Asia: The Supply Chain Revolution Starts Here

Asia is leading the revolution in digitally-driven, highly-integrated supply chain solutions but supply chains must be a strategic priority to maintain global competitiveness

Softening consumer demand in major economies and trade tensions have undoubtedly combined to weaken global growth.[1]

But that decline in economic momentum shouldn’t deter business in the Asia-Pacific because there’s a revolution underway – in supply chains – and the region is at the heart of it.

Asia is leading the way in evolving ever smarter, technology-driven supply chain models which are highly interconnected and can readily compete in the digital marketplace.

Supply Chains in Asia- a Strategic Priority

That’s why, more than ever, supply chain investment in Asia is a strategic priority.

This investment provides businesses with flexibility to respond quickly and efficiently to economic headwinds, whatever they might be.

Take trade tensions, for instance. A recent poll found more than 90 percent of Chinese companies are reviewing their supply chains, including relocating production, to lessen the impact of tariffs.[2]

That requires agile, increasingly integrated supply-chain ecosystems, which in turn, demands collaboration between businesses, governments, and logistics networks – not always an easy task.

But the rewards can be phenomenal. Modern supply chains make it much easier for small to mid-sized businesses (SMEs) in Asia to not just scale up fast, but be globally competitive.

Asia’s supply chain advantage – a fresh approach

So what exactly is Asia’s advantage?

Asia is well ahead in digitization, which delivers greater visibility and efficiencies in supply chains.

But it’s also because, historically, the region is starting from a vastly different base.

In the early 90s, Asia’s supply chains ran from a desktop and reflected technology of the time –electronic shipments such as PCs, clunky mobile phones or semi-conductors.

Trade routes were one-dimensional and linear – focused simply on delivering products from low-cost factories in Asia to highly-developed US and European markets.

Trends in outsourcing, offshoring, and near-shoring were yet to come.

By the mid-2000s, we had well-established just-in-time supply chains.

Fast forward to today and global supply chains are almost unrecognizable.

They’re now run on smartphones – are more innovative, more diverse, digitally driven, sophisticated and, critically – aligned to business strategy.

Not just in the array of products and the way they’re being transported, but in best-practice supply chain solutions which are driving cost efficiencies and ensuring global trade is more accessible to all kinds of business.

Global production shifts have fed this growth, with more products now originating in Asia, traded intra-Asia, and destined for the United States and other major markets

With this huge transformation in trade flows, Asia has a central role in the supply chain revolution.

The largest trade lane is not Asia to Europe, or Asia to the US, but intra-Asia[3].

While this has been happening, some developed economies found themselves stuck with older, more rigid supply chain models and legacy infrastructure.

In contrast, developing Asian economies and businesses often started from nothing, so could hit the ground running with a fresh approach and develop new supply chain models unencumbered – with agility and innovation and knowhow.

Regional supply chain hubs have sprung up across Asia, from Guangzhou to Shanghai to Osaka and Singapore, giving APAC economies a bigger role in new networks.

A heart patient in Taiwan can now receive a pacemaker made half way around the world in one night, or sensitive biomaterials such as human liver cells can be sent between Japan and the US – arriving in perfect condition.

‘Best in class’ supply chain solutions

Digital innovation has vastly improved visibility, transparency, compliance and reliability in supply chains – but innovation in supply chains is not just moving products from A to B.

First, it must solve a problem. We have to ask, exactly what is the business problem, why isn’t it being solved by existing solutions, and how can we structure a supply chain to deliver real value?

Second, supply chains must be more adaptive, flexible and ready to respond to volatility and risk.

Third, they must deliver end-to-end visibility, which is intrinsically linked to trust and security.

Fourth, we are seeing a more personalized customer experience – the emergence of “on demand” supply chains.

Lastly, supply chains must reduce complexity and cost – and deliver operating synergies and efficiencies.

This is a challenge that extends far beyond the digital supply chain. We must constantly deliver new possibilities in the way we structure solutions for customers.

For our part, we started out in air express, but new demands and challenges have seen a huge evolution of FedEx offerings.

Our response to be ‘best in class’ today includes a vast mix of road, ocean and air transport solutions, inventory warehousing and distribution; e-commerce fulfilment; customs brokerage and trade facilitation; not to mention secure payment technology and forward logistics.

Asia’s Resilience has Powered Change

With five billion people, accounting for 40% of global GDP,[4] it’s not just size that makes the Asia-Pacific region stand out.

Asia is a vibrant, receptive marketplace and its supply chains have had to be resilient, having come through the Asian Financial Crisis, the Global Financial Crisis, the growth of China, and more.

As a result, we have seen Asia’s infrastructure and modern supply chains evolving as technology changed the playing field. In a diverse region like Asia, technology transcends culture, language, and to a large extent, regulations, to streamline cross-border trade.

Looking ahead, Asia’s place at the centre of world trade looks set for some time to come.

Global growth is increasingly driven by emerging markets, and by 2050, at least eight of the top 20 economies will be in Asia.[5]

Future Supply Chain Solutions

So against this outlook, we have to keep asking, what’s next?

To name just a few – big data, AI, autonomous vehicles, robotics – are changing the way we structure supply chains and design solutions which overcome specific challenges.

Our FedEx SameDay Bot is an autonomous delivery robot designed to change the face of last-mile delivery for the growing e-commerce market – in a way that’s both safe and environmentally friendly. Retailers accept orders from nearby customers who live within a few miles of the business and deliver them by bot directly to customers the same day.

Of course, not everyone is on board for the digital age, yet.

In our experience, some sectors and companies in Asia are slow to embrace change and still prefer old ways of working – like paper airway bills, telephone and even fax bookings for shipments.

Compare that to most e-commerce businesses in Asia which have never known anything other than electronic, integrated supply chain systems.

Staying ahead of the global competition demands technology-driven supply chains which are vital for business survival.

Asia has had a head start in supply chain evolution – we must not lose the momentum.

[1] IMF World Economic Outlook, Executive Summary, April 2019