ASEAN nations are great options for resilience

It has become clear that traditional, low-cost, single sourcing adds minimal resilience to supply chain operations which brings us to the ASEAN countries.

Subscriber: Log Out

Can supply chain leaders looking for resilience turn their eyes toward a group of 10 Pacific countries nestled between China and Australia?

Yes, they should. The ASEAN region, particularly the five highly industrialized nations of Thailand, Malaysia, Indonesia, the Philippines, and Vietnam, are perfectly positioned to help leaders deliver my concept of optionality. Optionality, discussed in my newest book, Insightful Leadership: Surfing the Waves to Organizational Success, is a primary leadership strategy for building resilience into your supply chains.

For decades, disruptions were few, far between, and often localized. In general, that didn’t pose too much of a problem for supply chains that for decades have pursued the
single, lowest-cost source.

However, in the last few years – even before the pandemic struck in March 2020 – we have seen an explosion in the rate and magnitude of disruptions—disruptions that have destroyed the connections between supply and demand.

These disruptions are not slowing down, are striking simultaneously and are intertwined. These blows have destroyed the old thinking.

We have gone from trade wars to the pandemic to on-and-off lockdowns to the explosion of e-commerce to a new paradigm of remote and hybrid workforces to Russia’s second invasion of Ukraine in the last decade to Chinese saber-rattling over the Taiwan situation to inflation. Basically, there is more disruption around the corner in a world where disruption is the new normal.

Their effects go beyond closing a few regional distribution centers, an exploded port or a hurricane-swamped coastline. It has become clear that traditional, low-cost, single sourcing adds minimal resilience to supply chain operations.

Which brings me back to the ASEAN countries. From electrical components (the Philippines, Malaysia, Vietnam) to semiconductors (Thailand) to packaged foods (Thailand, the Philippines) to aerospace components (Singapore), Tompkins Ventures research has found many in the region ideal for manufacturing. Middle classes in these countries are growing, which makes them potential markets, not just production centers.

The region’s population tops both the U.S. and the EU – and skews younger. In fact, other than China, India and sub-Saharan Africa, ASEAN’s 640 million inhabitants are the third-largest population in the world.

That population offers inexpensive labor with required skillsets, even compared to China. Java, the biggest Indonesian island, has 180 million people, and rates for operating labor in warehousing are $119 U.S. dollars a month. Yes, industry and technology and automation are always going to threaten labor, but in this part of the world, the capex justification is just not there.

You can hire a lot of people for the price of a $600,000 robot.

ASEAN governments are welcoming investment. Indonesia just broke ground for another industrial estate – the country has more than 100, along with 19 strategic economic zones that offer tax breaks. The region has made massive improvements in transparency and infrastructure, although there is a long way to go – which offers opportunity to those pursuing optionality.

Indonesia and the other four highly industrialized countries will grow faster than China over the near future, according to the International Monetary Fund.

All these factors minimize risk, and investments are coming – semiconductor plants, logistics capabilities, data centers and more. Governments are responding with even more infrastructure improvements, and major companies are following.

Just last year, shipping giant Moller-Maersk out of Denmark acquired LF Logistics, which focuses on logistics in the Asia-Pacific. Over the last two decades, Hong Kong-based LF Logistics has expanded to 10,000 employees and 223 warehouses/fulfillment centers in 14 countries.

This year, news reports have Elon Musk’s Tesla agreeing to build not just a battery factory but electrical vehicle production facility in Indonesia, which has solid reserves of nickel.

Countries such as Japan, Saudi Arabia and South Korea are targeting the region for investment. Another investor, China, is a major reason why the rest of the world should be looking at the ASEAN region.

Taiwan holds the lion’s share of the world’s advanced semiconductor market. China’s recent military exercises shows that the Communist country does not have to invade the tiny island to interdict trade. Halting the export of semiconductors from Taiwan would be a body blow to the world’s economy, which makes it puzzling as to why more countries and companies are not looking at optionality.

Companies without experience operating in this part of the world – be they large, medium, or small – need partners who know the landscape to find property, build facilities, and connect with logistics. From its inception, Tompkins Ventures has partnered with experts in the ASEAN and other non-China sourcing regions to deliver optionality to global supply chains.

If leaders in your enterprise have not made similar moves, it’s time.

Jim Tompkins is an international authority on designing and implementing end-to-end supply chains. He is a serial entrepreneur who has started several businesses; worked with private equity; designed many industrial facilities and automated materials handling systems; implemented many supply chain information technology solutions and worked to enhance the performance of many 3PLs and 3PL clients. He can be reached at [email protected].

SC
MR

Latest Podcast
Talking Supply Chain: The last-mile tech advantage
Last-mile delivery success depends on many aspects of the supply chain to work effectively together, but none is more important than the…
Listen in

Subscribe

Supply Chain Management Review delivers the best industry content.
Subscribe today and get full access to all of Supply Chain Management Review’s exclusive content, email newsletters, premium resources and in-depth, comprehensive feature articles written by the industry's top experts on the subjects that matter most to supply chain professionals.
×

Search

Search

Sourcing & Procurement

Inventory Management Risk Management Global Trade Ports & Shipping

Business Management

Supply Chain TMS WMS 3PL Government & Regulation Sustainability Finance

Software & Technology

Artificial Intelligence Automation Cloud IoT Robotics Software

The Academy

Executive Education Associations Institutions Universities & Colleges

Resources

Podcasts Webcasts Companies Visionaries White Papers Special Reports Premiums Magazine Archive

Subscribe

SCMR Magazine Newsletters Magazine Archives Customer Service

Press Releases

Press Releases Submit Press Release