Supply chains relocate to Southeast Asia amid global rebalancing

Wong Siew Loong, president, Kuehne+Nagel, Asia Pacific, speaks with Maritime Fairtrade on why multinational organizations are relocating their supply chains to ASEAN countries.

Are we seeing major shifts in the global supply chain? 

Since 2016, we have seen organisations take gradual steps to diversifying and rebalancing their sources of production. The COVID-19 pandemic exposed supply chain vulnerabilities and accelerated this process of diversification, making resilience and agility a more urgent business consideration. 

As such, organisations are relooking at how they can make their supply chains more agile and flexible, to reduce the risk of exposure to potential disrupts. We are seeing new manufacturing hubs emerge in Asia, particularly in South and Southeast Asia. While China remains a significant player in the global supply chain, particularly in green technologies, organisations are also looking to expand their operations in countries such as Southeast Asia and India. 

Do we see a trend of organisations diversifying their sources of supply to countries in Southeast Asia? If so, why? 

There is a growing trend of organisations readjusting their supply chains to achieve a better balance across China, South Asia, and Southeast Asia. This strategic shift can be attributed to the following factors. 

• Geo-political rebalancing: In light of the ongoing trade dynamics between US and China, organisations are encouraged to readjust their supply chain sources to build more resilience. 

• Lower cost: Southeast Asia has been emerging for some time as the natural next stop for manufacturing that are reliant on lower labour costs. 

Which sectors or industries will be more incentivised to look at Southeast Asia as a favourable destination to relocate elements of their supply chains? 

Sectors or industries that appear to be more incentivised to look at Southeast Asia to relocate elements of their supply chain include electronics, renewable energy related (solar panels, batteries, etc.), healthcare and semiconductor. 

How will this trend affect Singapore’s role as a transport hub in the global supply chain? 

Singapore, a globally renowned nation, stands out as one of the world’s most connected countries. Its strategic location along major trade, shipping, and aviation routes has placed it at the forefront of international commerce. A recent survey has revealed that nearly 50 per cent of businesses with supply chain operations in the Asia Pacific region have plans to expand or establish new manufacturing capacities in Southeast Asia within the next three years. 

Despite its relatively small local market, Singapore holds immense significance as a key hub and gateway to Southeast Asia, attracting numerous regional start-ups to establish their holding companies here. Many companies have already chosen Singapore as their regional or international headquarters, which has sparked an increased interest in setting up supply chain management hubs in the country. 

The upcoming completion of Tuas Port is another milestone for Singapore, as it will become the world’s largest container port, with a remarkable capacity of handling up to 65 million TEUs annually. This impressive development aligns perfectly with the ongoing trend of supply chain diversification into the ASEAN region, further solidifying Singapore’s position as a vital economic powerhouse and gateway to Southeast Asia. 

As companies continue to recognise the strategic advantages of being based in Singapore, the country’s economy is set to flourish even more. Its robust infrastructure, well- established business ecosystem, and connectivity to major global markets contribute significantly to the nation’s economic growth and success in the region. 

How does Kuehne+Nagel assist clients who are looking at reorganising their global supply chain networks? 

Kuehne+Nagel understands and acknowledges that in today’s rapidly changing world, supply chains must be able to quickly adjust and adapt their strategies and processes to be ready and resilient for the present and future. Hence, we have come up with a clear structured framework to optimise the supply chain for our clients. Here is Kuehne+Nagel’s supply chain framework in detail: 

• Supply Chain Transformation Advisory: We assist our customers to be the industry leaders in supporting organisations with change management approach as it relates to organisational design, supply chain setup, nearshoring/offshoring decisions and partner setups. 

• Inventory Assessment: We help review existing demand and supply strategies to maximise on-time fulfilment levels, minimise downtime, while improving cash flow and operations. 

• Logistics Operations: We help our customers establish their current footprint, analyse processes and re-align network to support the organisation’s objectives, while ensuring the most optimal supply chain leading to resiliency.

We also analyse and consult on product classification as well as trade compliance to ensure minimal disruption while exploring free-trade zone (FTZ) solutions and special government programs, while optimising duty and taxes. 

• Sustainability: We assist in developing customised sustainability framework with tactical prioritisation that support organisations in achieving their SBTi commitments or make CO2 improvements. 

• Supply Chain Digital Assessment: We identify process improvements using pro- active root cause analysis techniques. 

We also provide the most suitable supply chain visibility solutions and improve educated decision making with the help of predictive analysis. 

We also establish faster, efficient, and more accurate information sharing along the supply chain through system integration. 

At Kuehne+Nagel we also work collaboratively with our customers and assist the customers with their requirements whether it is network analysis, assessment of supply chains for optimisation, design of supply of chains for resilience. 

Dedicated teams in key accounts have established a methodology and process to engage with customers requiring supply chain services. This involves joint engagement with the customer stakeholders, establishing the project team, project goals and deliverables. 

Photo credit: Kuehne+Nagel

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