Singapore — 23 June 2026

Southeast Asia's supply chains are absorbing several shocks at once. According to McKinsey Global Institute’s 2026 trade update, US-China trade fell by around 30% in 2025 as tariff rewired global flows, with ASEAN absorbing much of the shift and deepening its role in global manufacturing. This year, escalating conflict in the Middle East has disrupted Asia-linked freight corridors, pushing carriers around the Cape of Good Hope, stripping capacity from Asia - Europe air routes, and driving up energy and logistics costs across the region.

Steve Cheung, President of Dematic Asia, China and MEA, the region’s leading logistics automation supplier, has watched this shift accelerate. "Political tensions, shifting trade policies and border restrictions are forcing organisations to rethink the traditional low-cost, labour-intensive operating model," he says. "In many parts of Southeast Asia, that model is not viable anymore." 

Across Southeast Asia, the assumption that cross-border labour would remain cheap and readily available has proved difficult to sustain. Policy shifts, border tensions and tighter mobility controls have made labour availability increasingly unpredictable. In Thailand, the number of Cambodian migrant workers has plunged from around 550,000 to approximately 194,000 following a border clash last year, with manufacturing and agriculture sectors already feeling the strain, according to the Bangkok Post.

Steve sees this as part of a wider pattern. "Many organisations previously depended on cross-border labour flows – particularly across China, Malaysia and the wider region – and highly concentrated manufacturing or distribution networks," he says. "Today, those same organisations are redesigning their supply chains around flexibility, visibility and redundancy, reducing dependency rather than waiting for conditions to improve." 

The dominant strategic response to supply chain disruption in recent years has been resilience – the ability to absorb a shock and recover. 

Steve is clear that the rationale for automation has moved beyond cost savings and headcount. "Initially, people in Southeast Asia thought: labour is cheaper here, so why automate?" he says. "But the demands have changed. It is not just about cost; it’s accuracy, safety, traceability and the ability to handle complexity consistently – at peak." He points to a tobacco manufacturer Dematic worked with, where the requirement was a fully automated warehouse managing the flow from raw materials through to finished product. The driver was the need to eliminate mishandling and inventory discrepancies in a high-value environment where errors carry serious consequences. "When product goes missing or gets damaged, that has an impact on cost, but it’s also a compliance and brand risk," Steve says. E-commerce has added another layer. Consumers now order across a wider range of products, expect faster delivery, and have more alternatives than ever when a retailer fails to deliver. "If your operation cannot handle the volume accurately and on time, the customer moves to a competitor," Steve says. "That’s a brand risk, not just a fulfilment problem. Businesses who invest in smarter automation also have an opportunity to take a larger share of the market, because their operations can handle situations others can’t.”

Steve points to a shift in how Dematic approaches warehouse design, with AI now playing a central role. "Previously, we would design a warehouse based on experience and the systems we had implemented before," he says. "Now, we use AI to enhance our analysis of a customer’s entire operation – the data, the flows, the volumes – and build an optimised system that reflects the customer's operations now and into the future."

When your business model changes or your volumes shift, the system should still be able to serve your purpose." 

To explore how your operation can build greater control, visibility and predictability, reach out to the Dematic team today.