Logistics and Supply Chain Management, 4th Edition

Emerging mega-trends

Of the many emerging trends that will affect the shape of supply chains in the

future, perhaps the most critical are those to do with demographics and changes

in global spending patterns.

Some of these demographic and wealth redistribution changes include:

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A projected increase in the world’s population from somewhere in the region

of 7 billion today to over 9 billion by 2050. At the same time age profiles are

changing differentially across countries and regions and this combined with

cross-border migration means that some countries’ populations will grow

whilst others will shrink. As a result, spending patterns are likely to change,

causing some markets to expand and others to decline.

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The United Nations reports that already today half of the world’s population

currently live in urban areas and by 2050 about 70 per cent will be city

dwellers. The growth in the number of ‘mega-cities’ – defined as having

a population of over 10 million people – will continue as the move from

rural to urban areas accelerates. The challenge of serving these massive

conurbations will require an increased focus on ‘city logistics’ with city-

specific supply chain solutions.

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The trends towards a redistribution of wealth from the western world to the

newly emerging economies will continue. For example, it is estimated that

over the next 20 years the US’s share of worldwide wealth will slip from 28 per

cent to 24 per cent and that during the same time, Asia’s share of the global

market will almost double – meaning that it will account for over 50 per cent of

the global economy by 2030. The middle classes in the emerging economies

are likely to increase from 400 million in 2010 to over 1 billion by 2030.

The combined impact of these demographic and wealth distribution changes

may well make existing supply chain arrangements less than optimal. Businesses

that have established production and supply arrangements designed to serve the

‘western-centric’ demand patterns that prevailed in the past may need to sub-

stantially reconfigure their supply chain networks to take advantage of the rapidly

developing markets of Brazil and India, for example. To illustrate the dramatic

changes in global spending power already apparent, it is estimated that Asia

accounts for around one third of worldwide retail sales, including 35 per cent of all

car sales and 43 per cent of all mobile phones.

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In addition, the geographical loca-

tion of supply of many commodities could change as traditional sources may no

longer be viable. For example, it is quite possible that because of climate change

the patterns of global food production will alter quite dramatically. In other cases

the relative costs of extracting and producing raw materials and basic commodi-

ties could change radically between countries, making some traditional sources

uneconomic.

LOGISTIC S & SUPPLY CHAIN MANAGEMENT

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