Sai Tunuguntla
Singapore
We were delighted to host the annual Supply Chain & Procurement Leadership Forum (SCPLF) in Singapore a few weeks back. Each year we convene industry leaders and practitioners over an informal dinner and facilitate conversation on issues of immediate relevance. Themed "Capitalize on uncertainty", the event helps ideation around ways of working to navigate constantly changing external environments.
In addition to our proprietary research, we ran a survey across key markets in APAC. Based on the responses of more than 90 supply chain and procurement function leaders, we see a clear trend: supply chain and procurement leaders are gearing up for significant changes in their networks.
SE Asian countries will have an increasingly important role in future supply chains
As both regional and global companies pursue "China Plus One" strategies, countries in the Association of Southeast Asian Nations (ASEAN) such as Vietnam, Indonesia, Thailand, and Malaysia are expected to play a pivotal role in future supply chains. These markets are becoming increasingly attractive for companies seeking to diversify and rebalance their operations. Commodity prices are largely declining and function leaders are looking to claw back buying leverage that was lost during the period post-COVID. Building timely intelligence on price shifts and having should-cost or should-pay models in place to realize the savings across the value chain will be pivotal.
However, survey respondents were concerned about the dramatic increase in freight costs and lead times. Our analysis suggests that freight costs increased across the board and on certain routes such as the Shanghai-Rotterdam route, they went up by more than 330%. The situation has also driven change in carriers operating models, where they are prioritizing spot-rates and skipping ports to keep up with tight supply. A few companies that are challenged to pass these increased costs downstream to their customers are looking at local and vertically integrated suppliers in the near term. It has become imperative for all companies to build more real-time intelligence and prepare diverse options for supply assurance.
Digitalization was seen as the #1 priority in changing ways of working. We are seeing increasing maturity of technology solutions. A number of use cases captured in the figure below have been implemented by AlixPartners for its clients including those based on GenAI toolsets. Figuring out the "real" value creating use-cases, having clear success metrics, and managing diverse stakeholder expectations are some of the key skills that supply chain and procurement organizations will need as they pursue digital transformation.
Four distinguished industry leaders and practitioners joined a panel discussion that also saw lively participation from the attendees. The panelists were:
The panel kicked off with a discussion on how to balance the competing demands of agility, risk, and cost. Panelists emphasized that while certain baseline requirements – such as safety and avoiding production disruptions are non-negotiable, there are opportunities to improve in all areas without sacrificing one for the other. To achieve these outcomes, the panel discussed having a core group of global suppliers complemented by local suppliers. This supply model needs to be underpinned by strong relationships with logistics providers, including freight forwarders.
The panel were all in agreement on the priority of digitalization and how it was more important than process automations. Visibility and predictability of the supply chain were couple of use cases that were discussed in depth. Finally, the panel and the attendees deliberated on the need for "self-awareness" around organizational maturity regarding the model of collaboration between supply and/or procurements teams and Business Units. In organizations where this collaboration model is advanced, there is a good debate and constructive challenge process. The outcome of such an engagement is clear expectation setting and prioritization – i.e., not all products and customers should accord the same and highest priority (there are "hero" products and customers and then there are others). Further, in such organizations, the mindset shift happens from avoiding failure at all costs to having plans to recover from failure quickly and demonstrate resilience.