rials – as well as catastrophic global events from fires to floods. Two patterns are dramatically changing the region’s sourcing landscape, according to a new report from Pacific Basin Economic Council (PBEC), Monash University Malaysia and KPMG, which studied 132 companies that shifted or considered shifting their supply chain destinations across 13 jurisdictions over a five year period from 2018-2022, comprising 232 relocations.  Firstly, Asian economies are becoming markets in their own right as their incomes rise.  Secondly, companies’ ability to deliver products digitally has shifted the principal driver of regional growth from manufacturing to services. Multiple markets, multiple motivations The study found that much of the relocated supply chain distribution has remained in Asia (71 per cent), with 55 per cent centred in Southeast Asia. Vietnam received the highest number of company inflows, with India showing perhaps the greatest potential for future sourcing patterns to emerge.  While increases in tariffs were mentioned as a key reason for sourcing moves, they only represented 23% of the reasons given, accompanied by the uncertainty created by geopolitical factors (23 per cent). Indeed, an equal portion of companies decided to move their capacity based on incentives and to more stable supply chain settings of the receiving market (25 per cent). Supply-side risks regarding access to sustainable materials and general raw materials were the highest-ranked concerns among business leaders.  Meanwhile, transportation costs, delivery reliability, supplier capacity, and the financial stability of suppliers were key concerns in moving capacity or entering a new country for the first time. Further, many capacity moves were to multiple markets (44 per cent), highlighting the increased complexity of observed sourcing patterns and the further fragmentation of global supply chains. Mainland China’s mature manufacturing infrastructure, the report noted, often means that more than one alternative sourcing destination is often needed to meet the demands of capacity moves. Another notable trend was that existing entrant factory moves (53 per cent) were more prevalent than new entrant factory moves (31 per cent). A smaller number of companies decided to reshore some of their capacity (16 per cent), the main reason being to take advantage of existing capacity and be close to final markets. The data also reveals how these moves affect labour headcount for the receiving market. The reasons behind these moves and specific trends may significantly impact supply chain decisions for other manufacturers. Effective risk management is vital As this data reflects, business leaders’ decisions made in the past five years, as well as decisions being made in the coming 10 years, are dramatically changing the supply chain and sourcing landscape in Asia Pacific.   As companies redesign their sourcing strategies and plan relocation to other markets, they must consider associated third-party risks pertaining to stable governance, tariffs, tax regimes, adequate infrastructure, access to market, availability of skilled labour, sanctions, environmental-related concerns, local issues, cyber-attacks, and unethical sourcing.  Bribery and corruption also remain areas of major concern in some emerging markets. Companies must also ensure detailed investigation and due diligence work before choosing alternative suppliers/regions to relocate their manufacturing units. Post-Covid-19, the world is seeing dramatically altered supply chain structures. Fundamentally, manufacturing and supply chains are becoming more localised, directly impacting companies’ operations, costs and sourcing. As such, supply chains will need to adopt more robust planning in anticipation of future pandemics and other global events and incorporate better sustainability and resilience into their systems.  Striving towards open and transparent global data standards will not only enhance cross-border trade aspects during the pandemic recovery phase but will also build much-needed preparedness into border processes and supply chains to help ensure future resilience. This story first appeared in the February 2023 issue of Inside Retail Asia Magazine.