Growth Opens for High-Tech in Emerging Markets

As wages rise in emerging markets, and the global middle class continues to grow, heightened demand for high-tech products worldwide is expected to follow. In fact, according to UPS's 2012 Change in the (Supply) Chain Survey, this gradual shift toward emerging market demand is anticipated to impact the high-tech supply chain within the next three to five years.

With more middle-class consumers demanding access to high-tech goods overseas, companies will be faced with reevaluating their supply chains and designing distribution models to accommodate the rise in demand in new and existing markets.

Today, 97 percent of US-based high-tech companies currently fulfill or sell their products in North America, making it the largest consumer market for high-tech products in the world, according to data from the 2012 survey, commissioned by UPS and conducted by IDC Manufacturing Insights. Despite North America's position as the leading market for high-tech fulfillment and sales, high-tech companies that only focus on demand at home could miss out on major market opportunities in the coming years.

What markets should companies have their eyes on for growth? High-tech fulfillment is expected to increase in multiple markets across East Asia, the Middle East, and South America over the next three to five years. Let's take a closer look at these high-opportunity areas.

• China: Within the next three to five years, China is expected to become the No. 2 high-tech fulfillment location just behind North America and surpassing Western Europe and Japan. Today, 80 percent of high-tech executives fulfill or sell products in China, but these numbers will increase to 88 percent by 2017.
• South Korea: Today, 69 percent of the survey respondents sell or fulfill high-tech products in Korea. However, this figure is expected to increase to 82 percent in the next three to five years.
• India: The number of high-tech executives reporting plans for selling and/or fulfilling product in India increases from 62 percent today to 84 percent over the next three to five years.
• Middle East and Africa: High-tech fulfillment is expected to grow in the Middle East and Africa from 36 percent who fulfill there today, growing to 58 percent who plan to in the next three to five years.
• South America: High-tech fulfillment in South America is projected to rise from 58 percent today to 77 percent in the next three to five years, with Brazil specifically seeing a change in fulfillment from 58 percent to 76 percent by 2017.

These numbers suggest, not only global market growth, but also market diversity, presenting both opportunities and challenges for US-based high-tech companies. The opportunity is, of course, to serve more customers in more regions of the world, where the market for high-tech goods and services will likely continue to grow. The challenge is to develop supply chain strategies to enable successful operations in multiple emerging markets, where many companies may not operate today.

Ignoring emerging market trends will not be an option for most growth-focused high-tech businesses. In order to prepare for the next three to five years, companies need to start examining their business and supply chain strategies to determine where they are today versus where they will need to be tomorrow -- and whether their supply chains are flexible enough to enable expansion.

Factors that determine high-tech supply chain flexibility include:

• Global transportation and distribution assets that enable service in target markets
• Access to multi-modal transportation options to balance cost efficiency and speed-to-market needs on a case-by-case basis
• Availability of existing third-party resources and assets in key regions to identify shared asset opportunities and limit fixed asset investment needs
• End-to-end visibility technologies across the global supply chain
• Supplier management strategies and resources
• Reverse logistics partners that can deliver products back to customers -- or to refurbishment or recycling centers -- while keeping service levels high and costs low
• Risk management strategies and plans that encompass every region where companies plan to operate in the future

Some third-party logistics providers can help high-tech companies evaluate their supply chains based on these factors and develop strategies and execution plans for delivering on new global business goals.

The most important thing to remember? Focusing on the right emerging markets at the right times can mean new and emerging business opportunities for high-tech companies.