The ECCT’s Supply Chain committee hosted a seminar on the topic “Enhancing trade with Europe through supply chain resilience” with the support of UPS. The event featured presentations by Lin Shiu-mei, Vice President of APAC Corporate Affairs for UPS International and Jeff Chung, General Manager, Asia (ex Korea) Delivery Systems and Services and Electronics for the Merck Group in Taiwan. Opening remarks were made by Susan Hu, Deputy Director-General of the International Trade Administration under the Ministry of Economic Affairs; Helena Reitberger, Representative of Business Sweden, The Swedish Trade & Invest Council and ECCT CEO Freddie Höglund. The event concluded with a panel discussion featuring the speakers as well as Michelle Huang, EU Channel Sales Director for ADATA Technology Co., Ltd. and Lisa Feng, APAC Solutions Director for UPS International Inc. Closing remarks were made by Stephanie Hericher, Co-chair of the Supply Chain committee.

In her presentation, Lin Shiu-mei spoke about the state of APEC supply chains and key strategies for strengthening resilience based on research conducted by UPS. She stressed the importance of dialogue between governments and the private sector to ensure that solutions proposed by governments to address challenges are practical. The Asia Pacific Region experienced great economic losses from the great supply chain disruption during the Covid-19 pandemic. Between March 2020 and April 2022, the cost of transportation rose by four standard deviations, businesses experienced some of the longest lead times in history and a number of smaller economies were under-served as shipping companies by-passed their ports in favour of ports in large economies.

Neither governments nor businesses were prepared for the disruptions caused by both the surge in demand for goods (insufficient supply of capacity as e-commerce made it easier for consumers to order goods online) coupled with the disruptions to logistics caused by the lack of personnel (from government lockdowns and other restrictions imposed to reduce the spread of Covid-19. The top five factors exacerbating supply chain disruptions were failures in policy coordination within economies, failures in policy coordination across economies, including transport eco-systems (restrictions imposed varied significantly from country to country), the unintended effects of health protocols on workers (especially rigid testing and quarantine measures imposed on workers), policy decisions made without understanding the business impact (stock-piling and nearshoring did not consider the impact on complex supply chains, raising the cost of business at home while decimating suppliers and partners overseas) and overexposure of SMEs to trade risks.

One of the key lessons learnt from the pandemic is that flexibility is necessary for resilient supply chains. This resilience needs to be multi-dimensional in terms of sourcing, production, transportation, distribution, delivery. In addition, real-time visibility across the supply chain is necessary to allow suppliers and partners to respond to bottlenecks. Having a single supplier for components or transport makes one extremely vulnerable. Therefore maintaining a suite of transportation options and strong logistics partnerships can help businesses pivot quickly across modes during air or seaport closures. Moreover, companies with broad customer bases are able to shore up capacity in new centres of demand in Asia.

According to UPS’s November 2023 report “The State of APEC Supply Chains: Lessons Learned, Key Strategies to Strengthen Supply Chain Resilience, Access Partnership”, based on a survey of 1,200 firms, there are five key dimensions of supply chain resilience: flexibility, redundancy, robustness, connectivity and visibility. Many firms have made improvements since the pandemic. They have invested in visibility and robustness indicators but lack flexibility and have uneven connectivity (managing different modes of transport) and are still struggling to manage inventory.

But businesses are taking the issue seriously. According to report from PWC, 60% of Asia Pacific business leaders see supply chains as the main driver of profitability and 43% of them are actively investing in supply chain transformation.

To help businesses, in 2023, the APEC Business Advisory Council (ABAC) developed and endorsed a Supply Chain Resilience Toolkit to help businesses assess their resilience. The Supply Chain Resilience Toolkit uses 27 indicators to allow businesses to gauge their score based on their products to identify and address gaps. The toolkit generates a report and recommendations.

The title of Jeff Chung’s presentation was “Glocalisation to support the semiconductor industry’s growth in Taiwan”. Merck is a major supplier to the global semiconductor industry and a major investor in Taiwan’s semiconductor supply chain.

According to Chung, exponential growth in data needed for Artificial Intelligence applications is driving the demand for large volumes of ever more powerful semiconductors. AI has the potential to increase efficiency much faster than previous technological breakthroughs and it will increasingly be used in a variety of fields. For example, AI is driving personalized medicine, drug discovery, diagnostics and treatment planning. In addition, AI is optimising traffic flow and public transport systems. Autonomous vehicles, including cars and drones are transforming transportation. AI is a critical element in managing resource consumption, renewable energy sources, and improving the efficiency of power grids. Moreover, AI-driven surveillance and data analysis is enhancing security and emergency response capabilities. AI is enabling hyper personalized learning experiences and automating administrative educational tasks. It is also revolutionizing advanced automation, efficiency in production, and supply chain management.

Merck is an expert in chemistry and physics and is using AI to expedite its R&D process. For example, according to Chung, the firm used to have to test 90-100 materials to find the optimal one for a particular process. Using AI can now narrow down the options to three to five materials, which can significantly speed up the R&D process.

Merck’s materials are used in all the major aspects of the semiconductor manufacturing process. Merck is investing in both R&D and production facilities across the world. In Taiwan, it has facilities in several cities and is building more in Kaohsiung in order to be close to its customers. It is also working to increase sourcing locally in order to improve its resilience. According to Chung, around 50% of its semiconductor products for Taiwan are made locally. The firm plans to invest NT$17 billion (€500 million) in Taiwan over the next 5-7 years, which is the company’s single largest investment globally, as part of efforts to increase the percentage of localisation.

The panel discussion focused on topics including how supply chains evolved during the pandemic, lessons learnt and how supply chains have been evolving since the pandemic. Michelle Huang from ADADA introduced her firm. Lisa Feng explained how UPS is helping its customers to optimise and improve the efficiency of their shipments. Speakers noted that many firms have actively expanded production and suppliers beyond China in order to increase diversity, redundancy and resilience. They also noted that they are preparing for a surge in activity ahead of a potential increase in tariffs that incoming US President Trump has said he will impose on products imported into the United States.