SUPPLY CHAIN STRATEGIES

In the face of global economic shifts and geopolitical tensions, supply chain strategies are undergoing a profound transformation.

Our annual Trade In Transition report reveals that 44% of global executives are diversifying their supplier base, with 47% of Asia Pacific (APAC) leaders doing so to mitigate US-China trade tensions.

These macroeconomic forces and fluid trading environments mean many businesses face a dichotomy between diversification and consolidation.

Increasingly, companies are exploring innovative approaches to diversification such as friendshoring and dual supply chains.

But a significant number are also looking to consolidate and work with fewer suppliers.

Alongside this, high inflation in many countries has led to an evolution in the just-in-time model, with businesses now favouring a 'just-right' approach to inventory management.

In this chapter, we will look at how APAC supply chains are turning this disruption into opportunity, highlighting four key areas of focus for logistics.

SUPPLY CHAIN STRATEGIES

FROM DISRUPTION TO OPPORTUNITY: ADAPTING TO CHANGING DYNAMICS IN APAC SUPPLY CHAINS

Disruption in supply chains is a growing challenge, and businesses facing an unpredictable future are increasingly being pushed to balance efficiency with the need to be flexible.

For end-to-end supply chain providers, this imperative to plan ahead is even more pronounced because of the growing disruption.

How can organisations be ready for sudden adverse weather conditions that close ports, a pandemic that leads to worker shortages, or a geopolitical crisis that creates no-go zones or leads to complex sanctions?

Slower, equally pressing issues such as the need to decarbonise while reversing the damage done to our ecosystems, cannot be ignored when dealing with short-term trade flow challenges.

The following pages outline four key areas forward-thinking logistics providers use to redefine supply chain strategies and turn disruption into an advantage.

THE IMPORTANCE AND VALUE OF SUSTAINABLE PRACTICES

The transport sector is responsible for over a third of global CO2 emissions. Aside from the moral imperative to decarbonise, there are also commercial advantages to taking a leading role in sustainability.

Many international end-to-end supply chain service companies are already working together – via initiatives like the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping – to quantify impacts, identify solutions and promote more sustainable logistics strategies.

There’s no better benchmark for success than collaborating early, communicating pain points and building a forward-thinking strategy."

Glen Hilton, CEO and Managing Director, APAC

Logistics companies setting out sustainable roadmaps also have the opportunity to improve operations and drive efficiency, while simultaneously embracing sustainable activities that ensure the longevity of both the company and the planet.

Once in place, sustainable initiatives often come with immediate commercial benefits. These include greater operational efficiency, lowered energy costs and increased energy security, leading to less supply chain disruption.

Compared to 24 months ago, do you feel your supply chain is:

Much more resilient and able to withstand shocks
Slightly more resilient and able to withstand shocks
Has about the same level of resilience and ability to withstand shocks
Is less resilient and able to withstand shocks
Is significantly less resilient and unable to withstand shocks
Other/Don’t know

2. LOOKING TO IT AND TECH INNOVATIONS TO PROVIDE INSIGHTS AND OPPORTUNITIES

When it comes to finding efficiencies and managing disruption, AI and various other digital tech solutions are proving to be highly effective modern tools for forward-looking businesses. Investment in advanced digital technologies, such as Internet of Things devices, blockchain, and real-time tracking systems can enhance visibility and traceability of goods throughout the supply chain.

But technology can also make meaningful improvements to seemingly minor elements of an end-to-end service. In Busan, South Korea, we deployed an Auto Stop & Go system, which automatically switches off idling trucks, reducing CO2 emissions.

Modern tech innovations also help with scenario planning and simulation. Predictive analytics and modelling can anticipate potential disruptions and proactively adjust supply chain strategies.

3. UTILISING FLEXIBILITY AND AGILITY TO MITIGATE SUPPLY CHAIN SHOCKS

Developing agile supply chain models that can quickly adjust to changing market conditions and disruptions starts with building in flexibility – the ability to change plans quickly. Innovative solutions such as BoxBay, which enable greater container handling efficiency, can be rolled out in any location and are fully automated, allowing for the same capacity of a conventional terminal in a third of the space.

Flexibility can mean switching between different modes of transportation, or shipping routes based on real-time conditions. Or, in the case of cargo shipping firm ZIM, linking Western Australia with its trade partners in southeast Asia through its Thailand-Fremantle Express service, which opens up more flexible connectivity to new and emerging markets.

To be more agile, end-to-end supply chain providers are investing in resilient infrastructure, such as automated and robotic systems, which reduce reliance on manual labour and improve operational continuity, usually while increasing productivity.

4. FOSTERING CLOSER COLLABORATION WITH PARTNERS

Partnering up with an experienced end-to-end logistics solutions provider with a global reach helps manufacturers mitigate against disruption and tap into efficient cargo transportation from start to finish. By working together, all parties can reduce fragmentation in supply chains, share insights and improve planning, explains Glen Hilton, CEO and Managing Director, Asia Pacific.

“We co-create solutions with our customers in order to address their resilience challenges. There’s no better benchmark for success than collaborating early, communicating pain points and building a forward-thinking strategy that aligns with our customers’ needs,” Hilton says.

Logistics companies are embracing sustainability, focusing on agility and building resilience to sudden supply chain shocks. By doing so, they are better able to manage difficult periods and minimise the impact of unforeseen events through a series of tech-driven preparedness initiatives.

By implementing these strategies, shipping, port and logistics providers can enhance their ability to withstand and respond effectively to future disruptions, contributing to a more resilient and adaptable global supply chain ecosystem that is sustainably future-proof.

By working together, all parties can reduce fragmentation in supply chains, share insights and improve planning."

SUPPLY CHAIN STRATEGIES

THE CONTINUED RISE OF E-COMMERCE IN SOUTHEAST ASIA

E-commerce in Asia is booming.

In 2023, global online sales reached US$5.8 trillion and are expected to grow by 39% to pass US$8 trillion by 2027. China currently holds the largest portion of this vast sum, with retail giant, Alibaba accounting for nearly a quarter of the global market share.

DID YOU KNOW?

Global online sales are expected to grow by 39% to pass US$8 trillion by 2027

Source: www.statista.com

DID YOU KNOW?

Global online sales are expected to grow by 39% to pass US$8 trillion by 2027

Source: www.statista.com

In fact, nearly half of China’s retail transactions are carried out online. And e-commerce is a major force elsewhere in Asia, too, accounting for over 30% of sales in both South Korea and Indonesia. Meanwhile, the Philippines and India have the most rapidly expanding ecommerce markets in the world – both expected to see an increase of over 20% in 2024.

Nearly half of China’s retail transactions are carried out online."

These figures do mask a somewhat uneven picture, however, particularly across Southeast Asia.

Many of the region’s markets remain underdeveloped, but with increasing internet penetration, higher smartphone penetration and the growing base of the younger generation, the potential for expansion is huge.

Platforms like Shopee and Lazada have seen significant growth in Southeast Asia. However, evolving logistics capabilities are facilitating the emergence of new merchants, marking a gradual shift away from dependence on Chinese imports and towards higher-value transactions.

How do you expect the rapid expansion of e-commerce in Southeast Asia to influence your supply chain strategy?

It will drive us to adopt more advanced technologies
It will lead to changes in logistics and distribution models
It will primarily create new challenges to overcome
Other/don’t know

MEETING THE NEW LOGISTICS NEED

The region’s geography and infrastructure create challenges for all online retailers, with B2C ecommerce businesses facing distinct logistical hurdles compared to platform players. For these retailers to effectively compete across Asia’s markets – and further afield – they need to develop unique supply chains.

Increasingly, such businesses are balancing an omnichannel sales platform, which requires careful inventory management and can often be further complicated by returns and reverse logistics. They must also navigate cross-border shipping and customs requirements while maintaining the flexibility to scale operations in response to demand fluctuations.

“Time to delivery and efficiency are key points of differentiation which give retailers a competitive advantage. And as the value of transactions increases, reliability, security and stability in supply chains and logistics are increasingly important,” says Cecila Chen, Senior Director, Commercial, Logistics, South China at DP World. This is where end-to-end logistics comes into its own.

DP World uses a network of connected nodes and local partners to create a smooth path along the supply chain. For example, our partnership with UNICO in South Korea enables us to offer enhanced last-mile capabilities and improve delivery times. Similarly, our recent acquisition of Cargo Services Far East significantly boosts our end-to-end logistics capabilities in the fast-moving retail and fashion sectors.

Time to delivery and efficiency are key points of differentiation which give retailers a competitive advantage."

Cecila Chen, Senior Director – Commercial – Logistics – South China – APAC

TECHNOLOGY’S GROWING ROLE

Technology is a key differentiator, and at DP World, we have integrated it throughout the system. For example, we are trialling autonomous mobile robots that use RFID technology in our warehouses, to efficiently handle, sort and store goods. Meanwhile, artificial intelligence and the Internet of Things are helping us optimise our resources, predict and plan the best routes, track cargo and improve efficiency. All this data-driven decision-making contributes to a faster, more reliable and transparent supply chain for our customers.

Technology is also enhancing demand forecasting, inventory management and logistics planning, enabling retailers to operate with greater certainty, improve their planning and, ultimately, reduce costs.

Although much of Southeast Asia’s e-commerce has focused on clothing and low-value electronics, market segments like health, beauty and home and living are expected to grow. Many of these products will rely on new technologies and more specialised logistics services.

“As an ecommerce customer, your satisfaction relies on the complex journey your new purchase takes to arrive at your doorstep being so seamless as to be invisible,” says Chen.

“And so, in a fast-paced digital marketplace with rising consumer expectations, an effortless customer journey backed by robust, responsive supply chains is key to ecommerce businesses’ success.”

Robust, responsive supply chains are key to ecommerce businesses’ success."

Cecila Chen, Senior Director – Commercial – Logistics – South China – APAC