Mega-Cities in Emerging
Markets Pose Special
A conversation with Edgar Blanco, research and executive director, SCALE Latin
America, MIT Center for Transportation & Logistics.
Part of the Engineering Systems Division of the MIT
School of Engineering, the Center for Transportation &
Logistics coordinates more than 100 supply chain
research efforts across the MIT campus and around the
world. Its goal is to educate not just students but corporate leaders in the essential principles of supply chain
management, and to help organizations boost productivity and decrease their economic and environmental
impact. SupplyChainBrain caught up with Dr. Blanco
at the 2011 Annual Conference of the Council of Supply Chain Management Professionals, in Philadelphia.
Q: Before we speak about the particular logistics
challenges that companies face in mega-cities in the
world’s emerging markets, let’s define just what a
Blanco: It is an urban area that usually has 10
million or more people in it. Currently, around the
world there are roughly 44 cities that meet that criterion. People in these markets represent close to 15
percent of the global GDP, and people within these
cities usually earn about 80 percent more per capita
than people do in the rural areas.
Q: So obviously you’re studying them because
they aren’t just big, but different in some kind of
way, I suppose.
Blanco: Why is it important to study this type of
logistics? These mega-cities, at least the majority of
them, actually are in emerging markets, not in the
developed economies. So they are the kind of environments that most companies, especially in the U.S.
and Europe, are not used to dealing with. They
already represent a big share of the GDP, but they will
continue to grow and probably double in the next 15
years. Any company trying to keep on growing, especially as they go into emerging markets, needs to
understand them and be very conscious about the
unique aspects of those cities.
Q: So, what are these aspects?
Blanco: The first one is density. When we
think about density, we usually think of New
York, of Manhattan. When we think about density
in emerging markets, a city like Mumbai comes to
mind. When you do the numbers, you see that
Mumbai, for example, has 29,000 inhabitants per
square kilometer while the New York City area
will have under 8,000. We’re talking about orders
of magnitude in difference. This creates lots of dif-
ferent problems for companies. They need to
think, “How do I get to those customers and those
consumers in those environments?” Size matters,
density matters—because this density translates
Q: What is unique about these mega-cities, other
than the size?
Blanco: The fragmentation of the channel is
one of them. But one of the elements that makes
this even more complex is the kind of partners you
have to deal with. A small store by itself is not
unique. But the kind of technology that is available
right now in those stores is. The answer is none.
These stores are usually managed by individuals.