Press release

Half of executives in Asia believe their supply chains are not able to support their next stages of growth

Half of executives in Asia believe their supply chains are not able to support their next stages of growth

Half of executives in Asia believe their supply chains are not able to support their next stages of growth

  • April 08, 2015
  • min read

Press release

Half of executives in Asia believe their supply chains are not able to support their next stages of growth



A new Bain & Company survey of multinational and domestic companies in the region finds 70 percent of respondents see their Asia Pacific supply chains as a top priority, but far fewer believe their organizations are ready to address supply chain challenges

Shanghai – April 8, 2015 – Low-cost supply chains designed for Asia's decade of hyper-growth have become unwieldy, complex and inadequate for serving customers' changing needs.  This is hurting companies' ability to deliver on their business strategy.  In its new report, Redefining Supply Chains to Win in Asia-Pacific, Bain & Company shares the results of a survey of nearly 70 supply chain senior executives across a broad range of multinational and domestic companies in the region, which found that a full 70 percent agree their supply chain is a top management priority.  Yet, only half believe their organization is ready to address the supply chain challenges that are preventing them from adequately supporting their next stages of growth.

Many companies with all or part of their supply chains in Asia Pacific are feeling the erosion of the low-cost advantage that once drew them to the region and are trailing behind others that have overcome supply chain bottle necks. Bain's survey found 65 percent of respondents said increasing manufacturing and logistics costs were a barrier to optimizing their supply chains; 48 percent pointed to service requirements and growing complexity.  The report also identifies other additional areas of concerns for supply chain executives in Asia Pacific over the next three years.  These include:  increasingly complex distribution networks; digitalization, which is raising the bar on supply chain performance; and growth limitations as a result of organization effectiveness and increasing talent gap.  

"Asia Pacific's supply chains are keeping many executives awake at night," said Raymond Tsang, Bain partner and co-author of the report.  "Whether companies have some or all of their supply chains in the region, the bottom line is the same: they know where they fall short, but the ‘silver bullet' to create fast, effective improvements for the long-term continues to elude them."

However, even in such a thorny environment, some companies are increasing the distance between them and their closest competitors.  Based on its work with companies to transform their supply chains in Asia Pacific, Bain has identified the four key behaviors that enable organizations to pull ahead (and stay ahead) of the pack:

  1. Align the supply chain to the business strategy – a rule that applies in any market.  Companies need supply chains that are designed to deliver the best business strategy.  That's why the top performers are clear on how they'll win today and in the future, and they use that knowledge to guide every supply chain decision.  Consider the difference between Alibaba and  The former's strategy is rapid expansion across different businesses, which requires a flexibility model for logistics.  The latter emphasizes control over the customer experience and opts to handle all logistics in-house to enable Same Day or even 3-hour delivery.
  2. Design the supply chain to serve the most valued customers. This requires companies to design their supply chains around customer needs, striving to meet the service levels required to win with their most valued customers, balanced with the cost to serve. Samsung Electronics successfully configured its supply chain to focus on B2B customers.  It also serves B2C customers, but prioritizes critical B2B orders for high-value customers.  This approach helped the company grow its B2B business to 6 percent of revenues in 2013 and put it on track to achieve 20 percent by 2020.
  3. Evaluate whether the organization supports the supply chain.  Winners design supply chain organizations to ensure effective collaboration, with clear roles across functions.  They also build a talent pipeline to support future growth.  As Haier grew from a single product line in home appliances to multiple product categories, it evolved its supply chain organization and established a dedicated supply chain management department to coordinate resources among supply chain functions. The company also established a solid system for acquiring talent by closely monitoring competitors' talent movement and through campus recruiting at targeted universities.
  4. Invest in supply chain digitalization.  The best companies surpass their rivals by investing to capture their share of the booming e-channel growth while also improving supply chain visibility and performance.  In 2010, Chinese home appliance retailer Suning saw an opportunity to offset declining growth in its physical stores by investing in online capabilities.  It laid out an omni-channel strategy, giving supply chain priority to the online channel.  The approach helped Suning grow overall revenues by nearly 8 percent in 2011-2013.

"Supply chains were often designed for a very different costs and customer environment in Asia. Left unchanged, the supply chain capabilities that helped companies in the past will only hold them back in the years ahead," said Pierre-Henri Boutot, a Bain partner and the report's co-author. "Given the magnitude of changes in the region, now is the best time for them to reinvent their supply chain footprint in Asia."

Editor's Note: To schedule an interview with Mr. Tsang or Mr. Boutot:

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