emerging market retail supply chain

8/13/2019 Emerging Market Retail Supply Chain

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Abstract

Consumer-driven companies eyeing the pot of gold at the end of the emerging

market rainbow face a wide spectrum of challenges in reaching it. Demand and

competitive dynamics, fragmented supply chains and complex logistics are some

of these. To add to these, visibility is even harder to achieve in diverse emerging

markets that are at various technology maturity levels in terms of business

processes and execution. Adopting a demand-driven strategy that gears the entire

supply chain to actual consumer demand can help better sense and respondto consumer purchases and behavior. In light of the considerable opportunities

these markets offer, companies that put in place a demand-driven supply network

for retail execution in such markets with the right strategy, technologies and

implementation will emerge ahead of the pack.

Your Emerging Market Retail Supply Chain:Is it Demand Driven?

VIEWPOINT


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Adoption by

distributors

Maturity ofERP system

Systemreadable

input dataformat

Follow-upcalls to send

data

SLA

adherenceto send data

Multiple

changes inagreed

format

Data quality

Marketmetadata

variance

India China Russia LatinAmerica

Africa MiddleEast

**Dimensions

In Chinareadiness for

adoption washigher

Multiple ERPsystems in India

with varying levelsof maturity

In India there are

varying file formats.China formats are

more consistent

System and manual

follow-ups andreminders are typically

required higher in theinitial few cycles

SLA compliancemoderate to start and

improved over a periodof time

Formats were

changed frequentlyduring the initial few

cycles. Stabilizedafter few cycles

Measured throughrejected files or

records based onbusiness rules set-up

Metadata like

hierarchies were seento moderately vary

across countries

For e.g.

Introduction

Emerging markets can prove to be

veritable gold mines for consumer-driven

product companies that face slowing

growth in developed markets. Mining

that gold profitably, however, is a whole

new ballgame compared to their existing

operations.

Even in developed markets, consumer-

driven companies are today grappling

with fast-changing consumer demand,

availability of a wide range of alternative

and substitute products, and shortened

product lifecycles. This is true across

consumer packaged goods (CPG),

fast-moving consumer goods (FMCG),

pharmaceuticals and medical devices,

consumer electronics, and high-tech

equipment.

Measures like moving manufacturing to

low-cost locations improve margins is

extending already stretched supply chains.

To add to the complexity, organizations

must work with a wide and ever-growing

network of partners to improve operational

efficiencies. Managing raw materials

and energy procurement costs in such a

scenario is another monumental challenge.

In emerging markets, the opportunities are

immense they account for 40% of sales

and 60% of growth for CPG companies.

However, the challenges of retail execution

too are magnified manifold. These markets

are typically characterized by economies

that are opening up, young and growing

populations driving a new consumption

culture, low value but high volumes of

transaction, and intermediary-driven

fragmented supply chains.

As more companies turn to these regions

for future growth, there is clearly a strong

case for better understanding emerging

markets, improving visibility and reach, and

supporting government initiatives such

as financial inclusion drives and health

coverage.

It is critical to put visibility on priority

especially in such multi-level fragmented

supply chains considering the low

margins involved a couple of missteps can

erase the profitability of an operation. The

upside is that companies can build a strong

physical supply chain in such markets

without owning most of it given the coststructures involved, very often there is a

surfeit of intermediaries willing to handle

part of it for relatively modest returns.

Retail in emerging markets

The innovative approach in these markets

involves taking this diverse and

fragmented physical infrastructure and

putting on top of it a highly evolved

information technology infrastructure

to ensure enhanced visibility, agility and

reach.

A word of caution: Even with similarities

between the emerging markets, there are

stark differences in the business processes

and execution across different markets

such as India, China, Russia, Latin America,

Africa, Middle East, etc. The table below

shows the technology maturity levels of

retail supply chains in these developing

economies.

Table-1: Technology maturity levels in developing and emerging markets based on

experience


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To capitalize on the opportunity presented

by these markets, consumer-driven

product companies need to optimize

business processes such as demand

visibility and planning, supply chain

optimization, order and claim (dispute)

management, product management,

trading partners operations, channel

management, product promotions, loyalty

management, buyer space integration,

payment gateway services, mobile

payments, digital promotions, and mobile

financial services. While technology

solutions are available to drive these

initiatives, successful implementation

requires customizing global best practices

to meet local compliance requirements

and providing flexibility for multi-

country processes, languages, reporting

requirements, and currencies.

Such technology initiatives can deliver

tangible results such as increased order

fill rates to stores, ability to execute trade

plans tailored to different channels,

improved effectiveness of the field sales

teams, and reduced un-productive costs

(e.g., distributor inventory) across the value

chain.

In todays regime of shortened product

lifecycles, an organization can end up with

costly inventory or lost revenues owing to a

mismatch between demand forecasts and

the order fulfillment processes potentially

fatal for fledgling operations in developing

markets. Hence it is critical for distributors,

retailers, vendors and manufacturers to

work cohesively in order to prevent stock-

outs or expensive inventory pile-ups.

A Demand Driven Supply Network (DDSN)

ensures that all supply chain activities

are based on actual consumer demand.

By adopting this strategy, companies

can accurately sense and respond to

actual consumer purchases and behavior,

resulting in lower inventory management

costs. It also ensures that the consumer

finds the right product in the right place at

the right time.

Experts see demand-driven retailing as a

system to continuously capture consumer

behavior through technologies and

processes. By aligning demand, supply and

product to fulfill customer expectations, it

helps improve operational performance. It

further enables quick response across the

entire network.

Further, organizations can optimize the

entire front-end value chain system

(CPG-Distributor-Retailer), increase sales

and release precious capital for market

expansion.

Demand-driven approach to

retailIndustry research shows that organizations

that adopt demand-driven retail have

demonstrated success in understanding

and responding to consumer demand

signals, building value networks, and using

the supply chain to support product and

services innovation.

To manage uncertainty, especially in hard-

to-predict emerging market scenarios,

businesses need to enhance their ability

to anticipate and respond to unplanned

events. This necessitates evolving the

supply chain strategy from push to pull

driven. Organizations that develop the

capabilities to redistribute, reallocate and

reroute inventory in response to real-time

consumer demand will emerge as industry

leaders.


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For new operations in emerging markets,

such issues can imperil the entire initiative.

DDSNs can address these challenges that

consumer product companies face today.

They help empower local leadership to

respond to changing market conditions

through better coordination between

sourcing, manufacturing, distribution,

and warehousing. They make actionable

insights available across the entire value

chain.

Leveraging collaboration and workflow

tools, DDSNs facilitate joint planning and

execution with upstream suppliers and

downstream customers. This enables

organizations to receive timely data from

distributors with the desired accuracy, to

deliver the market insights for decision-

making.

An effective DDSN will provide companies

with the following capabilities:

DDSN for your emerging

market operations

Consumer-driven product companies need

to maintain very high service levels. This

is because consumers will not wait if their

preferred product is not on the shelf. They

will simply go to another retailer or choose

a competitors product.

Industry data shows that reduced demand

visibility at retail stores leads to out-of-

stocks, higher markdowns, sub-optimal

product allocation, and higher product

returns. It is worth considering that:

Nearly 30% of out-of-stocks leads to

CPG manufacturer losses

Nearly 45% of out-of-stocks leads to

retailer losses

Connected front-end supply chain that

provides consumer product companies

timely and improved channel visibility

services such as demand, paired with

actionable insights

Smart selling aids that enable the

frontline sales force to carry out a

perfect sales call at each point of sale Optimized trading partners operations,

all with ability to rapidly expand

services as well as coverage

Mobility solutions to expand reach and

improve services

Data consolidation from multi-tier

distribution channel partners

Validation and reconciliation of

consolidated sales and inventory data

Enriched POS data with granular view

of reseller and end user records

Managing and enabling channel

incentive programs

Driving loyalty for value chain partners


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Engage with digital

consumers and evolving sales

channels

Mobile devices have become the preferred

medium for almost all interactions, from

social networking and sharing information

to shopping and entertainment. Digital

consumers have embraced the Internet,

telecom, media and social space, changing

how they communicate, transact and make

purchase decisions. This new breed of

active, informed and assertive consumers

are making themselves seen and heard

by their need for participation and

uniqueness. A successful DDSN strategy

cannot afford to ignore or treat them

lightly.

Organizations must adapt to the newdigital media to acquire such consumers

ahead of the competition. Further, merely

acquiring these consumers is not enough

winning their loyalty is a major challenge

for many businesses.

By enabling self-service mechanisms,

offering personalized products, customized

service, and rich experience, businesses

can redefine the rules of engagement.

Engaging successfully with the digital

consumer offers the following businessadvantages:

Better integration and collaboration

with consumers and partners based on

consumer insights

Improved supply chain visibility and

efficiency

Improved service levels

Increased revenue growth

Financial inclusivity for consumers

Global, scalable managed service

offerings


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Conclusion

Emerging markets hold the promise of

enormous opportunities for consumer

product companies. They also present

significant challenges in terms of retail

execution. Fragmented physical supply

chains and limited visibility can be serious

obstacles for companies considering

expansion in such markets.

Many CPG companies have poor or no

visibility into the demand and inventory

at intermediaries which is crucial for

success of demand-driven supply network.A well thought-out strategy to build a

demand-driven supply network (DDSN)

on the back of new technologies with the

right implementation approach can help

overcome these challenges.

An effective DDSN spans the entire supply

chain from manufacturing, warehousing

and logistics, to promotions, distribution,retail and consumer touch-points including

digital and social media. It enables

clear visibility into consumer needs and

behavior, accurate demand forecasting and

efficient product lifecycle management.

A well-implemented DDSN drives greater

collaboration across the entire supply chain

and helps companies:

Reduce cost through productivity

enhancements

Reduce cycle times for processes such

as order acquisition

Reduce inventories in chain to increase

stock turn-around

Standardize terms of trade with trading

partners

To successfully implement DDSN initiatives,

consumer product companies need to

consider the following factors carefully:

Implementing IT systems and

facilitating data synchronization

Deploying global solutions serving

local market needs at various levels of

maturity

Defining processes that use time-

phased planning methodologies across

the supply chain

Using demand estimates for operations

and strategy planning Creating agile supply chain processes

to enable quick response to demand

changes

Establishing control of processes and

activities between CPG manufacturers

and retailers


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About authors

Sanjay Nambiar,

MicroCommerce Platform Head, Global Markets - Infosys

Sanjay has 17+ years of experience in various roles across Strategy, Consulting, Technology Implementation, Execution of

business outcome services and Sales. He currently leads the MicroCommerce business platform team at Infosys. He has

been instrumental in setting up and running the business platform service by enabling digitization of the order-to-cash

value chain in the micro commerce space.

Bhupesh Luthra,

Principal Consultant Business Platforms, Infosys

Bhupesh has more than 13 years of consulting experience in retail, CPG, logistics, and distribution processes across multiple

industry verticals. He has functional expertise in retail execution, front-end supply chain, demand planning, and secondary

sales visibility solutions across emerging and developing markets. He is currently leading the business platforms consulting

team responsible for incubation and adoption across retail, CPG, manufacturing, hi-tech, automobiles, pharmaceuticaland consumer product driven companies. He provides guidance for platform roll-out and implementation across multiple

clients and the expansion of platform services to leading consumer product-driven companies across industry verticals.


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