Tag Archives: global supply chains

There’s One Key Reason To Buy American In 2017

With the Trump administration’s “Made in America” campaign in full swing, attention has turned to the Pentagon’s global supply chain. The reasons to Buy American might be a little more compelling than you expected….

In 1933 Franklin D. Roosevelt signed into law the 1933 Buy American Act which required the Pentagon to purchase US-manufactured products for anything over a $3,500 threshold. The military supply chain looked very different to today’s, over 80 years later.

The law required that the U.S. military’s entire supply chain be sourced domestically, from the textiles that go into uniforms to the raw materials that are used to create tanks and other weaponry. Roosevelt’s intention was clear: firstly, the law was a patriotic one, with the ‘buy American’ message resonating as strongly in the 1930s as it does among voters today. More importantly, the Act was designed to ensure a strong manufacturing base, critical to the country’s recovery from the Great Depression.

Roosevelt said in 1940: “Guns, planes, ships and many other things have to be built in the factories and the arsenals of America. They have to be produced by workers and managers and engineers with the aid of machines which, in turn, have to be built by hundreds of thousands of workers throughout the land.”

Is Buy American realistic in 2017?

While the 1933 law is ostensibly still in effect, the military supply chain draws heavily on foreign materials and components. In 2013, for example, nearly $20 billion (6.4 per cent of all U.S. military spending) went to overseas entities. This is achieved through the use of exemptions or waivers, which guarantee flexibility and security of supply.

After the White House published a “Buy American” executive order in April, the Office of Management and Budget provided new guidance to federal agencies on enforcing the existing laws, limiting exemptions and maximising the procurement of U.S. products. The Pentagon’s acquisitions office has reportedly instructed its contractors to put in place a training program on how to comply with the 1933 law.

However, there are also a number of materials that simply can’t be found or manufactured domestically, such as the rare earth element needed for flame-resistant rayon fibres used in uniforms (sourced solely from Austria), night vision goggles (91 per cent of which are from China), or lithium ion batteries, semiconductors, microchips and even missile propellant.

Is cybersecurity a reason to Buy American?

Two of the reasons for the 1933 Buy American Act – building patriotism and manufacturing jobs – still remain valid and are a key focus on Trump’s administration, but in today’s world of hi-tech military hardware, there’s a third, critical factor – cybersecurity.

Commentators are alarmed by the presence of Chinese-made microchips in America’s most advanced fighter jets, while components from other foreign entities can be found in American communication satellites, unmanned drones, bomb disposal robots and other gear. Futurist and author Peter Singer, predicted that these microchips could be used to “blow American fighter jets from the sky” if the two countries were ever to go to war.

While very little can be done about the rare-earth materials and metals found only outside of the U.S., it remains to be seen whether the Made in America push will lead to supply chains for vital components including microchips and semiconductors re-shored to the U.S.

In other news this week…

Supply Chain Management software market booming

  • Analyst firm Gartner has announced that the supply chain management (SCM) software market will reach $13 billion by the end of this year, up 11% from 2016.
  • Gartner has also predicted the market will exceed $19 billion by 2021.
  • Growth is being driven by a demand for agility, as vendors move to cloud-first or could-only deployment models, while end-users are becoming more comfortable about cloud security and recognise the benefits of software-as-a-service solutions.

Read more on MH&L news 

When does an SME need a procurement function?

  • New research from Wax Digital has found that having a procurement function is just as vital for SMEs as it is for large corporates.
  • The UK-based survey found that 75% of respondents said procurement was needed once a company reaches a £50M turnover, 77% claim to need procurement by the time it has 100 supplier contracts, and 72% said that procurement was necessary once 500 invoices per month were being processed.
  • Rising costs was the most common reason for introducing procurement, followed closely by inefficient processes and increasing business risk.

For more information visit www.waxdigital.com

Elon Musk’s Hyperloop hits the news again

  • Tech entrepreneur Elon Musk made headlines on Friday when he announced via Twitter that he had “verbal approval” to build a hyperloop – an ultra-high-speed underground transport system – linking New York and Washington DC.
  • If it goes ahead, passengers and cargo would be packed into pods and shot through a system of giant vacuum tubes on magnetic cushions, cutting the current travel time from nearly three hours (high speed train) to 29 minutes for the 355km journey.
  • Musk has also been in conversation with Chicago and Los Angeles officials about hyperloops.

Read more at Financial Review

 

The Brexit Horror Show: It’s Going To Be Rocky!

We all like to watch a good horror show.. but UK customs trying to manually process our imports? Entertainment it is not!

Are you ready to watch the Brexit horror show unfold?

The National Audit Office (NAO) pubilished a report last Thursday reviewing HM Revenue & Customs’ development of the new Customs Declaration Service (CDS).  The system is being developed in an attempt to manage the predicted 255 million UK customs declarations per year (an increase from 55 million)  once the UK leaves the EU.

But, with a significant amount of work still to be completed before March  2019,  many are concerned about what chaos might ensue.

Amyas Morse,  head of the NAO, did little to disguise his own concerns when he briefed the media on the report this week. He warned of a potential “horror show” at customs if the transition to CDS is not made by January 2019.

He said “What we don’t want to find is that, at the first tap, this falls apart like a chocolate orange.”  (Yep, we were confused by this too – it’s well known that Terry’s Chocolate Oranges are not known for their fragility; hence the marketing slogan “Don’t tap it, whack it!”.)

“It needs to be coming through as uniform, a little bit more like a cricket ball” he continued.

What Is The Customs Declarations Service?

The CDS is a new system, which will be installed to manage all imports and exports post-Brexit, replacing existing system, Customs Handling of Import and Export Freight (CHIEF).

CHIEF can currently process only 100 million declarations per year.  This leaves no question that a new system is needed given that HMRC are estimating an increase to 255 million once new trade and customs agreements are made during Brexit.

Completion of the installation is forecasted for January 2019 which doesn’t allow much room for error or delay given that the UK will officially leave the EU in March 2019. Indeed, the report confirms that there is still a “significant” amount of work to complete and a number of vacancies to fill, which means there’s a pretty good chance that the full functionality of CDS won’t be ready in time.

Ironically, in 2016, the UK came fifth out of 160 countries in the World Bank’s ranking of the efficiency of the border clearance process, including customs. Time will tell if this can be maintained post-Brexit!

Why Should Businesses Be Concerned?

The National Audit Office believes the government is only just starting to realise how difficult Brexit will be.  In a worst-case scenario it would become impossible for customs to collect the £34bn of duty, excise, and VAT taken at the border every year.

Customs officials might have to manually process imports and exports if the new electronic system is not in place, which would of course be a nightmarish scenario for businesses and their supply chains.

Mike Cherry, chairman of the Federation of Small Businesses, said “It’s extremely concerning that the UK’s new customs system may not be ready in time for Brexit, potentially resulting in massive delays to trade and leaving thousands of businesses in the lurch.” And hat’s not to mention a lack of confidence businesses will feel in the UK if their flow of goods is disrupted.

“Can government actually step up in these very difficult circumstances and deliver a unified response?” Morse asked. “I’m not seeing it yet.”

The report, and the alarming comments made by Amyas Morse will no doubt increase the pressure on the prime minister to re-evaluate Brexit progress and policy, but will it be in time to stop a customs horror show?

Let us know your thoughts on the NAO report in the comments section below. 

In other procurement and supply-chain news this week….

Bangladesh Factory Blast

  • Major European buyers of apparel supplied by a Bangladesh garment plant have started investigations after a boiler explosion in the plant killed 13 people and injured dozens
  • The explosion occurred during maintenance work at the factory, whose top buyers include Finnish fashion chain Lindex, which is part of Stockmann
  • Stockmann communications manager Anna Bjarland confirmed to SM that the factory supplied garments to both Stockmann and Lindex saying that the company was investigating

Read more on Supply Management

Hazardous chemicals in Tesco’s clothing supply chain

  • Tesco has joined a growing list of major high street retailers in beginning to remove chemicals thought to be hazardous from the supply chain of its clothing brand
  • Greenpeace said Tesco will immediately begin the process of eliminating 11 groups of hazardous substances from its F&F brand, including phthalates, brominated and chlorinated flame retardants, chlorinated solvents and heavy metals
  • Alan Wragg, technical director for clothing at Tesco, said: “This commitment is part of our goal to protect the environment by sourcing products sustainably and responsibly for our customers.”

Read more on Business Reporter 

Could China lead the way with AI?

  • In the battle of technological innovation between East and West, artificial intelligence (AI) is on the front line. And China’s influence is growing
  • China has invested massively in AI research since 2013, and these efforts are yielding incredible results. China’s AI pioneers are already making great strides in core AI fields
  • It is becoming clear that belief in U.S. dominance of the tech world is flagging. As it stands, China is in the driver’s seat

Read more on Venturebeat

NEC to build world-first information platform for Global Pandemic Supply Chain

When a disease outbreak hits, even the slightest inefficiency in supply chains can lead to a catastrophic loss of human life. A joint initiative of The United Nations World Food Programme and NEC Corporation will greatly improve the supply chain response to the next pandemic. 

The 2013-2016 West Africa Ebola outbreak began in countries of Guinea, Liberia, and Sierra Leone, with smaller outbreaks occurring in Nigeria, Mali and Senegal. Imported cases led to infections being reported in the UK, Spain, Sardinia and U.S. before the outbreak was declared in June 2016. By this point, the World Health Organisation reported a total of 28,616 cases and 11,310 deaths.

According to the UN World Food Programme (WFP), the need for a streamlined and coordinated supply chain response was highlighted through the many challenges encountered during the West Africa Ebola outbreak. They included:

  • Severe warehousing and distributing capacity constraints
  • Limited visibility of the overall supply and demand of critical items
  • Access constraints caused by border closures
  • A lack of public-private sector coordination resulting in duplicate efforts and an inefficient response

Protective clothing (pictured above) is an example of a critical item that must get through to healthcare workers in outbreak areas. A full set of protective clothing includes a suit, goggles, a mask, sock, boots and an apron. Healthcare workers change garments frequently, discarding gear that has barely been used to minimise exposure to the virus. By October of 2014, Ebola suit makers including DuPont and Kimberly-Clark had tripled production to try to cope with demand as health workers used an average of seven suits per bed, per day. The World Health Organisation estimated that three million protective suits were needed over the course of the outbreak. Tragically, healthcare workers represented nearly 10 percent of cases and fatalities due to ebola.

New supply chain platform will save lives when the next pandemic comes

Supply chain logistics are a critical part of any emergency intervention. Inadequate logistics can lead to critical delays, cost lives and waste precious resources. NEC’s announcement of a new information platform, which will be part of the Global Pandemic Supply Chain Network, is expected to improve response times, find cost efficiencies and aid in continuous improvement.

The technology has been described as a “logistics visualization system that will enable end-to-end tracking of pandemic response items” – such as protective clothing – within a country facing an outbreak, helping to ensure quick and appropriate delivery of supplies to people in need. Other key functions of the system include reporting, analysis of supply chain inefficiencies, data integration with existing logistics systems and in-country warehouse management.

“It is widely recognised that the global health architecture could be reinforced with an improved supply chain platform to enable better preparation and faster response time for pandemics”, said a spokesperson for the Japanese Government, which committed US$1 million to the development of the new technology.

 Public/private collaboration driving results

Perhaps the most encouraging aspect of this announcement is the demonstration of how effective public and private collaboration can be in solving enormous challenges such as a global pandemic response. Aside from the key collaboration between the WFP and NEC Corporation, a framework for future pandemic response has been developed through an “unprecedented” level of cooperation between public organisations including the UN, WHO, UNICEF, the World Bank; and private sector companies including Johnson & Johnson, UPS Foundation, Becton, Dickinson & Co., and NEC.

 In other procurement news this week…

 White House trade advisor reaffirms administration’s trade goals

  • The U.S. is seeking more reciprocal trade arrangements with key countries to boost growth, reduce the trade deficit and reclaim American production capacity, according to Peter Navarro, director of the White House National Trade Council.
  • Speaking in Washington last week, Navarro singled out nations that have contributed to the current deficit problem, including Ireland, Vietnam, China, South Korea, Taiwan and Switzerland.
  • According to Navarro, the U.S. plan to reduce the trade deficit “is not based on higher tariffs, but rather getting our partners to lower theirs.”

Watch Navarro’s speech here.

Canadian federal procurement processes flagged for an overhaul

  • Addressing an event hosted by the Information Technology Association of Canada last week, Canada’s Public Services and Procurement Minister Judy Foote stressed the need for an overhaul of federal procurement processes to improve accessibility for SMEs.
  • At present, unreasonably complex processes and requirements are resulting in 8000-page responses to RFPs, which small businesses simply do not have the resources to undertake.
  • Ms Foote said that government procurement processes “have the ability to shift markets … (and) launch businesses.”

Read more at Ottawa Business Journal

 

World Trade and Procurement in the Trump Era

Trump’s trade  policies will greatly affect our global supply chains. How will increased protectionism and bilateral deals impact the procurement function?

Frantically attempting to understand the new modern world, commentators and experts are struggling to digest the political earthquakes of 2016. It remains wholly unclear what binds together the widespread nationalism, populism and division in countries around the world.

The threat to global supply chains

Trump has a clear dislike of international trade, preferring to shield the USA’s economy from competition. He has a disdain for businesses moving operations to other countries.

Whether or not organisations source much directly from non-domestic sources, they are dependent on global supply chains and networks. These networks are responsible for sourcing the goods and services to meet the needs of stakeholders. Threats to free trade pose challenges to procurement professionals and their ability to source goods and services efficiently and cost-effectively.

For many years, there has been a trend for opening up procurement markets. This trend has entailed removing tariffs on imports, opening up non-discriminatory bidding on public contracts to non-domestic businesses and harmonising regulatory regimes to make cross-border trade less bureaucratic and more efficient. This has allowed procurement teams to drive down costs and increase competition and product choice.

Trump’s abolition of free trade agreements

Since inauguration, Trump has honoured his commitments to abolish pending free trade agreements (FTAs) with the European Union and eleven Pacific Rim countries. Both contained provisions which would have opened up the procurement markets to non-discriminatory bidding for businesses across participating countries. This eases importing processes.

Trump also vowed to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico, which has been critical in creating and sustaining supply chains in North America.

With this move away from free trade, what are the prospects for continued integration of procurement markets in the Trump era? There are two points to cover – new bilateral FTAs including the USA and the movement towards free trade driven by powers beyond the USA.

The prospect of new bilateral deals

Firstly, whilst Trump has expressed a strong distaste for multilateral FTAs such as TTIP, TPP and NAFTA, he has sung the praises of bilateral deals. This has been strongly signalled with the UK in particular.  Trump has made some ambitious comments that there is a  deal ready to sign once the UK departs the EU.

If this were to happen, tariffs and perhaps other barriers would be removed, with the intention of easing cross-border trade.

The prospects for this are not great, however. With Trump’s “America first” agenda, it is not clear how easily any deals could come to fruition. FTAs are based on compromise, whereby countries grant reciprocal access to each others’ economies. For American companies to gain the ability to win public contracts as part of a deal with another country, access to American government contracts would need to be provided to businesses from the other country.

It is far from clear whether the new administration would accept the American government awarding contracts to more foreign companies, effectively moving the jobs associated with that contract to other countries.

China could be the driving force behind liberalising trade

The second topic is perhaps more pertinent then; this is the possibility that other countries or systems will emerge as the force behind liberalising procurement markets to replace a more protectionist and isolationist USA.

China’s global economic influence is steadily increasing. The TPP’s death presents China with the opportunity to be the leader in free trade. It is the lead behind the proposed Regional Comprehensive Economic Pact (RCEP), which includes sixteen countries, such as Australia, Japan, India and South Korea. In total, RCEP covers 30 per cent of global GDP and around half of the global population.

The agreement focuses on tariff removal, with some harmonisation of standards and intellectual property rights. RCEP is not equivalent to TPP in integrating procurement markets in different countries, however. Whilst procurement teams would benefit greatly from cheaper imports from elimination of tariffs, RCEP does not include detailed provisions of government procurement – non-discrimination does not look likely to be included. The eventual, and lofty, ambition of RCEP is to create a free trade area across the Asia Pacific.

Driving integration in procurement markets

Aside from China, multilateral institutions are perhaps the most likely to drive integration and liberalisation of procurement markets over the coming years. The European Union has long been a driver of liberalisation of procurement markets.

In 2016, the EU signed a detailed FTA with Canada,   including detailed provision for procurement.  It has pending agreements with countries such as Singapore and Vietnam and is in long-term discussions with an array of countries and trading blocs.

The World Trade Organization’s (WTO), Agreement on Government Procurement (GPA), consisting of 47 members (including the EU28), reciprocally opens procurement markets. It is looking likely that Australia will accede to the GPA in 2017 and discussions of China becoming a full member, further opening up procurement markets.

Also within the WTO, the Trade in Services Agreement (TiSA) is a proposed agreement to ease trade in services. This would include 50 countries, including the EU countries and the USA. With this, trade in services between the countries would become  frictionless and there would be elimination of preference for domestic suppliers, which might apply without a minimum value threshold for all government agencies.

Access to global markets is core for procurement

Globalisation continues to be much maligned by electorates and the media. But for procurement teams who rely on sourcing goods and services from around the world, either directly or indirectly, access to global markets is core to maximising value for money and ensuring public services are as effective and cost-efficient as possible. Without engaging in the broader political debates, it is clear that one industry needs access to suppliers of goods and services, without unnecessary barriers – the procurement industry.

Are Supply Chains Already Feeling the Trump Effect?

President-elect Trump doesn’t take office until January 20th 2017, but his impact is already being felt in global supply chains.

Trump trade deals

Yes, it’s been a little over two weeks since Donald Trump won the US Presidential election. And it’s still nearly two months until he officially takes office. Yet, it’s hard to get away from media reports on what will happen during Trump’s first 100 days in office.

NAFTA, the Trans-Pacific Partnership (TTP), and import tariffs have all been in the news. And if global supply chains weren’t already watching with interest, they certainly should be now.

NAFTA – Overhaul on Cards

During the election campaign, Donald Trump made much of the movement of US manufacturing jobs to Mexico. One solution was to end US involvement in NAFTA, pushing companies to move jobs back to US heartlands.

The North Atlantic Free Trade Agreement was signed in 1994, effectively eliminating tariffs between the USA, Canada and Mexico. The agreement has allowed for seamless movement of goods across borders. It also means that the US currently has more trade with Canada and Mexico, than Europe and China.

An estimated $1.4 billion worth of goods cross the US-Mexico border every day. However, it’s not all been positive, with many organisations moving production to Mexico, where costs are lower.

However, in the past week, the stance from the Trump camp appears to be one of overhaul, rather than withdrawal. The President-elect wants to ensure a “better deal” for America, as well as reduce America’s $76 billion trade deficit.

This could include tariffs of up to 35 per cent on Mexican imports, and penalising companies moving production there. Other changes could include issue to do with currency manipulation, as well as labelling of meat products, and lumber production.

However, experts have warned that any or all of these measures could hurt the USA too. Increased meat prices in US supermarkets, higher house prices, and Mexican tariffs on US goods could all be on the cards. And that’s without the guarantee that jobs would come back to the US.

Relocating Supply Chains

One company subject to plenty of Donald Trump’s ire during the election was Apple. The President-elect singled out Apple several times as an example of a company that should re-shore its production.

To emphasise his point, Trump has threatened to put a 45 per cent import tariff on all Chinese-made goods. At present, Apple devices are assembled in China, with key components sourced from specialised suppliers throughout Asia. In spite of this, however, re-shoring is not that simple for Apple.

Experts have warned that moving production would be challenging, citing a lack of skilled workers and a steep hike in costs. There is also the matter of the highly complex supply chain Apple has established in Asia.

Analysis carried out by the MIT Technology Review stated that higher labour costs, and logistics costs of transporting components to the US, would add between $30 and $40 to the cost of producing each iPhone.

However, the Nikkei Asian Review has reported  that Apple is actually looking at moving some elements of production. It would not be unprecedented either. In 2012, key Apple supplier Foxconn set up an iMac assembly line in Texas. And in 2013, Apple supported Flextronics, another contractor, in building a Mac Pro production line in Texas too.

The media this week reported a call between Donald Trump and Apple CEO, Tim Cook, leading many to suspect that discussions are already taking place. However this ultimately plays out, global supply chain movement and disruption could happen. And if Apple were to move first, it seems like that others would follow suit.

‘Made in China’ Great Again?

One country not looking favourably on President Trump’s policies and tariffs is China. It has been reported that China is unhappy with potential import tariffs, as well as being labelled as a currency manipulator by the future President.

Reports from state media have stated that any tariffs would be met with tariffs of China’s own. There was also a thinly veiled threat against raising tariffs above agreed WTO levels, and starting a trade war.

However, at the same time, China could be a major beneficiary of Trump’s plans to pull the US out of the TPP on his first day in office.

The aim of the TPP was to create a common market, similar to the EU, between its members – the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. As these countries make up 40 per cent of the world’s economy, it was seen as a great opportunity for many.

However, critics argue that it favours big business, and Donald Trump looks set to abandon it in favour of freshly negotiated trade deals. The belief is that, without the USA, the TPP would be dead in the water. But that would open up markets to greater deals and trade with China.

Australia was one country that signalled it would be interested in a China-led trade deal. Deals such as the Regional Comprehensive Economic Partnership (RCEP) could see China increase its power in Asia, leaving America in the cold.

What do you make of the policies announced by President-elect Trump in the past week? Could the US suffer by going down a protectionist route? Tell us your thoughts below.

So you’ve got more time to bargain hunt this Cyber Monday, we’ve tracked down the top news headlines this week…

Samsung and Panasonic Investigate Labour Abuses

  • A Guardian investigation has revealed exploitation of migrant workers in Malaysian factories producing goods for leading electronic brands Samsung and Panasonic.
  • The group of Nepalese migrant workers claim they have been deceived about pay, as well as having to pay large sums of money to secure the jobs.
  • Working conditions are reported to include 14 hours on their feet without adequate rest and with restricted toilet breaks.
  • Samsung and Panasonic have opened investigations into the conduct of their suppliers following the claims.

Read more at The Guardian

BMW Logistics Using Autonomous Robots

  • The first fleet of autonomous transport robots to be used in everyday operation has been launched by BMW.
  • The first fleet of ten robots has been put into operation at the car maker’s Wackersdorf plant.
  • The robots will transport components around the facility, and are capable of carrying loads up to 500kg.
  • The move comes as the company aims to remove as much CO2 emission from its manufacturing processes.

Read more at Supply Chain 24/7

Shell May Face UK Trial Over Nigeria Spills

  • A High Court is to make a decision on whether two Nigerian communities can bring cases against Shell.
  • The communities claim that pollution from repeated spills has caused lasting damage to their environment.
  • Lawyers representing the communities argue that Shell controls and directs its Nigerian subsidiary, and is therefore responsible.
  • However, Shell have also lodged applications to challenge the jurisdiction of the English courts in the matter.

Read more on Supply Management

Canada Energy Decisions to Impact Freight Carriers

  • Canada has announced a plan to phase out all coal power by the year 2030.
  • Four affected coal power plants will will have the option of switching to lower-emitting resources or using carbon-capture and storage technology.
  • The move will have a knock-on effect on the country’s freight carriers, particularly the railroads.
  • Volumes of coal carried by railroads have fallen by 12 per cent this year, and are likely to get smaller still in the next decade.

Read more at the Wall Street Journal

Why Elon Musk Thinks Supply Chain is “Tricky”

If Elon Musk describes something as tricky, then you know that it’s something organisations should be paying close attention to.

Elon Musk

When someone who:

says something is “tricky”, it means something!

“Tricky” Supply Chain

Elon Musk, founder of a number of high profile companies, including Tesla motors, PayPal and SpaceX, was interviewed recently at Code Conference 2016.

In the interview, Musk tells a couple of stories and anecdotes about Tesla’s Supply-Chain that highlights how things can derail fast and put your production to a halt.

It helps to illustrate the role that procurement can, and must, have in anticipating and preventing such situations. Also, in minimising impacts, and if the worst happens, to react quickly, and get back to normal as fast as possible.

You can watch the whole interview below (I recommend you do). If you prefer to go directly to the part I am referring to (1 hour 10 min into the interview), it is here.

Turning Point in SE Asia Supply Chain Challenges

A turning point has been reached in the challenges facing the South East Asia supply chain, say global consultancy Crimson & Co.

South East Asia Supply Chain

In the light of economic growth, rising affluence and booming consumer demand, many international businesses are seeking to capitalise on the growth in South East Asia’s developing markets.

The challenges in the South East Asia supply chain have reached a turning point. This is down to the scarcity of supply chain professionals, increased consumer diversity, and fragmented supply chains.

The many layers of suppliers, localised delivery and route to consumer practices, and lack of transparency and consistency in information flows, make it incredibly difficult for businesses to achieve the next wave of global growth.

SE Asia Supply Chain – Huge Promise

There is huge promise but transforming supply chains to reach market potential, handle diversified products, and provide outstanding quality and service to customers is a mammoth task. The businesses best able to overcome these challenges can transform their South East Asian supply chains to become a source of competitive advantage, and drive global growth.

With rising labour costs and the move away from an export-based economy, changes in China are creating opportunities for South East Asia in global manufacturing. This also positions global businesses to capitalise on growing demand in these markets.

For most companies the potential is clear. The challenge is how to address it.

The Time is Now

Richard Smith, Director of Crimson & Co Singapore, argues that the time to transform supply chains is now:

“South East Asia is an incredibly attractive region with rapidly growing markets and low cost operations. The challenge is how to address fractured supply chains and the shortage of supply chain skills.

“As companies move their factories from China to South East Asia, they should grasp the opportunity to carry out a full supply chain review to identify how they should configure their supply chains to better deliver on their current and future business strategies. Due to the significant costs involved in the transformation, businesses need to assess the real benefits and ensure it will deliver against objectives.

“Companies can accelerate their supply chain transformation by bringing best practice from elsewhere in their organisation, other industries and innovative local supply chain practices. Through understanding their businesses’ maturity and readiness to change they can identify where sustainable improvements can be made and how to leverage disruptive technologies to drive business performance.”

Challenges Remain

However Smith warns that a number of challenges remain across the South East Asian supply chain, such as high staff turnover, with employees quick to leave for higher salaries, as well as a lack of experienced professionals with supply chain knowledge across manufacturing, distribution, planning and supply chain management.

In order to ensure successful transformation, Smith also warns that knowledge and awareness of local culture and business landscapes is critical, with a long term focus on developing local supply chain knowledge and people capabilities. This can be done by establishing a physical presence in the region, and developing region-specific leadership and training programmes.

Smith concludes: “Opportunity abounds in the South East Asia region with unrivalled chances for market growth, logistics, sourcing and manufacturing. The time to reinvent networks and processes is now – transforming the South East Asia supply chain into a source of competitive advantage.”

Crimson & Co is a global supply chain consultancy, with a scope spanning supply chain strategy, planning, procurement, manufacturing, logistics and customer channels.