12 June 2023

HSBC: Malaysian corporates are moving supply chains closer to home

2 in 3 looking to reduce number of suppliers
Nearly 73% Malaysian corporates have held excess stock

Over the next 12-24 months corporates in Malaysia are looking to move more of their supply chains closer to home.

This is according to HSBC’s latest report “Global Supply Chains – Networks of Tomorrow”, which shares that Malaysian corporates will base half of their supply network in Asia.

As supply chains shift in response to ever-changing factors, including the entry into the Regional Comprehensive Economic Partnership (RCEP)*, the trend for Malaysian corporates to move their supply chains closer to home is becoming more apparent.

Karel Doshi, Head of Commercial Banking, HSBC Malaysia, comments: “Corporates in Malaysia have begun to realign their supply chains to capitalise on the advantages offered by RCEP. RCEP is an opportunity for Malaysia to boost trade liberalisation and economic integration. Malaysia, as a prominent ASEAN economy, can take this route to further strengthen trade with RCEP partners, while domestic corporates can look forward to growing regionally.”

“Additionally, Malaysia can support these supply chain changes with its natural resources, labour force and banking infrastructure. With economic activity in South Asia back to pre-pandemic levels, we see Malaysian corporates focusing on increasing regional trade, expanding its digital capabilities and driving sustainable initiatives.”

Now in its third year, “HSBC Global Supply Chains” examines how corporate treasurers and senior managers are reshaping their supply chain and working capital strategies in response to global economic changes, sustainability policies and digital enhancements. For this survey, we interviewed more than 785 corporates across 14 markets between August and October 2022.**

At a time when “supply chain resilience” is increasingly heard on earnings calls, 2 in 3 (67%) Malaysian corporates are looking to reduce their number of suppliers.

“Most corporates facing supply chain disruptions might want to work with more suppliers, however, we are seeing that it is making more sense for corporates to secure their sourcing from fewer suppliers while cultivating longer-term, more strategic relationships with them. Looking atgeographic diversification is an important consideration when designing more resilient supply chains,” adds Karel.

Disruptions to global supply chains and the resulting logistical challenges have also caused just-in-time inventory management to give way to just-in-case. Nearly 3 in 4 (73%) Malaysian corporates have held excess stock, with an average increase in inventory of 36%.

On sustainability, nearly 3 in 4 (73%) of corporates in Malaysia are requiring new suppliers to align to their sustainable requirements during onboarding, reflecting a desire to make this an integral part of their supplier relationships. While around a quarter of corporates in Malaysia have environmental (22%) and social policies (27%) in place, many plan to implement policies within the coming two years. For sustainable supply chain investment priorities, the top two priorities Malaysian corporates are planning to invest in are energy efficiency (89%) and environmentally friendly plants and machinery (85%).

Corporates in Malaysia also stood out from their regional and global peers in their desire to access banking solutions online (55%) indicating the importance of seamless connective banking solutions through online platforms as a top digital priority.The report also noted that most corporates in Malaysia (82%) are paying suppliers in their local currency, going against the regional trend of mainly using USD to settle.

Karel concludes, “The model of having everything arrive just in time is unlikely to come back entirely. A topic that corporates are increasingly discussing is the need to get the balance right between stocking up for just-in-case scenarios and the cost of doing so.”

As corporates continue to make changes to their supply chains, “payment and financing terms” (46%) and “digital integration with treasury” (25%) and “ESG credentials” (21%) are three of the top five factors considered when deciding on suppliers.

Media enquiries to:

Joanne Wong
+603 2075 6169

* RCEP is the world’s largest free trade agreement, encompassing China, Japan, South Korea, Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations. On 21 February 2023, the Philippines became the latest member to ratify RCEP.

** HSBC commissioned East and Partners to interview the senior management of 787 corporate treasurers and senior managers across 14 markets from large multinationals to local organisations, online and traditional retailers, and both HSBC customers and non-customers.

HSBC Malaysia
HSBC’s presence in Malaysia dates back to 1884 when the Hongkong and Shanghai Banking Corporation Limited established its first office in the country on the island of Penang, with the permission to issue currency notes. HSBC Bank Malaysia Berhad was locally incorporated in 1984 and is a wholly-owned subsidiary of The Hongkong and Shanghai Banking Corporation Limited, founding member of the HSBC Group. In 2007, HSBC Bank Malaysia was the first foreign bank to be awarded an Islamic banking subsidiary licence in Malaysia, namely HSBC Amanah Malaysia Berhad.

HSBC Malaysia offers a comprehensive range of banking and financial services including Islamic financial solutions. HSBC Malaysia has also led innovation in Malaysia by introducing Malaysia’s first ATM and Electronic Touch Banking in the early 1980s. Today, HSBC Malaysia has launched innovative solutions such as HSBCnet for secure banking for businesses, Trade Transaction Tracker and Facial Recognition on supported mobile phones.

The Hongkong and Shanghai Banking Corporation Limited
The Hongkong and Shanghai Banking Corporation Limited is the founding member of the HSBC Group. HSBC serves customers worldwide from offices in 62 countries and territories. With assets of US$2,990bn at 31 March 2023, HSBC is one of the world’s largest banking and financial services organisations.