Asia Pacific Supply Chain Director Survey 2011

by Guest Posting on 2011-03-30

Asia Pacific Supply Chain Director Survey 2011 - A Strategic Perspective

“Analytiqa’s research identifies that over one-fifth of Supply Chain Directors intend to change their logistics providers between 2011 and 2012.”

London 29 March, 2011: Analytiqa’s latest primary research “Asia Pacific Supply Chain Director Survey 2011” reveals the supply chain dynamics behind Asia Pacific’s leading retailers and manufacturers. They acknowledge significant investment in supply chain technology is required and are questioning the capabilities of their 3PLs...


A unique, complex market…
The Asia Pacific market represents boundless growth potential to both established industry players and new market entrants, depending on a company’s ability to overcome the region’s unique logistical challenges – its expansive geography, cultural diversity, uneven levels of economic development and a fractured regulatory and infrastructure environment, all of which presents difficulties in creating an efficient supply chain that is able to service both regional and global customers.

Characterised by their supply chains, retailers and manufacturers operating in the Asia Pacific region are increasingly pressured to deliver exceptional customer services on an on-going and increasingly cost-efficient basis.

Analytiqa’s report, sourced directly from the opinions of influential Supply Chain Directors, evaluates the influence and contribution of the supply chain function at a strategic decision-making level and the relationships Supply Chain Directors have with their logistics providers in today’s challenging business environment.

Analytiqa’s research provides clear guidance and key action points for retailers, manufacturers and contract logistics providers seeking to maximise the strategic potential of their supply chain and outsourcing relationships or enter into new, profitable, commercial agreements.

Supply Chain Directors: room at the top?
There is always room to enhance and strengthen a company’s supply chain. In a constantly evolving, competitive and cost-driven market, retailers and manufacturers must aim to establish, deliver, and communicate business value throughout their supply chain.

Analytiqa’s analysis reveals that Asia Pacific retailers and manufacturers appreciate the strategic role their supply chain plays in achieving sustainable competitive advantage. Indeed, the vast majority of Supply Chain Directors acknowledge that, to varying extents, strategies relating to the supply chain function are discussed and decided upon at the top of their organisational hierarchy.

However, this does not necessarily equate to Supply Chain Directors securing Board-level positions. Despite the strategic decision-making and budget-holding responsibilities of a Supply Chain Executive, 57% of Asia Pacific retailers and manufacturers fail to include such a knowledgeable and experienced supply chain professional as a Board member.

Outsourcing Dynamics…
As 40% of Supply Chain Directors anticipate an increase in outsourced activity over the next two years, Analytiqa’s primary research provides a critical insight into Supply Chain Directors’ internal decision-making, examining their outsourcing strategies, investment plans and key challenges.

The strategic drivers that motivate Asia Pacific retailers and manufacturers to conduct supply chain activities internally or outsourced vary from activity to activity. Analytiqa’s research identified the current and forecast outsourcing requirements and investment plans for 1 - warehousing, 2 - national and 3 - international distribution, 4 - reverse logistics, 5 - value added services, 6 - IT, 7 – procurement and 8 – administration activities.
 
The analysis unveils not only the share of such activities outsourced over the last five years, but anticipated outsourcing rates up until 2015, how many logistics providers make tender lists, how these companies are selected and the key selection criteria for choosing a compatible provider.

With over one-fifth of Supply Chain Directors expecting to change logistics providers between 2011 and 2012, retailers and manufacturers emphasise that demonstrating robust service capabilities and expertise within their operating markets, closely followed by achieving an acceptable balance between measurable performance and financial costs, will strongly differentiate a 3PL when campaigning to win a logistics tender from a prospective client in the Asia Pacific region.

When it comes to considering outsourcing opportunities in the Asia Pacific region, there is a strong tendency to implement a ‘close to home’ logistics strategy, particularly with the warehousing function.

However, Asia Pacific companies are becoming far more sophisticated and knowledgeable in their approach to the logistics tender process. These retailers and manufacturers are consolidating their 3PL model as they strive to deliver more superior customer service at lower total cost by teaming up with a small number of trusted 3PLs that demonstrate potential to implement fewer, bigger contracts with much wider scope.

Demonstrating a highly targeted approach, retailers and manufacturers in Asia Pacific on average approach up to six 3PLs per outsourced contract. However, within these parameters there are significant differences per distribution tender, or per warehousing contract.

With one-in-four manufacturers and retailers only approaching up to three external logistics providers per tendered contract, it is vital for 3PLs to effectively communicate their services and raise their company profile for a better chance of winning a tender.


Two-fifths of Supply Chain Directors plan to change logistics providers during 2011/12




 
Too much for a single 3PL to manage?
Supply Chain Directors understand that employing a single 3PL for their pan-Asia Pacific logistics requirements has the potential to reduce costs through economies of scale and promote more direct and frequent business relations between the client and the 3PL.  In 2011, however, around 35.0% of Supply Chain Directors consider logistics providers to still be incapable of meeting their pan-Asia Pacific supply chain management and operational needs.

These manufacturers and retailers believe that as supply chains extend across the Continent in line with its expanding geographic boundaries, let alone worldwide, they are far too complex and fragmented for a successful partnership with a pan-Asia Pacific ‘one-stop-shop’ 3PL.
 
Analytiqa’s research also identifies that while manufacturers and retailers are warming to the concepts of shared-user distribution and the adoption of supply chain transparency initiatives (e.g. ‘open book’ contracts), they are highly adverse to implementing a 4PL management model.

Supply Chains of Tomorrow…
With today’s volatile business environment making supply chain management more complex and unpredictable, even the most well-designed supply chain model will fail to deliver profitable returns without proactive attention and maintenance to keep it running competitively and offering sustainable business value to an increasingly demanding customer base.

Unanticipated transportation disruptions as a result of natural disasters in the Asia Pacific region have highlighted how multinational retailers and manufacturers can find themselves without critical components and finished inventory. With deliveries affected by fuel shortages and damaged transportation infrastructure, these companies are impelled to reevaluate the risks imbedded in their Asia Pacific and global supply chains.

When it comes to maintaining an efficient, effective and integrated supply chain, Analytiqa’s research identifies that one-quarter of the major retailers and manufacturers will fail to frequently review their Asia Pacific supply chain model, emphasising that while such procedures may sound simple, they are often taken for granted and overlooked.
 

Less than one-half of Supply Chain Directors will review their supply chain model frequently, 2011




Looking ahead at this year, the most critical strategic issues particularly facing these companies are forecasting accuracy, overcoming intensifying supply chain complexity, managing the strain of increasing costs, and aligning the performance of 3PLs to their strategic supply chain goals.

Limited use of technology and IT systems makes it difficult to manage information and coordinate logistics efficiently.  It is therefore unsurprising that nearly 70.0% of Supply Chain Directors intend to overhaul their supply chain planning technologies in order to sharpen their end-to-end logistics operations over the next two years. Asia Pacific retailers and manufactures will be rolling out strategic initiatives to help benchmark their supply chain performance, investigate alternative transport modes and increase their supply chain forecasting accuracy.


Mark O’Bornick, Research Director, Analytiqa warned:
“Leading Asia Pacific retailers and manufacturers are demonstrating an increasing appreciation of their supply chain’s role in achieve sustainable competitive advantage. Nonetheless, the current market environment poses multiple challenges to their entire value chain. Despite Supply Chain Directors being able to clearly identify areas of improvement, along with potential solutions, supply chain issues are not always granted the Board-level time they require.

There are also key areas of activity where logistics providers fail to perform. The strategic decisions and investment made by Supply Chain Directors will be critical in shaping the future success of their businesses, but they doubt if their logistics providers are capable of meeting the challenges that lie ahead.”

“The lack of innovation and ‘added value’ is a theme that applies across all 3PLs.”
- Leading Asia Pacific FMCG Manufacturer

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