Asia’s supply chains growing to become world’s biggest

According to Cushman & Wakefield’s report The Role of Asia Pacific in Global Supply Chains, South-East Asia and India will have major global supply chain networks in a decade’s time.

Cushman & Wakefield note Asia’s role in global trade has changed over the past two years as the pandemic has disrupted supply chain networks, which has affected the flow of trade globally.

It says corporations are now reconfiguring and building their logistics and industrial networks in the region.

“As the world economies recover and businesses look for effective ways to address supply chain volatility, there is greater emphasis on being more resilient and designing flexible, responsive, and efficient supply chain networks in the region to cater to regional needs,” Tim Foster, Head of Supply Chain & Logistics Advisory, Asia Pacific at Cushman & Wakefield says.

“The rising ‘Asia for Asia’ approach sets the stage for the growth of supply chain networks in the region, particularly in South-East Asia and India, and also highlights the critical factors that contribute towards the optimisation of these networks,” Tim adds.

The report also notes Asian consumers are expected to buy more products that are manufactured in Asia, and the robust economic and demographic growth prospects for the region supports this.

It says Asia is expected to account for over 40 per cent of global economic output, 54 per cent of the global population, and 65 per cent of the global middle class by 2030.

It also anticipates trade in Asia will grow because of these changes and will shape the design of its supply chain networks and says the region will manufacture more technology-based products as its population increases over the next decade.

“Asia will continue to be a key source of finished goods for global markets,” Tim says.

“The manufacture of components and sub-assemblies will increase in markets like Vietnam, Indonesia and India, and these markets will move up the value chain and begin producing more finished goods as China’s capacity is taken up with servicing domestic demand,” he adds.

“Food and beverage will drive growth in intraregional trade given their perishable nature and the need for cold chain integrity and traceability, with Indonesia, Vietnam, Philippines, and Malaysia being key markets.”

Cushman & Wakefield says businesses whose supply chains are being impacted by COVID-related pressures should experience some reprieve towards the end of this year.

It also notes that demand for logistics and industrial real estate is affected by supply chains when they are being designed and configured as well as by megatrends in demographics, urbanisation, technological advances, and structural shifts and disruption.

According to the report, online retail’s growth has caused e-commerce networks to expand, which has required warehousing space in major metropolitan areas with reliable transport.

It says newly developed warehouses must adopt technology, automation, and predictive analytics to deliver goods to consumers, so the buildings have more space for incoming orders.

With suppliers being required to provide information on their health, safety, labour, and environmental practices, transparency and sustainability are becoming important, the report says.

It also states these affect the supply chain as corporations try to meet their own Environmental, Social and Governance targets.

Cushman & Wakefield says it has identified three key real estate considerations that can be used to optimise Asian supply chains: network configuration, facility location and building specifications.

It comes as the company notes the rising cost of industrial property and that approximately 80 per cent of the value of a supply chain network is locked in at the design stage.

“Corporations need to focus on building resilience and flexibility into the supply chain,” Tim says.

“From a real estate perspective, the implications for industrial property abound, but it is important to remember that real estate demand is the product of supply chain optimisation,” he adds.

“The key is to first design the optimal supply chain network, then execute on real estate requirements. Bringing these factors together in a coherent way provides the strongest approach to navigate short-term and longer-term transformation.”

For more information on Cushman & Wakefield, click here.





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