NPI & Supply Chain Resilience Strategies

On April 2, 2024, our Asia Growth Exchange session brought together senior supply chain and procurement professionals to explore how to build robust, agile supply chains. The discussion focused on the challenges of high-stakes new product introductions (NPI), navigating the "China + N" phenomenon, and driving supply chain diversification across Asia. The following insights capture the collective wisdom shared during the session.

1. The Three Pillars of Supply Chain Excellence

On-Time Delivery

Participants stressed that the ability to deliver components and products exactly when needed is crucial. Even a minor delay can disrupt production lines and affect overall cost efficiency in today's fast-paced environment.

Quality Assurance

Maintaining high quality across every step—from raw material sourcing to final assembly—is non-negotiable. Consistent quality becomes even more critical during new product ramp-ups, where any lapse can derail a launch.

Cost Management

While reducing costs remains a key objective, participants emphasized that this must be balanced against the need for resilience and quality. Innovative approaches—such as independent yield tracking and digital verification—are helping companies ensure that cost-cutting measures do not compromise performance.

2. Dual Sourcing & Geopolitical Risk

Building Resilient Networks

The session highlighted a growing trend toward multi-sourcing strategies. With the "China + N" model gaining traction, companies are expanding their supplier base to reduce dependency on a single market and mitigate geopolitical and supply-chain risks.

Regional Trade-Offs

Alternative regions such as India, Vietnam, and Southeast Asia offer promising opportunities and have become top choices for firms looking to diversify away from China. Companies are actively relocating operations to countries like Vietnam and Indonesia, attracted by competitive labour costs, growing infrastructure investments, and stable policy environments (see: CNBC, “Southeast Asia is the Top Choice for Firms Diversifying Away from China,” June 24, 2024).

However, participants noted that challenges persist in these markets. Infrastructure, workforce capabilities, and service levels in Southeast Asia and India still lag behind the established Chinese ecosystem. Despite these diversification efforts, China’s scale and manufacturing sophistication mean that even significant shifts in global supply chains are likely to result in only modest reductions in its share of global exports in the short term.

At the same time, insights from McKinsey highlight that Asia is poised to benefit significantly from global supply chain shifts, with up to 25% of international trade—valued at $18 trillion—relocating. However, despite this diversification, China is expected to maintain at least double the export volume of the rest of Asia combined, underscoring its enduring role in the global supply network. Furthermore, intra-Asia trade constitutes 50% of all regional trade, illustrating that Asia is not just a manufacturing hub but also a major consumer market, creating complex, interconnected supply dynamics that companies must navigate.

Complexity vs. Resilience

While diversifying suppliers introduces additional complexity and may require higher inventory buffers, the trade-off is worthwhile. Resilient supply chains help companies navigate uncertainties and maintain uninterrupted operations.

3. Digital Enablement & Process Innovation

Remote Verification & Monitoring

Digital tools and remote oversight systems are increasingly being deployed to monitor supplier performance. These technologies provide independent verification of quality and yield, ensuring that production targets are met across dispersed locations.

Asia’s Digital Leadership in Supply Chains

Asia is at the forefront of supply chain digitisation, with companies pioneering advanced technologies such as autonomous planning, predictive analytics, and generative AI to improve supply chain agility and forecasting capabilities. Many firms are moving beyond pilot projects and adopting digitisation at scale to create resilient supply chains that can better anticipate and adapt to global disruptions.

Agile Operations

Many companies are investing in local, agile teams capable of quickly addressing issues at various nodes within the supply chain. This approach is particularly effective during rapid scale-ups or new product launches.

4. Sustainability & Ethical Standards

Regulatory Pressures and Scope 3

With evolving environmental regulations, companies are now held accountable for their practices and those of their suppliers. This has led to increased audits and the development of supplier sustainability programs.

Balancing Compliance with Efficiency

Participants acknowledged that meeting these higher ethical and sustainability standards may incur additional costs. However, investment is essential for long-term viability and meeting global market expectations.

5. The Enduring Competitiveness of China

Strength in Scale and Capability

Despite the move toward diversification, many speakers agreed that Chinese suppliers continue to deliver exceptional performance in terms of cost, quality, and reliability. China's mature manufacturing ecosystem remains a benchmark in the industry.

Overcapacity & New Demand Drivers

While concerns over overcapacity and commoditization were raised, there is optimism that new demand—driven by technologies such as AI and customized consumer products—will stimulate further innovation and growth within the Chinese manufacturing base.

6. Emerging Opportunities & Future Trends

Innovation as a Differentiator

Looking ahead, participants see flexibility, agile manufacturing, and technology integration as key enablers for future supply chains. Companies that invest in these areas will be better positioned to capture market opportunities as consumer demands evolve.

Infrastructure & Workforce Development

For India and South East Asia, significant infrastructure and workforce training investments are expected over the coming years. Although these regions may take time to match the capabilities of China, they will eventually offer competitive alternatives.

Conclusion and Recommendations

Integrated Management

Continue to focus on the core pillars of on-time delivery, quality, and cost while leveraging digital tools to monitor performance across your supply chain.

Strategic Diversification

Embrace multi-sourcing strategies to build resilience, but carefully manage the complexity of diversifying suppliers.

Sustainability & Innovation

Invest in sustainability programs and innovative technologies. Not only do these efforts help comply with new regulations, but they also create new avenues for growth and differentiation.

By integrating these strategies, companies will strengthen their supply chains and position themselves to thrive in an increasingly complex global landscape. All perspectives have been anonymized in line with our practice of the Chatham House Rule.