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The Health | august-September, 2020
| Column |
Post Covid-19: Supply
chain reconfiguration in
promoting regionalisation
The Covid-19 pandemic which
is expected to be prolonged and
drawn out at least until a vaccine
is readily available has rekindled
the call for Asean, a market of
nearly 700 million people and
growing middle class, to further forge and
foster regional integration.
At the same time, Covid-19 has
also been a catalyst and impetus in
exposing the critical need for business
and commerce to further digitalise and
explore usage of new technologies.
The one geo-economic factor that
will blend these two together – regional
integration and digitalisation – is supply
chain reconfiguration (SCR).
SCR can simply be defined as the
rearrangement of supply chain structures
to reflect current exigencies such as
disruptions and shocks. When the supply
chain adapts and adopts digitalisation
and new technologies, connectivity
will not only resume but become more
resilient.
This is nowhere better illustrated
than in the increasing substitution
of physically integrated supply chain
processes by physically fragmented
ones as highlighted by Jamari Mohtar in
“Tackling MCO’s economic paradox and
its aftermath” https://www.emirresearch.
com/tackling-mcos-economic-paradox-andits-aftermath
SCR, therefore, will be a pivotal driver
in the momentum towards closer and
deeper regionalisation amidst the
expected-to-be prolonged Covid-19 crisis.
Towards that end, even as SCR
is tapped to promote ever-closer
regionalisation, it’s also dependent on the
role played by member-states of Asean in
enhancing and boosting connectivity and
supply chain.
In calling for regionalisation,
member-states could set up a common
supply chain fund, perhaps in the form of
an Asean “Business Infrastructure Bank”.
Funds would be pooled from memberstates
that will be proportionately
reflected in the shares held as well
as financing support from the Asian
Development Bank (ADB) and even the
Asian Infrastructure Investment Bank
(AIIB).
The fund or bank will provide
financing to both governments and the
private sector to develop and promote
SCR and enhanced trade connectivity
in the region and beyond. This includes
digital adaptation and adoption as a
means to promote digital convergence
and supply chain confluence as
exemplified, for example, by e-commerce.
A common protocol needed
There is also the need for a common
protocol that will obviate problems
arising from supply chain disruptions,
a point made by Hanim Hamzah, Senior
Fellow of the CIMB Asean Research
Institute (CARI). This common protocol
should encompass all aspects in the
supply chain management (SCM) – legal,
Just
EMIR-sing
By Jason Loh
The
mushrooming
in
e-commerce
as a result of
the impact of
the Covid-19
outbreak
will lead
to greater
usage and
competition
for urban
traffic
space within
domestic
borders
as shown
in studies
on urban
logistics
systems. ”
technical, digital and financial. By the
same token, it should reflect SCR and its
building-blocks for future developments.
For example, the common protocol
should make use of distributed ledger
technology or otherwise popularly
known as blockchain to enhance regional
participation in the supply chain and
thereby boost regional integration.
McKinsey’s report entitled, “Blockchain
technology for supply chains – A must or a
maybe? (2017) outlines three benefits to be
had from a SCR that’s operationalised via
blockchain, namely:
• Replacing slow, manual processes.
• Strengthening traceability; and
• Reducing supply-chain IT transaction
costs.
As such, SCR will allow member-states
to enjoy efficiency gains as well as reduced
costs over time with blockchain playing
a role as part of the digital economies of
scale.
In turn, this will contribute towards
greater regionalisation as member-states
are put on a more level playing field, so
to speak, in terms of digital adoption and
adaptation leading to enhanced supply
chain connectivity.
Following on from digitalisation, SCR
can also take the shape of new technologies
that introduce the logistics of the future –
looking forward and ahead.
For example, an integrated and
multi-modal network of distribution
channels revolving around underground
tunnel technology as the centrepiece in the
supply chain system and operationalised
by digitalisation could partly lead the way
in SCR.
Underground or subterranean tunnels,
including undersea tunnels, would allow
for seamless and uninterrupted supply
chain activities – that is also resilient
against an outbreak of pandemics such
as Covid-19 where imposition of partial
lockdowns and movement restrictions also
affect production and distribution.
The mushrooming in e-commerce
as a result of the impact of the Covid-19
outbreak will lead to greater usage and
competition for urban traffic space within
domestic borders as shown in studies on
urban logistics systems.
And uncertainties over the “expiry
date” of Covid-19 coupled with whether
the pandemic can be totally controlled in
the form of the imminence of a “second” or
“third” wave cutting across borders makes
the case for a new logistics all the more
compelling.
Deployment of technology important
Although construction of subterranean
networks of supply chain will take some
time and could even outlast the remaining
duration of the Covid-19 outbreak,
nonetheless, SCR in this form will provide
a lasting contribution towards regional
integration.
The underground tunnels can also serve
to enhance internet and therefore digital
connectivity within the Asean region,
thus further boosting SCR in a reciprocal
relationship.
Deploying technologies such as
near-synchronous magnetic motors which
are similar to the technology used in roller
coasters, underground tunnels would also
speed up the supply chain process and
thus by extension facilitate and promote
regional integration in terms of linking
production networks and bases as part of
the wider supply chain processes.
This can be seen in the Just-in-Time
(JIT) inventory management system
whereby delivery of the needed raw and
semi-processed materials take place
according to the scheduled demands of the
user so that there is no overstock and waste
is eliminated.
Digitalisation – Internet of Things (IoT),
Big Data, precision analytics, business
algorithms and artificial intelligence (AI)
and not least 5G wireless technology –
plays a crucial role in the processing and
coordination of operations and orders in a
timely, targeted and expeditious manner.
This means that SCR in terms of the
new logistics can be leveraged by Asean
member-states to promote both horizontal
and vertical integration across borders
even as the latter could be instrumental in
driving the dynamism of the former.
In the final analysis, SCR is not just
about reshoring and onshoring the flow
and movement of trade and investment.
More than that, it involves also the
reconceptualising and re-adapting the
physical assets and infrastructure of the
supply chain to strengthen intra-regional
connectivity.
That would then yield spill-overs and
serve as building-blocks for future logistics
which in turn will further deepen regional
integration. — The Health
Jason Loh Seong Wei is Head of Social, Law
and Human Rights at EMIR Research, an
independent think tank focused on strategic
policy recommendations based on rigorous
research.