Disruption, Digitisation, Resilience

2 DISRUPTION, DIGITISATION, RESILIENCE : The future of Asia-Pacific supply chains supply chains, such as automotives, and others predominantly supply-related bottlenecks, such as food and beverage. Similarly, all industries have not responded equally, with some — such as high- end manufacturing — finding it much harder to make dramatic shifts to their supply chains owing to sophisticated processes, high sunk costs and the need for specialised production facilities, which cannot be easily established in a new location. Supply-chain challenges differ significantly between managers based in Asia-Pacific and those based in North America and Europe — resulting in a range of responses. First, all supply-chain managers surveyed in North America and Europe are either conducting a complete overhaul of their supply- chain strategies or making some changes to it, while a third in Asia-Pacific are not. Second, 48% of supply-chain managers in North America and 40% in Europe say their top strategy at this point is diversifying their supply chains to source from a range of suppliers or to sell in a wider range of markets, while this share in Asia is just 24%. These differences suggest there has been less panic among Asian supply-chain managers and that North American and European firms could be taking a step back from long and very global supply chains to add more resilience through regionalisation and diversification. They also imply that the reshoring rhetoric we have seen in the past 18 months may not just be rhetoric. How companies are responding also depends on their size. Larger companies are keen to diversify supply chains and move away from “single sourcing” to reduce supply-chain dependence. Meanwhile, smaller companies — Covid-19 has had obvious implications on supply chains, but despite the disruption witnessed in the months immediately following the outbreak, supply chains in Asia-Pacific have proven to be more resilient than initially expected. Shifts in supply chains were already under way, owing to geopolitical and economic factors, and covid-19 has accelerated some of them. Recent outbreaks of the virus — driven by the delta variant — mean that we have not seen the last of supply-chain disruptions yet, as economic activity across Asia-Pacific continues to be hampered. The pandemic has resulted in a desire to rethink and reshape supply chains. A third of them are preparing to completely overhaul their supply- chain strategy, according to our latest research, although these changes are geared towards the long term. Additionally, how supply-chain managers based in Asia are thinking about their supply-chain strategy differs markedly from their counterparts in North America and Europe. Shifts in supply chains were already under way, owing to geopolitical and economic factors, and covid-19 has accelerated some of them. Other key findings from the research include: Sector supply chains have not been impacted equally by the pandemic. Some sectors are witnessing both a demand and supply shock to EXECUTIVE SUMMARY