Smarter connected supply chain driving Hong Kong forward

Digital transformation has affected many industries in Asia Pacific (APAC), and the logistics sector is another one to reap its benefits: the connected supply chain is here and having a major impact. Where are we now, and what can we expect going forward?

APAC has long been a major global hub for the transport and logistics industry, and while that continues to be true, digital technologies are disrupting the traditional and established ways of doing things. Logistics companies throughout APAC are today increasingly reliant on technological innovation to reinvent and improve supply chains, often driven by the need to service ever-growing demands for e-commerce and cross-border trade platforms.

The importance of APAC in logistics

APAC's role in the global supply chain business has always been significant, and it shows no sign of decreasing. APAC's role in global trade is, in fact, forecasted to continue. According to PwC, by the year 2030, 16 of the top 20 bilateral trade routes in the world will include APAC markets and will account for $4.7 trillion in trade value with routes incorporating APAC commanding more than an 80 percent share.

Hong Kong's own role in the supply chain is set to evolve thanks to China's Belt and Road Initiative and Hong Kong's geographical location in the Pearl River Delta (PRD). The PRD is known as "The Factory of the World" and is responsible for a GDP in excess of $1.4 trillion, representing around 12 percent of China's economy. Infrastructure and integration plans for the PRD will have a dramatic, positive effect on the supply chain from which Hong Kong could hugely benefit.

That said, an evolving supply chain can of course mean increasing operational complexities and infrastructure gaps. An increasingly globalized supply chain likewise means shifting market dynamics that must be addressed. I would like to see Hong Kong continue to keep its place as the second largest country in APAC for trading and transporting goods, behind China, but to do that we will need to continue our push towards greater digital adoption to effectively manage these and other issues.

Transforming the supply chain with digital

For some time, we have known that the next logical step forward for supply chain would be to fully embrace digital. Logistics companies in Hong Kong and throughout APAC have recognized this and know that a digitized supply chain will expand on tools they already utilize, like cloud-based systems, data analytics and artificial intelligence (AI) – driving supply chain benefits from these tools is now the top priority for executives.

So, what we are seeing, in my view, is that Hong Kong's logistics industry is becoming increasingly tech-savvy. People have talked about the digital supply chain for several years, and now they are implementing it. Internet of Things (IOT) tools and AI solutions are helping companies make their supply chains more efficient, and the scope for machines and other digital tools to offer predictive, pre-emptive solutions is a powerful ally for logistics companies to have.

What digital technologies are impacting supply chain?

IoT and AI are proving central to companies digitizing supply chains in Hong Kong and throughout the rest of APAC. Being able to predict when parts need to be repaired or replaced is a significant advantage, while data analytics tools give companies better and more accurate inventory management than ever before.

Further to these tools, other digital solutions are delivering benefits, such as next-generation robotics, automated vehicles (AVs) (warehouses already have autonomous packing and unpacking forklifts deployed), blockchain, IoT sensors and more, and we can see Hong Kong being committed to staying at the cutting edge of supply chain digital technologies.

According to IDC, digital solutions will see a marked increase in use throughout APAC over the three years from 2016 to 2019: asset tracking systems (an IoT tool) by 10 percent, wearables (also IoT) by 16 percent, autonomous vehicles (AI) by 16 percent and supply chain analytics by 14 percent. Furthermore, according to DHL, over 75 percent of businesses recognize the potential cost reduction benefits of digital tools and their importance in giving them a supply chain for the modern era.

Digitally-driven outcomes and a supply chain for the future

Logistics companies in Hong Kong now need to focus on digitizing every aspect of the supply chain: it will help speed up time to market and generate more data, which in turn powers better decision-making and an enhanced operation overall.

PwC found that 67 percent of businesses now "consider digital supply chain disruptive and important" and that 40 percent of APAC companies have already deployed technologies like collaboration tools and supply chain analytics. Digitization can help Hong Kong logistics companies drive a reduction of 3.2 percent in annual costs combined with a 2.7 percent increase in annual revenues.

This is achieved by using digital to shift from the traditional supply chain model to the digitally-integrated model, where supplier, production, distribution and consumer form part of a mutually-beneficial cycle rather than separate, defined stages of a linear process.

Hong Kong must embrace the benefits digital can bring to the supply chain: the trade and logistics industry is the biggest of Hong Kong's four main economic pillars and accounts for roughly a quarter of our GDP. Digital technologies can help us drive forward today and tomorrow.

To read about how Asia Pacific companies can transform their supply chains using the latest digital technologies, download the PwC report: Building Connected Supply Chains.

Edmund Yick
Edmund Yick

Edmund is the General Manager of Orange Business Hong Kong and Taiwan. He is responsible for developing and managing our portfolio of business solutions for multinational enterprises and provides strategic direction to support the growth of Orange Business as the leading integrated communications provider in Hong Kong and Taiwan. Edmund likes having a whisky or two during his down time to unwind when he is not driving.