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The hidden flaw in global supply chains: why optimisation alone is no longer enough

For decades, supply chain network design has been built around a simple premise: if organisations can model enough data accurately enough, they can find the optimal network. Companies have used optimisation models to reduce transport costs, consolidate facilities, improve inventory positioning and create more efficient operating networks.But the environment in which these models operate has fundamentally changed. Global supply chains are no longer being tested by occasional disruption. They are operating in a permanent state of uncertainty, shaped by fuel price volatility, geopolitical instability, shifting trade patterns, sustainability pressures and changing customer expectations. In this environment, the biggest risk is not making the wrong calculation. It is asking the wrong questions. Many supply chain models are still designed to identify the cheapest or most efficient network under a defined set of assumptions. The problem is that those assumptions increasingly fail to hold. A network that appears optimal today can become a competitive disadvantage when fuel costs rise, trade routes are disrupted or production economics change. The challenge facing supply chain leaders is no longer simply how to optimise a network. It is how to understand whether that network remains effective when the world changes. The limits of traditional network design Traditional supply chain modelling has its roots in operational research and planning. It typically takes a bottom-up approach, integrating large volumes of historical data and using that information to identify an optimal outcome. This works well when the system being modelled is relatively stable. However, supply chains are not static systems. They are interconnected networks where decisions influence one another continuously. A decision to move production closer to customers may reduce transport costs, but increase manufacturing costs. A facility consolidation may improve efficiency but reduce resilience. A sourcing decision may look attractive until tariffs or geopolitical changes alter the economics. Every decision creates consequences elsewhere in the network. This is why isolated optimisation exercises can produce misleading answers. They may optimise one part of the supply chain while unintentionally creating weaknesses elsewhere. The issue is not that optimisation is wrong. It is that optimisation based on a single scenario creates a false sense of certainty. The move from prediction to preparedness Supply chain leaders do not need another model that tells them what will happen. They need models that help them understand what could happen. This requires a different approach to strategic decision-making. Instead of asking, 'What is the lowest-cost network based on current conditions?', organisations should ask, 'Which network structures perform well across a range of possible futures?' A robust supply chain strategy is not necessarily the one that performs best in one scenario. It is the one that performs consistently across multiple scenarios, including those that were not expected. This is increasingly important as businesses face uncertainty that cannot be forecast with precision. Designing for resilience, not just efficiency The traditional focus of supply chain optimisation is efficiency. But many optimisation efforts can introduce fragility. When networks become too tightly tuned to a specific set of assumptions, small changes can create disproportionate consequences. This does not mean we must abandon efficiency. Cost remains critical, but we must seek to understand the relationship between efficiency and resilience. Advanced modelling approaches are now enabling organisations to explore these trade-offs more effectively. Rather than separating transport, facilities, inventory and operational decisions into different analytical exercises, multidimensional models evaluate how these critical dimensions interact. This allows leaders to identify strategic tipping points between different cost centres, and pinpoint the moments where a previously successful strategy becomes unsuitable because the environment has changed. The rise of top-down strategic modelling One of the limitations of traditional approaches is that they often become constrained by the complexity of the data they consume. Many large organisations have data spread across multiple ERP systems, and such fragmentation means it can take months or even years to build a network model. By the time the model has been built, it is often tied to a historical set of conditions that were only precise to a previous operating environment, and so the model is outdated and inaccurate. Strategic decisions, however, are rarely determined by every operational detail. They are driven by a smaller number of critical relationships and choices. A top-down modelling approach starts with the strategic understanding of how the network works: the role of different locations, the relationships between production and distribution, and the factors that influence commercial outcomes. By creating a top-down abstraction of the network, rather than a model that is overfitted to static data, supply chain leaders can better manage uncertainty, as the model won't be brittle to fluctuations in the operating environment. Equally, top-down modelling is powerful as it enables sensitivity analysis, revealing which parameters prompt the biggest changes in network performance. This insight indicates the best opportunities for optimisation, and where precise data is actually needed. This provides strategic clarity before organisations commit to major network decisions. The future of supply chain strategy As our world becomes increasingly more volatile, the organisations that succeed will be those that understand supply chains as complex systems rather than linear cost equations. There needs to be a shift, to start questioning what decisions create the greatest strategic advantage over time. That shift represents a fundamental change in supply chain thinking. The future of supply chain network design will be defined by the ability to understand complexity, anticipate uncertainty and make decisions that remain valuable when conditions change. Organisations that adopt next-generation technology will reap the benefits of better decisions and gain advantage from the transformations they enable. This article was supplied by SimPath as Partner Content.

APAC-Europe air cargo volumes drop 15% year on year

Air cargo volumes between Asia Pacific and Europe have dropped, with ex China volumes taking a hit and ex Hong Kong volumes continuing to decline. For Asia Pacific as a whole, volumes to Europe were down 10% week on week and 15% year on year, shows figures from WorldACD Market Data. Volumes from e-commerce hotspot Hong Kong were down 23% year on year, after four consecutive week on week declines, according to the week 28 (6-12 July) figures from WorldACD. The decline followed the end of the EU's de minimis exemption and its introduction of a temporary €3 customs duty on low-value parcels imported from outside the EU as of 1 July. This decline in volumes reflected "the impact of the removal by the EU of de minimis import tariff exemptions since 1 July", said WorldACD. EU member states agreed in December to introduce the customs duty charge per item on parcels valued below €150. This is intended to bridge the gap until the EU Customs Data Hub is launched in 2028. In addition to a drop in air cargo volumes from Hong Kong, air cargo volumes from e-commerce hub China were down 13% week on week and 15% year on year. Plus, volumes from Taiwan to Europe were down 24% week on week. WorldACD noted that in terms of week on week impact, typhoon Bavi "particularly affected capacity and chargeable weight from Taiwan and to a lesser extent volumes and capacity from China and other parts of East Asia".

New Hactl chief Frosti Lau: putting people before technology as he charts the next 50 years

When Frosti Lau left Cathay Cargo after 20 years to become chief executive of Hong Kong Air Cargo Terminals (Hactl), many in the industry were surprised. Long-serving staff at Cathay tend to stay - or switch to shareholder Swire Group - but not Mr Lau, whose most recent postings have been in Singapore and Australia. "I wanted to move back to Hong Kong for family reasons," he told The Loadstar. "I wanted to spend more time with my mum and my family. "Hong Kong is my home. I just want to continue to help it grow." Joining Hactl also offered something different. "The CEO role is a very good opportunity," he said. "Not just internationally, but because I feel I can make an impact on the Hong Kong community." That community focus runs throughout Mr Lau's vision for Hactl as it celebrates its 50th anniversary. While many logistics executives talk first about automation, infrastructure, or growth, he repeatedly returns to 'people'. His own journey into logistics began unusually early: "When I was 10, my father gave me a typewriter," he laughed. "He wanted me to type import and export forms, because it cost him money to have someone else do it." "I don't know why," he said, "but cargo just came naturally to me." That early introduction eventually led to a career that included six years with Dragonair and spanned Asia and South Africa, giving him experience across cargo (in which he has spent 16 years and counting), passengers, and digital transformation, before returning home to lead Hactl. But, under Mr Lau, will Hactl ever expand beyond Hong Kong? "There is a need to look at diversification, but of course, Hong Kong is our home," he said, noting the current HK$1bn investment in its facilities. "This is the biggest market, and we have the most sophisticated facilities, so we will definitely continue to invest in Hong Kong." But, he added: "We will keep looking at other options, but many of the bigger locations already have scale. One of the things I keep thinking about is where would be a good location for us. "Wherever we go, whatever we do, we have to ensure a good management team, and be able to support financial decisions between property, operations, and investment. We will look at what we can scale." But for now, he says, his priorities are clear. "There are three things I'm really interested in," he explained. "Partnerships, AI and digital, and talent development." Partnerships, he believes, should extend far beyond commercial relationships. He wants Hactl to work more closely with airlines, customers, and organisations such as the Hong Kong Trade Development Council, while also exploring staff exchanges with airline partners, so employees gain a better understanding of customers' operations and culture. Technology also has an important role to play, but not at the expense of people. "I'm doing a master's in AI," he said, "but technology should empower people, not replace them." Instead, he believes, artificial intelligence should remove repetitive work and help solve operational problems, leaving people responsible for oversight and decision-making. He explained that technology would help Hactl "to stay relevant", and also find new customers. "I think that's one big opportunity. Hactl has always been a very technology-driven company with very experienced people. How can we enhance [that], and how can we further deploy AI and digital? We need to continue to push for efficiency. Hong Kong is not a cheap place to operate, so we must continue to improve, and also stay relevant to the customers. More customers are now demanding digital partnerships." He added that his experience at Cathay could help. "Can we use AI to address any problems? We have a very, very sophisticated multi-story operation, but I also experienced digital transformation at Cathay Cargo, which might help us bring up different questions." The third priority, talent development, is perhaps the one he speaks about most passionately. "I want people to feel valued," he said. "You want people to be reasonably compensated, but more importantly you want them to grow together." That philosophy appears well suited to Hactl, where many employees have spent decades with the company. Asked why staff remain for so long in an industry often associated with high turnover, Mr Lau points to culture. "We take care of our people," he said. He cites everything from committees that allow staff to influence the quality of food in the company cafeteria, to practical measures that help employees cope with Hong Kong's intense summer heat while working on the terminal floor. "They feel they belong," he said. "Many people have grown together with Hong Kong Airport." As Hactl modernises its facilities over the next 15 years, Mr Lau believes that culture will become even more important. "My mission is for us to be the most trusted partner, the most innovative, and the most sustainable operator," he said. "All these need to be empowered by people." Hactl has earned a reputation for producing leaders who speak as readily about people and culture as they do technology and infrastructure. If his first weeks in the job are any indication, Mr Lau is very much cut from the same cloth.