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Risk in the East: Procurement Blindspots in Asia
Cheap, fast, and totally opaque: The real price of sourcing in Asia when risk goes unmeasured
Ana Zvijinschi
July 09, 2025
The Illusion of Predictability
For years, procurement teams saw Asia as a simple, reliable sourcing engine. Send the order, wait two weeks, and goods would arrive — fast, cheap, and with little hassle. China handled manufacturing, Vietnam was the backup, and India took care of services. As for risks? Those were assumed to exist elsewhere.
But that belief is outdated.
The pandemic broke the just-in-time model. Since then, tensions between countries, natural disasters, tougher ESG rules, and export bans have forced a major rethink of how sourcing from Asia works.
Yet many procurement teams still haven’t caught up to this new reality.
Then vs. Now: What Changed
Then | Now |
|---|---|
Stable low-cost labor + consistent production | China+1 sourcing diversification = fragmented ecosystems |
Predictable trade lanes, low logistics volatility | ESG regulations (EU CSDDD, Germany’s Lieferkettengesetz) add sub-tier exposure |
Limited global scrutiny of labor or environmental impact | Supply-side nationalism (export controls, license requirements) |
Tier-1-focused vetting; minimal sub-tier oversight | Increased supplier silence, delays, and unwillingness to share risk data |
Who's Hurting the Most: Industry Fallout
Industry | Key Disruptions |
Electronics & Semiconductors | - Malaysian and Taiwanese disruptions in chip production cascaded across auto and telecom sectors.- U.S. sanctions reshaped the semiconductor trade balance and vendor lists. |
Pharma & Chemicals | - India’s API reliance on China exposed EU/US vulnerability post-COVID.- Stricter EU supply chain rules now require pharma companies to audit upstream manufacturing. |
Retail & Apparel | - Bangladesh, Vietnam, and Cambodia became ethical risk hotspots.- Social audits now tied to ESG-linked financing and insurance. |
Industrial Manufacturing | - Just-in-time is no longer viable.- Shift toward dual sourcing and local buffer inventory. |
Deep Dive: Regional Hot Zones & Red Flags
Context: Why EU & US Should Care
The EU and US remain Asia's largest trade partners — with the EU importing over €500 billion in goods from China alone in 2023, and the US sourcing over $2 trillion from Asian markets broadly. What happens in a factory in Guangdong or a port in Ho Chi Minh ripples directly into automotive, pharma, retail, and tech value chains across Berlin, Boston, and Brussels. Each country's risk profile is no longer local — it’s a mirror reflecting Western operational fragility.
2024 Snapshot: Asian Imports to EU and US
Note: Charts show 2024 import value in billions for China, Vietnam, India, Indonesia, and the Philippines. Data based on estimated trade statistics.
China
What | How |
Then | World factory with full-stack production capabilities |
Now | - U.S.-China tensions impacting tech and telecom (Huawei, SMIC)- Export restrictions on gallium, rare earths, and AI chips- Forced labor scrutiny (e.g., Xinjiang cotton) |
Procurement Watchpoints | - Supplier ownership transparency (state-linked firms)- License/export control alerts- Hidden ESG liabilities in inland provinces |
EU/US Impact | - Tech export controls impact chip supply chains, especially for automotive and defense sectors- Xinjiang-related bans affect apparel and solar imports into EU markets |
Vietnam
What | How |
Then | Rising China alternative; low cost, high enthusiasm |
Now | - Infrastructure strains (ports, power outages)- Skilled labor shortages in high-growth zones |
Procurement Watchpoints | - Verify local subcontractors (common in apparel and furniture)- Reassess real capacity vs. promised scale- Align lead times with infrastructure realities |
EU/US Impact | - Increased reliance for electronics and footwear makes Vietnam a bottleneck- Power outages can delay delivery to big-box retailers and electronics distributors in the West |
India
What | How |
Then | Global hub for services, pharma, and select manufacturing |
Now | - Bureaucratic red tape persists (especially for new factories)- Local content rules and tax unpredictability |
Procurement Watchpoints | - Monitor compliance with new drug and API rules- Establish escalation paths for slow-moving suppliers- Align SLAs with regional festival/downtime periods |
EU/US Impact | - APIs and generic drugs from India feed into EU/US pharma; any disruption = direct risk to health systems- Telecom service support centers face challenges from tax and labor law unpredictability |
Indonesia & Philippines
What | How |
Then | Supplementary sourcing locations for retail, food, and BPO |
Now | - Environmental risks (flooding, typhoons) + subpar ESG compliance |
Procurement Watchpoints | - Validate working conditions and waste disposal compliance- Build disaster-response clauses into contracts- Maintain visibility on informal subcontracting (especially in textiles) |
EU/US Impact | - Philippines’ BPO sector critical to Western customer support- ESG violations increasingly trigger import bans or fines for EU fashion brands sourcing from Indonesia |
What Procurement Needs to Watch (Tactically)
Tactical Area | Action Steps |
Sub-tier Mapping by Region | - Use tools like Sourcemap, Interos, or in-region auditors- Track logistics dependencies by geography |
Re-score Supplier Risk | - Integrate geopolitical, ESG, and disaster-prone metrics- Assign region-specific weights |
Revamp Scorecards | - China: Add export license compliance, SOE flagging- Vietnam: Real vs. claimed capacity scoring- India: Regulatory agility, dispute handling metrics- ASEAN: ESG depth scoring, natural disaster readiness |
Contract Clauses That Now Matter | - Business continuity and second-source readiness- ESG audit rights beyond Tier 1- Escalation timelines with local calendar alignment |
Board-Ready Risk Snapshots | - Monthly regional dashboards- Scenario planning templates (e.g., China-Taiwan flare-up) |
Final Word: You Can't See What You Don't Measure
Asia isn't broken. But the procurement lens used to manage it? Definitely is.
If you're still treating supplier risk as a spreadsheet add-on instead of a category KPI, you're not just late. You're exposed.
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Until next time,
Zvi,
ProcureNerds