Disruption, Digitisation, Resilience

14 DISRUPTION, DIGITISATION, RESILIENCE : The future of Asia-Pacific supply chains Now they’re pulling back and trying to add more resilience through greater regionalisation and diversification. This could be about European and North American firms taking a slight step back from long and very global supply chains and reshoring some production, while this may not be the case for Asian supply chains that mainly service the Asian market. This may also indicate that the widely held optimism around trade in Asia is reflected at the industry level as well. When asked what approach characterises their firm’s primary supply-chain strategy in the Asia-Pacific region, the leading choice among five options was “diversification” (30%). To the extent possible in the circumstances, supply- chain managers are adapting their supply chains to source from a wider range of suppliers and/ or looking to sell into a wider range of markets. For Mr Mullick at Unilever the focus was on building resilience. “For many products, we managed to create a resilient source, which was in a different geography, just to keep our position more hedged.” Supply-chain strategy preferences also clearly depend on the size of companies. Smaller companies want to localise supply chains, while larger companies want to diversify them. In our survey, 33% of companies with an annual revenue under US$500m picked localisation as their primary supply-chain strategy, compared with just 11% of companies with revenue higher than US$500m. On the other hand, 38% of large companies picked diversification as their primary supply-chain strategy, compared with 20% in smaller companies. The larger companies seem keen to diversify supply chains and move away from This perhaps indicates there was less panic among managers based in Asia-Pacific, either because they understood the extent of disruption caused by the pandemic better or because they have dealt with major supply- chain disruptions before and know how to deal with them, or both. Some events in the past decade that threw regional supply chains into disarray include the Tohoku earthquake and Fukushima nuclear disaster of 2011, 8 the Thailand floods later that year 9 and the Tianjin port explosion in 2015. 10 Jayant Menon, visiting senior fellow, ISEAS-Yusof Ishak Institute, feels this could also be owing to the fact that, notwithstanding the recent Indian experience, Asian economies have managed the pandemic well generally, especially compared with the US and Europe. But this advantage is being eroded by a combination of new and highly contagious variants — delta in particular — and relatively slow vaccination rollouts, he adds. For many products, we managed to create a resilient source, which was in a different geography, just to keep our position more hedged. Anirban Mullick, director of business development at Unilever International One other factor this divide could be attributed to is the length of supply chains. European and North American supply chains have expanded globally over the past 20 years. 8 “Japan Disaster Shakes Up Supply-Chain Strategies.” Working Knowledge . 31 May 2011. Available online at https://hbswk.hbs.edu/item/japan-disaster- shakes-up-supply-chain-strategies 9 “FACTBOX-Thai floods crimp global supply chains.” Reuters . 28 October 2011. Available online at https://www.reuters.com/article/thailand-floods-supply- chain-idUSSGE79R00E20111028 10 “Tianjin Port Explosion, August 2015.” HFW Briefings . Accessed on 14 June 2021. Available online at https://www.hfw.com/Tianjin-Port-explosion- August-2015