Singapore will have to build resilience in its supply chains and workforce to move beyond the current crisis, said Monetary Authority of Singapore (MAS) managing director Ravi Menon yesterday.
In his keynote address at the Singapore Maritime Lecture webinar, held by the Maritime and Port Authority of Singapore, he said the Covid-19 pandemic has shown the world the importance of resilience.
"Resilience is not just about being strong, it is not even about staying on your feet all the time. Resilience is about getting back up again even after being knocked down... and to keep moving forward," he said, noting that the sharp contraction in global trade volumes has impacted the maritime industry.
He debunked the idea that onshoring and retreat from global value chains will result in resilient supply chains. "With the border restrictions in the wake of Covid-19, there has indeed been some onshoring of supply chains to secure essential goods and services. But it is not practical for most activities to be onshored and it will be costly and inefficient to do so."
He said the more robust supply chains are usually the more diversified ones, backed by multiple sources of raw materials, production locations, warehouse hubs and distribution channels.
While an extensive relocation of production from China in the near term is unlikely, the desire to mitigate China concentration risk will lead to some diversification of production locations in Asia, and the pandemic has added some impetus to this trend.
"Even before Covid-19, firms had started to adopt a 'China plus one' sourcing and production strategy as wage costs rose in China and US-China trade tensions intensified," Mr Menon said, noting that new production locations and value chains have emerged in Vietnam, Taiwan and, to some extent, Malaysia, in this China-plus-one push.
"The wind is blowing towards Asia," he said, crediting the rise of Asia's middle class as the bigger force driving supply chain diversification.
Middle-class consumption patterns are boosting and reshaping intra-Asian trade in goods and services. Supply chains that used to focus on Asian exports to Europe and America are increasingly diversifying to also meet final demand in Asian markets.
Mr Menon said this would mean more regional trade routes and the growing importance of regional ports, and 12 of the top 15 container ports in the world last year were in Asia.
In the wake of the pandemic, there will be a rebalancing from just-in-time to just-in-case operations, but maintaining huge stockpiles will be expensive.
Flexible supply chains that can ramp up or down or quickly switch to other routes or production points will thus have the advantage. Integrated supply chains, with more seamless solutions and end-to-end connectivity across online and offline logistics activities, will give firms greater resilience.
Automation and digital technologies present opportunities to improve efficiency and provide better service across logistics, port operations and shipping, but for business continuity, the maritime industry also needs to explore end-to-end digitalisation that links customers and other stakeholders.
But firms need to understand how technology will affect jobs and how to address skills, jobs and careers in an integrated manner.
In the financial sector, for instance, an MAS-commissioned study by Ernst & Young on the impact on jobs showed that some tasks will be automated and others substituted by data analytics. "The remaining tasks will converge into new job roles that require more judgment and customisation - both of which require new skill sets," Mr Menon said.
Singapore's maritime industry can build a resilient workforce by doing similar granular analysis, "to identify changing tasks and new skills in evolving job roles, map out skill gaps across the industry, and plan appropriate interventions", he added.