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Emerging Markets

Companies focus on new supply chain priorities

Container ship supply chain from Alamy 17Oct22 575x375

Diversification away from China has been the most visible learning from the trade wars and pandemic disruption, industry experts tell GlobalMarkets

Companies are emerging from the pandemic with new priorities in supply chain financing, with an emphasis on resilience and flexibility, industry analysts have told GlobalMarkets.

“If the last few years taught us anything, it’s that visibility, agility and resilience are key components of your supply chain,” said Andrew Verona, head of supply chain for Singapore and Malaysia at Unilever.

Supply chain disruption, the cost of living crisis and spiralling energy prices have brought these issues into sharp relief and have been one of the major talking points at this week’s IMF Annual Meetings.

“We have seen a dramatic shift in the last two years in the way supply chains work, here in Asean in particular,” added Christopher Ong, managing director, DHL Express Singapore, referring to the 10 members of the Association of Southeast Asian Nations bloc. “From the trade war starting in 2019 we started to see shifts away out of China.”

While a diversification away from China has been the most visible learning from the trade wars and pandemic disruption, corporate treasurers report a number of other amendments they have had to make to processes.


LIQUIDITY SQUEEZE

Joseph Chua, executive director and deputy treasurer for Lenovo, said one lesson of the pandemic was around liquidity — and making sure it reached everyone in a company’s chain. “We want to make sure that our second tiers, our third tiers, are stable in terms of being able to get the right financing,” he said.

“We found that in the pandemic, there was a liquidity squeeze in the market. Everybody drew upon financing lines, and interest rates shot up double digits because everybody wanted cash on hand

in case everything went wrong. We found down the line the second and third tier were being squeezed out.”

The best way to ensure stability, Chua said, was digitisation, and ensuring that platforms reach down to the second and third tier of supply.

“We need to digitise our processes to make them more efficient, and track trade flows from a cash perspective to ensure the entire supply chain will not collapse.”

Sustainability has also become a key part of supply chain management. “The hardest thing is to decarbonise scope 3 emissions,” said Fang Eu Lin, partner at PwC, referring to indirect emissions in a company’s value chain as defined by the Greenhouse Gas Protocol.