Supply-chain strategy rethought

25-Oct-2021 Intellasia | BangkokPost | 5:02 AM Print This Post

The Covid-19 pandemic is resulting in a broader rethinking of supply-chain strategies among organisations across Asia Pacific and beyond, according to a new report commissioned by Citi and by the Economist Intelligence Unit (EIU).

“Disruption, Digitisation, Resilience: The Future of Asia-Pacific Supply Chains” identifies nine key factors to attract investment projects in the changing world. It draws on a survey of 175 global supply-chain managers across six primary industries: automotive, footwear and apparel, food and beverage, manufacturing, IT/technology/electronics, and healthcare/pharmaceuticals/biotechnology.

Key findings from the research indicate that companies are rethinking their long-term strategies for the future and investing more to digitise their supply chains. Respondents in Asia Pacific were also more bullish about globalisation and international supply chains than their counterparts elsewhere.

At the same time, supply chain managers in Europe and North America could be pulling back from global supply chains to add more resilience through regionalisation and diversification.

The research also identifies countries that supply-chain managers are either already investing in or planning to invest in including Indonesia, Bangladesh, South Korea, Myanmar, Malaysia, Sri Lanka, India, China and Vietnam.

It identifies nine factors that respondents say make a country attractive for investment: labour costs; geographical location; access to key markets, infrastructure and regulatory environment; productivity; skilled workforce; government subsidies/incentives and other skills; currency convertibility; political stability and tax rates; and access to finance.

According to the report, the top five causes of pandemic disruption to supply chains were production stoppages (36.4%); followed by logistical challenges across air, sea, rail and road (20.9%); limited access to raw materials and primary inputs (17.3%); trade restrictions such as export controls and import tariffs (11.8%); and limited access to intermediate goods such as steel, components and semiconductors (6.4%).

The automotive sector was affected the most by the pandemic with over 50 percent of respondents citing very significant disruption to their industry. This was followed by footwear and apparel, manufacturing, food and beverage, healthcare/pharmaceuticals/biotechnology, and IT/technology/electronics respectively.

The main causes of supply-chain disruptions in the automotive sector included production stoppages, trade restrictions such as export controls, access to raw materials or primary inputs, supply of technology, and a semiconductor shortage that has been an especially big problem in this sector.

While logistics was a key source of disruption in the food and beverage sector, access to raw materials/primary inputs was cited as the top reason for supply-chain disruption in the healthcare and pharmaceuticals sectors.

The survey also reveals that there have been changes in supply-chain strategy over the past 18 months in Asia Pacific. A total of 44.6 percent of respondents said their approaches had changed but the core strategy remained the same, while 32.6 percent of managers surveyed are conducting a complete strategy overhaul, while 22.9 percent reported no change in strategy.

Close to half, or 48.3 percent of supply-chain managers in the automotive sector and 40 percent in the footwear and apparel industry are conducting an overhaul of their supply-chain strategy, higher than the survey average of 32.6%. This compares with 23.1 percent for manufacturing, 33.3 percent in both the food and beverage and healthcare/pharmaceutical/biotech sectors and 16.7 percent in the IT/electronics industry. Given their complexity relative to other industries, specialised tech supply chains cannot shift easily.

Finally, the report outlines some future concerns most companies globally are facing, among them the next pandemic, a breakdown in the global trade system, and an economic or financial crisis. Nevertheless, the Covid-19 pandemic has accelerated investments in digital tools and processes for supply chain management.

Of all supply-chain managers surveyed, 32.5 percent say their companies have increased investment in digital tools or processes by more than 50 percent as a result of the pandemic. While this number stands at 12 percent among managers in Europe and North America, it shoots up to over 40 percent in Asia. These investments are largely in the areas of trade facilitation, forecasting and predicting, inventory management and manufacturing processes.

The report, Citi says, shows that all industrial sectors are responsive to the challenges presented by the pandemic with a common goal to secure the sustainability of business operations for the long term.


Category: FinanceAsia

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