In 2025 and 2026, COOs in Asia are navigating a volatile and uncertain global environment. The OECD Economic Outlook emphasises the importance of proactive risk management, strategic diversification, and digital transformation in navigating this complex landscape.
As Asia's C-suite unites in its War Room strategy, the focus is clear: fortifying supply chains is not just about mitigating risk—it's about securing long-term competitiveness.
Diversification and digital twins
As global geopolitical tensions persist, companies are rethinking their supply chain strategies to reduce overreliance on single-source suppliers or regions. According to Atul Chandna, EY Asia-Pacific supply chain leader:
"Global shifting geopolitics has led Southeast Asia (SEA) to become the lynchpin of corporate 'China+1' strategies. Companies are aggressively diversifying production and sourcing to reduce single-country dependency."
He cites the examples of the Regional Comprehensive Economic Partnership (RCEP) and ASEAN-led Integration initiatives as streamlining trade and enabling regional sourcing strategies.
Chandna highlights that Singapore's position as a logistics hub, with linkages to over 600 ports worldwide, makes it an ideal anchor for dual sourcing models, especially when manufacturing in Indonesia or Malaysia aims to become "Singapore+".
"Best practices that companies should consider as they reimagine their supply chain include diversifying supplier networks across low-risk jurisdictions, seeking multiple suppliers and multi-route shipping, and implementing digital geopolitical risk dashboards." Atul Chanda
To measure the effectiveness of these strategies, Chandna recommends using key metrics such as:
"Time-to-recovery (TTR) from disruptions, revenue-at-risk by region, and supplier concentration ratios. Companies that have clear multi-sourcing and supply redundancy plans yield faster recovery during global disruptions."
Resilience vs. cost – Becoming the value multiplier
Historically, there has been a perceived trade-off between cost optimisation and supply chain resilience. However, Chandna argues that this mindset is outdated:
"The conventional trade-off between resilience and cost has evolved. Today, resilience should be framed as a value multiplier, not just strategic insurance or added cost."
He cites data showing that resilience investments deliver tangible business outcomes: "Notably, those that invest in resilience yield better revenue growth: companies with higher resilience scores achieve on average 5.2% better revenue growth and 16% fewer stockouts."
This shift in perspective is critical for COOs who must justify resilience investments to the board and stakeholders. Resilience is no longer a cost centre but a strategic lever for long-term competitiveness.
Real-time visibility and predictive capabilities
Digital technologies are playing a pivotal role in enhancing supply chain visibility and efficiency. Chandna highlights the importance of end-to-end visibility beyond Tier 1 suppliers:
"Having end-to-end visibility of the supply chain beyond Tier 1 suppliers has become critical in pre-empting and reducing systemic risks. Only a few companies have reliable Tier 2 visibility, despite a majority of supply failures originating from Tier 2 and beyond."
To address this, Chandna recommends the use of digital twins, which enable real-time decision-making and disruption prediction: "Digital twins allow for real-time support and decision-making in dynamic environments and can be used to predict disruptions and optimise operations."
He also outlines three proven strategies for ensuring return on investment (ROI) from digital technologies:
- Integration with real-time analytics: Ensuring that digital tools are linked to live data streams for predictive insights.
- Scalable cloud-based platforms: Deploying modular, cloud-native solutions that can be expanded as business needs evolve.
- Collaborative ecosystems: Building digital bridges with suppliers and logistics partners to enable shared visibility and joint planning.
- Sustainability: From brand risk to strategic advantage, sustainability is no longer just a compliance or reputational issue—it has become a core operational imperative. Chandna notes:
"Across Southeast Asia, supply chain sustainability has shifted from brand risk management to core operational and strategic value," he adds.
He highlights regulatory and consumer-driven pressures:
"Regulations like the EU CBAM and Thailand's Plastic Waste Action Plan are pushing firms to adopt extended producer responsibility (EPR) schemes. One of the most effective and scalable steps that organisations can take is to track and reduce Scope 3 emissions through supplier engagement and collaboration."
For COOs, embedding sustainability into supply chain strategy is now a boardroom-level issue, directly linked to cost, risk, and market access.
Economic and trade policy uncertainty
The OECD report highlights that US-China trade tensions, import tariffs, and trade policy uncertainty continue to impact global trade flows significantly. For Asian economies, such as Korea, Malaysia, and Thailand, which are deeply integrated into global supply chains, these developments pose significant risks to their export performance and cost structures.
The report also notes that the front-loading of exports to the US in late 2024 and early 2025 created temporary trade spikes; however, quarterly trade growth is expected to remain weak over the medium term.
COOs must now factor in tariff volatility, regional trade fragmentation, and regulatory divergence when planning supply chain strategies.
Inflation and input cost pressures
The OECD projects that services sector inflation will remain elevated in many economies, including Australia and Indonesia, with inflation expected to stay above central bank targets in 2025 and 2026. This has a direct impact on logistics and transportation costs, which are critical components of supply chain operations.
Additionally, rising import prices, especially for energy and food, add pressure on domestic inflation, further complicating cost management for manufacturing and logistics firms.
COOs in Asia are increasingly looking to diversify supplier bases, localise critical components, and adopt digital tools for better visibility and responsiveness in procurement and logistics.
Labour market tightness and productivity constraints
Across Asia, labour-intensive sectors are facing inflationary pressures due to tight labour markets. The OECD notes that rising consumer and corporate inflation expectations could fuel wage growth, particularly in services sectors.
In economies like Vietnam, where exports grew by 15.5% in 2024, labour shortages and wage pressures are emerging as constraints to scaling production.
COOs are responding by investing in automation, workforce upskilling, and digital transformation to improve productivity and reduce dependency on scarce labour.
Climate and natural disaster risks
The OECD report highlights Indonesia's vulnerability to monsoon variability, which could disrupt agricultural output and rural supply chains. Similarly, Iceland's volcanic activity near the capital region has caused damage to infrastructure and necessitated additional public spending.
These climate-related disruptions are prompting COOs to integrate climate risk assessments into their supply chain planning and invest in resilient infrastructure and diversified sourcing strategies.
Strategic shifts in supply chain management
To combat these challenges, Asian COOs are increasingly adopting a "War Room" approach, where cross-functional collaboration across procurement, logistics, finance, and risk management is essential. Key trends include:
- Nearshoring and regional integration: Companies are shifting from global to regional supply chains, leveraging ASEAN integration and India's growing manufacturing capabilities.
- Digital supply chain tools: Adoption of AI-driven demand forecasting, blockchain for traceability, and IoT for real-time logistics monitoring is accelerating.
- Supplier diversification: Reducing overreliance on single-source suppliers, especially from high-risk jurisdictions.
- Inventory and buffer stock strategies: Rebalancing just-in-time models with strategic stockpiling to mitigate disruptions.
- Sustainability and ESG integration: Aligning supply chain resilience with climate goals, particularly in countries like Japan and Singapore, where green logistics and circular economy initiatives are gaining traction.
Chandna says across SEA, supply chain sustainability has shifted from brand risk management to core operational and strategic value.
"Further, regulations like the EU CBAM and Thailand's Plastic Waste Action Plan are pushing firms to adopt extended producer responsibility (EPR) schemes," he continues. "One of the most effective and scalable steps that organisations can take is to track and reduce Scope 3 emissions through supplier engagement and collaboration."
The road ahead
In 2025 and 2026, COOs in Asia are navigating a volatile and uncertain global environment. The OECD Economic Outlook emphasises the importance of proactive risk management, strategic diversification, and digital transformation in navigating this complex landscape.
For Chandna, Southeast Asia is emerging as a leader in digital transformation and supply chain innovation. He sees that the region's supply chain leaders are investing in next-generation trends and technologies to fortify resilience and efficiency further.
He observed that digital transformation has evolved from pilot phases to strategic imperatives, with companies implementing initiatives such as digital control towers to gain end-to-end visibility of their supply chains. This provides real-time visibility, allowing issues to surface quickly for faster decision-making.
He suggests the next step involves leveraging artificial intelligence and machine learning for forecasting, demand planning and scenario simulation. "This helps to reduce stockouts, overstocks and better scenario planning," he posits.
The final step he suggests is for leaders to: "explore the automation of core operations, such as using robotic process automation in procurement, order processing and Internet of Things-based robotics in warehouse operations for increased efficiency."
As Asia's C-suite unites in its War Room strategy, the focus is clear: fortifying supply chains is not just about mitigating risk—it's about securing long-term competitiveness.
"Only those companies that can build agility, embed sustainability, and harness digital capabilities across their supply chain will thrive in this new era of volatility," concluded Chandna.
