WHY NOT TO MAKE ASSUMPTIONS ABOUT DELIVERY IN MEGACITIES

Adapting existing distribution models is not enough and can be a costly mistake.

13.10.2016

NirmalThakkar, SCM.dk

In many developing countries, economic growth has created a sizeable middle class with money to spend on items beyond the first necessities of living. For brands that have proved successful in mature markets, the urban areas of these countries in particular are attractive targets for expansion and growth. But one would be wrong to think that logistical solutions for megacities can be found by upscaling existing models. Mumbai is not the Indian version of New York City.

Attractive potential markets for global brands

The global trend of urbanisation is reflected in the growing number of megacities (usually defined as urban areas with a population over 10 million). In 2015 the world counted 34 megacities, and 26 of them were to be found in developing countries.

While the average income in emerging market countries is still much lower than in mature markets, there also is a segment of the population benefiting from the economic development and eager to show it by buying luxury goods from global brands. In a city of many millions, even a few percent of the population represents a large number of potential customers. It is no wonder, then, that Western brands are eager to gain a foothold in this environment.

Adapting existing distribution models is not enough

For marketeers entering a new market it is routine to develop a marketing strategy adapted to the situation, even for an existing, unmodified product. Supply chain managers may be tempted to take an easy approach by starting from existing distribution models and tweaking them a bit to fit the characteristics of the particular location. After all, delivery remains delivery and a distribution centre is a distribution centre.

Unfortunately we have never seen this approach meet with success. It comes closer to a recipe for disaster, because it doesn’t take into account the multitude of large and small differences that can wreak havoc on the supply chain if not addressed properly.

Population density and infrastructure

To illustrate how divergent urban distribution environments can be, we will focus on two major characteristics: population density and traffic infrastructure. In emerging market cities, population densities can be much higher than in mature markets – consider Mumbai, with over 29,000 people per square kilometre, and New York City, with just over 2000. Also, because the average store is much smaller in emerging markets, the number of stores is higher and the average shipment size considerably smaller, so that the scale of logistics operations in emerging markets is fragmented when compared to mature markets. This explains why, for example, roughly 25% of the cost of goods must be attributed to transportation in Latin America and only 5% in North America.

Urban authorities in emerging market countries have many problems to deal with, and creating a transportation-friendly environment is usually not a top priority. Even if it were, realising infrastructure changes is a matter of several years if not decades. Today’s reality is one of congestion and delays.

Shred all assumptions

Developing a distribution network based on invalid parameters can be a costly mistake. One way to avoid that mistake is to start from scratch and rigorously check every single assumption. For companies that don’t want to take the time and to devote the resources required for this process, there also is the option to team up with a logistics provider who already has a local presence, knows the challenges, and is experienced in dealing with them.

If you are considering an expansion into emerging markets and have any questions about your distribution network, our experts will be happy to support you. Please get in touch with your local Damco office here.

Are you interested in more ways to avoid risks and reduce your supply chain costs? Then you can download our recent white paper Six ways to lower your logistics costs (without compromising on speed or quality)here.

amfori a.i.s.b.l.

Sponseret

Du kan ikke styre det, du ikke kan se: Håndtering af miljømæssige risici i globale forsyningskæder

Consafe Logistics

Sponseret

[Webinar] Smarter warehouse automation – lessons from a global retailer

Relateret indhold

11.11.2025SCM.dk

Nu sker det: Industriens brug af elektrificering oplever gennembrud

11.11.2025Delfi Technologies A/S

Sponseret

Genbrug på autopilot – nemt og smart

10.11.2025SCM.dk

Dansk Industri samler kræfterne for et stærkere beredskab

10.11.2025SCM.dk

ESG i forsyningskæden kræver solidt greb om scope 3

07.11.2025SCM.dk

Droner og betalingskaos får danskerne til at tage kriseberedskab alvorligt

07.11.2025PALOMAT

Sponseret

Slip for tunge løft – gør arbejdsmiljøet smartere med PALOMAT®

07.11.2025SCM.dk

Højesteret sår tvivl om Trumps toldpolitik

07.11.2025SCM.dk

FN slår fast: Målet om 1,5 graders opvarmning er tabt

Hold dig opdateret med SCM.dk

Tilmeld dig nyhedsbrevet og følg med i alt som rører sig indenfor ledelse af forsyningskæden, Nyhedsbrevet kommer kun to gange pr. uge.

Se flere temaer

Events

Se alle
DNV Business Assurance Denmark
Kursus
Auditorkursus i kvalitetsledelse

Formålet med kurset er at få et grundigt kendskab til de værktøjer og auditprincipper, der skal anvendes af auditorerne, for at virksomheden får det optimale udbytte af virksomhedens kvalitetsledelsessystem efter DS/EN ISO 9001:2015 og den interne audit.

Dato

12.11.2025

Sted

Odense

Dansk Standard
Kursus
Introduktion til standarden DS 21001:2025 – Ledelsessystemer for jernbanesikkerhed

Standarden DS 21001 for jernbanesikkerhed er blevet opdateret og udkommer nu i en 2025-version. På dette 1-dagskursus præsenteres den nye standard og de væsentligste forskelle til versionen fra 2020.

Dato

13.11.2025

Tid

09:00

Sted

Kosmopol, København K

Dansk Standard
Kursus
Introduktion til standarden DS 21001:2025 - Ledelsessystemer for jernbanesikkerhed

Standarden DS 21001 for jernbanesikkerhed er blevet opdateret og udkommer nu i en 2025-version. På dette 1-dagskursus præsenteres den nye standard og de væsentligste forskelle til versionen fra 2020

Dato

13.11.2025

Tid

09:00

Sted

Kosmopol, Fiolstræde 44, 1171 København K

Dansk Standard
Kursus
Functionel safety - ISO 13849

Dette kursus handler om konstruktion af sikkerhedsrelaterede styresystemer i henhold til ISO 13849-1.

Dato

13.11.2025

Tid

09:00

Sted

3S, Fredericia

Roima Intelligence
Webinar
Webinar: SCM + WMS accelererer modebranchens time-to-market

På dette webinar sætter ROIMA og e-SCM Solutions fokus på, hvordan samarbejde og udveksling af data på tværs af forsyningskæden er altafgørende og viser, hvordan moderne SCM- og WMS-løsninger i samspil kan accelerere time-to-market.

Dato

13.11.2025

Tid

11:00

Sted

Microsoft Teams

RELEX Solutions
Webinar
Webinar: Beyond the Blind Spots: AI-Powered Merchandising That Actually Works

Join RELEX and Suzy Monford, CEO of Food Sport International, to learn how AI-powered merchandising helps retailers detect shifts earlier, act more quickly, and ensure every decision counts.

Dato

13.11.2025

Tid

18:00

Sted

Online