The Association of Southeast Asian Nations (ASEAN) include a substantial number of the world’s most dynamic and trade-minded economies – from financial and production capitals like Singapore to emerging global supply chain hubs like Vietnam. Over the past decade, ASEAN’s role in global trade has increased substantially and steadily, with total trade among ASEAN members increasing by 25 per cent between 2010 and 2019 and value of trade with non-bloc partners rising 33 per cent in the same period. As the world saw Covid-19 put immense pressure on the global supply chains, it also exposed the vulnerabilities of the ASEAN supply chain.

ASEAN economies were further held back by systemic inefficiencies such as complex tax regime, e-commerce regulations and customs protocols. For example, customs documentary requirements are vastly different across ASEAN, resulting in customs delays that create traffic bottlenecks and increase shipping costs. These differences are largely due to a disparity in digitalisation between the member states. Although all 10 members have access to a common trade platform known as the ASEAN Single Window (ASW), only about half are currently using it.

ASEAN member states have also joined forces with their pacific neighbors – Australia, China, New Zealand, and South Korea –to sign the Regional Comprehensive Economic Partnership (RCEP). However, it is uncertain if RCEP will fare much better – the lack of penalties and binding requirements means that nations can beg off the agreement’s standards if they deem them contrary to the country’s public policy objectives. Future proofing ASEAN’s 2030 digital supply chain needs to start NOW.

The 2030 ASEAN digital supply chain – where do we start?

With Covid slowly releasing its clutch on the region and trade agreements offering imperfect assurance of future success, where does that leave ASEAN’s hopes for a better, more efficient, and more synchronized trade and supply chain network?

Kearney is advocating for ASEAN to embrace and leverage digitalisation to fundamentally transform end to end supply chains in ASEAN. Such a digital supply chain should at minimum have four key qualities as seen in the figure below. However, in reality, the current supply chains in ASEAN lack some of the necessary qualities. Instead, in ASEAN, we have difficult-to-navigate logistics-supply markets, manual collection of inventory data and low-to-no tracking of ocean vessels.

There is a better way – imagine this:

• Advanced software to predict an upcoming stock shortage

• Automatic placing an order with a manufacturer with the inventory needed to fulfill it

• An online ASEAN transport platform to shop for the best logistics option

• The goods picked up from the manufacturer by crowd-sourced vehicles (essentially Uberised trucks)

• Track-and-trace enabled truck provides all parties with live-location data at any given moment

• The quick and easy online filling of cross-border customs documentation

• Trade documents stored in blockchain-enabled databases for added security. Any other services—such as insurance and trade financing— being arranged with similar ease thanks to digitalisation.

• The goods passing through customs without a hitch due to digitalised customs documentation

• During disruptions, AI-equipped system recommending an alternative route to minimize delays. New first-mile and last-mile arrangements are made automatically

But how do we get these from where we are today? There are 4 main themes of actions to path the way: Institutional reform, infrastructural upgrade, technological advancement and adoption, and human capital growth.

Institutional Reform – At a regional level, a good starting point would be for holdout nations to adopt the ASW. Additionally, ASW can be integrated with the ASEAN Smart Logistics Network (ASLN) and non-member nations can be included in the ASW. On a national level, governments can redirect some resources allocated to support businesses during COVID, to digitalize trade services. Nations can also continue COVID-related debottlenecking efforts – such as streamlining custom processes for ‘low-risk’ traders – and even expand it into non-emergency product categories. These efforts in tandem with digitalisation measures that are already planned or under way, like the parts of the ASEAN Comprehensive Recovery Framework (ACRF), can go long way toward shifting ASEAN into a higher logistical gear.

Infrastructural Upgrade – With 9 out of 10 member states having higher logistical costs—relative to national GDP—than the global average, supply chain infrastructural upgrades are a necessary step to achieve this goal. Although some such infrastructure projects, like smart ports and improved internet access in underserved areas, are already underway, an estimated US$1.26 trillion needs to be further invested in infrastructure projects through 2025 to adequately digitalise the ASEAN supply chain. Learning from the past successes of Indonesia, public-private partnerships (PPPs) is powerful method of ramp up the much-need infrastructural spending.

Technological Advancement and Adoption – Access to up-to-date information and communication technology varies widely across ASEAN, with small and medium sized enterprises (SMEs) at low levels of adoption of even basic levels of digitalisation. National governments are mindful of these shortfalls and have advanced regional initiatives such as the Regional Digital Trade Connectivity (RDTC) project. To make a meaningful difference, policies need to drive significant expansion of digital access across supply chains, particularly at the SME level. ASEAN should consider establishing testbeds to try out pilot projects with regional tech “unicorns”, including the selective relaxation of regulations that may be hindering tech innovation. Additionally, as the region becomes more reliant on tech, nations should also invest and cooperate with each other to develop the cybersecurity muscle concurrently.

Human Capital Growth – ASEAN has an annual digital talent shortfall of 1.08 million workers. The supply chain talent deficit is even deeper—13 million annually and worsening by 14 percent year over year. Two primary causes of these talent gaps seem to be low levels of tertiary education enrolment and relatively meagre rates of Internet usage. A significant compounding factor is a regional failure to realize the full professional potential of its female population; only about 53 percent of women in ASEAN nations are currently in the workforce. Apart from existing top-down national and regional level efforts, ASEAN nations should also increase female economic participation and deploy PPPs to incentivise companies to do what is necessary to foster upskilling within their workforces.

SMEs will continue to be the backbone of ASEAN. With less than 10 percent of SMEs using advanced digital tools for their core business processes, and with just over a third have an online presence of any kind, governments will need to focus on accelerating SME digitalisation to achieve a truly digital supply chain. A potentially effective way to coordinate regional initiatives would be through an ASEAN SME Control Tower, or ASCT. Such an entity, ideally under the auspices of the Asia Development Bank (ADB) or a similarly trusted authority, would act as an institutional bridge between SME-related activities across ASEAN countries. It could measure the effectiveness of ongoing initiatives, identify policy gaps, and gain a working understanding of new challenges affecting SMEs as they arise.

One potentially potent way ASEAN can ensure the long-term success of its digital supply chain initiatives is by tying these efforts to a growing regional push toward more environmentally sustainable business practice. Taking operational cost as a proxy for relative global greenhouse gas (GHG) emissions, logistical inefficiencies account for 15 to 20 percent of global GHG emissions, through such activities as engine idling during roadblocks, inefficient routing of truck traffic, and shipping idle on open waters due to delays. Supply chain digitalisation can greatly enhance our understanding of environmental impacts throughout the logistical chain (e.g., Life Cycle Assessment), aid decision-making for everyone along the length of the supply chain and provide unprecedented level of detail to consumers and social influencers regarding the true environmental impacts of products and services throughout the economy.

In conclusion, the different segments of the economy and society have a great deal to gain from a timely and well-executed digitalisation of Southeast Asia’s supply networks. The work required to make this happen will take years to unfold—and the time to begin is as soon as possible.

The Monetary Authority of Singapore (MAS), in partnership with the International Finance Corporation (IFC) and the United Nations Development Programme (UNDP), today launched an open financial education and action programme for micro, small and medium enterprises (MSMEs) in Asia and Africa. Known as the SME Financial Empowerment (SFE) , this programme aims to help MSMEs build foundational digital financial literacy skills, and gain a good understanding of cross-border financial services relevant to MSMEs, to help them thrive in the post-pandemic digital economy. The SFE was rolled out with market partners in Asia and Africa, starting with Ghana, India, the Philippines, and Singapore, and will benefit more than 400,000 MSMEs across both regions.

SFE is an inclusive and structured programme run on a digital portal operated by Proxtera [1] , which provides a global platform to link domestic SME ecosystems and catalyse cross border trade, financing, and digital services. The other key entities supporting the SFE are the United Nations Capital Development Fund (UNCDF), Singapore University of Social Sciences (SUSS) and the Global FinTech Institute (GFI). In 2022, the SFE aims to assist MSMEs in three key areas – Essential Financial Digital Skillset, MSME Financial Services, and Digital Economy Access & Growth. The first tranche of the programme will comprise two learning modules focused on essential financial digital skillsets –

(a) Foundational Financial Literacy which covers basic financial concepts and financial products essential for MSMEs. 

(b) Global Financial Literacy equips MSMEs with knowledge to connect to the digital economy and expand internationally by leveraging networks, financial services, fintech solutions and digital tools.

Further learning modules will be released in future tranches. Upon completion of each module, businesses will receive a digitally verifiable certificate issued by SUSS and GFI, that grants access to financial services tools and knowledge services through a resource hub.

The SFE learning modules incorporate best practices on key financial literacy and financing topics, benefitting from the programme sponsors, Ant Group, Digital Pilipinas, Globe Telecom, Validus and Visa as well as from a wider ecosystem of community partners including Bolttech, Coface, Consolidated Bank of Ghana, Development Bank Ghana [2] , and Philippines Department of Trade and Industry Philippine Trade Training Center.

The SFE builds on an earlier MOU between MAS and IFC on the Financial Trust Corridor (FTC) initiative to drive wider financial knowledge sharing, financial trust building and financial inclusion for MSMEs and financial institutions in developing markets. The FTC comprises a multi-party cross-border governance framework and trusted closed loop digital infrastructure, which governments and financial institutions from different countries can utilise to share verified information on foreign business counterparties and their supporting financial institutions. This information will help businesses involved in cross-border trade obtain easier access to financing.

Sopnendu Mohanty, Chief FinTech Officer of MAS, said, “An empowered MSME is essential to an equitable and sustainable digital economy. Such enablement begins with digital economy literacy. The affordable, bite-sized learning programme provided by SFE is a collaborative effort involving financial institutions, and public and private sectors. Through the foundational and global financial literacy modules, MSMEs in Asia and Africa will benefit from new skills to leverage networks, financial and digital tools to grow their business internationally.”

Qamar Saleem, Regional Industry Manger, Financial Institutions Group Advisory Services, Asia and Pacific at IFC, shared, “We are delighted to partner with MAS and UNDP for this impactful initiative, which has the potential to improve the livelihoods of thousands of small business owners in emerging markets. Empowering MSMEs with financial literacy and digital skillsets will help to level the playing field for smaller businesses, ultimately helping to address financing gaps and improving financial inclusion. Our team in Singapore will also play a vital role in maximizing the impact of this program through its extensive knowledge and decades of experience in implementing best practice and strengthening the processes and resources of MSMEs in emerging markets around the world. We look forward to leveraging our expertise to build a better future for MSMEs in Asia and Africa.”

Marcos Neto, Director of the Finance Sector Hub at UNDP, highlighted that: “In every country in the world, SMEs play a central part in the economy and society - and they are also the backbone of the global economy. SMEs represent up to 90% of the business segment in many countries - and also up to 80% of employment. But, too often, the potential of SMEs is constrained by gaps in knowledge relating to digital processes and technologies. Helping SMEs to participate in the digital economy, through relevant training and digital financial skills, can unlock productive and sustainable growth opportunities. This knowledge is a real catalyst, and an important reason as to why UNDP is delighted to collaborate with IFC and the Monetary Authority of Singapore in this important initiative. These efforts also align with UNDP’s global work that puts strong emphasis on sustainable SME growth, and aims to mobilise increased and more sustainable finance for SMEs.”

Asia Pacific’s e-commerce sales are expected to nearly double by 2025 to reach US$2 trillion ($2.79 trillion), according to market research company Euromonitor International. To capture a piece of that pie, retailers must successfully tackle pre-existing supply chain issues exacerbated by global events, including the Covid-19 pandemic.

“Many large retailers have deployed technologies like self-service scanning devices, mobile computers and mobile point-of-sale solutions at their storefronts in the past years. This enables them to adjust their operating models rapidly as the pandemic accelerated e-commerce and ‘frictionless’ shopping demands to a whole new level,” says George Pepes, Asia Pacific (APAC) Vertical Solutions lead for healthcare and retail at American mobile computing company Zebra Technologies.

However, he claims that those in-store investments alone have limited impact as fundamental operational issues, such as inefficiencies in inventory and fulfilment, persist. Pepes adds: “Many retailers are still using legacy technology systems or manual processes to guide inventory, fulfilment, and logistics actions that do not mesh with modern retail models.

Digitising the warehouse

A recent Zebra survey — documented in the Annual Global Shopper Study, which was released last year — showed that technologies like real-time inventory visibility (82%) and workforce scheduling software (76%) have been helping retail associates create a better customer experience.

This is exemplified in the case of Australian online cosmetics retailer Adore Beauty, which had an official stock list of more than 250 global beauty brands and over 13,000 products. In the last five years, its business grew quickly, such that it was dispatching approximately 6,500 orders daily. It, therefore, decided to move away from its paper-based warehouse processes to keep up with its continued growth.

Pepes says Adore Beauty invested in Zebra’s TC8000 Android Touch mobile computers to modernise its warehouse operations. As such, the e-commerce company saw a 30% increase in productivity across warehouse operations, a 50% reduction in the cost to fulfil customer orders, and improved their outbound order accuracy rate to 99.9%.

APAC retailers, adds Pepes, should also consider leveraging Internet of Things and radio frequency identification (RFID) solutions to enhance their supply chain resilience. “Those who can achieve enterprise-wide connectivity, conduct real-time analytics, and automate mundane tasks and critical decision-making will find it easier to execute operations when demand, labour or production levels are unsteady. They will also be able to track and optimise every process, asset and resource with end-to-end accuracy, improving decisions and outcomes,” he notes.

However, he says that there is no one-size-fits-all digital transformation strategy. “[Retailers need to deploy] solutions that are customised to their goals and unique technological challenges. [They can do so by working] with the right solution partners to determine which technologies can deliver a competitive edge and enable them to take advantage of future growth opportunities. Within the business, strong and active leadership is also required to guide each business through the digital transformation process.”

Last-mile delivery woes

Last-mile delivery is another area that retailers tend to overlook in their digital transformation plan. “The last mile is the most inefficient and costly part of the supply chain. And while retailers, e-commerce companies and logistics providers have embarked on their digital transformation journey, the challenges are more infrastructural,” says Xander van der Heijden, CEO of UNL, a provider of smart micro-location platform and next-gen mapping technology.

He explains that addressing formats in Asia Pacific are complex and non-standardised. There is also a lack of precision in mapping — for example, addresses in Indonesia and India are often landmark-based and descriptive like “the house across the big tree”.

To make matters worse, van der Heijden says that most traditional mapping providers struggle to achieve more than 70% geocoding accuracy. “Inaccurate and unreliable addressing and geocoding are the biggest challenges for last-mile delivery. Without accurate addresses and geocodes, routing engines and optimisation algorithms become useless. Even a single wrong address can have significant implications on delivery planning, delivery times, costs and customer satisfaction.”

Van der Heijden also notes that an effective last-mile delivery strategy requires rethinking the delivery model beyond routing optimisation. APAC retailers will need solutions that can provide full control over the last mile as well as the flexibility to adapt to industry and market shifts.

Micro-location as a solution

Here is where smart micro-location can help: “In the context of UNL, a smart micro-location platform is a fully integrated ecosystem of enterprise-grade, plug-and-play mapping and data tools to build scalable hyperlocal solutions with location intelligence at various scales,” says van der Heijden.

He continues: “So we’ve [digitised] the world into a smart 3D grid, enabling us to digitise physical locations and interface with them via their unique digital identity. [As such, our smart micro-location platform can] create semantic and spatial relationships between landmarks and points of interest, allowing us to accurately parse 90% of failed addresses. It can bring the figure up to 100% through easy-to-use smartphone apps and tools that users use to complete the geocoding process, and by collecting location intelligence such as where to park the car and the fastest way to get to the front door.”

Since each APAC market has unique challenges regarding infrastructure, addressing systems and local standards, the UNL platform is also designed to be data agnostic.

“[Our platform offers] companies plug-and-play tools to create their virtual private maps and securely bring their data and business knowledge. This brings a layer of flexibility, local context and accuracy to location-based solutions like last-mile delivery,” says van der Heijden.

The platform, he adds, is developed with security in mind and follows industry standards for data authorisation and privacy. UNL will continuously harden the platform’s security, such as using blockchain to ensure and protect user identity and data ownership. “Data autonomy and ownership have been core to our company philosophy and values since day one. Any data our clients bring remains under their control and ownership, and they can manage data access rights.”

Powering the future of retail

As supply chain disruptions continue, volatility and uncertainty are here to stay for the foreseeable future. APAC retailers must therefore reimagine their supply chains and empower their employees with the right technologies to address ever-changing business and customer demands.

“Retailers will be [increasingly] expected to provide a seamless customer experience between online and brick-and-mortar. Technology [can help by] fuelling productivity, shopper satisfaction and service, shaping the retail experience,” says Pepes.

Apart from digitising the warehouse and supply chain processes, he advises retailers to consider using prescriptive analytics. By doing so, they will be able to “intelligently analyse what is happening across the supply chain in real-time, interpret why it is happening and delegate a [particular] task to a specific worker to resolve the issue right then and there”.

Meanwhile, van der Heijden believes that hyper-localisation will be vital to a retailer’s success in the future. “The future of commerce is hyperlocal, hyper-contextual and hyper-connected. Hyper-local deliveries promoting micro-local commerce will become the norm and carve the path towards greener, more sustainable supply chains and higher customer satisfaction.”

He concludes: “Taking it a step further, local inventories will become shared inventories in the future, allowing companies to collaborate and cross-capitalise on their resources and enabling new delivery, data and business models.”