The redesigned supply chain strategy

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The redesigned supply chain strategy

Pandemic is forcing managers to rethink their approaches and invest more in digitalization, Citi report says

Kwai Tsing container terminals in Hong Kong on April 7, 2020. The coronavirus pandemic has prompted some countries to reconsider their reliance on distant supply chains. The New York Times

Covid-19 pandemic is driving a broader overhaul of supply chain strategies among organizations in the Asia-Pacific region and beyond, new report commissioned by Citi and the Economist Intelligence Unit (EIU) says .

“Disruption, Digitization, Resilience: The Future of Asia-Pacific Supply Chains” identifies nine key factors to attract investment projects in a changing world. It is based on a survey of 175 global supply chain managers in six main industries: automotive, footwear and clothing, food and beverage, manufacturing, IT / technology / electronics, and healthcare / pharmaceutical / biotechnology.

Key research findings indicate that companies are rethinking their long-term strategies for the future and investing more to digitize their supply chains. Respondents in Asia-Pacific were also more optimistic about globalization and international supply chains than their counterparts elsewhere.

At the same time, supply chain managers in Europe and North America could withdraw from global supply chains to increase their resilience through regionalization and diversification.

The research also identifies countries in which supply chain managers are already investing or planning to invest, including Indonesia, Bangladesh, South Korea, Myanmar, Malaysia, Sri Lanka, India , China and Vietnam.

It identifies nine factors that respondents believe make a country attractive for investment: labor costs; geographical location; access to key markets, infrastructure and the regulatory environment; productivity; skilled labor; government subsidies / incentives and other skills; currency convertibility; political stability and tax rates; and access to finance.

According to the report, the top five causes of pandemic supply chain disruption were production stoppages (36.4%); monitoring of air, sea, rail and road logistics challenges (20.9%); limited access to raw materials and primary inputs (17.3%); trade restrictions such as export controls and import tariffs (11.8%); and limited access to intermediate goods such as steel, components and semiconductors (6.4%).

The auto sector has been hit the hardest by the pandemic with over 50% of respondents citing a very significant disruption to their industry. Next are footwear and clothing, manufacturing, food and beverage, healthcare / pharmaceuticals / biotechnology, and information technology / computing / electronics respectively.

The main causes of supply chain disruptions in the automotive sector included production stoppages, trade restrictions such as export controls, access to raw materials or primary inputs, technology supply and a shortage semiconductor industry which has been a particularly significant problem in this industry.

While logistics was a key source of disruption in the food and beverage sector, access to primary raw materials / inputs was cited as the main reason for the disruption of the supply chain in the food and beverage sectors. health and pharmaceuticals.

The survey also reveals that there have been changes in supply chain strategy over the past 18 months in Asia Pacific. In total, 44.6% of those surveyed said their approaches had changed but the basic strategy remained the same, while 32.6% of managers surveyed made a complete overhaul of their strategy, while 22, 9% reported no change in strategy.

Almost half, or 48.3% of supply chain managers in the automotive sector and 40% in the footwear and apparel industry are overhauling their supply chain strategy, which is higher. to the survey average of 32.6%. This compares to 23.1% for manufacturing, 33.3% in the food and beverage and healthcare / pharmaceutical / biotech sectors and 16.7% in the computer / electronics industry. Given their complexity compared to other industries, specialized technology supply chains cannot easily scale.

Finally, the report describes some future concerns that most of the world’s businesses face, including the next pandemic, a breakdown in the global trading system, and an economic or financial crisis. Nevertheless, the Covid-19 pandemic has accelerated investments in digital tools and processes for supply chain management.

Of all supply chain managers surveyed, 32.5% say their companies have increased their investments in digital tools or processes by more than 50% as a result of the pandemic. While this number rises to 12% among managers in Europe and North America, it climbs to over 40% in Asia. These investments mainly concern the areas of trade facilitation, forecasting and forecasting, inventory management and manufacturing processes.

The report, according to Citi, shows that all industry sectors are reacting to the challenges posed by the pandemic with a common goal of ensuring the sustainability of long-term business operations.

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