What a difference a year makes! Way back in 1997, we used to talk about the "Asian Tigers." We looked at the region's economic system from afar with envy. We marveled at these economic powerhouses. Rapid growth, low unemployment, skilled/productive labor, innovative, adept...these were among the terms most often used to describe the Asian bloc as customers, suppliers, and competitors. In a nutshell, a year ago we were "Asia-euphoric."

It's a far different story today. Most of us in 1998 can be characterized as "Asia-phobic" and will likely remain that way for the foreseeable future. Today the words often heard about certain Asian economies are collapsing, cratering, unstable, overleveraged, a house of cards, and on and on. Many of us are scrambling to cover our exposure in Asia and stem the bleeding. Logisticians and transportation enterprises are among the most anxious and concerned.

What happened? At a recent A.T. Kearney executive forum in Orlando known as the Global Business Policy Council, CEOs from around the world discussed factors contributing to the economic situation in Asia. The feeling was that there was no single crisis, but rather a series of crises at play. These included:

• Information crisis. A lack of transparency obscured the risks and weaknesses of the Asian economies. Once the problems began, the lack of credible information on status further eroded confidence.
• Banking crisis. As the Asian nations liberalized their foreign investment schemes, they failed to modernize their banking supervision.
• Currency crisis. As the U.S. dollar strengthened, currencies pegged to it became overvalued, eroding export competitiveness.
• Investment crisis. The high percentage of foreign investment in portfolios fled when devaluation became imminent.
• Corporate crisis. Many Asian firms were bloated and had loaded up on short-term debts that were also U.S. dollar-denominated. The curtain came down with devaluation, which resulted in numerous bankruptcies.

Asia will come back—some countries sooner than others. The region still has a number of pluses, including high productivity, manageable public-debt levels, an export orientation, and relatively open access. The real question, though, is what kind of Asia will emerge? The tiger of old? Not likely, for while we can reasonably anticipate a downturn for several years, the economies that re-emerge will have stricter disclosure, tighter supervision and enforcement, restructured corporations, and more modest domestic and foreign investment levels. Yet our surveys of corporations indicate that Asia remains a growth opportunity particularly relative to other parts of the world. The current crisis is, in fact, providing many companies with opportunities to add or strengthen their presence in Asia through acquisitions or true alliances.

The logistics arena is particularly active. This sector is consolidating at an accelerated rate, particularly in the freight forwarding arena. A recent A.T. Kearney survey of shippers worldwide about their selection criteria for logistics and transportation services in Asia underscores the point. The survey results demonstrate that scale—built through volume/density and network breadth—does in fact have an impact on the shippers' key selection criteria, as shown in Exhibit 1.

The implication of these trends is significant in terms of the portfolio of services required and the infrastructure necessary to deliver on the promise of commitment, as we've learned in domestic transport. However, not all shippers are alike in terms of needs and price points, as demonstrated by the pyramid of shipper needs shown in Exhibit 2.

Why is a strategic approach needed? Asia is a complex environment from a supply chain standpoint with a significant number of key elements in play. (See Exhibit 3 on the next page.) Despite the complexity, the payoff for getting it right is huge. To cite one example, the Asian currency crisis is expected to result in a doubling of import growth rates in 1998, 1999, and beyond. How successfully companies capitalize on that growth opportunity depends in no small part on how aggressively and comprehensively they manage their supply chains in this region.

1. Physical network design and material flows.
2. Day-to-day operating practices, processes, and decision rules.
3. Selection and management of supply chain participants.
4. Information technology systems for data exchange and status visibility.
5. Organization structures, roles, and responsibilities.
6. Measurement and management systems and procedures.
7. Company policies for doing business in Asia.
8. Joint process improvement activities with suppliers and service providers.