Rerouting APAC supply chains for a fractured world

When the Strait of Hormuz effectively closed earlier this year, it triggered the largest oil market shock in recorded history. Supply Chain Insights spoke with global experts to understand how businesses are beginning to plan with global disruption in mind.

According to the World Bank's April 2026 Commodity Markets Outlook, global oil supply fell by more than 10 million barrels per day in March alone, sending Brent crude to its highest monthly rise ever. For supply chain leaders across the Asia Pacific, it was a confirmation that the era of lean, single-path supply chains has passed.

Speaking recently at an economic conference in Sydney, Australian Prime Minister Anthony Albanese said the disruption of the pandemic and the current fuel crisis had exposed the fiction that Australia could run as a just-in-time economy, offshoring manufacturing and narrowing its industrial base on the assumption that supply would always be there.

The shift in strategic priorities is visible right across the client base, though the pace and depth of response varies. Justin Fried, Managing Director APAC at global supply chain consultancy TMX Transform says that across TMX's work in the APAC region, Australian businesses that spent years optimising for cost – holding lean inventory, relying on single overseas suppliers, building linear supply chains from source to shelf – are now focused on resilience, and the geopolitical awareness to sustain it.

"Our supply chain team is also seeing heavy investment in technology to manage volume uncertainty – real-time control towers, automation to counter labour fluctuations, AI for demand projection and inventory positioning."

The response is not uniform. Large corporates are adapting actively, diversifying their supplier base with secondary and tertiary layers and modelling geopolitical risk at board level. Mid-sized businesses are feeling the sharpest pressure – large enough to carry global exposure, but constrained in how quickly they can respond. Smaller businesses remain largely reactive, absorbing shocks rather than restructuring ahead of them. "The willingness to move is there," Justin says. "But supplier switching can take years to execute successfully, and most businesses are still calibrating how far and how fast to go."

Raghav Sibal, Vice President and Managing Director Asia Pacific at Manhattan Associates, sees the same pattern from the technology side. "There has been a very clear shift away from supply chains designed purely around cost efficiency toward networks focused more heavily on resilience, agility and flexibility," he says.

"Geopolitical instability, shipping disruptions and ongoing trade uncertainty have all reinforced the risks of relying too heavily on a single sourcing region." However, Raghav says this is not about abandoning global supply chains. "Most organisations are diversifying suppliers, introducing multi-sourcing strategies and reassessing where inventory sits across their networks. In doing so, they’re reducing over-dependence on any one geography while investing in technologies that provide greater visibility and operational flexibility."

In Asia, where the intent to restructure is clear but commitment remains cautious, Garret Lu, Sales Director Asia at Dematic, sees how businesses are translating regional supply chain strategies into practical operating models. "Clients are actively reducing reliance on any single country or supplier. We're seeing China-plus-one and even China-plus-two strategies, as they expand into Southeast Asia and India," he says. "But organisations are taking a cautious approach, making incremental adjustments and building operational readiness step by step."

The Real Cost of Going Local

A McKinsey Global Institute report published earlier this year found that trade is being reconfigured along geopolitical lines, with ASEAN export volumes growing at more than twice the global average as companies diversify away from single-country sourcing. China, meanwhile, is ramping up intermediate components for final assembly elsewhere, with exports of industrial goods rising 9% last year even as consumer goods exports declined.

Manhattan’s Raghav Sibal says the first thing for businesses to establish is that regionalisation doesn’t have to be a binary choice. "Regionalisation is not an all-or-nothing strategy," he says. "More localised supply chains can reduce exposure to disruption and long lead times, but they also increase inventory duplication, supplier management complexity and labour costs. The organisations navigating this best are maintaining the advantages of global sourcing while selectively diversifying manufacturing and inventory to reduce risk."

When working through the decision-making process with clients, TMX Transform’s Justin Fried says it’s often about being direct about trade-offs. Improved resilience comes with higher local labour, energy and compliance costs. Greater flexibility means reduced scale, and localisation reduces shipping exposure but can tie up working capital, require more inventory, and shift risk from global disruption toward localised vulnerabilities like labour shortages or extreme weather. "Most Australian businesses end up at a hybrid model," Justin says. "Where cost and efficiency matter, or where there's a capability gap, they continue to use offshore suppliers. Where a particular part of the supply chain is business-critical and resilience in that area is worth paying for, they localise selectively."

Dematic’s Garret Lu raises automation and software-enabled execution as a tool to offset the trade-offs of regionalisation rather than simply add to its cost. “Regionalisation introduces higher operating costs, duplicated infrastructure and more nodes to coordinate,” he says. “Automation, supported by software layer, helps to mitigate those trade-offs. It delivers consistent throughput and accuracy across multiple sites, reduces dependency on local labour conditions and enables higher density storage, which helps make up for smaller facility footprints.”

Building for Multiple Futures

Many businesses are wondering how to invest when the policy landscape could look entirely different in twelve months. For Garret, the answer starts with a leadership mindset shift. “The approach has moved from optimising for a single outcome to building optionality and scalability into supply chain decisions,” he says. “We encourage clients to run what-if analyses across different geopolitical and demand situations so that decisions are more robust. The goal is not to predict the future, but to design a system ready for it.”

In practice, that means phasing investments, working with trusted 3PL partners to avoid overcommitment, and prioritising proven, software-enabled and scalable solutions over untested technology. Clients that are moving forward with automation, Garret notes, are increasingly looking to standardise as a repeatable regional model across different countries as their networks expand.

Raghav agrees and says the answer lies in building adaptability into technology platforms, including agentic AI integration. "Businesses are placing greater value on adaptability when making long-term supply chain investments. The focus is becoming less about forecasting every future outcome and more about building agility into the supply chain itself," he says.

Businesses are moving toward unified, cloud-native platforms that connect inventory, warehousing, transportation and fulfilment more seamlessly, and investing in AI that does more than generate dashboards. "Agentic AI is beginning to take a more active role in execution," Raghav explains. "It can analyse operational data, identify issues and, within predefined parameters, carry out routine tasks autonomously – enabling organisations to respond to disruptions and shifting demand without placing the burden entirely on operational teams."

Justin says investment decisions need to work across multiple policy outcomes. "The goal is to make moves that create value regardless of whether conditions tighten, stabilise or reverse, and to avoid overreacting to current policy incentives like subsidies or tax breaks that may not be there in two years." He’s seeing TMX teams advise clients to shorten payback horizons to three to five years, favour modular and phased investments, and opt for asset-light structures like leasing over ownership where possible. There's a shift away from big-bang investment in a single, highly automated distribution centre toward a network of smaller, more dynamic nodes – warehouses with modular layouts and plug-and-play automation that can be reconfigured as network requirements change.

Premium logistics sites with automation-ready specifications, strong power infrastructure and transport redundancy are in demand, but in many locations power availability is becoming a real bottleneck, with grid connection timelines at new sites stretching well beyond initial projections. "The industrial property market is becoming increasingly divided," Justin notes. "On one side, future-ready sites with the power, data and physical configuration to support modern supply chain operations. On the other, older assets that need significant work or can only serve lighter logistics roles. Clients are having to make deliberate choices about what they want."

Future-Ready Design

There is broad agreement among the experts on the hallmarks of a supply chain built for the current environment, even if the emphasis differs. For Justin and the TMX team, it comes down to five structural shifts:

• Moving from one or two core source countries to multi-region sourcing across China, Asia and domestic suppliers.
• Replacing just-in-time inventory with a segmented strategy that keeps fast-moving goods lean while holding buffers on inputs at risk of disruption.
• Building network redundancy with multiple ports, routes and carriers.
• Deploying real-time control towers and AI-driven forecasting rather than systems that record events after the fact.
• Shifting from annual risk reviews to continuous monitoring of shipping disruptions, supplier health and geopolitical developments.

"The supply chains designed for business as usual are the ones under the most pressure right now," Justin says. "What we're helping clients build instead is something designed assuming instability: agile, redundant, and able to absorb shocks without significant service impact."

Raghav points to integration as the defining characteristic. "Many organisations are still operating with fragmented systems, disconnected data and limited end-to-end visibility," he says. "The businesses performing best today are those combining real-time visibility with execution agility – the ability to act on information quickly through intelligent inventory allocation, order orchestration and fulfilment decision-making."

Garret identifies three attributes that define a future-ready supply chain: digitally connected, operationally flexible and automation-enabled. "It needs real-time visibility and data-driven decision-making, supported by integrated software. It needs built-in redundancy and diversified sourcing. And it needs to integrate automation to reduce reliance on labour and manage volume fluctuations," he says. "There’s still a gap between that and where many supply chains sit today. Many networks are still relatively centralised, labour-intensive, and designed around cost efficiency rather than disruption resilience. The next phase of transformation has to balance efficiency with flexibility and responsiveness, scalability and operational readiness."

This article was originally published in Supply Chain Insights on 8 June 2026.