New Strategic Initiatives for Your Asia Supply Chain

All right, we're going to get started. So again, a big welcome to all of you for this new webinar organized by the Global Supply Chain Council and BCI. The topic of this webinar today is a new strategic initiative for your Asia supply chain footprint. So I just want to, you know, again, welcome all of you joining us from different parts of Asia. We have quite a number of people attending, and I just want, before we get started with the presentation, just to remind you on a few things for you to make use of this platform. The first thing is you can, using the chat box located on the right side of the screen, you can introduce yourself if you want, tell us who you are, what you do, where you are. You can also, if you have any questions during the presentations or during the panel discussion, make use of the Q&A button, which is located at the bottom of your screen. So please ask questions at any time, and again, we will answer all those questions at the very end, you know, together with panelists and the speakers. Also, if you're wondering whether you will get a recording, yes, you will. We are recording this session, and we will be then sharing a link for you to rewatch if you want within 24 hours. In our thank you email, you will have a link, and you can, you know, rewatch the session session at any time. Also, if you are interested to get a copy of this presentation, a copy in PDF format will be shared to you as well, you know, in one day after the event. And also towards the very end of the webinar, when you are finishing it or when you're leaving us, you will be asked to give us some feedback on the webinar. So don't hesitate to give us— tell us, well, you know, how did you like it and give us also some ideas for improvement for the next one. So without further ado, I'd like to first bring on Luc Kremers from BCI to start presenting. And again, he will be joined by Peter de Wit also as well for this presentation. So go ahead, welcome Luc.

Yeah, thanks Max. And on behalf of BCI, a very warm welcome to all of you joining this webinar here with us today. My name is Luc Kremers. I'm the VP APAC for BCI. I have 20 years experience in supply chain and logistics. I've always been based in this region, worked with many industries, I've been working from Shanghai, I've been based in Hong Kong, and currently I'm based in Singapore where we have our regional office for APAC. Joining me today will be indeed Pieter de Wit, partner with BCI. He has 20 years plus experience in supply chain logistics in various P&L leadership roles and operational roles. He's also worked with a number of industries and spent most of his career in APAC, being based also in Shanghai 5 years, Hong Kong 5 years, and Singapore 5 years. I think we have a great program for you here today. We will start start with a BCI presentation first, just to give you a few pointers, a few insights in how can you navigate these very turbulent times we're having these days here in Asia. Then we'll have 2 fantastic panelists from Bridgestone and Seekwork joining us and sharing with us their expertise and insights in doing the business. And we will end indeed with an open Q&A where you can ask all your questions. So the core program is about an hour for those of you who are very busy in your schedule, but all of us, the panelists, and we from BCI will stay on for the next session as well. So I do encourage you to stay on. You can continue to ask questions and we will answer them as good and bad as we can, of course. Let's start with a very brief introduction into BCI itself for those of you who don't know us perhaps yet. So BCI is a global supply chain consulting and implementation firm. We were founded in the Netherlands in '85. We've grown since then over time to cover a worldwide scope. We have offices in Asia, in Shanghai and Singapore. We have We have offices in Europe, we have offices in the US, so we can support you on your global projects. As you can see from the scope of services we provide, we are focused pretty much on supply chain. So that covers manufacturing footprints, how to optimize them, where to put your factories. It includes also distribution network design, similarly where to put your DCs. If that leads to perhaps a need for a new location, we can help you search for that. So location advice, site selection is things we do. We link that also, of course, to the business strategy. How should business strategy drive your supply chain? We do things like outsourcing. So who are the right 3PLs for you in this region? Who can you work with? How can you select them? And finally, we're not just consultants in the sense we give you a nice report, but we also are very hands-on, pragmatic, involved in many cases with the implementation projects really of our clients to make sure that the benefits we have identified also get really implemented together with your team. We're pleased to say that for a number of years in a row now, we have been selected by Forbes also to be one of the best management firms in the Americas. If you then look at some of the industries we work with, yeah, we work pretty much across industry. You see here the various industries we have clients with. You see the clients can be large organizations, but we also work with smaller and medium-sized companies with quite a wide spectrum of firms that we can support, obviously. Let's delve into the presentation for today. Let's start straight away with the 5 key takeaways that we want you to remember and get from this presentation here today. Hopefully they can help you in managing and in further improving the supply chains that you, that you have right now. 2 areas we're covering: China and Southeast Asia, the key focus of today. For China, 2 topics basically. First of all, it's a large market, is the leading market in terms of e-commerce. Consumers are very demanding. How do you organize yourself for that? We hope to give you some tips and ideas on that topic. Related or similarly, in China right now there are challenges. There is unfortunately quite a lockdown ongoing right now. There's various disruptions. So how does that impact you. And I'm sure you have all heard about resilience. We hope to give you some further insights on how can you make your supply chain more robust and resilient to deal with that. Then for Southeast Asia, there we see a slightly better environment, less having trade tensions in that sense, so still very open for foreign direct environments, foreign direct investment. A lot of companies right now investing in plants and growing their footprint in that part of the world. But we're also seeing cost pressures there. Less labor available, land costs going up. So how do you deal with such situation? And that's some topics we want to discuss. In Southeast Asia, e-commerce is also very important, is also growing, is also still quite challenging. It's a more fragmented market. We see different maturities in the markets, the way the consumers buy, the partners to work with. You have many platforms that you need to deal with, various parcel courier companies out there with their own challenges. So similarly, let's see how we can give you some key takeaways on how deal with that. And then finally, if those first 4 topics are perhaps more strategic in nature, of course you still need to run the day-to-day operations of your supply chain as well. So how about what is the right operating model to run the supply chain in these regions and how can we support you on those things? So let's start first then with China, the first topic. As we, as I think most of you are aware, of course it's a huge country. It's leading in terms of e-commerce. The share of the business is around already 25% and only growing. If you were to go pre-COVID to the malls, you would see them getting very quiet. People are buying things online these days and even more so now, of course, in the current environment. We also see that consumers are quite demanding and it's possible also because they get that service level. They, I would say in tier 1 cities, they expect for most categories these days same-day deliveries. Whether that's even really necessary or not, because for some products you may wonder, do you really need to get that the same day? But And the other trend we see is that even for your specific product category, let's say cosmetics, you don't need to order and get that today. It's not super urgent. But what we see then is when you have platforms like a Tmall and a JD.com offering such service levels for other product categories, clients get kind of almost, you can say, expecting this. I don't want to say spoiled, but they expect that more or less now for all product categories basically in the market. And that's just tier 1 cities. And it also very quickly cascades down to the other cities, tier 2, tier 3, tier 4, etc., in the China market. What we see companies then having as a supply chain setup, most of them still you can call the classic setup, starting off a while ago, a long time ago in Shanghai in the center of the country, having grown then of course with the RDC typically in the north and in the south, and trying then to cover this huge market from 3 locations. And that's of course the question I guess we need to ask ourselves, is that really sufficient these days to be successful in the e-commerce market in China? What we then see, having worked, for example, with quite a large beauty products organization, and they set themselves as an ambition for the next 5 years out, because that's what you do then. You don't look just for this year's trends when you design yourself a network in China. You should look for the mid to long-term future. So let's say in the next 5 years, they wanted to have an 80% same-day delivery service levels in major tier 1 and 2 cities. And when that's your ambition, then you quickly start talking about basically putting an RDC near or close close to all those tier 1 and 2 cities in China, you're easily talking then an investment of 15 to 20 RDCs that will be then required. Then you're talking, of course, also omnichannel. You would have B2C through those platforms, JD, Tmall, to go to consumers. You see a lot of large companies now also getting active in D2C, so directly shipping to consumers from their own fulfillment centers. And you would still have quite a fair large segment of the market, B2B, working with distributors, mainly for your tier 3 and tier 4 cities. But overall, that becomes quite a complex network, obviously. So it also becomes a matter of how do you run that. Typically, you would see that a mix of in-house sites and outsourced to partners. And I guess the good news is if you can handle this China speed, if you can handle this kind of complexity in the e-commerce network, I think you set yourself up for being very successful also in other parts of the world. Because the trends you see in China will then help you also later on in other parts of the world to manage How to go about that then? So yeah, we do quite some of these kind of projects with our clients. I think it's important to have a proven framework. So we then have various design principles we always use then to come up and guide our clients in setting up such a network. I think one of the key things to look for then is, of course, first of all, the service level. And I mentioned it, what kind of service level do you set yourself as a target for the coming years? I think that's a very vital first starting point that more or less then also drives how you set up the rest of your network. But some other elements there to really take care of is think of building up at least one facility in-house that you make a very strong center of this whole network where you can invest, where you can grow capabilities, where you can invest in automation. And perhaps in the other spokes of the network, the other hubs, there you can be more flexible and work with outsourced parties, but have a strong core. I think that's a great or a key element of setting up such networks. The other thing maybe to highlight then is also run lots of scenarios, especially Now, given the volatility, given the potential growth scenarios you see, so that you can find that right trade-off between having the right service level, also the investment required versus the efficiencies you then want to have in such a network, that it then makes sense for you in your company, in your business case in this part of the market. That's on the first one, e-commerce. The second one related to China is related to resilience and the disruptions we unfortunately still see. I guess end of the year, a lot of us were expecting expecting maybe to get into more quiet periods, gradually going back to normal perhaps. But yeah, as of beginning of this year, obviously we've seen again some major disruptions being the Russia invasion of Ukraine and also in APEC specifically, of course, currently while we're speaking, the lockdowns in Shanghai that have a major impact, of course, on the vessels piling up and will have a major impact going forwards. And that's maybe one thing, Till, to highlight is that maybe in the past we saw a disruption and then a period where you could Right now, I think we're really in an environment where you see disruption upon disruption. So how do you deal with that as an organization? And I'm sure all of you are aware how important then, of course, is to be resilient. So in BCI, we have also a framework for that that we call the BCI Resilience Wheel. The first part in red on the outside is really about the risk, to make sure you cover all your risks, that you are aware of them in your supply chain. We still sometimes see organizations working in a more classical classic limited risk methodology and don't fully cover the whole spectrum of all the risks that are out there. Our methodology, for example, has about 150 vulnerabilities that you could map out and see whether they are applicable in your footprint, in your supply chain. Then more importantly, how you set yourself up to be more resilient. And so we identified 3 core pillars. The first one being the footprint itself, your infrastructure, your facilities. Where do you set your factories? Where do your DCs, also how you run your supply chain. Is it a global supply chain, or as a lot of companies now are evaluating and going for, is it more a regional by regional supply chain? How do you do things like sourcing? Is it still single sourcing, which is very risky, or are you doing dual sourcing? Those kind of decisions, of course, sit on the footprint side of things. We identified technology as a key enabler to become more resilient. There's a lot of great technology out there, and I will highlight one of them. in the next slide that can help you build resilience in the supply chain. The main one being actually right now we clearly see the top one investment for companies in technology space is actually visibility. You must start from getting visibility in your supply chain. The third pillar we identify is actually your organization, which sometimes gets looked at a little bit less in detail, but that's things like the corporate culture, I would say. So are you a more centralized organization where HQ takes the big decisions and is maybe a bit more risk-averse and maybe has a slower decision-making process, or are you more decentralized and you enable and power, give power, let's say, to the teams in the region who are close to the business and see those disruptions on a day-to-day basis and then make the right decisions to react to that and put mitigation in place. So that's another element, another pillar to look at clearly. And when you talk about resilience in your supply chain, I'll show you then a certain case study, some pragmatic example. I mentioned visibility, I think, is number one in most companies or organizations, right now when it comes to the technology investments. So here we see a company, Hyster-Yale, that invested in a control tower. It's an American organization producing material handling equipment. Think forklift trucks, think reach stackers for the container yards. They're having about 20 manufacturing sites worldwide. And prior to COVID, they had very poor or very little visibility in their end-to-end supply chain, both the upstream side, suppliers to their factories, and the downstream Then they put an initiative in place. So this was already pre-COVID where they wanted to build a digital platform, create one version of the truth of all the information out there in their extended supply chain. So the vision was clearly to start off with visibility and connectivity, get that first, use it then to build insights in what's going on and how to react to that. And from there on was then to grow further into more analytics or predictive analytics, and even in the end considering things like automation and decision-making. And that is something we have seen seen a lot is that sometimes the initiative has been defined a few years ago, but then during the COVID period where the needs became much more urgent, additional investment was then put into such initiatives and it was sped up so that the results were coming earlier than perhaps the original timeline would have indicated. And that's the same that this organization did that. So it implemented a control tower solution from Jagger and from FourKites to give them first visibility in the upstream supply chain, suppliers to factories. And that And that yielded then already throughout the last few years some benefits. So one example clearly was during the Suez Canal last year when the Evergreen vessel got stuck. They could really pinpoint not only the exact containers that were stuck on that vessel, but even which specific parts were inside those containers. So that enabled them then to adjust their production plan and then still make sure that for your number one priority customers, they could still meet the demand. So they were sheltered from such disruption. And then for your tier 2 and perhaps lower priority the customers, there would then be still an impact, but at least you are very much aware of that in advance, and you can communicate clearly with them those upcoming delays and maybe look for some ways together collaboratively to mitigate that. So, that clearly gave them quite some benefits in managing these disruptions as we see them in the supply chain these days. So, that's something on resilience, and in this case, on a technology example of putting a control tower, in example, in place. Peter, over to you for the next 3 points.

Thanks, Luc. So today I'm going to talk a little bit more on the topics in Southeast Asia, where one of the big topics these days is what to do with manufacturing, how to stay competitive. And competitiveness depends on quite a lot of things, but one the more new things that come to play are also trade tensions. So, if I go from, from right and clockwise to the center, then I see that, for instance, the growth is a very big engine in Asia. And you see that Asia is becoming more attractive for all sorts of things. Restrictions are are lifted. Where in the US and Europe, you see that actually the growth is a little bit moderate. And you also see that there are problems on the labor skill set. Where you see in Southeast Asia, quite a lot of things come together. There's a lot of growth. There's a lot of opportunity to work together with China. And you see that also there, the business restrictions are becoming less. And what you also also see, especially on the, on the tension side, on the geopolitical side, is that Southeast Asia is typical a friend of all regions, and for this you see that they have a good future. If we go to the next, then we see on the next slide that especially to stay competitive, there are certain manufacturing strategies that most companies follow. You see that there are 4, where the first is how can I really improve my current manufacturing footprint? Can I automate? Can I innovate? The other one is maybe stay in country, and most people are in China, and maybe I should shift west. There are opportunities to also consider to maybe move out of China and put China Plus One strategy in place, and there you see that Southeast Asia could play a role. And the last is that quite a few companies could also consider to reshore, bring things back to either US or Europe. Typically, the most chosen manufacturing strategy is very much in staying in the region and start multiplying the manufacturing footprint, the China plus one. We see especially based on some study reports of McKinsey that there is a lot of investment, especially in the emerging Asian countries like Indonesia, Thailand, and Vietnam, and that this is typically done by inter-regional investments. So the investments are really coming from Asia as well. And if I want to take an example of a very fast-growing emerging footprinting country, then I think the best one is Vietnam to take as an example, quite a lot of companies have started their— the China Plus One solution. Companies like Nintendo, Foxconn, Samsung, but also sport and apparel companies like Nike and Adidas, and electronic companies like Intel and Sharp. They all have seen that there is a lot to take to go to Vietnam. Vietnam. The only thing that they are very, very careful for is the ecosystem that is there and also the capacity that can be found in terms of labor and space. If we go to the next slide, then you can see that it's not just Vietnam. The ecosystem that needs to be right for companies can really diverse per industry. And we see that specific industries, they make shifts for a China Plus One strategy. Of course, it's driven for quite a bit on lower wages, but on the other side, you see that especially for apparel and footwear, regions like Indonesia and like Vietnam are very attractive. And for electronics, you see also that, for instance, regions like Thailand and Philippines are very competitive and attractive regions. If we go to the next, we can see that BCI actually helps quite a lot of companies with their manufacturing footprint strategy. And when we are considering ideal locations for companies, we actually look at 3 criteria to really measure good locations for. On one, it's the cost, of course, especially labor, space, startups, and maybe some incentives. And we take a scope of 5 years into account. Of course, qualitative aspects like labor availability, the skill set of labor, and also the business climate, and then the other thing that we cannot avoid is also to consider what are risks, so financially, but also maybe politically, or maybe also some natural risks that can really make a location attractive or less attractive. Typically what we do is we plot these into an overview where we can easily identify what is an attractive location based on these 3 aspects. If we go to the next, I would like to talk a little bit more about another aspect which is very, very interesting in and very hot in the Southeast Asian market. The growth in Asia is phenomenal, and you see quite a lot of companies growing double digits, but even on a country scale, you see that most countries, they grow in the next few years either high single digit or low double digits. Obviously, as a company, you need to make sure that you have a commercial strategy that adapts to this and a supply chain strategy that fits. What we see these days is that especially due to the fact that e-commerce is growing so much faster than the traditional channels, you see that there are a lot of changing demand patterns and that has effect on your supply chain. And challenges, what you recognize is that it's very hard to forecast, it's very hard to finance your growth, and you need to really make sure that you have the right governance in play, that you have the right logic for allocating your inventories throughout your channel, and make sure that you overcome any inefficiencies when it comes to performance of labor and space and so forth. Typical topics that we recognize are being addressed is, of course, should I split my traditional B2C or retail business from maybe the e-commerce business, how can I improve my compliance? How can I further standardize? And how can I further also see how I can increase performance? And one of the things that is recognized for improving this is considering to go more cross-border. Obviously, if you have followed the full wheel, then based on these, you can really define also then your next midterm view and really see what needs to be adjusted to come to a very successful next 5 years. For the next slide, you'll see that the considerations that you could take in Southeast Asia to really, really adopt the next 5-year plan is if you have your traditional traditional local-for-local setup, should I introduce maybe a regional DC or should I introduce local fulfillment centers? All of these could really help you on one end to be effective and save cost or to really improve your service. If we go to the next slide, then you see that typical considerations for really making your network an effective one. Look at various scenarios, how you can really reach the market. Should I go direct? Should I make use of cross-docks? Or should I put DCs and fulfillment centers in place? Obviously, this has effect on cost and service level. And once you have figured out what is the best schematic, then look at where to locate your DCs. Should I do it centrally or decentrally? Should I do it in-house or outsourced? Should I make use of my existing DCs or am I outgrowing these and should I look for new locations? We looked at it. What are costs, quality, and risk factors for each location? And what can I consider else? Should I really put the channels together in my network, or should I make separate networks? Should I make a different strategy for fast-moving articles versus slow movers? Should I really see whether I would make differentiations in, in service levels? And can I adopt automation in warehouse and in transport? If we go to the next, you can see the that all these topics, once decided, come to another question, and that is, how should I execute my network? Should I invest in the execution myself, so own operations, or should I really make sure of lifting on others and outsource my logistics, or should I consider a mix? What we typically see in Southeast Asia is that the landscape is still very fragmented. It's improving, everything is harmonizing quick. You see that there are cross-border opportunities, but then you see that not every partner can offer the same service in every country. So is this a reason for operating yourself? We see that sometimes it is. It makes sense if you have significant growth and if you have an idea of really going into investments of automation. If you don't really have a long-term view, if you see that your business is still very scalable and if you see that you have a lot of seasonality, maybe then outsourcing is a good alternative. Look at your partners, look at how you want to interconnect with your systems and then really start defining on what is best for you in the partnership with partners. And then last, you see that a lot of companies, they actually like to have the mix. They realize that they would like to remain having control, so they would like to have their own control tower, like also Luc was talking about the, the high-yield solution. Make sure that the systems are yours and then look for what are warehouses and labor solutions in, in the market. That's it for me for now. If there are questions, happy to answer them by the end of the panel discussion. But now back to you, Patrick.

Hey, thank you so much, you know, for having us here. Good afternoon, audience. My name is Patrick Haaks. Thanks, Luc. Thanks, Peter. Let's switch to the second part of the agenda. So, Luca and Peter shared their 5 key takeaways for the audience to think about strategic initiatives, and I'd like to move on to, you know, the panel discussion to also bring it to a more practical way and views from, you know, practitioners. I'm very happy that we have Eric van Steen and also Tobias Keune of Seekwork here joining us. So Eric, can I ask you to turn off— so turn on your video to see if we can make the technology work and people can see you on the screen as well. But let me first of all introduce you to Eric. So Eric is the VP Supply Chain at Bridgestone, responsible for planning all procurement, direct and indirect warehouse and transport operations. Supporting a $4 billion plus business across more than 12 markets in Asia, has been leading quite some business transformations. Hopefully he can share some insights on how to make that work, Eric. And before Bridgestone, he was working with J&J, he was working in the consulting field as well as Electrolux. So quite a diverse background. So always good to have people with, you know, diverse backgrounds to share ideas. For those of you that don't know Bridgestone, I think that's hard to imagine if you are— if you have a car, you rent a car, if you rent a scooter, et cetera. But Bridgestone is the world's largest tire and rubber company, well known for the tires, close to 100 years of existence. And I think a nice one in terms of Japanese-US culture. So if we have time, we can even talk about the cultural aspect there, Eric. But Eric, welcome to the show. So Peter and Luc spoke a lot about footprint. You know, can you take us on, you know, the Bridgestone footprint in terms of Asia Pacific and, you know, what has been your evolution and your rationale of having such an infrastructure in place?

Thanks, Patrick. Great to be invited for sharing some thoughts and experiences. So the Bridgestone footprint in Asia has been established a long time ago.

Right?

Well before I joined, from the start, from its inception, Bridgestone had an international outlook. So they started to operate in Southeast Asia already back in the '60s. Singapore was one of the sites that they had. In general, the strategy has been to produce sort of local for local and be very close to the customer on the one hand. On the other hand, also to be quite close to the supply base. As you pointed out, Bridgestone is a company that makes tires, sells tires, in addition to some other developments and businesses, but that's still its core. Therefore, rubber supply has always been quite an important part and still is of our production and procurement processes. So being close to market, which is nothing new really, and being close to source have been 2 key drivers. As a result of that, we've had quite a significant footprint across Asia, some of which is still there from its origins. I would look at Indonesia, where we have plants for quite a few decades. Even further back, Thailand, where we have multiple manufacturing plants. But it's also changing because the footprint or the factory that we used to have in Singapore, set up in the '60s, was actually closed down already in the '80s. Similarly, we had a plant in Australia, and that was closed down in 2007 or '08. Together with also the changes in the car manufacturing that we saw in Australia in those days. So that's sort of the driver behind our footprint. One more thing to note, logistics cost. As you know, tires, you end up shipping a lot of air because you can stack them up, but there's a big round space in the middle of the donut and you can't really fill that up. So the value density of the goods that you ship is somewhat lower than you would like it to have it. So that also plays an important role in the decision-making process, particularly in the current ocean freight cost environment.

So you have, Eric, you have a quite decentralized local-for-local setup, if I would summarize that to a certain extent, right? Perhaps—

To a certain extent, correct.

In the mature markets or in the high labor cost markets, you know, where less car manufacturers are, perhaps a little bit less. Well, if you had to kind of put on your crystal ball, if you had to pick your crystal ball, what do you expect, you know, in the next few years? And so will that decentralization continue, or will you balance more, you know, in terms of more like a segmented approach? Approach in terms of your footprint for the future?

I assume you're referring to Bridgestone, right, in terms of our strategy? Yeah. So the segmentation plays a role to a degree but not to a large extent. So to put a manufacturing plant in place, depending on the size, depending on the location, depending on whether you need to purchase the land can be anywhere from $500 million to $1 billion. So, to do that, so that's a significant investment, needless to say. And those prices are obviously slightly different, or prices, those costs are somewhat different, of course, across the globe. But as a broad range, I think that's still a a relevant sort of target number. So the decisions we make have, in terms of footprint, our access to raw material supply, whether it's local or imported, the size of the market that we would operate in, the general attractiveness of that particular market from a production point of view, support you would get from governments, investment attractiveness, etc. And then last but certainly not least, in many ways most important, manufacturing cost, right? So those are, I would say, the key factors that play a role. We have a very comprehensive set of evaluation criteria that we've in fact reviewed a few months ago as we looked at our global in, sorry, manufacturing footprint again, and some decisions were made about investments we will make in various parts of the world. I cannot share that because that's confidential, but we continue to review our manufacturing footprint, but they're really investments for the long term. So you're talking, yeah, something that would last decades beyond its start of its operation.

Sure, thanks, Eric. Another question here for you, Eric, is, you know, Luke shared the resilience aspect and, you know, that resilience is a key driver for many companies. If I ask companies like, hey, you know, do you have a KPI for resilience, it's always hard, right? Because nobody exactly knows what it really means. How do you embed resilience, you know, in the supply chain of Bridgestone, Eric? Can you take us with perhaps one or two examples on how you have effectuated resilience resilience and made it stick in the organization?

Yeah, I would say it's one, well, KPI. It's not really KPI to your point, but one evaluation factor is obviously our ability on the upstream, on the supply side, the raw material supply side, whether we ever get into a position to have to stop manufacturing because because we run out of certain particular materials. That hasn't happened, at least not as long as I've been here. Let me knock on wood there. So, that's one sort of factor or evaluation criteria. On the downstream side, it's obviously to what extent are we able to fulfill our customer demand. Across the, you know, still relatively wide portfolio of SKUs that we carry. In terms of improving our resilience, one of the things that— this goes back to your earlier question around footprint— that Bridgestone has done well for all the reasons that I mentioned, but it pays dividends in the current environment over the last 2 years with COVID COVID causing havoc across the world is that not having one or two single sort of mega plants for entire regions or even globally, but having multiple factories across the region. So last year, or 2 years ago in fact, when COVID first hit, we saw the wave sort of coming across the region, and to some degree we were able one factory sort of backing up another. So that's been in place and part of the strategy for many years. The other thing to consider is indeed on the raw material supply side. Here, the key has been, other than the obvious around sort of good contracts and and sort of the willingness to make the necessary or pay the price that needs to be paid is the focus on partnerships. So, and the suppliers that we work with, a number of them we have had relationships, well, effectively since the start of the company, indeed almost 100 years ago. So, but some of these relationships still today go back 10, 20, 30 years. And that bond is very strong. And that's something that I wasn't aware of when I joined Bridgestone, but that's— it's been very clear that what has been built up over many years has helped us to navigate some of these challenging circumstances. Last thing, if I could just mention, inventory is another another lever to play with, as we all know, both on the raw material side as well as on the finished goods side. Clearly, there's impact on your cash, so you've got to be careful with that. Supplier diversification is another one, but that's proved, or as I learned, proved to be very difficult because any switching component would require a full R&D process in terms of testing the material, running trials in the manufacturing plant, etc. And that is quite a lengthy process. So we do do that in addition to getting products ready to be produced in multiple sites, again, selectively. But those are some of the ways that we, we build resilience over time. But it's not easy. And it's because we laid the foundation in many years ago that we were able to benefit from that in the last couple of years.

Good. If we can switch gears a bit, Eric, so from resilience to the other point I think that Peter was making on e-commerce. So you expect that from a tire company to step in the e-commerce journey, but I know that you have quite some different models in Asia where you are exploring e-commerce. You know, can you take us through one of the key learnings in terms of, you know, one or two example markets Where, you know, what has Bridgestone done as a traditional B2B company in terms of, you know, getting your feet wet basically or kicking the tires on e-commerce? So what worked and what didn't work, Eric?

So yeah, e-commerce in our businesses and within Bridgestone is still relatively small. So we're talking single digits or maybe low double digits. The main markets are China and Australia. Part of the reason that it's still relatively small is because at the end of the day, the tire cannot be delivered well, or can be delivered and will ultimately be delivered perhaps to your home, but you're not going to put it on yourself onto the car. So it's It's not a consumable as it is with apparel or groceries or all the other things that we buy over the web these days. So I think that's played a big factor in how the tire industry is engaging with, excuse me, e-commerce in general. But there is a consumer base out there. Those are on the bell curve. The hardcore internet buyers, and they will buy tires over the internet as well. It's obviously competitive space. It's easy to compare prices and models and brands across a wide range of products. So we continue to invest in it. Different strategies, whereas in China we work with the Alibabas of the world and in in Australia, we have our own sort of capabilities in that space. As the client portfolio also changes, right, with more young new consumers coming on board, we expect also more demand and sales to shift to those platforms.

Thank you, Erik. Yeah, I would like to, you know, thanks for your insights, Erik. I would like to switch gears to bring our next panelist here on the stage. Good morning, Tobias. Tobias is calling in from Cologne, Germany. Germany, and he's the manager of commercial excellence. So I know we have supply chain excellence, but even commercial excellence, that's a great title to have. And Tobias is with Siegwerk, a company that perhaps you might not be familiar with, but, you know, almost in business for 200 years, so even much longer than Bridgestone, and is one of the world's leading companies in making inks for packaging materials as well as, you know, printed magazines, and other kind of aspects. And Tobias is supporting the business in terms of commercial excellence, been with the company for 6 or so years and has also a background in consulting and in project management in various engagements. So thank you for joining us here this morning, Tobias. So it's good to have somebody from the commercial field, you know, in a supply chain event. So it's also good to learn from what can learn from the commercial, and what does really commercial ask us to deliver in terms of our day-to-day practice? So Tobias, perhaps you can start off with painting a picture on, on, on ZEEKR in Asia in terms of your supply chain and some of the key challenges that, that you face at the moment.

Yeah, thank you, thank you, Patrick. Thanks for having me here today. As you already mentioned, we are one of the world leaders in the area areas of inks for packaging applications. So we are quite an integral part of the packaging value chain. If anything goes wrong at our end, it will eventually affect really also the consumer in the supermarket. And this is true for our global business but also for Asia. Talking about our Asia business, our structure, we have separated Asia into 3 sub-regions, meaning Southeast Asia, India including Bangladesh, and Greater China. This represents roughly 20% of our global top line, meaning roughly €250 million. Talking about our supply chain, maybe a bit of background how it works, and I cannot tell you much more because I'm also an amateur in that area. But basically we follow a 2-step production process, which is first the grinding of pigments which we use for our ink, and second we do the blending. So it's pretty simple, and this also determines our manufacturing footprint. So we have in total 4 so-called centers of excellence in Vivadi close to Delhi, in Shanghai, in Bangkok, and Tangerang, which is close to Jakarta. And furthermore, there are, say, smaller setups, around 14 smaller setups, so-called blending centers. So what happens is actually we have the full production process happening in the centers of excellence, starting with the grinding of the pigments, and then we also produce, you can say, intermediate kits, which are then also partially shipped to blending centers where we then actually produce the final product. So this is more or less how it works. And the footprint I have just described, it's also, you could say, a historic legacy. But generally speaking, it still makes sense because we need a high degree of customer proximity. Our customers have quite high expectations in terms of lead times, and a fair share of what we actually sell is made to order, which also means that there is a certain limitation to produce in one location and then ship it somewhere else. But say this pattern also of our blending centers and centers of excellence. It has changed over the years, always depending on where we see the market demand and where actually the— how the markets actually develop.

Okay, good. So you also have a quite, you know, dispersed— can I call it a mix of local-for-local setup in Asia? If you had to look into your crystal ball, I also asked the question to Eric, what are that, you know, will drive potentially, you know, changes in your setup? What could be changes where you said, hey, you know, but if that would be happening or if those principles would change, that would really make us rethink the way we operate and serve our markets?

Yeah, I think the most important driver I already mentioned briefly is clearly where do we see the demand, where we see also clusters of packaging converters, and they eventually follow the consumer demand. So when we look at the big trends for our industry, it's growth of the population, urbanization, and that's where we will actually follow. Plus, of course, there are all these geopolitical developments. Trade barriers that drive our setup. And I think as we've seen recently, this can also change, and that made it very clear to us that we need to stay also quite flexible. Now, say one, I would say beauty compared to other industries, and my supply chain colleagues don't hear it now, but like setting up an ink production is not incredibly complicated. Yeah, it's not compared to, I don't know, semiconductors or something that it's a billion-dollar investment or something. So we are able to change the setup when these, say, parameters I've just described change. Plus, of course, also mentioned by Eric, raw material availability is really a very crucial factor. Not sure whether this will change in the future because there you have, yeah, pigment industry is quite interesting in this regard. The geographical regions where pigments come from are really quite stable because it's a very, very long, yeah, you say history of production patterns that you have globally that drives the pigment industry.

And thanks for that, Tobias. And when I was making the introduction, I was already hinting like, hey, Tobias is coming from the commercial side. So some people in the supply chain call that the dark side.

I think that's—

I'm making a joke here, but if you had to call out, you know, from your lens as a professional, you know, how can the supply chain better serve the needs of the commercial, if you had to kind of, and this can be broad, Tobias, but what are elements that from a commercial lens you would like to see more for supply chain practitioners or the ways that, you know, a supply chain professional engage in their profession? What would be key elements to kind of, you know, share with the audience here?

Yeah, of course, always faster, always in best quality, Yeah, also joking. Yeah, I mean, eventually it's, I think, an optimization task, not a maximization task. So what we expect, or what the commercial side always expects, is that you have very close collaboration to find this optimal point. Yeah, to really figure out what are customer expectations, for example, in terms of lead times. So for example, in the earlier presentation, I like to hear that that the Chinese customers are demanding in terms of lead times. It's the same also in our B2B industry, but then you just have to find a middle ground and say same-day delivery if you have make-to-order production is maybe virtually impossible, and then you have to find a good compromise. I mean, what certainly helps in that discussion And maybe that is something also SDN can contribute, is to have good transparency, have the right metrics in place to monitor what is delivery performance, what is our performance in terms of quality and stability. Yeah, so because there's always, you know, kind of this, say, observed reported service level, and then maybe the service level perceived by the customer and by our salespeople. And yeah, sometimes this is kind of an impossible discussion because one side will say, this is my number, and the other one say, no, I see something completely different. So I think a balanced KPI system that is accepted by operations and the commercial side really helps to to make this a constructive discussion.

Thank you. Hey, just a question to the audience, so drop us questions so we can pick them up either in the next few minutes or post the hour. So, and also, you know, raise your hand if you would like to stay on for the panel with the audio on and the video on, basically to have an open roundtable discussion after the hour. So then Max and Denny can make sure that that your rights are transferred after the hour so we can stay on and have a full conversation. So Tobias, you mentioned lead times, right, as a key driver. I know your business a little bit. You have quite some different models in place in Asia. What has been the driver for, if you compare India versus some other markets where you have a different kind of setup, what can you share with the audience on what worked or what didn't work in that regard?

Yeah, I mean, if you even— if you just look at our company website, you see we have to say the densest network of what we call color matching center, which is one subtype of these blending centers in India. Yeah, so there we have a very dense network, again purely driven by the customer demand. There we have in India for one particular business unit in offset things. We have a rather fragmented customer structure, so we have these roughly 10 distribution centres, local distribution centres, plus even distributors to serve this demand. And this is quite different, say, from the structure where we have in China, say, these industry clusters in the east and south of Shanghai, which we can also serve using 2 hubs.

Okay, but do you see that going to be, you know, the next model for if Seagrid would expand in the future? So the importance of lead time, the portals of local proximity in order to drive business success?

I think it's hard to give a say generic answer to that. There is also the other, say, development, yeah, that we want to look at Asia as a region, yeah, and say if just the regional proximity allows and also trade barriers are not there, then we would also try to sometimes consolidate production, yeah. It really depends the market. And say from a pure efficiency standpoint, sometimes we would also love to consolidate, but then you have, yeah, counter-effects that might prevent us from doing so.

Okay.

But what you described also in your earlier presentation, trying to consolidate also production and simplify it, is clearly also an oil agenda.

Yeah, because my last question to you, and then I think we're gonna hit the hour, and then we can stay on for a little bit broader discussion with people that want to stay on. So people had to drop off, you know, you can drop off for other meetings. You know, you have a quite local-for-local setup in Asia from a manufacturing and from a distribution point of view. So how do you create leverage in terms of balancing that, you know, Cost on one side, you know, service levels, you know, a lot of people talk about resilience, talk about agility, flexibility. How do you, if you all put that into one blending pot, how do you balance that in terms of, you know, having the right setup for Seekwork for success?

I think one key factor is also to look into our product portfolio Yeah, so if we have only very local product portfolios of our customized made-to-order inks, then it's harder to consolidate than if you also have, let's say, a better managed product portfolio. This is key for us and this will also help our customers. And resilience, it's super big topic for us because also our customers ask for that. Yeah, so especially the bigger multinational international accounts, they usually always ask for, say, a backup plan because if something happens like currently in Shanghai, yeah, we are still producing, but you know about the limitations there, then you just need a plan B. And I think that is also, right, let's say, a more recent development in the past 2, 3 years. that our customers in the packaging converting realm, they really ask explicitly their suppliers to be resilient. And that means very specifically to have a backup plan if something goes wrong for our, say, default supply chain.

Good, thanks Tobias. I'm going to ask if Eric can turn his video back on and if Luke and Peter can also turn the videos on so so we can have a little bit like an open kind of Q&A and panel discussion. So again, I think Max is doing the technology to bring other people and give access to that they can also fill in here. So let's see if technology is working. It is working. I want to ask a question to you, Eric, but we were running a little bit out of time, but I want to ask it now to you, but also to Luke and Peter, is a big topic beyond everything what is happening with the pandemic and, you know, volatility in the market is sustainability, right? So how to kind of— can you take us on, you know, your view on how to embed sustainability in the culture and the way, you know, you basically put the right operating model in place?

Yeah, thank you for that question. So sustainability in a way has been part of of our core, I would say, our mission from the start of the business. Obviously not using the word sustainability and not in the way we describe it today, but our mission is to serve society with superior quality. So our founder came up with that and it's been our guiding light since then. Sustainability clearly fits neatly into that. And in fact, with, I would say, our new CEO, but he's been there already for 2 years, we've really pushed that to the heart of our business and the heart of our strategy. Very timely, maybe slightly overdue, you could argue, but I personally, I'm a big proponent of is, and I'm very happy with the strategic direction that Bridgestone has taken over the last 2 years. I think in some areas we're quite advanced, in some areas we have to do some catch-up in relation to other industries and maybe even our own industry, but we're now making very significant strides in relation to how we assess our supply the type of materials that we use in the production process and the material circularity ratio, how we're looking at end-of-life tire and recycling, the partnerships that we have started with a number of players in that market. Obviously CO2 output. I'm involved in a number of activities across the region to look at how we can reduce our footprint and get to the 50% reduction by 2030 that we've committed ourselves to. So a lot of activities in this space, and clearly, to your point, from a sustainable— from a supply chain point of view, there are a lot of implications on that. So we're developing various programs and strategies from efficient warehouses to optimization of transport, working with our 3PL partners as well in that context across a whole range of activities to improve the footprint. So, or to improve the, sorry, the CO2 output. So, and on top of that, if I may just make a quick mention, we've launched on the 1st of March what we call the Bridgestone E8 Commitment. So these are 8 values that basically inform and drive our strategy, our business decision-making, including what we do around sustainability, both in terms of purpose and process. And we're quite excited about this enhancement of our strategy and the enhancement of our communication of our intent and commitments, both internally and externally.

Thanks, Eric.

And then Peter, can you share perhaps from a consulting perspective how that, you know, is being embedded in projects that you are working on? Is that similar to Eric? Is that different in terms of the importance and the way sustainability is effectuated by clients?

Yeah, I have to say, Patrick, that we recognize that probably in Europe and the it's a bigger topic than in Asia, but that Asia is now catching up. So, and what we recognize is that people are asking us to help measure the sustainability, and there we are having now indicators where we are helping our companies with carbon footprint calculations, giving ideas on how to really make it a sustainable future for the next 5 years.

Okay, good. Hey, then the other question I want to ask is, you know, because I think one of the key takeaways, what we've learned from the BCI presentation as well as, you know, mentioning by Eric from Bridgestone and Tobias of Seagull, is having a more dispersed, decentralized footprint in place from a production and distribution point of view. My biggest question to the folks here as a panelist is like, that's great, but what does that mean in terms of from your planning, from your governance, from your enablers' point of view? Luke, you mentioned you need to shift gears in China from 3 facilities at the minimum to 20 any— what does that do in terms of, you know, making sure that you have the right control mechanisms and cadence in there, the governance there, in there to kind of really have embraced that complexity and to manage that properly? Because it doesn't come for free, right? It's not like, you know, turning on the light switch and you have that process in place, right? And so any advice, any key enablers you say, you know, this is really the threshold that companies need to put in place in order to effectively Actually, that's indeed a good point.

And then the first element where I see that is also when you do this kind of studies, these kind of network design studies, it's no longer good enough to do them in isolation, which you tend to see more in the past. I would say you did a network design study and that recommended something and that's it. And then you hop it over to others in the organization and now let's try to implement it. I think that now all, first of all, needs to be much more managed upfront, who should be involved, what stakeholders need to be aware of this project, need to be aware of what kind of decisions are being made, so that they're also much closer then to being able to execute, to implement the findings of such study. And then clearly indeed planning and inventory management and optimization of that process and that function is key. And that's something that sometimes is still a bottleneck. Sometimes you then get worries from the team like, can we really manage this? And that that has an impact on the design decision or the kind of complexity you want to go for or not in your network. And in some cases, that team is then aware of this is what's coming, and then they need to prepare indeed. Yeah, then you're talking the typical general things like the planning process needs to be robust and ready and might need an assessment to see can that be done. And in some cases, it means technology upgrades. So depending on the planning system such company then has already in place or not, it means typically they will need to open it up as well.

Yeah, but what's the clear— what's the key bottleneck typically? If you say, you know, you move away from 1 or 2 facilities to more than 10, what in your view, in your experience, Luc, is what you always kind of hit the— where you always hit the fence in terms of, you know, hey, this is the— these are the 1 or 2 must-dos going forward?

That is hard to say. It's still pretty much company-specific. I would say the bottlenecks of where clients then run into what could be limitations, let's say, of the capabilities they have is company-specific because in many cases it's system-related. In many cases it requires an upgrade of the systems, but I've also seen it in terms of mindset and capability of the team. And then sometimes it requires a leader to step up and say, this is something we will have to do. The other way around, it can't be the case that the fact we can't do it yet is going to be a bottleneck and holding us back from design. finding the best network going forward. So it can be a combination of the people, the process, and the technology systems out there generally.

But let's ask the practitioner here, because Eric, I think you're also running this process, you're running this governance, right, in your 12 markets. What has been key for success in managing a more dispersed footprint from your end, Eric?

One thing that I think the audience wouldn't be familiar with, for us, when I joined, one of the key focus things that I focused on early on was to put in a robust IBP or S&OP process at the regional head office here in Singapore to have visibility of the demand and the supply. Because although we have a lot local for local, local factories like Thailand, Indonesia, Vietnam, they produce for their home market but also for export within the region and in some cases also for Americas, Europe, and Japan. So connecting, having visibility of the demand, the supply, and optimizing that. And then crucially, which wasn't there before, for is not keep that information just in supply chain, but invite sales and marketing to the table. They were a little bit surprised when I asked at the start because that wasn't done until then. But now we have a very, yeah, I would say quite a robust, well-functioning process with all the key steps from demand planning, supply planning, the IRR meeting, the MBR meeting at the with my boss, the APAC CEO, involved as well. So we look at the financial implications of some of the trade-off decisions we made. So I think those are the— that's for me a key factor. Again, wouldn't— would not be a surprise. But yeah, some of these fundamental processes like IBP are critical in making this work.

Thanks, Erik. Question here from my end to Peter. Is you mentioned, you know, some of the operating model choices that companies need to go through. If you look into today's market, so logistics costs are going north, the fragmentation in APAC from a 3PL industry is still out there. You know, the market is pretty much all-time high. What does that mean in terms of brand owners like Bridgestone or Seaguar engaging with a 3PL in terms of managing that relationship? If you want to say, you know, I think I heard Eric said, hey, you need to partner more if you talk about resilience. What, how can you effectuate that on a tactical or operational level ultimately to within a new 3PL or in the way you manage 3PLs in a geography with complexity like APAC?

Yeah, so the development is going very, very quick and you see that basically profiles are changing constantly. If you are working with a partner that is developing in the same way as you are and there is a cultural fit, then there is really an opportunity to start cementing longer partnerships where then all of a sudden you can also talk in investing together. And then you really have opportunities to invest together in automation, to invest together into a new network that can be adopted to the change and really exchange good data to ensure that your network is ready for the next few battles.

Peter, okay, I'm with you there, but you worked on the other side of the table, right? You worked 20 years in the logistics service provider industry. You know, what can brand owners do? What could brand owners consider or should consider if the market is getting more tight, capacities are getting more tight? You know, what are the 3 elements that companies really need to think about when we talk about partnership? Because partnership is a little bit for me too easy. That's a typical consultant word, like, hey, we need to think about partnership. But how can brand owners with you know, what can they do and what does that mean?

So everyone has a different network, but you see that you need to really identify a partner that really fits your network. And once this network is fitting together, you can really start developing to make it denser and to really start exchanging more tactical data and also more supply chain data to really prepare networks. And there you see that people then can really help you also on really keeping the cost under control and ensuring that the service levels Okay, Max, question to you.

Do we have people joining in for audio, or can we turn audio on, or do you want to have questions raised by the Q&A button here? Just want to—

So everybody can actually raise their hand, switch on their microphone, so no problem. Yeah, everybody can do this.

Yes, I would like to encourage us still. I see we have quite some people joining us to really kind of open the floor for questions from the participants. So if you can raise your hand and then ask your question, I think that would be highly appreciated. Don't be shy. You can ask a question. We can always say no, right? That's always a good thing. But no, but please raise your hand, ask the question. I have one question just to kind of, you know, let the audience think a little bit more on, you know, we spoke quite a lot about, you know, the review of the network and the footprint. You know, what are critical success factors in reviewing a footprint? Perhaps, Luke, from your angle, can you take us through, you know, some of the key success factors for companies to consider you know, such a process and make that work at the end of the day? And then we can also ask the same question to Eric and Tobias. But what are critical success factors from a consulting side in order to make sure to robust this process and people can implement?

Yeah, actually, I mentioned it earlier. I think an important step first is before we even do modeling and and those kind of things, because that's the core. So it is what I would call stakeholder alignment. It's really getting inside the organization the same view on what are we trying to achieve and what does the demand side of things that the people in sales and marketing want to achieve, what is their vision on the commercial side of things and how the supply chain should support it and how does supply chain see that. Because too often we see those functions not fully aligned yet and then the risk is that the project is run in some corner, in either corner of which whichever part of the organization has launched it, and then the results don't get fully accepted and realized then later by the organization. I think to me that that's a key first step. That's what I've seen myself also doing more over time these days, a strong stakeholder alignment in the beginning, make sure we're all going in the same direction. We know why we're launching this project, we know what we have as an ambition, and if there's still some difference in opinion, let's try to iron that out as well throughout the project so that we get clear on implementing the findings. of such study. I think the technicalities of running a network design study these days are more or less known. I think to me that's a key element.

Okay, from a practitioner point of view, Eric, can you echo what Luc said? Any other insights on, you know, from a complex organization like Bridgestone, if you would reshape your footprint, you know, and what are key elements that drive drive success at the end of the day.

Yeah, I can only echo what Luke said, really. If I look at our own situation, that's key. One of the complexities that we had to deal with in some ways are still dealing with, if you put a plant in, let's say, Thailand, and you run a P&L that's based on regions, then the investment, where do you, how do you allocate that, right? Some companies have sort of aggregated that into a global P&L. We're still operating on a regional one. So that's with the initial investment, but also going forward. So if you make a budget for the year based on certain export numbers that then turn out to be different than originally expected, therefore your conversion costs being relatively higher per tire. How do you cope? How do you deal with that governance and the sort of the financial implications of that, which, you know, could be quite significant because it will determine the region's profit and therefore could have an impact on people's bonuses all the way through the organization? So that's another aspect of governance. That kind of needs to sort out, well, earlier in the process. So, with the extensions that we are investing in and the sort of the green or brownfield plants that we're considering, we're watching that a little bit more closely to make sure that there's better global alignment on that aspect as well, in addition to the demand side and why we're sort of initiating this initiative in the first place.

Okay. Any feedback from your angle, Tobias, on, you know, from a business side, you know, in order to drive this for success?

Really not my core area of expertise, I have to admit. But I think that what is true for any of such projects, be it in the commercial area or SCM, you also really need to get the baseline right. Whatever you want to optimize, make sure that that model captures all the key dimensions that drives the business. Even look, if you say it's just a technicality, but still, that is— I think the first weeks of such a project are really crucial. I have seen it not just in the S/4HANA same realm, but also in, I would say, commercial projects.

My question— that's a good point, Tobias. My question to Luc would be, if you look into today's volatile market, right? So everything is, you know, changing so rapidly, right? Energy prices, inflation, labor availability, you know, capacities, you know, demand fluctuations, mix fluctuations. So how do you make sure that you have all of those ingredients at some point in time filtered in, you know, the technicality and say, you know, hey, but what is the best for company A or company B?

Yeah, that's a good question. There's a few elements there. So some of these macro trends, like disruptions, like the geopolitical situation, the various elements, we typically take as a first phase as well to boil that out, to make that clear. Again, because there's different expectations and different opinions even still to certain within the organization. So more fact-driven, that's where we can enhance that as well with some key insights, data on what are those trends. There's then a big input into the modeling, into the mapping of the network and modeling it. The other element I think to highlight is that network design is not only a quantitative exercise. Some things that you can quantify, of course, costs and service levels and lead times and entries you would, but there's still the softer, the qualitative elements as well, which then also sits in the methodology you should use, which is what you saw earlier, the quality of the business environment and the risk element there. That ultimately you get an output of both quantifiable factors, mostly cost and service level driven, but also qualitative factors. And that then becomes a total picture of where you want to go, what are the options you have, what are the pros and cons of the various scenarios that you've analyzed, and that should then give a good insight, let's say, in the way forward.

Hey, we have a question here that I want to address here. It's a question from Tony. It's about China. Let's say the decrease of China as a manufacturing powerhouse and the increase of Vietnam as the next, I would say, China, right, as a manufacturing hub for the region. What are, you know, the panelists' view on this, knowing also that Vietnam from a size, from a people point of view, you know, it's not China, right? So what is the expectation? What is the outlook of this development in the next 5 years? So are we expecting a further surge? Are we expecting, you know, that Vietnam basically will even disperse to other geographies? Perhaps from a BCI point of view, Luc, can you comment on this?

I could. I hope also Eric and Tobias can share their views. Views is always interesting to hear. Now, I think it's— right now, Vietnam definitely is doing well. We can say there's lots of interest, but also, yeah, from some of the studies we have done, some overheating is probably too much to call it, but some costs are going up rapidly. Land is scarce already in certain provinces, so also we're seeing some of the limits perhaps. I think it's still an industry-by-industry case as well. The other thing you need to look at not just your plant in Vietnam, does it make sense, but about the ecosystem. Is there an ecosystem of suppliers? And that's where China is still very strong. So even your factory costs may be slightly higher or disadvantaged in a certain extent of being in China, but if your ecosystem is there of suppliers, it might still overall big picture make sense. So don't forget, again, is to analyze it in a wider aspect and not just your facility, but how does it fit in your whole supply chain?

I think.

Eric, any comments from your end? I saw you nodding. So what are considerations if you say, you know, Vietnam, what are other, you know, other geographies in Asia?

Well, I was nodding because I am in full alignment with what Luc said. That was going to be my response as well. In terms of, you know, it's industry-specific to some degree, but that ecosystem that China's built up over, you know, a few decades, that is hard to beat, right? And there's a lot of, quite a bit of talk about, you know, the globalization and the reversal of that. I think as people have commented, and I would tend to agree with that, there's maybe a slowdown of that, but I don't see a reversal happening in the short Clearly, China, the position China is taking at the moment and its place sort of in the global community and world order, has caused some changes, some reflections, but they have a formidable power in terms of their agility, the quality of, and the variety of what can be made there. So I don't see it moving away, but I think it's an and model, right? As you also said, Patrick, you know, you got the China plus Vietnam has been up and coming for quite some years now and was accelerated. We actually were in Vietnam already already quite some time ago. We opened up a manufacturing plant there in 2006. Not the same history like we had in Thailand, for example, but still, that's, that's already 15 years. We've been very successful there. Fantastic quality. We've had multiple awards every year from, from Toyota and other automotive manufacturers that we, that we supply from there. So we're quite happy with, with our presence there. both from a commercial as well as from a manufacturing point of view.

Good, thanks. Hey, another question here that I want to throw into the mix here to the panel is from Asim about Southeast Asia and that the fact that Southeast Asia has a huge potential, but it's a fragmented market. And the question here to the panelists is, and I'm going to read this, condense it a bit, how do you recognize and address challenges in Southeast Asia, then leverage to build a one-regional supply chain strategy, especially for small and medium-sized enterprises. So it's about Southeast Asia fragmentation in terms of, you know, diversity in supply chain infrastructure, supplier raw material supply base, different customer profiles, distribution channels. If you throw that into a pot, you know, how do you basically build a one regional supply chain for small and medium-sized enterprises? So it's an interesting question. I would like to get some perspective on this. Peter, you were talking about this in your presentation, Southeast here, perhaps you can kick off in giving your insights on, you know, what's the best way to throw all of those components into the mix and develop a supply chain strategy for small and medium-sized companies?

Yeah, so there is a lot more possible these days because you see that especially for RCEP, a lot of trade is going up where you see also borders are becoming more flexible. So you can centralize a little bit more, but especially if you are small and medium-sized, you cannot do this still all together, all by yourself. So you, you really need to look for partners, and there you see that especially the regional logistics partners with a network in each individual country with operations that offer shared solutions are opportunities to go for. And then you really need to have discussions on, can I link my business entirely with the logistics of one more regional player.

Okay, that's one side of the coin. Anybody want to chip in here, Eric or Tobias?

Yeah, go ahead.

Yeah, are we making it too complex? That would be my counter-question. Like, are we not making it too complex?

Yeah, well, what I can say, Patrick, that of course You can also still have a consideration that a few things need to be done with a distributor too, right? So just choose your battles.

Yeah, it's not an easy question to answer because it depends on the makeup of your— the type of product, the type of industry, what products, what markets you target. So yeah, as I said, if I just look at it through the Bridgestone lens, we've established a network of plants that supply both locally and regionally. Some of our markets, Malaysia, Singapore, Korea, we do not actually have plants, so they're completely dependent on the other Yeah, it's, it's again not, not rocket science, I would say, in terms of being very clear about what customer segments you're targeting, what that means for your product portfolio, and keep that as rationalized as you can. And then, yeah, build up the network with the analytics that Luc was already referring to, but very closely aligned to that commercial strategy. and then back into your, whatever that manufacturing footprint is that you have, which can be combination of in-house and outsourced as well. So, yeah, how you then fine-tune that and keep sort of modifying to deal with the disruptions that we see or the fluctuations on the demand side, yeah, that is then the art of the supply chain manager that comes into play and the quality of team, the technology, the visibility that was mentioned earlier. So yeah, then you sort of orchestrate all of that. But yeah, none of that is built up overnight. And clearly the demands on the supply chain have changed a lot, right? Risk was always a topic, but now it's really at the forefront, right? So yeah, that's changing and that's why it's still a very interesting place to operate in perhaps more now than ever before, right? It's kind of the era of supply chain, I would say.

Yeah. And Luc, do you also see this? Because I know that, you know, a lot of companies have been looking at Southeast Asia and consolidating or managing that region from a single P&L point of view, or at least from a single supply chain governance point of view. Do you see also an uptake in, you know, for instance, the concept of the regional distribution centers for that geography, Or is that, you know, it has always been on the verge but it's not really kind of, you know, vamped up in terms of tackling the potential in that region?

Not so much yet, I would say, historically. Indeed, a lot of country-for-country setups. Yeah, again, industry-specific, but in a sense, consumer goods and the ones, industries that are distribution intensive, you see that a lot. That's actually where we see now opportunities for more consolidation. Well, what Peter mentioned earlier, the RCEP, but also other free trade agreements and Vietnam. Fitrade DeGraeven is there already for many years. We see the cross-border is getting better, to say, let's say that. And so cross-border shipments, especially mainland Southeast Asia, are easier to manage, are more efficient, less lead times at the border. So that opens up opportunity. There's maybe an area where not, where not all companies have yet fully considered what that, what it offers us. So you don't need a DC and in Malaysia and in, and in Thailand and in Vietnam and then if Cambodia is your market, maybe one central one could do that part of Southeast Asia. Of course, Philippines, Indonesia is still a different story. At least the mainland part of Southeast Asia, we believe there are opportunities now to look at more centralized setups. Yeah, but it's early days, but it is— that's good. That means if you're doing it right now, you'll be one of the first to benefit from it as well compared to your competition.

Good, good. I'm looking at the clock here and I get a few notes from people that they have to drop off. So I think it's also a nice point in time to wrap wrap up. First of all, thank you, you know, Eric, to be with us from a practitioner's point of view to share insight. Thank you, Luke and Peter, you know, for sharing your insight. Thank you, a big thank you for Max and the GCC platform as well as attendees. So thanks again for staying so long with us here for the last hour and a half. And please let us know if you have any questions that you want to follow up with, happy to share. So again, thank you so much for joining us here today and stay safe, stay healthy, and enjoy the rest of the day, I would say. Yeah, thank you so much.

Thank you for organizing. Bye-bye.

Thank you, thank you so much.

Thank you.

Come on.

Yes, bye-bye.