How have supply chains evolved in recent years?

Today, we see that supply chain has a permanent seat in the boardroom. The importance – and the risks – of supply chains have become undeniably evident, to the extent that the supply chain is a part of almost every decision, be it about growth, optimization, resilience or sustainability.

Supply chains are now shifting from the traditional linear, horizontal structure to a multi-polar one. Where global supply chains were traditionally designed into two main “poles” for cost efficiency – with the developing and cost-effective producing markets at one end and developed markets at the receiving end – that is no longer effective today. 

Global geopolitics are more complex now, as some countries raise barriers to trade and others seek to stand out as alternatives. The global imbalances, trade flow disruptions, taxation and logistics have changed the cost regime for different countries, and companies now need to update their supply chain network. As a result, the global supply chain is led into a strategic architecture reset. 

At the same time, companies are less asset-intensive and consider working with partners than owning everything from manufacturing to transportation and sales. Such an ecosystem-centric approach through multiple partners allows companies to create more resilient supply chains through alternative sourcing and ensuring an agile operating model and workforce. 

How competitive does Southeast Asia remain as a manufacturing base within the global supply chain?

Many businesses have leveraged a hub-and-spoke model for their operations in Southeast Asia. 

Singapore, with its well-educated talent pool, stable government, clear regulations and ease of doing business, is an attractive location for companies to set up their regional headquarters. Thailand has established itself as an automotive hub in the region, while Indonesia and Vietnam are strong manufacturing bases for consumer goods companies. 

How is AI playing a part in supply chain optimization and decision-making?

AI has become very user-friendly and widely accessible, allowing businesses to explore AI-assisted decision-making. Research has found that around 40% of supply chain organizations are investing in GenAI, focusing on knowledge management applications.

Businesses can integrate AI into four building blocks of supply chain operations: plan, source, make, move.

Plan: GenAI adds simplicity to interactions throughout tech-enabled planning efforts. For example, companies can run what-if scenarios on what might happen if certain global shocks disrupt daily operations. The GenAI tools can even suggest several courses of action if things go awry. Risk management may be a promising area for GenAI’s input in preparing for risks that supply chain planners have yet considered. 

Source: Companies can tap on GenAI-powered bots to negotiate cost and purchasing terms with vendors in a shorter time frame, reducing costs by bringing structure to complex tender processes. GenAI is also useful in extracting information from large contract, allowing companies to better prepare for renewal discussions. 

Make: GenAI in supply chain helps companies accelerate from design to commercialization much faster. Companies are training models on their own data sets and asking AI to find ways to improve productivity and efficiency. Predictive maintenance is another area where GenAI can help determine the specific machines or lines that are most likely to fail in the next few hours or days, improving overall equipment effectiveness.

Move: Some companies are already using GenAI to optimize picking routes within their warehouses and boost workforce productivity while slashing operational costs. The tool can also help companies understand if its trade network was optimized and identify areas for improvement.

How can organizations achieve a sustainable supply chain? 

Supply chains account for a significant proportion of an organization’s greenhouse gas emissions and operating costs, however, many organizations struggle to embark on a sustainability journey due to a lack of visibility of their supply chain and emissions data, and comprehensive ways to measure sustainability progress. The key barriers for businesses in implementing a sustainable supply chain include technological limitations, a lack of visibility, regulatory complexities and scalability concerns. 

At EY, we have a strong supply chain practice with a team of over 6,000 professionals globally. The EY team works with clients to help them address the complex issues – from sustainability through disruptions and digitalization – and opportunities to grow, protect their operations and redefine their end-to-end supply chain to support their enterprise objectives.