What The New Global Middle Class Is Doing To Your Supply Chain

Posted by Joerg Koesters in SAP for Retail on Jul 16, 2014 12:43:27 PM

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Question: What do you get when you take millions of people in emerging markets that are rising to the “middle class” and add them to a millennial generation with a voracious appetite for consuming products, services and gadgets?

Answer:  Supply chains under massive pressure.

Supply chains have never been as long or as complicated as they are today (Tweet this). The globalisation trend of the last two decades has meant that even smaller companies have had to build extended supply networks just to keep pace with growing demand in diverse locations.

In emerging markets as a whole, the middle class has grown from a third of the developing world's population in 1990 to over half today. The developing world is no longer simply defined by being poor. The buyers of today (and tomorrow) are the growing and increasingly well informed and connected global middle class who are not accustomed to having to wait for their needs to be met.

With many companies now trying to differentiate themselves by the responsiveness of their supply chains, the transition from a supply chain to a demand network has already begun (Tweet this). There will come a time in the not too distant future when supply chains will not be chains at all, but rather will transform into demand networks.  For this to happen, it means breaking down the silos and embedding supply chain functions directly into the most powerful functions of the company, such as merchandising, marketing, engineering, service, and logistics.

For example, industries such as retail, consumer products, and high-tech need to become much more tightly integrated with marketing and merchandising organisations. Logistics service providers or wholesalers should leverage market data and customer insights to create new products and services for their customers. Only then can companies unleash the real potential of demand networks, eliminate redundancies, create efficiencies, and introduce truly innovative and differentiating processes.

"The buyers of today (and tomorrow) are the growing and increasingly well informed and connected global middle class who are not accustomed to having to wait for their needs to be met"

Sounds good doesn’t it?  Most companies today aren’t there yet, but technology has gotten considerably easier to use in recent years and is having a huge impact. Mobile, in memory computing and cloud are making supply chain optimisation and efficiency much easier now than in days gone by, but you still have to get your house in order with the right processes for integration, collaboration, transparency, traceability and sustainability.

As a business you need to plan, but chances are you also need to adjust those plans due to unexpected surges or shortfalls in demand and changing supplier capabilities. With the right tools, you can now automatically examine alternative scenarios. After the right response is determined, a history of the logic that went into why that is the best of different alternative responses can be stored. This type of advanced visibility is changing the way we think about supply chain agility and innovation, and the insights we can gain into how our supply chains are performing.

Leveraging the wealth of performance data about the supply chain enables real time analysis, provides insight into fragmented business processes and achieves a deeper level visibility.  Not all companies are ready or able to transform their supply chains into demand networks as yet, but they can certainly transition from management by exception to management by information.