Streamline and protect: the future of APAC supply chains

Over the next decade, Asia Pacific will account for around 70% of global economic growth¹ and, by 2030, will surpass all other regions globally for aggregate consumer expenditure. Such growth will have a profound logistical impact. Business leaders will need to recalibrate their supply chains at speed with reliability, visibility and resilience front of mind.

The key benefits of establishing secure, effective supply chains are laid bare in our new research, based on a global survey of 500 business executives in the technology sector, which finds compelling evidence for a link between high-performing supply chains and improved business performance.

The survey invited businesses to rate the performance of their supply chain and logistics against seven key criteria: cost, speed, reliability, resilience, visibility, decarbonisation and security. Their responses highlighted that, historically, businesses with high-performing supply chains grew revenues by a greater extent than those with low-performing supply chains in each of these areas.

There are many reasons for this. Businesses can only boost sales if their supply chains and logistics can keep pace with demand. If they regularly have to deal with longer delivery times, or their product is frequently out of stock, consumers will seek out alternative brands. Streamlined supply chains also reduce the need to hold high levels of inventory, which frees up more capital to invest in growth.

According to our research, 77% of technology businesses with high-visibility supply chains grew revenue in the past three years, compared with just 46% of businesses with low-visibility supply chains.

But the majority of global businesses do not appear to fully grasp the strategic importance of their supply chain and logistics. For example, only 53% agree that a well-functioning supply chain and logistics help deliver growth.

Our research indicates that businesses in the APAC region are better informed than the global average in this respect, with the figure rising to nearly six in ten businesses (59%). However, in the tough economic climate, cost control is still the number one priority (cited by 44%) of APAC businesses.

Blueprint for a successful supply chain

As the complexity of global networks grows, supply chains will need to improve in multiple areas, including forecasting and efficiency. The survey data indicates that short-term cost goals are compromising investment in initiatives that could improve supply chain performance, such as technology.

APAC businesses have made more headway in adopting AI, with around a third of businesses in the region (32%) reporting extensive use versus just under a quarter (24%) of respondents in the rest of the world. But it is yet to gain traction in a meaningful way.

Risk and resilience

With resilience low – just 20% of global businesses report that their supply chain is high-performing on resilience, and even fewer (18%) report high performance on security – businesses are vulnerable across the supply chain.

Perception of risks differs according to geography, but rising geopolitical tension tops the list for all regions in our research, cited by four in 10 global businesses (41%).  This could reflect longstanding strained relations between the US and China, and uncertainty about the future direction of the US-China relationship in view of on-going trade issues and a number of geopolitical flashpoints.  

Interestingly enough, research shows that geopolitical tension is not the top concern for EU businesses operating in China, but rather, the slow down of the Chinese economy.  

In parallel, 37% of APAC businesses flag new regulation as a major risk to their supply chain, making it the second-greatest threat. Many new regulations relate to ESG. According to PwC research, in 2022/23 alone, at least eight economies introduced laws or initiatives focused on the ‘social’ aspect of ESG; specifically, modern slavery and human rights. For example, in 2023 Japan developed non-mandatory guidelines to encourage its businesses to monitor and disclose human-rights abuses in their supply chains.²

APAC businesses are particularly concerned about an over-reliance on a limited number of suppliers/logistics partners. In fact, over a third of businesses surveyed (35%) in the region perceive supply chain-concentration risk as highly significant versus just under a quarter (24%) elsewhere in the world.

Their concerns are well founded. The semiconductor industry, for example, is reliant on a limited number of raw materials suppliers and manufacturers in Taiwan, South Korea and China – all countries vulnerable to major natural disasters, infrastructure challenges and geopolitical conflicts. As a result, the global semiconductor supply chain is in a perpetual state of jeopardy.

The wide range of risks, coupled with recent memory of the breakdown of global supply chains during Covid-19, has prompted businesses to rethink their network resilience strategies.

The imperative to collaborate

From consulting with partners on daily operations to working strategically to meet the requirements of a new product, process or service, collaboration is a key ingredient of effective supply chain management. Global companies are aware of the important role it plays in driving competitive advantage. In fact, six in 10 global businesses surveyed (60%) state collaboration with partners is essential to resolving long-term supply chain and logistics challenges.

When it comes to collaborative partnerships, businesses in the APAC region appear to report a higher level of satisfaction than their regional counterparts. For example, 59% of APAC businesses are satisfied with the flexibility of rates from their supply chain and logistics partners, versus 48% of businesses in the rest of the world. Similarly, 50% of APAC businesses are satisfied with co-innovation and testing new ideas versus 41% elsewhere. An exception to this trend is shipping priority, where satisfaction levels are lower in the region: 50% in APAC versus 57% elsewhere.

Our research indicates these partnerships need to be better nurtured, with more than half of APAC businesses (54%) stating their partners are solely focused on servicing their current needs. To ensure that the region continues to meet its high growth potential, businesses and their supply chain partners must prepare collaboratively and innovatively for the future.

Effective collaboration is key to navigating unforeseeable but inevitable global supply chain challenges. But although the figures suggest businesses are aware of the power of collaboration, they don’t always know how to harness it.

Several factors can complicate supply chain collaboration but businesses should strive for close alignment of business and supply chain strategies. Ensuring an open dialogue between partners at the highest levels of management is a good place to start.

To learn more about how to transform your supply chain for business success, read our full report, ‘The hidden power of supply chains: How supply chain and logistics can turbocharge performance in the technology sector.’