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What Population Changes Mean for the Global Supply Chain

Demographic shifts that vary by geographic region will transform supply networks in the coming years, says Fariborz Ghadar of the Penn State Smeal College of Business, and supply chain professionals should keep these shifts in mind as they plan for the future.
January 21, 2013

Fariborz Ghadar
Fariborz Ghadar

Demographic shifts that vary by geographic region will transform supply networks in the coming years, says Fariborz Ghadar of the Penn State Smeal College of Business, and supply chain professionals should keep these shifts in mind as they plan for the future.

Ghadar, the William A Schreyer Professor of Global Management, Policies and Planning, and his colleagues at the Penn State Center for Global Business Studies predict a strengthening of supply chains in emerging markets and an increase in specialized supply chains due to population growth and increased urbanization in developing countries as well as aging populations in developed countries.

Ghadar’s article, “The Changing Winds of Population Growth,” appeared in the August 2012 edition of Inside Supply Management and is based on research conducted at the Penn State Center for Global Business Studies, of which Ghadar is the director.

Differential Population Growth

Birthrates are growing steadily in developing countries and falling in developed countries. As the center of production moves toward areas with growing populations, such as Asia, Africa, and the Middle East, supply chains will change dramatically due to regional trade and investment in those areas.

These growing workforces and expanding trade patterns are giving rise to the “global middle class,” which will also have supply chain implications. Per-capita consumption of livestock products is increasing in emerging economies, and the supply chain will have to factor in the refrigeration needs of increased meat and dairy consumption.

Urbanization and Growth of Megacities

Workforce and labor opportunity growth in developing areas will set off a chain reaction of development, according to Ghadar, including increased urbanization. He also indicates that immigration policies will encourage more citizens of developing nations to return to their home countries after college.

This growth will tax existing infrastructures and create new development needs, including distribution and supply nodes. For example, the delivery industry will have to work with more localized carriers. The transportation infrastructure in these emerging markets won’t support the large trucks owned by dominant companies like DHL and UPS.

Aging of Certain Populations

Developed countries must take action to remain competitive at home. As their populations live longer and have fewer children, labor forces will shrink, negatively affecting national productivity.

But, says Ghadar, businesses can use this as an opportunity to create employment opportunities for older workers and create new technologies to enable higher productivity at an older age.

At a Glance

Fariborz Ghadar writes about the global supply chain implications of an increasing population that is growing at differential rates across the globe. Key highlights include:

  • Supply chains in developing countries and specialized supply chains must be strengthened to prepare for future population trends.
  • The population is growing at a faster rate in developing countries; growing workforces will take production toward these emerging economies, and increased refrigeration will be needed to accommodate the food shifts of the growing “global middle class.”
  • Increased urbanization in developing countries will require investment in infrastructure, including distribution and supply nodes.
  • The populations of developed countries are living longer and having children at a slower rate. To stay competitive, businesses must innovate ways for older generations to remain productive.
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