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Establishing supply chains in emerging markets

Supply chains in emerging markets

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Per Enggaard Haahr

Per Enggaard Haahr

Head of Department, Civil Engineering

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The most widely used definition of sustainable development is Brundtland’s 1987 definition: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” This definition of sustainability is highly relevant in specifying the relationship between developers and supply chains in emerging markets.

In other words, supply chain development in emerging markets relies on long-term economic, social and cultural aspects. In our view, this is the coming together of all three aspects defining the foundation of successful supply chain development. Moving towards emerging markets is a challenge that also brings plenty of opportunities for global collaboration. Different countries will contribute in various ways and their cultural diversity is important when setting local content targets.

However, in the current financial climate, developers are increasingly expected to deliver successful offshore renewables projects on fast track schedules, while also lowering the cost of energy. Project risks must be considered throughout the lifecycle, from tender to construction and operation, remembering that risks increase greatly in supply chains which have little or no experience.

A spirit of partnership
The question remains: How can the wind industry enter a new market and develop the local supply chain when skill shortages exist and still decrease the cost of energy? The answer lies in devising ‘win-win’ solutions in a spirit of partnership. We are responsible for harmonizing our aims and developing cooperation and trust between all parties, to achieve the common goal of delivering projects on time, within budget and avoiding risks. This way, the whole industry wins. This is the way ahead – a “team” working with mutual objectives can complete a project within budget and on time.

Partnerships between developers and local supply chains benefit from more open relationships based on trust and cooperation, changing attitudes and altering the way project team members deal with each other. Working together through long-term relationships to improve sustained performance, teamwork, eliminate waste and share the gains.

In the UK, the offshore renewables industry has learnt from the oil and gas industry’s Cost Reduction Initiative for the New Era (CRINE) which reduced costs on gas field developments by 40%. In the last 10 years, offshore wind has made huge progress in cutting construction, operation and maintenance costs. Setting realistic local content targets, combined with continuous training and improved procedures to address skill shortages, is the only way to deliver continuous improvements and share success.

Flourishing projects
There is no doubt that the industry needs to educate supply chains to help them enter emerging markets and differentiate between best value and lowest price. One example of a successful, developing supply chain with flourishing projects is seen in Taiwan. Developers are partnering local supply chains with well-known European supply chains to promote knowledge transfer and sustainable long-term collaboration. DNV GL is also engaged with local companies and the government to promote offshore renewables knowledge transfer through training and joint industry projects (JIPs).

When developing any local supply chain in emerging markets, standardization is another issue to consider. For the industry to attain global success, it is important to have a standardized approach and tailor it to local specific requirements. If a supply chain adopts very localized conditions, it may not be sustainable long-term as it will not match recognized global industry standards.

In conclusion, what Sir Michael Latham said over two decades ago in his UK Constructing the Team report is still valid today for developing supply chains in emerging markets: “above all it needs teamwork”. Cross-collaboration between mature and emerging markets is key for the success of sustainable supply chain development.

Let's talk!

Per Enggaard Haahr

Per Enggaard Haahr

Head of Department, Civil Engineering

Please click the link below to get in touch

Contact me