31 August 2020

Supply Chain Asia Why South East Asia’s supply chain needs a digital revolution

By Jonathan Savoir, Co-founder and CEO and Katherina Lacey, Co-founder and CPO of Quincus

The coronavirus pandemic has exposed weaknesses in the supply chain. Digital technology can mitigate these short-term difficulties and safeguard Southeast Asian economies in the long term.

With its strategic location, booming population, and growing prosperity, Southeast Asia is set to be critical region for the global economy. From its inclusion in the Belt and Road Initiative to its expanding manufacturing sector, the region’s countries have plenty to be confident about in the coming years.

However, one factor may limit its economic potential: The supply chain. The global pandemic is testing the resilience of every economy. In many Southeast Asian countries, the challenge of delivering vital supplies to their destination has been hindered by supply chains still dependent on manual processes and vulnerable to human error.

Traditional responses, including increasing personnel on the ground and working hours, are not compatible with social distancing. The region needs an agile supply chain underpinned by cutting-edge digital technology to make sure its economies achieve their full potential.

Finding the cure

COVID-19 continues to exert enormous pressure on Southeast Asian supply chains. The region has enforced stringent lockdown measures and emergency laws. This has put logistics providers in a position where they must adapt to this perfect storm, a storm brewing with lockdowns and curbed shopping activity.

Across the region, supply chains face unique challenges as eCommerce booms in popularity. TODAY noted that demand in Singapore has spiked at least 50 percent during its circuit breaker, while according to the Nikkei Asian Review, Indonesia saw a meteoric rise in eCommerce sales as the traditional post-Ramadan buying spree shifted online.

Anecdotal evidence shows this demand has stretched supply chains thin, and recruiting staff to spread the load is not possible during the pandemic. Logistics providers are questioning how they can get around these novel challenges.  We believe the answer is a digitalised supply chain.

This will create smarter and smoother logistics, at more economical costs. Digitalising the supply chain reduces parcel touchpoints, improves sequencing time, enables remote control, gives real-time visibility, and automates reporting from end to end.

Thailand shows the merits in customised solutions

Thailand is a regional manufacturing hub. Its major infrastructure investment continues to attract investment in the region.

Yet, few Thai logistics providers are aware of how technology can manage their deliveries and processes to reduce pre-delivery costs while optimising routing and allocation. This results in higher costs and inefficiency.

There is no one-size-fits-all approach when deploying digital technology. Each country needs a solution tailored to its unique pain points. In Thailand, start-ups have emerged as engines of innovation within the Thai market where they have seized the potential of digital technology to unlock new cost-efficiencies and optimisation in the country.

Indonesia’s islands present a unique challenge for logistics providers

Indonesia holds much growth potential for logistics providers. Its population is the largest in Southeast Asia and its steadily increasing GDP means a growing disposable income.

However, the country´s delivery ecosystem is highly complex. For example, a parcel travelling from Jakarta to Bali may find itself island-hopping through Surabaya and other cities via truck, boat, or plane. This journey only increases the level of delivery complexity. Additionally, infrastructure in Indonesia is dated.

Supply chain visibility is essential to navigating the archipelago’s complex supply chains. Being able to track a package’s journey gives customers confidence in eCommerce solutions Technology improves accountability with contactless tracking which, thanks to scanning, allows package tracking from door to door.

For an effective response to Indonesia’s diverse geography, route optimisation will be essential. From personal experience, it is not easy sending a package in Indonesia. There are several reasons. For one, government regulation is lacking when it comes to house numbering, meaning Jalan Terus 5 could also be known as 20. Very remote and rural addresses can be nigh impossible to pin down. It is therefore imperative to have a route that is the most time and cost-efficient, appreciating the unique logistical challenges relating to Indonesia.

Bottlenecks and delays: Vietnam’s economic success must be underpinned by a robust and agile supply chain

Despite the economic fallout from COVID-19, Vietnam is expected to become one of the fastest-growing economies in Southeast Asia. According to the Nikkei Asian Review, Apple plans to move around 30 percent of its total AirPods production to Vietnam this quarter.

However, there are signs that Vietnam’s supply chain is struggling. Vietnam’s unique geographical complexities in combination with disruptions from COVID-19 have exacerbated the countries’ supply chain deficiencies.

In particular, its 1,030-mile journey between north and south has proven a major logistical challenge to companies during the COVID-19 disruption. Transferring goods is proving arduous as airfreight and rail transport are constrained. Long-haul trucks are becoming scarce, which is contributing to major delays.

This year, as a result of COVID-19 restrictions, supply chain bottlenecks have emerged. In particular, according to NNA Business News, eighty-three percent of companies in Vietnam have been suffering from supply issues over the past two months due to the impact of the COVID-19 pandemic.

These bottlenecks and delays are symptomatic of a supply chain that will appreciate the benefits of digital technology. Logistics providers can go a long way in avoiding this disruption by adopting cutting-edge digital technology. The adoption of real-time tracking in the supply chain will enable providers to spot and mitigate potential bottlenecks.

An optimised supply chain will be able to potentially allow logistics providers to mitigate Vietnam’s geographical complexities. Optimisation, underpinned by cutting-edge technology, will enable an utilised use of capacity, time, and distance while reducing errors stemming from manual processes. Clearly, for Vietnam to fulfil its economic potential in the region, it will need an agile and robust supply chain, something digitalisation can enable.

A catalyst for supply chain revolution

The pandemic has highlighted Southeast Asia’s supply chain fragilities. The region has faced SARS and other natural disasters headlong, but never a crisis quite like this one. The supply chain has been affected at every link, from labour availability to warehouse spacing and transportation friction.

Even after we ease into our new post-pandemic normal, supply chains will continue to be stretched as Southeast Asia swells in citizens and their spending power, and manufacturers take a nearshoring approach. Logistics providers must embrace innovative digital technologies to reduce cost, boost efficiency, and create resiliency to thrive despite the stress.

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