When Payload Asia first talked to DHL Global Forwarding some few months ago in August, all eyes were on the inevitable supply chain disruptions that we have now grown accustomed to. Ever Green was just recently ‘unstuck’ from the Suez Canal, a relief to dozens of ships carrying billions of dollars’ worth of cargo who had to wait to enter the waterway. A punch in the gut to the shipping industry meant air cargo had to swoop in and carry the slack to deliver on time, whilst shippers and manufacturers bore the brunt of having to find a way to meet customer demand.
Resilience: Beyond China+1
For DHL GF’s Asia Pacific chief, Kelvin Leung, such incidents like the Suez Canal blockage may immediately spring to mind when discussing supply chain disruptions, but they are not that uncommon.
“If there is anything the last two years has demonstrated, resilience is key in a well-structured supply chain. Multinational firms have been re-assessing their supply chain networks to mitigate risks like the US-China trade dispute and natural disasters by diversifying their supply chain reliance on China.
Leung said that this supply chain disruption witnessed over the past year has fueled discussions on a ‘China + 1’ or a ‘beyond China+1’ approach. Many companies who have become reliant on the ‘world’s factory’, he described, experienced first hand during the pandemic the risks of putting all their eggs in one basket.
“For companies seeking a secondary production base, Southeast Asia has emerged as a popular destination of choice. This was already apparent prior to Covd-19 and tariff discussions as we had observed a number of companies moving their sourcing and production to Southeast Asian markets, such as Vietnam and Thailand, to capitalize on lower operating or labor costs.”
Staying agile with multimodal options
Not downplaying the impact of Covid-19 on freight mode options, Leung said the current air and sea freight capacity crunch has become a major concern for DHL’s customers. He said agility has become a key factor to manage complex supply chains.
Leung suggested that supply chains can be designed to host multiple inventory hubs as opposed to a major centralized one, and companies can adopt internal decision processes that will allow them to react swiftly.
“The infrastructural support within the markets under consideration is as important as the country’s manufacturing capabilities, as is its business contingency management strategies and ability to react promptly towards recovery,” Leung noted.
Leung said DHL customers have been open to multimodal options to manage the sea/air congestion. “Our rail solutions in China have seen a healthy pick up as customers seek capacity to send things to Europe and we have observed an uptick in customers using road freight services across Southeast Asia.”
Road and rail freight, he described, have been reliable alternative modes for some of DHL’s customers who previously relied on air and ocean freight. “We are seeing them gain traction and are optimistic about their growth in Asia Pacific,” he noted.
Visibility through digitalisation
Amidst supply chain disruptions and labor shortages due to work disruptions, digitalisation has been a key enabler for companies trying to reduce any uncertainty, with new tools that give them an early head start to crisis management.
“Beyond geography and finding the sweet spot between a ‘just in time’ and a ‘just in case’ inventory model, companies have increasingly relied on increased visibility with the help of technology,” Leung said.
In May of last year, DHL Global Forwarding launched its integrated online platform myDHLi to provide full shipment visibility and control in one platform with transparent management of freight rates, offers, transport modes, carbon emissions, and other relevant shipment data.
A year later, it expanded the reach of the new tool—from eight countries to 62 countries—and launched new features and functionalities, including a ‘save and edit’ option and new services such as myDHLi Reports to increase shipment transparency. Road freight customers were also added to the platform.
Because of this, the forwarding unit was able to operate remotely and digitally without disruption amidst pandemic-related lockdowns in many markets. This led to online bookings and sales jumping more than 50 percent (56 percent) in Q1 of this year compared to the same period a year ago.
Asia Pacific outlook
As far as prospects are concerned, Leung sees an upward trend in trade for Asia Pacific post-Covid. He noted that the introduction of customs systems like the ASEAN Customs Transit System, and trade agreements like the RCEP can only be beneficial to countries, businesses and consumers.
“A significant development on RCEP is that it will come into force in January next year, having reached the threshold of entry. This is the world’s largest trade deal, covering a market of 2.2 billion people and $26.2 trillion of global output. The partnership will create a trade grouping that covers about 30 percent of the world’s population, as well as the global economy.
Countries that have ratified the deal include Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, China and Japan. Australia and New Zealand are the latest countries that have ratified the agreement.
“It is especially interesting to observe how the current tension between US and China will be addressed in terms of trade under RCEP,” Leung noted.