Rebalanced and resilient: the urgency of supply chain transformation in Asia Pacific

The limitations of the traditional globalised approach to supply chains have been increasingly obvious as economic shocks and natural disasters have continually rocked international businesses. In the aftermath of COVID-19, the need to act now to rebalance supply chains for resiliency has never been clearer. And Asia Pacific will play a central role.
Growth trajectory  Asia Pacific is undergoing a fundamental shift. It is no longer purely a production hub for global markets, but now a region that global companies are increasingly sourcing from, manufacturing in and selling to. Asia Pacific’s maturing supplier and production landscape features: New supplier locations offering strong incentives Highly diverse supply and production capabilities Increasing focus on value-added production
US$428 billion How much trade between the 15 signatories to the RCEP could increase by 2030.  Growth in Asia Pacific remains strong even as global markets stagnate. Forecast economic growth    2021	2022 Advanced economies	5.1	3.6 China, India and ASEAN-5 	8.6	6.0  These factors are all incentivising companies to rebalance their operations towards more regional networks to target Asia Pacific’s booming middle class.
Asia Pacific’s share of global middle class: 2020	2030 54%	65%   These consumers are demanding: Greater choice Reliable fulfilment More sustainable practices This is fueling competitive pressure on regional players to improve quality and agility.
A final warning  Few companies escaped the impact of COVID-19. But the pandemic is just the latest in a history of disruptions.   The past decade has also seen: [2011] Japanese earthquake and tsunami [2011] Thailand floods [2016] Brexit [2018] The US-China trade war [2020] COVID-19 pandemic [2020] Global semiconductor shortages  And global trade uncertainty remains near an all-time high: [data from IMF World Trade Uncertainty Index here, perhaps from 2010 onwards]  102: How many new trade-restrictive measures were implemented between October 2018 and October 2019 alone.  Climate-related disasters and cyber attacks are also increasing, giving rise to both local and global supply chain disruptions. For example:  300 million: How many people globally live in areas expected to be chronically flooded by 2050.  40%: of CEOs in Asia Pacific are extremely concerned about cyber attacks threatening their growth.
What to prioritise to build rebalanced and resilient supply chains Developing digitally integrated supply chains and instituting a ‘just-in-case’ approach Developing digitally integrated supply chains to improve visibility and responsiveness Shifting to a ‘just-in-case’ approach for critical supply points serving higher-value customers.
And global trade uncertainty remains near an all-time high: [data from IMF World Trade Uncertainty Index here, perhaps from 2010 onwards]  102: How many new trade-restrictive measures were implemented between October 2018 and October 2019 alone.  Climate-related disasters and cyber attacks are also increasing, giving rise to both local and global supply chain disruptions. For example:  300 million: How many people globally live in areas expected to be chronically flooded by 2050.  40%: of CEOs in Asia Pacific are extremely concerned about cyber attacks threatening their growth.
What to prioritise to build rebalanced and resilient supply chains Developing digitally integrated supply chains and instituting a ‘just-in-case’ approach Developing digitally integrated supply chains to improve visibility and responsiveness Shifting to a ‘just-in-case’ approach for critical supply points serving higher-value customers.
Rebalancing supply base for increased regional consumption Enabling effective supplier selection and management for localised supply chains Enhancing and developing new supplier capabilities to partner with multinationals Realigning regional production footprints Going beyond traditional due diligence to select new locations for footprint expansion Establishing partnerships with local stakeholders for easier entry into new locations
3 key factors for successful supply chain rebalancing across Asia Pacific  [Digital enablement Properly deployed, digital solutions can boost resilience by improving supply chain visibility and responsiveness, while creating time and cost savings.  Environmental and social sustainability By moving towards circular economy models, companies can boost their resilience to disruption while contributing and committing to a Net-Zero future.
Trade and customs considerations Supply chain networks must be designed to minimise tax, trade and customs related costs, including taking advantage of RCEP and the Comprehensive and progressive Agreement for Trans-Pacific Partnership (CPTTP). Ensuring compliance with local laws and regulations is vital.

Rebalanced and resilient: the urgency of supply chain transformation in Asia Pacific

Pressures have long been mounting on businesses to review the globalisation of their supply chains. But the COVID-19 pandemic has presented both a final warning and an opportunity for Asia Pacific to rethink and rebuild.

Consumer markets in Asia Pacific are growing rapidly, while the supplier and production landscape matures and diversifies. Increasing standards are also driving the adoption of regionalisation models, in which companies not only manufacture in Asia Pacific, but also source from and sell to the region.

Meanwhile, economic protectionism and trade uncertainties are on the rise, along with the need to address threats linked to sustainability.

But just as multiple drivers are pushing businesses to transform their supply chains, there are numerous factors making such transformation more achievable than ever.

The dip in economic activity caused by COVID-19 has created the need and opportunity for many businesses to begin overhauling their legacy systems to build new ones, capable of meeting expected resurgent demand in Asia Pacific while engineering resilience against multiplying risks.

Low interest rates and bond yields have made capital more available and affordable, creating a window of opportunity to invest in transformation initiatives or make strategic acquisitions.

But much is still to be done. Suppliers in Asia Pacific must be moving toward ensuring they can meet the demands of multinationals wanting to establish a wider footprint in the region, strengthening quality standards, reliability and network visibility as needed.

Governments in Asia Pacific also have a vital role to play in promoting local innovation, enhancing infrastructure and using custom policies to boost stakeholder collaboration. 

Find your local Asia Pacific contact

Christopher Kelkar

PwC Asia Pacific Vice Chairman, Operations, PwC United States

Email

Sridharan Nair

PwC Asia Pacific Vice Chairman, Markets, PwC Malaysia

Email

David Wijeratne

Partner, Growth Markets Practice, PwC Singapore

+65 9759 1784

Email

Oliver Sargent

Partner, Sydney, PwC Australia

612 8266 0461

Email

Jason Hayes

Partner, Assurance, Sydney, PwC Australia

+61 407 232 142

Email

Gary Dutton

Partner, National Trade Leader, Brisbane, PwC Australia

+61 434 182 652

Email

Thomas Leung

Markets Leader, PwC China

+[86] (10) 6533 2838 / +[852] 2289 8288

Email

Ay-Tjhing Phan

Markets Leader, Jakarta, PwC Indonesia

+62 21 509 92901

Email

Yukinori Morishita

Markets Leader, PwC Japan

Email

Roderick Danao

Vice Chairman and Assurance Partner Markets Leader, Makati, PwC Philippines

+63 (2) 459 3065

Email

Kok Weng Sam

Markets Leader, PwC Singapore

+65 9367 3340

Email

Kevin Lin

Markets Leader, Taipei, PwC Taiwan

+886 2 27296666, x25230

Email

Niphan Srisukhumbowornchai

Markets Leader, Bangkok, PwC Thailand

+66 (0) 2844 1000 ext. 4723

Email

David Tay

Markets Director, TP.HCM, PwC Vietnam

+84 28 3823 0796, Ext. 4691

Email

Redha Shukor

Partner, Sustainability and Operations, PwC Malaysia

+60 (3) 2173 1832

Email

Peter Chambers

Partner, Food & Fibre Leader | Finance & Operations Leader, PwC New Zealand

+64 21 404 015

Email

Marc Philipp

Consumer and Industrial Products Leader, South East Asia Consulting, PwC Singapore

+65 8223 1503

Email

Nguyen Luong Hien

Partner, Deals/Strategy, Ho Chi Minh City, PwC Vietnam

+84 28 3823 0796

Email

Steven Zhong

Sustainability Strategy & Transformation Lead Partner, Shanghai, PwC China

+[86] (21) 2323 5349

Email

Jenny Chong

Asia Pacific International Tax Services Leader, China Tax Digital Products & Solutions Leader, Shanghai, PwC China

+[86] (21) 2323 3219

Email

Sarah Stewart

Partner, PwC Australia

Email

Daimi Tanaka

Partner, PwC Japan

Email

Jacky Lu

Partner, PwC Taiwan

Email

Joanne Robinson

General Manager, Auckland, PwC New Zealand

+64275896335

Email

Nurul A'in Abdul Latif

Executive Chair, PwC Malaysia

+60 (3) 2173 0935

Email

Paulson Tseng

Tax Reporting and Strategy leader, PwC Taiwan

+886 2 27296666 23672

Email