Businesses in the Asia Pacific are creating parallel and dual supply chains as companies navigate the complexities of increasingly fragmented trade environments, a research by Economist Impact and DP World presented at the World Economic Forum in Davos revealed.
The study “Trade in Transition” revealed that 33% of businesses based in the Asia Pacific (APAC) region are creating parallel supply chains to avoid disruptions caused by geopolitical risks, while 29% are creating dual supply chains to cater for the Chinese and US markets, as companies navigate the complexities of increasingly fragmented trade environments.
The research highlights how businesses in APAC are adopting diversification strategies and digital innovation to maintain supply chain resilience in the face of growing trade tensions particularly between China and the US.
The fifth annual Trade in Transition study surveyed over 3,500 supply chain executives across the world. The global findings, which were launched at the World Economic Forum, reveal that firms are being forced to adapt at speed to rising protectionism and shifting geopolitical alliances, with business continuity and cost management as chief concerns.
The research outlines three main trends in APAC trade: strategic diversification to manage risks and regional pressures, leveraging government intervention and reconfiguration, and technology adoption to counter labour shortages and enhance efficiency.
According to the study, adoption of “China Plus One” strategies and the creation of parallel supply chains have become more prevalent among APAC businesses, spurring the growth of alternative production hubs in other Asian countries such as Thailand and Vietnam. Firms in APAC are also increasing regional integration and establishing dual supply chains to better mitigate geopolitical risks, reduce costs and strengthen oversight.
Supply chain regionalization is further incentivized by the negotiation and implementation of regional preferential trade agreements which result in enhanced cost control, operational efficiency and support for local economies. 38% of APAC business leaders saw increased opportunities in the region with the likes of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) in effect, while 30% enjoyed cost savings given reduced tariffs on exports in member countries. Almost a quarter (23%) of respondents also reported enhanced sourcing within the region, strengthening local supply chains and reducing dependence on markets outside the region.
The research further showed that businesses continue to invest in emerging technologies such as automation and artificial intelligence to address workforce shortages and sustain productivity.
These investments are paying off, with 36% of APAC business leaders reporting significant reductions in trade operation costs, and 28% seeing improvements in resource planning and supply chain efficiency. Governments in the region are also supporting technological transformation, with initiatives such as Japan’s Society 5.0 empowering businesses through digital innovation.
