Mapping Tomorrow’s Expectations
If you want to get an idea of where the future demand for supply chain management services could come from, a good starting place is the industries that are likely to create that demand.
A recent analysis by the McKinsey Global Institute (MGI) offers an intriguing picture of global productivity patterns, and where the main growth opportunities might be over the next few decades.
The authors describe a key driver of growth that you might or might not be aware of: shifting demographics across the world.
Over the last 50 years the world economy has been pushed along by a demographic tailwind, they argue. This force is now fading as a result of aging populations and falling fertility rates.
MGI research suggests “that unless increases in labor productivity compensate for an aging workforce, the next 50 years will see a nearly 40 percent drop in GDP growth rates and a roughly 20 percent drop in the growth rate of per capita income around the world.” Canada and Germany look set to experience the largest fall offs, and among developing countries Saudi Arabia, Mexico, Russia, and Brazil are most at risk.
But there is some good news as well. In the countries studied by MGI, some 75 percent of the productivity gains required to offset the slow down through 2025 are within reach. To achieve these improvements, countries need to improve the performance of laggards in both the public and private sectors. The potential for catching up is especially strong in emerging economies.
Here are the sectors that could deliver these gains according to MGI.
Agriculture. Taking advantage of mechanization and scale could more than double productivity in emerging economies. In developed countries, which have already embraced these methods, further improvements are possible by harnessing technologies such as precision sensing.
Food processing. Overall productivity in this sector could increase by an estimated 59 percent mainly in developing countries through operational improvements such as the implementation of lean manufacturing.
Automotive. Although this industry already boasts relatively high rates of productivity, there are significant regional variations. India and China lag behind, and MGI estimates that overall productivity could be hiked by as much as 90 percent if the laggards adopt new methods such as improved manufacturing processes.
Retail. Although retailing is a large employer, its productivity is 30 percent lower than the average across all sectors, says MGI. Areas where improvements can be realized include the adoption of new technology and processes, and closing the gap between the high and low performers in specific formats.
Healthcare. Total healthcare spending is rising faster than global GDP, points out MGI. There are opportunities to cut spending by a quarter by 2025 without compromising health outcomes. For example, adopting best practices in operations and procurement and developing innovative delivery models could narrow the gap between low-performing countries and the leaders.
Of course just because these opportunities to lift productivity levels exist does not mean that countries will take the initiative and implement the required changes, MGI acknowledges. And there is considerable debate over how much growth should be targeted and the price societies will pay for raising the performance bar.
“Yet without growth, the world is a poorer place – and fulfilling social and debt commitments becomes harder,” says MGI.
The analysis offers much food for thought in terms of where supply chain management expertise will be needed in future decades, and how the profession can help countries to capture the productivity improvements they need. Regardless of how nations and industries respond, it appears that supply chain management has an important role to play.
 Where to look for global growth, Richard Dobbs, Jaana Remes, Jonathan Woetzel, McKinsey Quarterly, January 2015.