Skip to main content Skip to Footer

LATEST THINKING


Building on ASEAN's economic integration to optimize supply chains

Growth and global recognition of the ASEAN region depends upon increasing dependable trade.

Overview

ASEAN is among the world’s fastest growing regions, characterized by increasing internationalization as a result of foreign direct investment inflows and outflows.

The ASEAN Economic Community (AEC) with representatives from ten member states in Southeast Asia, formalizes the region’s aspirations to strengthen connections and will serve as a multiplier for growth.

Proposed AEC policies will create many opportunities for businesses in ASEAN to fuel business growth through freer trade, improved access to material inputs, increased viability of lower cost manufacturing locations and greater access to talent.

This point of view, based on a survey of 200 senior executives and more than 20 case studies of companies operating in ASEAN, identifies the AEC measures impacting supply chain management, shares the business perspectives on these measures, and proposes actions for businesses to consider in building future-ready supply chains in ASEAN.

Background

Growth and global recognition of the ASEAN region depends upon increasing dependable trade both within and outside ASEAN. Enhancing connectivity in ASEAN through trade thus lies at the core of the economic integration with AEC measures targeting tariff reduction, customs harmonization, free trade agreements and the development of an integrated, ASEAN-wide transport network.

However, to take advantage of the growth, standardization, and fluidity of trade and labor that the ASEAN business community aspires to, supply chain leaders must overcome a number of challenges. They must take action now to lay the groundwork for performing as regional rather than local companies, building the processes and capabilities needed to manage and optimize extended supply chains.

Key Findings

Our survey of business leaders provides a first-hand view of the perspectives on the integration and its potential for the region.

  • Businesses are not waiting for AEC initiatives to take hold before improving their supply chains. Over 70 percent of companies are creating new business and operating models to tap into the region’s opportunities.

  • Companies are also developing new sourcing strategies and digitizing their supply chains. Seventy seven percent of global and ASEAN-based MNCs have made changes in this area and 65 percent of local companies will follow suit in the next few years (up from just 38 percent today).

  • Taking a regional view of manufacturing will enable companies to seek economies of scale through capacity consolidation. Almost 60 percent of companies operating in ASEAN plan to review their manufacturing strategies based on market-specific competitive advantages over the next few years.