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[Podcast] Supply chain innovation and performance of manufacturing enterprises in ASEAN countries: A driving force for sustainable growth

4 November, 2024

Keywords: Supply chain innovation, financial results, manufacturing enterprises, ASEAN countries

In the current context, innovation associated with the latest knowledge and technology is considered as one of the important driving forces for economic growth. In particular, supply chain innovation activities from business processes, information technology, sourcing, logistics, distribution and other support activities are proposed as an effective approach towards gaining competitive advantage and maintaining long-term performance for businesses. Therefore, in this research article, the author group from Ho Chi Minh City University of Economics (UEH) points out the role of supply chain innovation in affecting the performance of manufacturing enterprises in ASEAN countries and proposes some solutions to optimize the supply chain in this fiercely competitive environment.

In the global supply chain, many businesses in complex production networks including suppliers, transit points and final markets are located in ASEAN countries. In particular, the manufacturing enterprise sector contributes significantly to economic growth and social development. Innovation is an important approach to find the improvement opportunities in the production value chain. Therefore, this trend has attracted a lot of attention from scholars and many studies on supply chain innovation are receiving attention in emerging countries in Asia. However, because of these limited resources, the effectiveness of supply chain innovation has not been clearly demonstrated or is being demonstrated at a low level in the developing countries.

To solve this problem, the UEH authors pointed out the role of supply chain innovation in operation performance in manufacturing enterprises in ASEAN countries. In addition, the moderating effect of organizational innovation, which facilitates the relationship between supply chain innovation and corporate financial performance, is examined. Therefore, innovation in the supply chain is not only a need but also a vital factor for manufacturing businesses in ASEAN.

What is supply chain innovation?

Supply Chain Innovation refers to the “incremental to breakthrough changes in products, processes, marketing, technology, resources, or organizations” that involve the participation of correlated parties. This change comes from 3 aspects – Process, Technology and Structure – with the goal of creating good values ​​for stakeholders.

On that foundation, supply chain innovation is considered as a process of improving and applying new solutions to optimize the entire process from production, distribution to logistics operations. This includes the use of new technology listed as: Artificial intelligence (AI), Big Data analysis (Big Data), automation or blockchain in supply chain management, with the purpose of increasing transparency and efficiency. Furthermore, businesses’ ability to apply innovation in the supply chain will bring outstanding advantages. In terms of the manufacturing businesses in ASEAN, supply chain innovation not only meets market needs but also helps businesses adapt to changes in technology and the business environment. Therefore, all relevant partners throughout the supply chain network do benefit from these activities.

The role of supply chain innovation in corporate performance

This research concludes that the supply chain has a direct impact on core business factors listed as production costs, product quality and distribution speed. A flexible and efficient supply chain helps businesses quickly respond to market needs, reduce unnecessary costs and improve operational efficiency.

In terms of the manufacturing businesses in ASEAN countries, the supply chain not only ensures the smooth production of goods but also faces increasing the pressure from customers to ensure quality, on-time delivery and cost optimization. Innovation in the supply chain both helps improve operational efficiency and increases the business adaptability in a constantly changing environment.

Factors affecting supply chain innovation in business operations in ASEAN

Access to technology and digitalization of the supply chain: One important factor promoting supply chain innovation is the ability to access and to apply technology. Technologies listed as automation, artificial intelligence and blockchain help businesses improve transparency, reduce costs and optimize operational processes. On the other hand, in ASEAN, the level of technology adoption in the supply chain has been uneven across the countries and many businesses have had difficulties accessing advanced technologies. Technology improvements in the supply chain range from using ERP (Enterprise Resource Planning) systems to comprehensively manage business operations, to deploying AI logistics monitoring systems to optimize delivery process routes and to reduce costs. For manufacturing enterprises, the application of these solutions can help enhance regional and international competitiveness.

Government support policies and regional cooperation: ASEAN governments are playing an important role in promoting supply chain innovation through promulgating policies to encourage technological innovation, to invest in logistics infrastructure and to develop concentrated production areas. However, policy differences among countries do create challenges for businesses wanting to expand operations in the region. In addition, regional cooperation through free trade agreements and economic cooperation programs plays an important role in promoting supply chain innovation. Initiatives listed as AEC (ASEAN Economic Community) have created more favorable conditions for businesses to access markets, resources and advanced technology

Impact of business environment and management culture: The business environment and the management culture in ASEAN countries have a great influence on the innovation ability of businesses. A stable and business-friendly business environment will create favorable conditions for investment and innovation activities. In addition, each country’s management culture affects how businesses deploy innovative solutions in the supply chain. Manufacturing businesses in ASEAN need to be flexible in adjusting their supply chain models to adapt to the changes in the business environment and management culture in each country. This includes collaborating with local partners, leveraging available resources and adapting management strategies to suit real-world conditions.

The results affirm the important role of supply chain innovation in improving the financial performance of companies in ASEAN countries. Furthermore, organizational innovation significantly moderates the relationship between supply chain innovation and financial performance of these corporates.

Policy implications on supply chain innovation for businesses in ASEAN countries

As being home to the world’s fastest growing economy, this ASEAN region is naturally aiming towards globalization in both the manufacturing and information sectors. To take advantage of these opportunities, ASEAN countries should invest more resources in developing their science, technology and innovation capabilities. With its proximity to China and one of the top three global manufacturing hubs, the ASEAN region has been attracting a growing number of international investors from places like the United States and China.

Developing countries in ASEAN are being lagged behind the world’s technological frontier and have a shortage of skilled labor, making supply chain innovation management strategies all the more urgent. Supply chain managers need to focus efforts, listed as production/service practices, support operations, and logistics, both in the upstream and downstream areas of the supply chain network. This result provides fresh insight into management strategies in businesses in ASEAN countries, shedding light on opportunities to promote business performance.

In this constantly-changing business environment, the ability to make informed decisions and to develop effective strategies depends on a solid grasp of the forces of supply chain innovation. The study provides empirical results on the impact of supply chain innovation dimensions and the moderating role of organizational innovation as follows:

First, leaders must understand that supply chain innovation practices can improve operational efficiency and reduce operational, logistics and distribution costs by implementing modern technologies listed as automation, Internet of things (IoT) and artificial intelligence (AI). In this way, managers can make informed decisions regarding resource allocation, technology investments, and developing and implementing supply chain strategies that support the achievement of organizational goals.

Second, in terms of the goal of better competition and adaption in the current market, manufacturers in ASEAN countries can innovate in production processes, support activities and/or logistics processes. In particular, this study provides supporting evidence that supply chain innovation is critical to business success in ASEAN countries. The author recommends regularly reviewing and improving the performance of all supply chain activities.

What is more, the fluctuations of customers, technology and competition in today’s corporate world are always changing. Therefore, supply chain innovation is considered a driving force that allows businesses to gain a competitive advantage over competitors and to improve long-term profits. Scholars have been increasingly interested in emerging markets (like ASEAN) over the past two decades; on the other hand, the recent empirical evidence on the link between supply chain innovation activities and firm performance in the corporate level has not been fully researched yet.

In summary, this study has indicated the impact of supply chain innovation on the performance of manufacturing enterprises in ASEAN, providing insights into the role of supply chains in improving business competition. The research results both help businesses in the ASEAN region better understand the importance of supply chain innovation and provide practical solutions in the region, contributing to promoting sustainable and competitive development of ASEAN in the global market.

Please refer to the full research titled Supply chain innovation and performance of manufacturing enterprises in ASEAN countries: A driving force for sustainable growth HERE.

Author group: Dr. Nguyễn Huệ Minh, Dr. Nguyễn Văn Dũng, MSc. Hoàng Thu Hằng, MCs. Trịnh Huỳnh Quang Cảnh – University of Economics Ho Chi Minh City (UEH).

This article is part of the series spreading research and applied knowledge from UEH with the message “Research Contribution For All”. UEH cordially invites readers the upcoming UEH Research Insights issue.

News, photos: Author group, UEH  Department of Communications and Partnerships, UEH