According to an EY report on South East Asia, supply chains must shift from just-in-time to just-in-case if businesses benefit from the manufacturing boom.
FREMONT CA: According to a new EY study, supply chains in South East Asia are suitable for transformation, with the manufacturing sector poised to drive significant post-pandemic growth.
By the study–Investing in Southeast Asia: Reimagining Manufacturing and Supply Chains–growth in the consumer goods, healthcare equipment, electronic manufacturing services, and agritech sectors is set to be a huge growth driver in the region, and companies must "reimagine and optimize" their supply chains if they want to reciprocate.
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The traditional just-in-time inventory approach to the supply chain is no longer adequate for "responsiveness, reconfiguration, and resilience.
EY advises companies rethinking their regional supply chain strategies to consider eight factors:
· Collaboration with customers and order fulfillment
· Value-chain optimization in regional trade and taxation
· Assets, footprint, and investments
· Visibility, intelligence, and traceability of the supply chain
· Product development
· Various stages of supply chain resilience and sustainability; workforce restructuring and upskilling; and
· Digital enablement.
Singapore’s investment in port infrastructure and terminal development through the new Tuas Mega Port eventually increased cargo capacity and productivity to serve the region's supply chain. To improve infrastructure connectivity, lower logistics costs, and encourage maritime economic development, Vietnam is all set with a seaport master plan for 2022-2030. Meanwhile, Malaysia's Industry4WRD National Policy on Industry 4.0 will encourage digital technology in manufacturing and related services. Other legislative interventions to strengthen the supply chain include free trade agreements to promote commerce and lower tariffs, to place Southeast Asia as a manufacturing gateway.
While focusing on a single source of supply increases reliability, it decreases flexibility. Companies are bound to find alternate, lower-risk, and local suppliers due to the epidemic and global trade concerns. They will better respond to local demand due to their proximity to consumers. This will result in a faster time to market, lower logistics costs, and a quicker time to market.
With the just-in-time approach showing signs of cracking, reverting to the just-in-case model for crucial components is the logical option. The enterprises should strive for a balance between just-in-time and just-in-case models by maintaining inventory levels for components that do not have a diverse source or are critical in keeping the supply chain running, even during disruptions, while reconfiguring their production and supply processes to avoid supply shocks.
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