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A blow to Asia as companies diversify supply chains post COVID-19


A blow to Asia as companies diversify supply chains postDisruptions caused by COVID-19 is inducing 57 per cent textile and apparel organizations to diversify their sourcing away from Asian countries like China, Vietnam and Bangladesh, says the Supply Chain Resilience Report 2020 by BCI. Many apparel companies plan to shorten their supply chains due to the pandemic, with Asia becoming the biggest casualty, says the BCI report. Around 30 per cent companies intend to reduce their sourcing from Asia, while another 13.2 per cent expect to reduce their sourcing from China.

The BCI Coronavirus Preparedness report published in March also revealed that within two months of January-March, the number of organizations who moved to local sourcing jumped from 16.3 to 36.4 per cent. The figure further surged to 66.2 per cent in June.

Companies to scrutinize suppliers locations, documents

Widespread global shutdowns have made it extremely important for companies to know the geographical location of their suppliers. The BCI reportA blow to Asia as companies diversify supply chains post COVID 19 suggests, while 63.4 per cent respondents are aware of the location of their critical Tier I suppliers, only 36 per cent know the location of their Tier II suppliers. Post COVID, around 60 per cent respondents intend to do a deep analysis of all their suppliers, while 45.3 per cent organizations intend to determine the location of all their Tier-II suppliers. Some respondents also plan to scrutinize the documents of suppliers to determine their success rate, says Rachael Elliot, Head-Thought Leadership, BCI.

AI for demand forecasting

The report also analyzes respondents’ plans for future inventory holding. Around 46.1 per cent intend to maintain the same inventory level as usual whereas 19.6 per cent plan to increase their inventories. Of those planning to retain inventory levels, 58.1 per cent plan to change their supplier base to quicken the speed of their deliveries.

Apparel retailers plan to leverage their predictive capabilities to determine changing consumer trends. While 43.7 per cent already use demand forecasting, 26.8 per cent plan to adopt this technique in future. Thirty-eight of the organizations also plan to add inputs such as AI into their demand forecasting. These techniques can help organizations mine data from multiple inputs more effectively. Around 73 per cent retailers believe AI and machine can add significant value to their demand forecasting processes. Majority of small organizations do not use any dedicated logistics services. In case of larger organizations, 31.9 per cent have their own in-house logistics, 30.8 per cent use a third-party logistics (3PL) company and 30.2 per cent use a combination of in-house and 3PL.

Post-COVID, 79.7 per cent organizations intend to retain their third party logistics services providers, while 7.8 per cent intend to reduce their dependence on them and instead opt for in-house logistics services.