August 21, 2025 in Articles
The Rise of Decoupling and Diversification Trends in Logistics
By Waldo Basilla, Chief Operations and Commercial Officer, Asia, APL Logistics
As more companies and supply chains turn to diversification beyond the evolving China Plus One strategy, core shifts are emerging in how the supply chain industry is structured for resilience in a turbulent economic climate. This article explores these rising trends of decoupling and diversification, what they mean for the supply chain, and how to ensure continuity and support for logistics operations.
Shifting Sourcing
While China established itself as a Tier One hub for items such as light manufacturing, apparel, and footwear in the 1990s, taking market dominance, it is now engaged in its own manufacturing evolution. The country is transitioning from “the world’s basic factory” to a more sophisticated manufacturing environment as its home economy matures.
This shift has, in turn, empowered the Association of Southeast Asian Nations (ASEAN) and other Southeast Asian territories to make their entry into these verticals. However, China still retains a strong presence in some manufacturing verticals, especially retail presence and high-end manufacturing and technological sectors.
The current observation shows a clear shift in manufacturing volume and scales away from China into Southeast Asia. This is paired with a move away from, or perhaps the evolution of, the China Plus One diversification strategy that was already in play. Alongside that manufacturing shift comes changes in the entire supporting ecosystem needed to sustain it. For example, many companies are increasing their footprint in markets like Cambodia, Vietnam, India, and Indonesia.
This is not a change that will happen overnight. But it is underway, with nearly 50% of supply chain executives globally stating they are already looking to downsize Chinese sourcing, be it for ASEAN markets or even the NA and EU1, with many already beginning that shift. Most are targeting no more than a 20% dependence on direct China-based manufacturing within the decade.
The Tariff Question
This overall trend is also being shaped by rising uncertainty around the tariff environment. Tariff uncertainty seems to be becoming a driver of diversification, especially away from wholesaler shipments to finished goods. This is further buoyed by the rise of e-commerce platforms that can supply finished goods to end markets without wholesaler involvement — and with a slightly simplified supply chain due to this. Companies are keen to trade globally, without market limitations that can adversely impact their own positioning in this turbulence. This has led to many companies adopting nearshoring strategies in strategic locations, to smooth supply chain complexity.
Changing Manufacturing Patterns
In 2018, the US accounted for 19.3% of China’s total exports, the single largest export market at the time2. By 2024, it decreased to 14.7%, the lowest levels in a decade. However, the reality is that much of this was rerouted through shifting supply chains, not truly “lost”. Chinese factories still have an important presence, just with added locales and longer supply chains. After all, China itself is exploring manufacturing partnerships with other Asian nations as it moves into alternative verticals and near-shores existing operations3.
Worth noting, however, is that manufacturers are understandably loath to abandon their Chinese trade partners completely, instead prompting them to develop infrastructure within these new areas.
For example, electric vehicle manufacturer BYD just invested a billion dollars in Indonesia to set up a new automotive plant, increasing their stake in the local economy, supporting job development4, and shifting some operations from China itself. These types of shifts liberate global trade networks to access new and valuable markets, but introduce additional uncertainties through a lengthening supply chain — making reliable logistics partnerships more important to supply chain growth and certainty than ever before.
APL Logistics: Supporting Success Across a Changing Supply Chain
Adapting to shifts such as these has benefits for more robust lines of trade, but can create additional supply chain complexities and introduce new points of vulnerability. This is especially true for raw materials, which now travel longer distances to reach factories, well before the end product is even manufactured and delivered to market, resulting in a far lengthier supply chain overall.
APL Logistics aims to be a partner that re-introduces some certainty to this shift by enabling the smooth movement of goods and materials, and orchestrating even the most complex supply chains. The support spans across both physical and digital solutions:
- Physical Solutions: Transport routes and supply lines are optimised through dedicated transport, freight, and warehousing solutions.
- Digital Supply Chain Orchestration: Digital solutions open the door to greater visibility across the shipment and order level, ensuring tighter timing and improved product or raw material availability.
In the raw material-component-manufacturing chain, material warehousing and just-in-time (JIT) solutions are used to minimize the need to carry and store inventory, but that comes at the risk of running short of raw materials or components needed on the production line. APL Logistics’ advanced supply chain support helps to minimize these risks and ensure timely delivery.
Connecting ASEAN Hubs to Global Markets
As more products and materials move over geographical borders during complex, distributed manufacturing cycles, companies also need the right trade compliance solutions to ensure smooth movement – from physical trucking to customs, brokerage and distribution.
APL Logistics is at the forefront of creating these new solutions, especially across rapidly diversifying Asian markets. These include new intra-national and international ASEAN hubs and new transportation solutions. Solutions that connect key nodes in this rapidly developing supply chain and facilitate consolidation and shipment to international markets such as Europe and the Americas. All coordinated with the overarching control tower, digital solutions, visibility, and orchestration required for positive and reliable outcomes.
Additionally, APL Logistics also provides detailed management at the order and SKU (stock-keeping unit) level, while still managing inventory for optimized costing. As Southeast Asia continues to advance its manufacturing capabilities, APL Logistics remains committed to supporting partners in their transition from lower-level manufacturing to products further up the value chain, such as electronics and industrial products.
With a four-decade long presence in the region, APL Logistics offers manufacturers an established, familiar operating network and a reliable partnership that ensures smoother movement of goods. To stay ahead of the global supply chain shift, the company has already begun building out the right technology investments to support greater visibility, new infrastructure nodes, and new transportation systems. All with the goal of empowering the partners to develop the resilient, scalable and flexible supply chains needed to thrive even within uncertainty.
References
1 https://www.supplychainmovement.com/half-of-businesses-are-reducing-production-capacity-in-china/
2 https://www.statista.com/statistics/1609793/china-us-share-in-exports/
3 https://amro-asia.org/chinese-companies-are-on-the-move-inland-and-to-southeast-asia
4 https://www.idnfinancials.com/news/52162/byd-invests-usd-1-billion-for-electric-car-manufacturing-plant-in-indonesia