPI stands for Logistics Performance Index.

16 Risk Mitigation Measures Risk Lack of technical expertise Local supplier inadequacy Insufficient I.T. infrastructure Trade restrictions I.P. Loss Antiquated logistics infrastructure Mitigation Measure Structured local content search Local supplier development Data security program Buffer inventory I.P. strategy Logistics contingency plan

17 Structured Local Content Search

18 Local Supplier Development Source: Jacoby, David. The Guide to Supply Chain Management, The Economist, Adapted from Michael Maccoby.

19 Data Security Program Data governance framework Designated I.T. architect Data security plan and procedures Learning (knowledge management) culture Targets, metrics, and monitoring

20 Buffer Inventory Raw Materials Inventory Supplier TL WIP Inventory Customs/ Agent/ Consolidator Ocean Shipping Line Finished Product Inventory Customs TL Warehouse/ Distribution Center LTL/ Small Package Retailer

21 Intellectual Property Strategy Legal Mechanisms Patents Trademarks Incorporations Domain registrations Non-disclosure agreements Practical Measures I.P. goals and targets Market intelligence program Site location evaluation criteria Center of excellence deployment

22 Logistics Contingency Plan Source: Jacoby, David. The Guide to Supply Chain Management, The Economist, Originally from Mentzer, John.

23 2-3x Revenue Potential Sub-Saharan Africa MENA Latin America 2015 Asia & Australasia Eastern Europe 2012 Western Europe 2011 North America % Annual Growth analysis based on Economist Intelligence Unit projections. 6

24 Cost to Deploy 10.0% Mitigation Cost as % of Current Revenue Illustrative Cost Structure Logistics contingency plan 8.0% I.P. strategy 6.0% Buffer inventory 4.0% Internet security program 2.0% Local supplier development Local content networking 0.0% % of Revenue

25 Each Investment is Unique; Study the Landscape Before Committing Supply Chain Risks by Type and Country Argentina Brazil Risk Index 7 (1=Low, 6 10=High) China Germany Vietnam United States Saudi Arabia South Korea Malaysia India Greece China Argentina Greece Hungary India Indonesia Malaysia Mexico South Korea Russia Saudi Arabia Turkey United States

26 BRIC Plus Uncovering economic and supply chain success in the new emerging economies David Jacoby (1)