Why Asia must adapt to keep its global supply chain crown
Mark Micallef
IN ancient times, the cost of moving goods determined the production and distribution reach of a product. So, products made in a particular market found their way to the end consumer linearly across trade routes such as the Silk Road or the Spice Route.
A truly international production network came into existence much later with advances in transportation technology, and due to the industrial revolution. Among the key innovations was ‘containerisation’ and markets in Asia such as Singapore and Hong Kong recognised its potential and built large new facilities, establishing themselves as major ports and clearing houses.
Steady innovations in supply chain management led to modularisation and decentralisation in production facilities all over the world, providing businesses the ability to harness unique advantages that different markets offered in terms of resources, skillsets, and technologies. The international production network now works like a flywheel, rather than the initial funnel approach.
Impact of pandemic on the supply chain in Asia
Over the past decades, with unprecedented levels of production, shipping, and trade, not to mention rapidly increasing consumption and purchasing in recent years, Asia firmly established its position as the supply chain capital of the world.
However, the global pandemic sent shockwaves through supply chains across the region. It upended distribution networks and exposed inherent vulnerabilities in the supply chain links, effectively straining regional economic growth. This has forced organisations to rethink how they operate, where they produce their products, how they move them, and what factors they build into their supply chain to ensure greater resilience.
As an important supplier of parts and intermediate goods, the Southeast Asia region has been deeply affected. North Asia too has not been insulated from the impact because of their dependence on the Southeast Asia region. All this has been exacerbated as the underbelly of the global supply chain became vulnerable to local shocks such as lockdowns and movement restrictions, workforce shortages, and port disruptions.
Businesses rethinking supply chains presents a mortal risk to Asia’s crown. There is a real threat of global businesses moving their production centres closer to home to avoid exposure to such trade disruptions, bypassing Asia in the process. EY recently found that 67 per cent of Asia-Pacific executives are taking steps to change supply chains compared with 52 per cent of global executives. But reshaping and re-routing supply chains can be complicated and cost-prohibitive. That’s why there’s still long-term sustainable growth for the Asian supply chain hub.
How can Asia avert future shocks to its global trade network?
The region cannot and must not sit still. It must in fact embrace complexity in the supply chain, giving businesses more options and opportunities to succeed and deter them from thinking about exit strategies for the region. History will look back at this period and a big part of that will focus on how technology played a key role in how the region responded to this moment of reckoning.
But we are still in the present. History can wait. We need to act now for the future to look at us kindly and that system of action will be based on adoption of digital technologies and agile collaboration. Companies need real-time line of sight and better supply forecasting to consistently cater to today’s dynamic demands.
Investing in digital planning tools can enable businesses to manage these uncertainties and shifting market dynamics more effectively. These tools enable multiple scenario planning and predictive analytics that help anticipate supply disruptions, align supply, and demand processes, and provide a single source of truth and full transparency on suppliers and client capabilities and needs.
By unlocking end-to-end visibility and providing better control, a robust digital planning platform can enable real-time collaboration among all the stakeholders across the network, from internal departments to suppliers to end customers. It can also help instil resilience, agility, and sustainability into an organisation’s supply chain operations, at the speed of business.
With longer lead times, shortage of raw materials and the current logistical nightmares, collaborative supply chain planning and management has never been more important. Investing in scenario forecasting, risk mitigation, and leveraging real-time actionable insights can potentially tip the scales back in Asia’s favour.
The stakes are high, with not just billions of dollars of business on the line, but also Asia’s commercial future and reputation as a global supply chain powerhouse. The supply chain with a just-in-time model, as we knew it, is dead. It requires a reset - to embrace complexity, and align people, processes, and technology.
The writer is senior vice president and managing director, Asia-Pacific, at Anaplan
