Supply chain disruptions appear to be a mainstay for now: APAC needs to accelerate Industry 4.0 initiatives to remain resilient: study

In a study of business trends in the Asia Pacific region (APAC) supported by original research and a small online survey (123 respondents), the disruption of supply chains is expected to remain a norm for the foreseeable future.

Analysis of the structural pressures on supply chains has led to the report arguing that technology and innovation will be key to building sustainable and resilient supply networks, supporting regional growth drivers such as e-commerce.

The study by Asialink Business, supported by Toll Group indicates that many APAC businesses have evolved their supply chains to support low-cost production and just-in-time logistics, giving rise to supply chains that extended across multiple borders for cost efficiencies. The global impact of the pandemic has placed these cross-border supply chains under strain.

Positively, many businesses are already taking steps to adapt, according to the report.

Four major Asia trends

The report recommends that Asia-based businesses recognize four major trends that can impact regional supply chains:

  • Onshoring: Building resilience by moving production back home or into nearby countries, diversifying suppliers and boosting inventory. Onshoring was appealing to small businesses, with 30% of respondents considering it.
  • E-commerce: Driven by Asia’s rapid digitalization, e-commerce now offers fast delivery, product variety, return options, traceability and personalised customer experiences. Businesses that can meet customer expectations can access some of the world’s largest markets.
  • Industry 4.0: Investment in automation, smart sensors and data analytics can enable businesses to integrate well into rapidly evolving regional distribution networks.
  • Sustainability and social impact: These twofactors continue to change how businesses engage suppliers in the region. Over 70% of respondents had identified reducing carbon emissions as a significant concern of customers, with governments in emerging Asian economies reaffirming its importance by the tightening environmental protection rules.

The impact of supply chain uncertainty has been the most significant on small businesses: 32% of small businesses surveyed had indicated that restrictions on business could threaten their operations, compared to 15% of medium-sized businesses and 8% of large businesses.

According to Peter Varghese AO, Chair, Asialink: “The COVID-19 pandemic, rising geopolitical tensions and extreme weather events have put supply chains globally under strain. To remain competitive in our increasingly competitive region, businesses will have to invest more in resilient and sustainable supply chains to meet the shifting needs of customers in APAC and internationally.”

Thomas Knudsen, Managing Director, Toll Group, said: “With no clear end to the pandemic on the horizon, the disruption of supply chains will be here to stay for the foreseeable future. Agile planning, innovation, and adoption of technology will thus be essential elements for business success. Businesses that emerge stronger will be those that fully embrace the opportunity to transform in line with demands of the new economic reality instead of making incremental changes.”