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Why Southeast Asia is becoming key to omnichannel supply chains

As companies shift from cost and efficiency to trust and resilience, Southeast Asia is becoming the place to turn uncertainty into opportunity.  

A pivotal role for One Plus strategies

Home to the world’s busiest maritime transport network, the tiny nation-state of Singapore offers nearly unparalleled trade links to over 120 countries worldwide, setting a benchmark for connectivity in Southeast Asia. Malaysia’s prowess as a back-end electronics producer underscores the region’s versatility. Indonesia capitalizes on its robust e-commerce growth, powered by a young, tech-savvy population. And the Philippines adapts to the evolving demands of the consumer goods sector.

Together, these nations are crafting a compelling narrative of innovation and sustainable development. And Southeast Asia is one of several regions that is playing a pivotal role in the future of omnisourcing and omnichannel supply chains and the growing trend toward One Plus supply chain strategies.

Below, we explore why this is happening.

Southeast Asia: The new frontier for omnichannel supply chains  

Anyone following developments in global trade in recent years knows that the Covid-19 pandemic and escalating geopolitical tensions have served as a wake-up call for businesses worldwide, prompting a strategic pivot in supply chain management. Companies are increasingly adopting ‘omnisourcing’ – a practice that mitigates risk by diversifying supply sources. They are moving away from a singular focus on cost and efficiency towards a balanced emphasis on trust and resilience. For example, in Mexico we’re seeing this shift in automotive supply chains for electric vehicle (EVs).

Southeast Asia stands out as a beacon of opportunity in this new omnisourcing era. With its unique blend of economic partnerships, including ties with both the U.S. and China, the ASEAN economies offer a compelling mix of skilled labor, manufacturing capacity, and expertise. The region’s political stability and involvement in trade treaties, such as the Regional Comprehensive Economic Partnership (RCEP), further enhance its attractiveness as an omnisourcing destination.

Over the next few years, we’re investing in the region to expand our footprint and workforce – particularly in Singapore, Malaysia, Indonesia, and the Philippines. Let’s take a closer look at those countries.

Southeast Asia: A Plus One on the rise

Singapore

Connects to more than 600 ports in 123 countries via over 200 shipping lines.

Malaysia

Home to over 3,000 tech and industrial suppliers ranging from automation and electronics to packaging and precision engineering.

Indonesia

Projected to be the world’s fourth-largest economy in terms of purchasing power by 2030.

PHILIPPINES

100+ million people make an attractive destination for the Fast-Moving Consumer Goods (FMCG) market.

Sources: Singapore MPA, InvestPenang, Wellington Capital

Singapore: A center of international trade  

Singapore exemplifies the region’s potential with its world-class infrastructure and strategic location. Despite its small local market, the city-state has leveraged these assets to become a hub for electronics and chemicals manufacturing. Its operational efficiency and robust innovation ecosystem have attracted significant industrial expansion, with the electronics, energy, and chemicals sectors experiencing notable growth. Investments from global giants like ExxonMobil and Shell underscore Singapore’s role as a critical node in the worldwide supply chain network.

Jurong Island is at the heart of the country’s energy and chemicals industry – an industrial park that opened in 2000. More than 100 companies have invested over S$50 billion there. The island’s integrated infrastructure forms a robust ecosystem of customers and suppliers, creating cost-saving synergies. The electric vehicle market is also growing as the country plans to expand and improve charging infrastructure to support increasing EV sales.

As a world-class business destination with room for growth, the demand for logistics services and omnisourcing solutions is also rising. That’s why we’re adding purpose-built logistics hubs to support dangerous goods transportation, including EV batteries.

Malaysia: A backbone of tech manufacturing

Malaysia complements Singapore’s high-tech prowess, specializing in back-end manufacturing and semiconductor assembly. Penang, in particular, has emerged as a powerhouse, hosting a thriving network of suppliers and drawing substantial foreign direct investment (FDI).

The island state is home to a broad spectrum of over 3,000 highly specialized local suppliers with products and services ranging from electronics, automation, and software development to packaging, plastics, and precision engineering. Some 50% of the country’s FDI in several industries runs through Penang. The government’s InvestPenang program and the Penang Development Corporation have played a vital role.

To help meet the increasing demand for omnisourcing options and solutions for omnichannel supply chains, we’ve recently added a fifth facility in Penang equipped with a state-of-the-art automated pallet storage and retrieval system and goods-to-person robotics technology.

Indonesia: An e-commerce engine

Indonesia’s rapid economic growth is fueled by its burgeoning e-commerce sector. With one of Asia’s highest internet penetration rates (75%) and a young, tech-savvy population, the country is becoming a global economic powerhouse.

By 2030, the world’s fourth most populous country will likely be the world’s fourth largest economy in terms of purchasing power. Forecasts call for rapid growth over the next decade, from US$4.2 trillion in 2020 to US$10.1 trillion in 2030. A surge in online shopping during the pandemic has made mobile commerce more accessible, with major cities like Jakarta, Surabaya, and Bandung now significant e-commerce hubs.

These developments are making omnisourcing and omnichannel supply chains more relevant, and the logistics sector is evolving accordingly. We’ve added a 40,000 sqm cutting-edge green warehouse facility to meet the soaring demand.

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Philippines: A consumer goods revolution

The Philippines is witnessing a transformation in its Fast-Moving Consumer Goods (FMCG) sector, with a shift towards online shopping and brand diversification. Localizing production has become a strategic focus, with companies like Unilever investing heavily to tap into the domestic market’s potential.

The pandemic disrupted traditional supply chains, triggering two significant shifts in the FMCG market: Consumers flocked to e-commerce platforms and tried new brands due to product shortages. These changes have expanded the digital footprint of FMCG businesses and reshaped consumer behavior, driving robust domestic demand for essentials ranging from food and groceries to beauty products.

This growing need for FMCG and the size of the population, at over 100 million, makes the country an attractive domestic market. The expanding retail market will need innovative omnichannel supply chains, adaptable warehouse capabilities, and a solid local logistics network. We’re partnering with market experts to combine their knowledge with our innovative technologies to enhance the efficiency of local supply chains and boost the country’s profile as an omnisourcing destination.

DHL Supply Chain’s new capacity in 2023

Grow SEA: Supporting sustainable, omnichannel supply chains

Southeast Asia is currently rewriting its business success story. The narrative is one of transformation and opportunity. However, the rapid growth in the region will require robust logistics solutions backed by state-of-the-art, sustainable supply chain technologies. That’s why we’re investing in this dynamic part of the world. By bolstering infrastructure, integrating sustainable practices, and creating jobs, we’re ensuring that Southeast Asia becomes a key player in omnisourcing and omnichannel supply chain strategies.

A more in-depth version of this article originally appeared on our blog, Logistics of Things. Read it here.

GROW SEA - FUELING SOUTHEAST ASIA’S GROWTH

We’re expanding our footprint and workforce in Southeast Asia over the next few years to meet the needs of a fast-moving business environment.

Learn more

Published: November 2023

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