Weekly Special - Future-Proofing Your Asia Strategy

Howdy fellow nerds -

This week we’re heading East. Not spiritually. Strategically.

And before you roll your eyes - “Why another Asia deep dive?” - let me tell you:

It’s not to save the corporate world. (Although maybe we do that along the way.)

It’s because I have an visceral need to control outcomes. And control in procurement starts with understanding risk — especially when it’s 8,000 km away, wrapped in red tape, and flooding once a quarter.

For procurement, when we think about Asia there are mainly 2 kinds of sourcing strategies nowadays:

• building for margin

• building to survive.

We’ve all treated the region as a vending machine: money in, product out. Specs ok, delivery on time, under budget, no questions asked.

We had China as anchor, Vietnam as backup and India the back office. Here and there some other bits and pieces.

Remember COVID? Containers stuck in ports. Followed by tarrifs. Then blackout in Vietnam. Or “unexpected subcontracting”, EU asking questions on ESG. Suddenly - reality was completely different than audit reports.

Bottom line, Asia stopped being that simple. This isn’t about ditching sourcing in Asia, it’s about sourcing smarter inside it. Be nerdy, be flexible.

Here’s a few tips and tricks.

When to Localize (and When to Walk Away)

Localization sounds nice in PowerPoints.
But let’s be real: most companies localize because they got burned.

DO localize when:

• Lead times are critical

• You face recurring delivery failures

• Import duties or ESG audits are eroding margin

• There’s regional customer demand (e.g., ASEAN-focused SKUs)

DON’T localize just because it feels trendy.

• Vietnam’s infrastructure is still shaky

• India has bureaucracy baked into breakfast

• Setting up in Indonesia without disaster planning? Good luck

Use scenario-based ROI to compare local production vs. flexible dual sourcing.

China+1 is a tactic.
Regional manufacturing ecosystems (Thailand, Vietnam, Malaysia, India) are strategies.

Balancing CAPEX vs OPEX in New Markets

Expansion sounds exciting until you realize every dollar saved in OPEX is now parked in a warehouse that took 18 months and 42 signatures to build.

Always model CAPEX recovery under worst-case disruption. If you’re still profitable after a 4-week port closure, I think it’s worth it.

Unless you're running a long-term regional strategy (5+ years), you’re probably better off with OPEX-lean setups via contract manufacturers, bonded warehouses, and 3PL providers.

APEX-heavy models (owned factory, in-country assets):

• Long-term control

• High upfront cost

• Brutal to exit

OPEX-lean models (contract mfg, 3PL, consignment stock):

• Faster to deploy

• Easier to switch

• Lower risk in volatile regions

Governance: Local Realities Need Local Rules

Most QBR decks are built for Europe. That’s why they fall flat in Asia.

Don’t rely on APAC dashboards created in Paris. Risk looks different in Manila after a flood.

Our APAC strategy needs dedicated governance with boots-on-ground intel.

What this actually means:

• Local procurement teams with authority - not just mailbox ownership

• QBRs adapted for regional realities, not dragged-and-dropped from London

• Supplier tiering that reflects regional geopolitical and operational risk

• Translation support (yes, seriously - stop assuming English is enough)

And please, if you’re still negotiating payment terms in USD across seven Asian currencies, you’re not managing FX risk—you’re praying.

Country Deep Dive

Not all Asia is the same — and yet most sourcing strategies treat it like a bulk discount aisle.

1. China: Still Dominant, Increasingly Fragile

The Mirage: “China's reliable, mature, and scalable.”
The Reality: Export controls, ESG scandals, and rising costs make it a compliance minefield.

• Key Risk: Overexposure to Taiwan-linked chip supply (TSMC = 90% of advanced chips)

• Watch Out: Sudden policy shifts, rare earth export bans, or Xinjiang-related restrictions

• Do This:

  • Map sub-tier links to Taiwan

  • Add escalation clauses for geopolitical events

  • Get real with ESG — not just the polished audit reports

2. Vietnam: Scaling Fast, Cracking Under Pressure

The Mirage: “It’s the perfect China+1 solution.”
The Reality: Ports are congested, power is unstable, and everyone is already there.

• Key Risk: Delivery failures due to overloaded logistics & utilities

• Watch Out: Apparel, footwear, and electronics face high disruption risk

• Do This:

  • Build inventory buffers

  • Run physical site audits (not Zoom factory tours)

  • Pre-qualify backup vendors in-country or nearshore

3. India: The IT & API Giant with a Bureaucracy Problem

The Mirage: “It’s easier than China.”
The Reality: Regulatory opacity, tax hell, and massive dependencies on Chinese inputs.

• Key Risk: 70% of API inputs still sourced from China

• Watch Out: Compliance lapses, plant changes with zero notice

• Do This:

  • Strengthen SLAs with regulatory transparency clauses

  • Demand biannual site updates

  • Track batch origin for APIs — not just batch numbers

4. Philippines: Growing Fast, Subcontracting Quietly

The Mirage: “It’s low-cost and well-governed.”
The Reality: Disasters are common, and Tier-1s often outsource to invisible Tier-3s.

• Key Risk: Typhoons, BPO disruption, labor transparency gaps

• Watch Out: “Certified” suppliers subcontracting to non-compliant ones

• Do This:

  • Insist on subcontractor visibility

  • Add climate resilience scoring into ESG audits

  • Use tools like Resilinc to simulate downtime impact

5. Indonesia: Rising Star, Risky Ground

The Mirage: “It’s the next Vietnam.”
The Reality: Climate risk, compliance gaps, and political uncertainty.

• Key Risk: Infrastructure failures, flooding, labor violations

• Watch Out: Food processing and textiles often run on informal labor

• Do This:

  • Use dual audits (internal + 3rd party)

  • Focus on regional disaster recovery planning

  • Secure transport SLAs — especially inland freight

Blind Spot Checklist: What You're Probably Missing

Let’s talk skeletons.

• How many suppliers in Asia run on subcontractors you’ve never heard of?

• How many factories passed your audit because they were “cleaned up” the week before?

• How many of your tier-2s or tier-3s are in regions prone to unrest, flooding, or policy swings?

Risk doesn’t just live in the factory.

You probably don’t have visibility into:

• Subcontractors your Tier-1 quietly uses

• Whether your audit was a real one or a stage play

• What % of your inputs depend on Taiwanese chip supply

• How many SKUs are exposed to rare earth bans

What to do:

• Use Sourcemap, Interos, or Resilinc for sub-tier mapping

• Add ESG metrics + FX exposure to supplier scorecards

• Make risk part of QBR, not a footnote

Bottom Line: We cannot fix a fragile system with forecasting

Every time there's a crisis, someone says, “We need better demand planning.”
Sure. But that’s not your biggest problem.

The real problem? A sourcing model that only works when nothing goes wrong.

Asia isn’t just a cost center—it’s a complex, politically sensitive, rapidly evolving ecosystem.

Treat it like one. Build governance, diversify exposure, and drop the idea that cheapest is best.