DHL report: Companies must re-evaluate to capture their slice of the $30 trillion emerging market growth
New independent research shows that to meet the demands of and capitalise on the emerging market growth opportunity, technology companies must significantly re-evaluate their current supply chains.
“Path to Growth: Shaping Tech Sector Supply Chains in Emerging Markets” is a report by Lisa Harrington, President of the lharrington group LLC, and Associate Director of the Supply Chain Management Center and lecturer of supply chain management at the University of Maryland.
The new whitepaper commissioned by DHL, the world’s leading logistics provider, makes clear that a “regionalised global supply chain” model is emerging as the new paradigm to meet global shifts in demand. Regionalised supply chains, shortened product lifecycles and shifting demographics characterise the challenges and opportunities for the technology sector in emerging markets.
The increasingly compressed lifecycle for many technology products is challenging in any market, allowing little room for error. The whitepaper shows the relentless pace of change in the technology sector makes emerging markets even more of an uncertain bet. In mature markets, demand patterns and technology adoption rates are better known and understood, as are the protocols of doing business in developed countries. The same cannot be said for emerging markets.
Harrington said: “Emerging markets present significant opportunities for the technology sector. But combine the unknown of operating in a new market with varying levels of infrastructure and unpredictable demand growth with the pressures of the sector – including expectations for effective service, product innovation, competitive price and personalization - and you have the definition of uncertainty."
These risks are unique to each market and companies therefore lack the familiarity that comes with doing business across different established markets. “To operate profitability in the face of uncertainty, companies must counter and manage risk by adopting supply chain best practices, like the regionalized global supply chain model. In doing so, supply chain networks are best placed to respond to the specific market’s own variables, issues and challenges while also competing well with local manufacturers.” added Harrington.
The white paper identifies three supply chain practices the sector must adopt to capitalise on the emerging markets growth opportunity. These include: Managing risk through a scalable and flexible approach to market penetration; Prioritising compliance and quality from the start, rather than low-cost quick fixes and Avoiding a “one size fits all” market approach.
Dr Jan Thido Karlshaus, Vice President Strategy & Business Development, Global Technology, DHL Supply Chain, said: “Emerging markets were once seen primarily as a place for sourcing products, based on a low-cost labour play. That paradigm has changed. Emerging markets are fast becoming engines of demand, a trend that carries tremendous implications for technology sector supply chains.
“The technology sector requires developing a scalable, flexible supply chain that meets the regulation and policy standards of every local market and is precisely engineered to support the divergent needs of these individualised markets."
Elon Musk's Boring Co. planning wider tunnels for freight
Elon Musk’s drilling outfit The Boring Company could be shifting its focus towards subterranean freight and logistics solutions, according to reports.
A Boring Co. pitch deck seen and shared by Bloomberg depicts plans to construct wider tunnels designed to accommodate shipping containers.
Founded by Tesla CEO Musk in 2016, the company initially stated its mission was to offer safer, faster point-to-point transport for people, particularly in cities plagued by traffic congestion. It also planned longer tunnels to ferry passengers between popular destinations across the US.
The Boring Co. completed its first commercial project earlier this year in April. The 1.7m tunnel system is designed to move professionals between convention centres in Las Vegas using Tesla EVs. It says the Las Vegas Convention Centre Loop can cut travel time between venues from 45 minutes to just two.
Boring Co.'s new freight tunnels
The Boring Co.'s new tunnel designs would allow freight to be transported on purpose built platforms, labelled as “battery-powered freight carriers”. The document shows that, though the containers could technically fit within its current 12-foot tunnels, wider tunnels would be more efficient. Designs for a new tunnel, 21 feet in diameter, show that they can comfortably accommodate two containers side-by-side, with a one-foot gap between them.
The Boring Co.’s new drilling machine, dubbed Prufrock, can tunnel at a rate of one mile per week, which is six times faster than its previous machine, and is designed to ‘porpoise’ - mimicking the marine animal by ‘diving’ below ground and reemerging once the tunnel is complete.
Tesla’s supply chain woes
Tesla is facing its own supply chain and logistic issues. The EV manufacturer has raised the price of its vehicles, with CEO Musk confirming the incremental hike was a result of “major supply chain pressure”. Musk replied to a disgruntled Twitter user, confused as to why prices were rising while features were being removed from the cars, saying the “raw materials especially” were a big issue.
Car manufacturing continues to be one of the industries hit hardest by a global shortage in semiconductor chips. While China’s chip manufacturing levels hit an all-time high in May, and the US is proposing a 25% tax credit for chip manufacturers, demand still outstrips supply. Automakers including Volkswagen and Audi have again said they expect reduced vehicle output in the next quarter due to a lack of semiconductors, with more factory downtime likely.
Top Image credit: The Boring Company / @boringcompany