APEC could play a role in strengthening supply chain resilience
The COVID-19 pandemic has caused significant disruption to supply chains in the APEC region and highlighted the need for governments to consider strategies for greater resilience, according to the latest APEC Regional Trend Analysisreport launched Thursday.
“ Most of the concerns raised about supply chain resilience have been echoed by the business community, but more can be done to manage resilience at the political level, ” says Dr Akhmad Bayhaqi, senior analyst at theAPEC Policy Support Unit.
The APEC region has produced nearly 60% of global manufacturing value added (MVA) over the past two decades, mainly spread over four main centers. When COVID-19 lockdowns affected these hubs, it resulted in serious supply chain disruptions. In the first four months of 2020 alone, the APEC region saw a 6.3% drop in exports and 5.5% in imports compared to 2019.
Attempts by “ companies ” to reduce supply chain costs by focusing on lean manufacturing, offshoring and supplier consolidation appear to have increased overall global supply chain risk and reduced flexibility, ” says Satvinderjit Kaur Singh, researcher at APEC’s political support unit. “ This has led to calls for greater resilience in the wake of COVID-19. ”
However, improving resilience is not an easy or free exercise, the report points out. Global supply chains have been formed on the basis of the business links that would provide the most profitable outcome, so that companies can position themselves competitively in global markets. The recent disruptions have highlighted the difficult puzzle for companies to choose between efficiency and greater resilience.
“Although the concepts of offshoring and relocation were widely considered in the early part of the pandemic, this results in higher production costs and harms the long-term global outlook,” Singh explains.
“Investments are needed to build more resilient supply chains,” adds Dr Bayhaqi. ‘IImproving just-in-time manufacturing combined with the right technology and other strategies such as creating cushions in the form of inventory, capacity or time frames and designing contingency plans for possible Supply chain shocks can build resilience.
The report calls on governments to avoid policy interventions that could disrupt the effective configuration of global value chains. Rather than seeing trade as the root cause of supply chain vulnerability, the report suggests that policymakers see global trade as part of the solution to achieving resilience.
“Governments can focus on promoting the digitization and visibility of the supply chain; and strengthening regional cooperation on trade, connectivity and economic openness, ”says Dr Bayhaqi. “Customs operations and cooperation can be improved by applying automation and digitization through platforms such as the Single Window System.”
Governments should take advantage of the knowledge transfers and productivity spillovers from global value chains for local businesses and help them maintain the skills and know-how they have acquired through their supply chain networks. .
Structural reforms could also play a crucial role in developing a stable and predictable regulatory environment for global value chains to operate and recalibrate their network structures during recovery from a pandemic.
“There are no easy solutions to supply chain disruptions,” says Dr Rebecca Sta Maria, Executive Director of the APEC Secretariat. “Today economies are focused on building sustainable resilience by looking at their supply chains more holistically, harmonizing regulations, digitizing processes and creating some level of redundancy to allow for flexibility. .
“ The important thing to move forward is to ensure that stronger trust in trading partners and deeper regional integration, involving micro, small and medium-sized enterprises, are an integral part of the strategy of the APEC for a resilient and inclusive economic recovery, ” concludes Dr Sta Maria.
See the latest APEC Regional Trend Analysis, May 2021
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APEC – Asia-Pacific Economic Cooperation published this content on May 28, 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unchanged, on May 27, 2021 04:23:01 PM UTC.