Indirect procurement leaders have to face a number of changes in the industry – many as a result of globalisation – that are forcing them to quickly adapt to increased complexity in supply chains.
Part of this, a new report has suggested, is the growing middle class, particularly in emerging markets.
A survey of 547 executives by Ernst & Young, titled Innovating for the next three billion: The rise of the global middle class, suggests that the middle class is set to reach five billion by 2030, largely driven by movements in Asia and other rapidly growing markets.
Demand from this enlarged middle class is expected to grow from US$21 trillion (£13.3 trillion) to US$56 trillion by 2030, and indirect procurement managers will have to find new ways to deal with the rapid global growth and capitalise on it.
According to Ernst & Young, companies will need to create entirely new products and services in order to continue to innovate and grow. They will also be forced to shift away from their current focus at the premium end of high-growth markets.
“Companies need to think about fundamentally changing the way they work in order to take advantage of these changing demographics,” commented Maria Pinelli, global vice-chair in Strategic Growth Markets for Ernst & Young.
She highlighted the findings that by 2030, 40 per cent of spending among the middle class will take place in Asia. Currently, this stands at just ten per cent, showing just how much is expected to change in the next 20 years.
Focusing on the effect the expanding middle class will have on the procurement sector, Bill Delves, area leader of Asia-Pacific strategic growth markets at the company, told SupplyManagement.com: “Creating low-cost but high-quality products and services for the middle class in rapid-growth markets will require companies to innovate across the entire value chain.
“They will need to strip out costs, increase efficiency and establish highly productive relationships with key suppliers and distributors to ensure that they can meet the price points that lower-income customers can afford.”
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