Economic woes drives talk at Singapore supply chain conference

Economic uncertainty and volatile oil prices dominated conversation over the last two days at an Asia Pacific supply chain conference in Singapore.

One of the consequences of rising oil prices over the summer months was that supply chain experts from North American companies started eyeing the possibility of relocating manufacturing away from Asia to near-shore locations in the Americas.

At a press briefing Monday, Richard Owens, senior vice president for DHL's Global Customer Solutions division, said he's hearing a lot, but not seeing a lot.

There's more talk about it than actual activity, but it does seem to be a coming trend, he said.

What DHL is seeing more of is the concept of postponement, where core manufacturing is taking place in the traditional production hubs in Asia, but final touches (like packaging or kitting) are performed nearer to the ultimate market.

These are things that can be done near-shore, said Alfred Goh, vice president of supply chain logistics for DHL's GCS division. They give you more agility.

On Tuesday, Hau Lee, a professor of supply chain management at Stanford University, said that process-based decisions were gradually replacing cost- and time-based decisions as the factor most heavily influencing supply chain strategy.

Delivering a keynote address at the SCM Logistics World 2008 conference in Singapore, he also alluded to the idea of postponement, saying it allowed shippers to better customize their supply chain.

People ask me, should I come back from China? he said. My answer is yes and no. You should do both.

With uncertainty swirling in global economies, Lee spoke at length about shippers building supply chains that were as adaptive as possible, a theme that came often as the economic crises gripping the globe inevitably provided a backdrop to the forum, as did the wildly fluctuating price of oil and its effect on supply chains.

An executive from Unilever said the industry would have to come to terms with the fact that pinpoint forecasts for everything from sales to fuel prices were simply not going to be reliable in the future.

Most of us are comfortable with a single number, said Gopalan Natarajan, a supply chain finance director for Unilever. But these days you have to be comfortable dealing with ranges. It all goes back to flexibility.

Natarajan said Unilever is focused on building assets that are adaptable.

The way the market is behaving today, it calls for a different way of thinking, he said. Where can we create flexibility? Are our factories mobile? How much of my asset infrastructure can I turn around and make plug and play?

Source: American Shipper