Independent research by University of Mary- land supply-chain lecturer Lisa Harrington has revealed that technology, or tech, com-panies should look at dramatically overhauling their existing African supply-chain strategies to meet the demands of an emerging, volatile consumer market.

A White Paper, titled ‘Path to growth: Shaping tech sector supply chains in emerging markets’, which was compiled by Harrington and com-missioned by global logistics provider DHL, made it clear that a “regionalised global supply chain” model was emerging as the new paradigm to meet global shifts in demand in developing regions, such as Africa.

“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. There is no homogeneous emerging market or approach.

“As a result, capitalising on growing consumer demand for technology products requires a supply chain designed specifically to meet the inherent challenges of new rapid-growth markets,” noted Harrington.

She added that three trends, in particular, characterised the challenges and opportunities for the tech sector in emerging markets – the increasing regionalisation of supply chains, shortening product life cycles and shifting demographics.

Elaborating on these trends, the report observed a shift in production and consumption as the attractiveness of emerging markets continued to grow.

For example, in 2006, some 25% of mobile phones were produced in high-income countries, but, by 2010, that figure had reduced to 18%.

“Trade flows have conventionally been long-distance and east-west orientated, but these long-distance supply chains are being replaced, at least partially, by shorter, regionally-based trade flows to meet the new global demand and
changing market dynamics.

“The regionalised global supply chain, in which goods are produced, sold and consumed in the same geographic region, is emerging as the new paradigm,” DHL Supply Chain Technology spokesperson Ewan Shannon told a media briefing in Johannesburg last week.

The challenge of meeting this regional demand, while managing short product life cycles, the report added, made the tech sector an “ideal” candidate for the adoption of nearshoring or onshoring.

In this practice, companies shifted their manu-facturing bases closer to the end-consumer in an effort to reduce risk and transportation costs, and improve customer service cycle times – while avoiding increased labour wages in China.

“For example, Nokia and Samsung have recently announced they will be building warehouses in Vietnam instead of China, while Apple is moving [its] production facilities from China to Texas, in the US,” said Shannon.

Meanwhile, as product life cycles in the tech sector were short “and becoming shorter”, Harrington said manufacturers were increasingly introducing new or improved products to stay a step ahead.

“As a result, many segments of the sector behave much like the fashion business, where obsolete product means markdowns, margin erosion and a potential loss of market share,” she explained.

Additionally, by 2025, yearly consumption in emerging markets was expected to reach $30-tril- lion, which, combined with a stream of new prod- uct introductions, carried “profound” implications for the tech sector, with the “constant” introdution of new products placing additional stress on tech supply chains.

Long lead times for products being manu-factured in emerging markets, combined with dynamic global consumer demand could quickly lead to product obsolescence.

“As a result, companies must have supply chains that are agile enough to fully support rapid new product roll-outs and ensure the maximisation of their profit opportunity window,” Shannon advised.

The report further said that two demographic trends that were positioning emerging markets at the forefront of the tech sector’s future were the rise of the global middle-class and urbanisation.

By 2030, all developing regions, including Asia and Africa, were expected to have the majority of their citizens living in urban areas and virtually all population growth over the next 30 years was predicted to occur in cities.

While Harrington believed urbanisation and the rising middle-class represented a “huge” opportunity for tech company supply chains, these firms would need to be prepared to fulfil rapidly growing and highly volatile demand patterns and be willing to operate in a complex environment characterised by inadequate infra-structure and divergent regulatory requirements.

“Tech companies must also be willing to hedge their bets regarding inventory-carrying decisions to ensure supply and avoid obsolescence,” Shannon added.

To capitalise on the opportunities offered by emerging markets, the report advanced, tech companies would be required to create supply chains that were flexible, scalable, cost effective and risk tolerant.

In addition, firms should prioritise compliance and quality from the onset and avoid a “one-size-fits-all” market approach.

Network and operational agility would become key differentiators for best practice technology supply chains, with this “agile” approach revolving around being “asset light”, but with access to capacity when and where it was needed, typically through partnerships with logistics service providers.