Overcome these four supply chain hurdles to excel in Asia

Many markets in Asia are still underdeveloped in terms of transport infrastructure, including established markets like Thailand and particularly emerging ones like Myanmar. Lack of roads or poorly maintained highways, inadequate rail systems, traffic congestion and rising fuel costs are hindering supply chains. Geographical and terrain obstacles in some markets like Indonesia and its multiple islands are also substantial hurdles for businesses.

Solution

As recommended by McKinsey, more industries in Asia need to ensure their logistics costs do not erode their margins. Supply chain managers need to employ optimization tools like network planning, vehicle scheduling and route planning to squeeze out the last bit of inefficiency in logistics.

Another area is order profile modeling utilizing artificial intelligence and machine learning to enhance optimal profiles of ordering frequency and lead-times that give the network and transport planning tools the best opportunity to effectively optimize. They also need to be able to operate at scale so finding consolidation opportunities is essential to effectively reach these more remote locations, which may require multi-client collaboration.

In addition, China’s Belt and Road Initiative is a global push toward infrastructure development. ASEAN-focused connectivity is also transforming roads, railways and air travel within the region. In 2018, Indonesia saw its infrastructure improvement efforts pay off with a ranking of 46^th place in the World Bank Logistics Performance Index, a jump of 17 positions.

In Asia, eCommerce and evolving fast-moving consumer goods platforms are creating a far more complex retail narrative. Added to this are consumer expectations for same-day and next-day deliveries putting last-mile logistics and fulfillment under the spotlight.

In China, online shopping is so prevalent that eMarketer reported that eCommerce represented nearly 37 percent of retail sales in 2019, becoming the world’s leading eCommerce marketplace. While this acts as a catalyst for logistics, it also adds to the cost.

Solution

Omni-channel logistics require digitally enabled solutions that support the supply chain. For businesses entering the multi-faceted marketplaces in Asia, it is about leveraging more digital and online channels that are more suited to today’s consumer behaviors.

It is also about bringing this technology to the supply chain. The good news is that Asia is perfectly equipped to achieve this. In Wuhan, the epicenter of the pandemic, supplies reached people quickly by leveraging artificial intelligence technology, proving a built-in digital resilience in Asia to cope with supply chain blockades.

As Supply Chain Asia noted, “AI-based forward and reverse logistics and smart shipment sorting solutions are changing the traditional ways of supply chain operations.” While admitting that progress in the region has been slow, changes are happening. There is now a significant shift towards smart tech solutions and several industries in Southeast Asia are embracing AI into their logistics processes to grow in the market.

Businesses are often concerned about the challenge of instability that creates a ripple effect that can seriously shake even the most solid supply chain strategy. This includes political issues, natural disasters and utility disruptions like power outages and water shortages.

Solution

Asia still has a lot of room to improve when it comes to sustainable supply chain management. More risk analysis and management efforts need to be put into this aspect so that businesses can prepare for future disruptions. Continuous business strategies are required, while businesses connect with strategic partners who have the resources, know-how and capabilities of handling a potentially detrimental event or crisis.

One of the key mindsets to deploy in Asia is the “Triple-A” philosophy: alignment, agility and adaptability. As is the case in Asia, you cannot create a “pure and lean solution” as something will always come along and disrupt it. A lean supply chain, whilst being very efficient, normally lacks the agility and adaptability to be able to “flex” with change. Being aligned with your business growth strategy, building in the agility to react to unexpected change (like COVID-19) and having the scope to adapt to ongoing diversity is essential for long-term success in the region.

Over the years, changing demographics, rising economies and higher disposable income have transformed key Asian markets like Thailand, Indonesia and Vietnam. Despite the progress, there are still vast diversities across different markets in terms of economic development, political environment, policies, legal frameworks and domestic regulations.

Solution

To fully understand and capitalize on the vast opportunities of the Southeast Asian landscape, businesses must study the specific and detailed realities in each market. One of the key factors to successfully implementing a solid supply chain strategy is to ensure that talent can operate at a local market level. Across the entire supply chain, businesses must employ teams with local knowledge who understand and can navigate the local market opportunities.

For those operating across multiple markets, it is however also imperative to ensure a solid standard framework solution that can be tailored to local needs. Therefore, strong local talent needs to be supported by skilled regional resources that can drive a standardized framework that allows for agile continuous improvement across many markets in parallel.

Building the capacity and ability to integrate sustainable business operations including strategy, finance, marketing, operations and procurement, will be a critical trend to penetrate the Asian markets. Markets should be treated not as a single market but with newly emerging second and third-tier cities and megacities regarded as individual hubs instead.