Diversification of Supply Chain in Asia is not a new subject; however, it is undoubtedly one of the most discussed, captivating, and critical topics gaining momentum with each passing day. The landscape has undergone significant transformations in a remarkably short span, prompting a revisit to this crucial domain (referencing the article published in 2022). Geo-political dynamics, economic fluctuations, regulatory frameworks, and talent landscapes continue to exert profound influence on corporate strategies pertaining to supply chain diversification in Asia.

“Change is the only constant” – a timeless adage resonating deeply across industries. As a Recruiter and Entrepreneur, I am continually captivated by the evolving dynamics within the realm of Supply Chain, where monotony finds no place!

Hence, in this edition of Expert Roundup, I embarked on a journey to engage with an esteemed panel representing diverse sectors including FMCG, Chemicals, Agriculture, and Food and Beverages. Their insights offer a panoramic view of Supply Chain Diversification in Asia, exploring the Outlook, Key Drivers, and Critical Considerations for industry leaders navigating this complex terrain.

Join us as we unveil the wisdom shared by these industry stalwarts, shedding light on the nuances and imperatives of Supply Chain Diversification in the Asian landscape.

Ganesh Krishnamurthy
Head of Supply Chain & Operations
Kimberly-Clark Professional

1. What’s your outlook on Supply Chain Diversification in Asia?

Our supply chain is already very much diversified within Asia, but we still do get imported products due to the nature and specification of the products. Given my experience in Asia I don’t think there is any reason we cannot localize everything from Asia to meet Asian customers or even global customers. At the time when people are looking at de-risking China, I feel China still has a lot to offer. They do have capacity and they are willing to collaborate more than before and not to mention their high quality as well.

2. What are the key drivers for it in your industry?

Few key drivers which are important to us are Business continuity planning, lead time and cost. On BCP we have seen in the past and even today that disruptions do happen and there are several factors. So, it is important for us to always keep a Plan B in place and where we don’t have, it takes time to develop one. Second is the lead time. Imported products do have 3 to 4 months of lead time which sometimes leads to slow moving if demand changes. By having it localized we have shorted lead time and better control on inventory management. Finally cost is an important factor too to drive different options in the supply network to ensure the balance between the fixed cost absorption vs conversion costs.

3. What are the 3 Key Points you think Leaders should bear in mind while strategizing and executing Supply Chain Diversification in Asian countries?

• • Firstly, we need to understand very well the business implications of diversification. So that we can develop the right strategy linking with business needs.
  • A very good knowledge on external trends and insights to identify the opportunities for growth.
  • Finally, the right people are in place for flawless execution.

 

 

 

Didier Chanove
Business Director for Plant proteins & Innovation in Asia-Pacific, Middle East & Africa
Kerry

1. What’s your outlook on Supply Chain Diversification in Asia?

In my point of view, supply chain diversification in Asia presents an imperative for resilience and risk amid further global disruptions. It strategically mitigates risks from geopolitical tensions, potential incremental natural disasters, and unexpected market shifts. Asia’s diverse landscape offers opportunities, but also complexity, for businesses to decentralize their operations, fostering agility and adaptability. Embracing diversification must ensure continuity in the face of uncertainties, driving sustainable growth and market competitiveness.

2. What are the key drivers for it in your industry (food ingredients industry)?

In the food ingredients industry, diversification is driven by evolving consumer preferences, regulatory changes, and sustainability concerns. With consumers demanding transparency and ethical sourcing, diversifying the supply chain allows for access to a wider range of solutions adhering to different standards. Regulatory shifts across Asian countries also require diversification to ensure compliance and mitigate regulatory risks. Sustainability imperatives push for diverse sourcing options and closer-to-market solutions to reduce environmental impact and ensure long-term viability.

3. What are the 3 Key Points you think leaders should bear in mind while strategizing and executing Supply Chain Diversification in Asian countries?

• • Cultivate strategic partnerships with local suppliers for deeper market insights and operational synergies.
  • Prioritize agility and flexibility in supply chain structures to adapt to dynamic market conditions.
  • Conduct comprehensive risk assessments to identify vulnerabilities and develop robust contingency plans.

Without forgetting our Sustainability imperatives!

Chun Hao Lok
Vice President, Global Supply Chain & Technical Operations
Archroma

1. What’s your outlook on Supply Chain Diversification in Asia?

Supply Chain diversification in Asia will continue on its current pace, especially fueled by the growth of India. The youthful demographic profile, rapidly rising income levels of the urban households, and the emphasis of government’s capital investments in infrastructure in the last decade has positioned it well to attract businesses affected by the US-China geo-political tensions. This can be seen in the acceleration of foreign direct investments into India. This has resulted in many companies diversifying their supply chains, outside of China and into India, with Foxconn’s recent announcement to invest in India being the most noticeable one.

2. What are the key drivers for it in your industry?

Logistics constraints (delays and volatility of freight costs) in the last few years, on major choke points – Red Sea, Suez Canal for example, have accelerated the need to invest in production facilities in APAC to cut the dependence of imports from Europe.

Changing consumer demand (e-Commerce) has changed the ordering pattern and shorter lead-times are more and more expected higher upstream in the supply chain.

Other factors include pressure on utilities cost in Europe, affected by the ongoing war, water-intensity pressure in countries like Spain, tightening regulations in the EU, have accelerated the diversification of supply into APAC.

3. What are the 3 key points you think Leaders should bear in mind while strategizing and executing Supply Chain Diversification in Asian countries?

• • Having a robust framework to assess the long-term capabilities and sustainability of your supply base
  • Designing an efficient distribution network that makes use of the existing and impending trade agreements amongst Asian countries
  • Availability of talent and development of human capital within the organization is critical to ensure the right resources are in place who not only understand how supply chain works in Asia but also being able to navigate through the very diverse cultural web of Asian countries.

Thomas Bilger
Head of Logistics APAC
Syngenta

1. What’s your outlook on Supply Chain Diversification in Asia?

Over the past two decades, companies have been investing in diversification despite its costs in response to challenges posed by events like the COVID-19 pandemic, US-China trade tensions, and other geopolitical issues. Most successful supply chains have been recognized as a clear competitive advantage. In Asia they have adapted, becoming more robust and expanding as a result of the “China +1” strategy from MNCs. This has drawn global investment across the region to leverage availability of labor and develop manufacturing, and logistics capabilities.

2. What are the key drivers for it in your industry?

The chemical industry is facing excess capacity from China post-COVID, causing increased inventory and lower prices amid weak demand. Price movements remain highly correlated to supply adjustments from China (state-owned enterprises) prompting established market players to seek diversification to reduce their exposure. Europe’s chemical sector is hampered by the energy crisis, but India is growing as a reliable alternative thanks to initiatives like “Make in India”. This might be more costly in the short-term but will offer more resilience to future supply risks and trade disputes which, as one could see during the COVID pandemic, proved to be beneficial.

3. What are the 3 Key Points you think Leaders should bear in mind while strategizing and executing Supply Chain Diversification in Asian countries?

• • Set clear objectives for diversification. Priorities and tradeoffs might be different whether the focus is to drive cost competitiveness, risk mitigation (or both).
  • Consider resources and capabilities needed to run a more diversified business. It usually requires stronger governance and functional knowhow as diversification is more complex to manage and companies do not desire to lose control over their core competencies.
  • Build and nurture relationships of equals with suppliers through sound SRM (Supplier Relationship Management). The direction should be clear for both parties to reap the benefits from the relationship.

Tom Bollaert
Head of International Operations / GM
Lianhe Chemical Technology

1. What’s your outlook on Supply Chain Diversification in Asia?

Where in the past the focus of supply chain was to find maximum efficiency and lowest cost this is shifting to resilience. This change is driven by the instable and disruptive environment we find ourselves in today. We had a pandemic, geopolitical conflicts, trade conflicts, climate change and wars. This need for resilience will further drive the need for diversification and require companies to source simultaneously from different countries with different risk profiles.

2. What are the key drivers for it in your industry?

In the Fine chemicals industry (Crop protection and Pharma) to achieve this efficiency companies dominantly focused on China and India. Both countries have significant advantages but given the current dynamic environment it reduces risk to source from different countries as well. Malaysia offers an excellent alternative. It is politically stable, has strong links with both China and the US, it is investment friendly and has a competitive labour force.

3. What are the 3 key points you think Leaders should bear in mind while strategizing and executing Supply Chain Diversification in Asian countries?

 

• • Geopolitical stability: Malaysia`s strategic position in the South China Sea and longstanding economic ties to China and the United States.
  • Competitive supply: Malaysia has a capable and competitive labour force. The government is very supportive of foreign investment.
  • Cultural fit: Malaysia is multicultural, and English is widely spoken. Involvement in trade treaties, such as the Regional Comprehensive Economic Partnership (RCEP).

In conclusion, the insights offered by our renowned panelists, hailing from varied industries, have been both enlightening and invaluable. As we reflect on the wealth of knowledge shared, it is evident that each perspective contributes to a richer understanding of the complexities surrounding Supply Chain Diversification in Asia. On behalf of The Supply Advisory team, we extend our sincere gratitude to our contributors for their time, expertise, and unwavering commitment to advancing discourse within our field.

We encourage you to stay connected with The Supply Advisory Blog for ongoing insights, expert opinions, and thought-provoking discussions on an array of Supply Chain Management themes. Together, let us continue to explore, innovate, and propel the industry forward.

Thank you for your readership and engagement.

 

Ananya Sinha Roy is the Director at The Supply Advisory, a leading executive recruitment firm specialising in Procurement & Supply Chain.

You can view the The Supply Advisory website or contact them directly at info@supplyadvisory.com for a more detailed discussion.