Emerging markets more mature in SCM use

Businesses in emerging markets such as China and Brazil utilize supply chain management more effectively to improve business processes and revenues compared to their counterparts in matured markets, analyst says.
Written by Kevin Kwang, Contributor

SINGAPORE--Companies in China and Brazil are changing the face of supply chain management (SCM) as they are more likely to align such processes to boost their business rather than to control costs, an analyst observes.

Kevin O'Marah, group vice president of research at Gartner, noted that Chinese companies topped a recent survey where 23 percent of respondents in the country said the top priority of their SCM departments was to "enable innovation and top-line growth". Comparatively, 14 percent of U.S. companies replied similarly while the U.K. came in last at 6 percent, O'Marah said at a media briefing held here Wednesday along the sidelines of SAP's SCM Logistics World 2010 conference.

A total of 444 companies across seven countries--the United States, United Kingdom, China, Brazil, Australia, Germany and Japan--were polled for the study.

Additionally, O'Marah noted that the emerging markets of China and Brazil are leading the charge in aligning SCM as a key business driver for companies with a manufacturing base. In Brazil, 93 percent of all SCM heads report directly to the CEO, president, managing director or general manager, while China came in second with 87 percent, he added.

The same could not be said for Japan, Germany and the U.K. where only 48 percent, 52 percent and 60 percent of SCM leaders, respectively, report to their company's decision makers, the Gartner analyst said. Globally, on average, 68 percent of SCM heads report to their CEO, president, managing director or general manager.

O'Marah said: "SCM processes are evolving more quickly in emerging markets than Western countries and other matured markets, and increasingly, the mission of supply chain is extending beyond cost control to broader business goals."

Elaborating on how IT is aiding the transformation of the industry, the Gartner analyst said technologies that help improve business-to-business (B2B) connectivity are the top investment focus among companies today. These rank above software that focuses on integrating customer demand and inventory management and other tracking mechanisms into a single management tool, he added.

However, he said investments in IT without an equivalent focus on improving business processes will always "end up being a negative investment".

He explained that investing in processes alone will generally see a bump of 2 percent in revenue, while an investment in technology will tend to yield no increase. Pair them up, though, and companies can clock an 8 percent spike in revenue, O'Marah noted.

Mark Averskog, director of global line of business sales for SCM, product lifecycle management and manufacturing for SAP's global field organization, added that there are differences in the IT investment pattern of multinational companies that have satellite offices in Europe, U.S. and Asia-Pacific.

Averskog, who was also at the briefing, said in the Asia-Pacific region, investments tend to focus on bolstering the infrastructure and bandwidth capabilities of the company's offices, whereas Europe and U.S. offices will already have "sophisticated technology" and investments will be made to maintain and enhance existing systems.

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