Why Supply Chain Costs Are Breaking Budgets in 2025

Are supply chain costs straining your budget?

In 2025, supply chain costs across the APAC region are hitting record highs, forcing companies to rethink their budgets. Shipping, storage, and labor expenses keep rising, making cost control more crucial than ever.

The RapidRatings 2025 Annual Risk Survey reveals that 68% of supply chain professionals expect higher risks this year. Nearly 30% of disruptions have already cost companies over $5 million each. Additionally, 54.5% of the respondents identify the Asia-Pacific (APAC) region, particularly China, as the most high-risk area.

So, what’s behind these rising costs?

Rising inflation, shipping delays, last-mile delivery challenges. The stricter sustainability rules also impact profitability and companies risk losing millions.

However, you can control rising costs, optimize operations, and protect the margins.

In this article, we’ll uncover the biggest cost drivers, explore smart strategies, and see how Oracle SCM can help you stay ahead.

Let’s first look at why the cost is rising.

Why Supply Chain Costs Surged in APAC

 

APAC has long been a key hub for global manufacturing and logistics. However, in 2025, the region is seeing a surge in supply chain costs, pushing companies to adapt quickly.

One of the biggest drivers of these rising costs is the continued disruption in global freight.

Moreover, in key markets, warehousing shortages are pushing rental costs to record highs. The excess demand for storage space forces you to pay more for less space.

To cope with rising costs, you must identify the key factors influencing this surge.

Let’s break down these factors in the next section.

Factors Influencing the Rise in Supply Chain Costs

 

Understanding the forces driving APAC’s supply chain cost surge is the first step to managing them. While multiple factors are at play, let’s understand the five key factors:

1. Inflation and Currency Fluctuations

Inflation continues to push up costs across the APAC region, increasing expenses for raw materials, transportation, and labor.

According to the Asian Development Bank (ADB)’s Outlook report, inflation in the developing APAC region is expected to decline to 2.9% in 2025, revised down from earlier 3.0% forecast.

The International Energy Agency (IEA) predicts oil prices will remain above $80 per barrel in 2025, further increasing fuel and shipping costs.

Higher fuel prices add pressure, making freight and delivery more expensive.

Currency fluctuations also add to supply chain volatility. The depreciation of some APAC currencies against the U.S. dollar is compounding the issue. This leads to increasing import costs and overall business expenses in the region.

2. Trade Route Disruptions & Port Congestion

Major APAC ports experience delays, rising demurrage fees, and container shortages, disrupting global shipping.

In the first half of 2024, 64% of analyzed ports in Southeast Asia¹ reported increased congestion. Manila experienced a significant rise, with average anchor and berth times increasing by nearly 20 hours. Ports like Chittagong (Bangladesh), Port Kelang (Malaysia), and Singapore also faced substantial congestion increases.

Additionally, shifting trade policies and stricter import/export regulations drive up costs. For instance, the U.S. administration plans to impose fees up to $1.5 million on Chinese-built or flagged ships to curb China’s dominance in global shipbuilding.

As a result, businesses spend more on alternative shipping routes and expedited freight to prevent delays.

3. Warehousing & Last-Mile Costs

The rise in e-commerce and the push for just-in-time supply chains are causing warehouse prices to skyrocket. In APAC markets, warehouse space is harder to come by, and rents are increasing.

In 2024, prime logistics rents in APAC rose, but at a slower pace. The average year-on-year growth hit 2.4% in the first half of 2024, compared to 6.2% in 2023. According to the report, Singapore was leading the region in rental growth, reflecting strong demand for logistics space.

Adding to the challenge, energy costs to keep these facilities operational are also rising.

Moreover, expensive last-mile deliveries further increase logistics expenses. This is primarily due to rising fuel costs and urban congestion.

4. Labor Shortages & Rising Wages

APAC businesses face labor shortages and rising wage challenges in logistics, warehousing, and transportation.

In Japan, retailers raised wages for the second consecutive year to attract workers amid a shrinking workforce and rising inflation. Labor unions pushed for a 6% wage increase for full-time workers and 7% for part-timers, exceeding previous targets. In India, nearly 20,000 port workers secured an 8.5% pay raise after negotiations, highlighting the region’s rising labor costs.

At the same time, a decline in migrant workers has tightened the labor supply, making hiring more expensive.

5. Sustainability Regulations & ESG Compliance

New environmental and sustainability regulations in Asia-Pacific force businesses to adopt greener supply chain methods.

Carbon taxation policies and new ESG reporting standards force companies to adopt costly compliance measures. This includes sustainable sourcing, carbon tracking, and supply chain transparency initiatives.

For instance, in 2024, Singapore announced an increase in its carbon tax to (Singapore Dollar) SGD 25 per ton for 2024–2025. It plans to increase the tax to SGD 45 per ton in 2026–2027 and SGD 50–80 per ton by 2030. This hike encourages businesses to cut emissions and invest in decarbonization.

Investments in sustainable infrastructure like Electric vehicle (EV) fleets and carbon-neutral warehouses also require significant upfront costs.

While these measures are important for the future, they add immediate pressure to your budget.

Let’s explore various strategies to minimize expenses and future-proof your supply chain.

How Businesses Can Reduce Supply Chain Costs

 

Leading companies optimize their operations besides managing expenses for efficiency, resilience, and agility. Here’s how you can do the same:

1. Use AI & Automation to Optimize Operations

AI forecasting helps organizations optimize inventory and prevent costly overstocking.

On the other hand, automating the procurement process improves supplier performance and reduces overall spending.

Logistics providers use AI-powered route optimization to reduce delivery delays and fuel expenses.

For example, DHL uses AI-driven logistics solutions to optimize delivery routes, improving on-time deliveries by 95%.

2. Nearshoring & Reshoring to Reduce Logistics Costs

Moving production centers closer to customers saves money on shipping, import taxes, and delivery times.

Companies that adopt nearshoring strategies build more flexible supply chains and reduce dependency on a single region.

For instance, Apple moved part of its iPhone production from China to India and Vietnam to reduce trade risks and diversify its manufacturing.

3. Optimize Warehousing & Distribution

As warehouse costs continue to rise, businesses are optimizing space and turning to automation to cut expenses.

Smart warehouses use IoT tracking and AI storage optimization that help companies reduce storage expenses and boost overall efficiency.

At the same time, warehouse robotics accelerate fulfillment, reduce labor costs, and improve order accuracy.

For instance, Amazon’s robotic fulfillment centers boosted warehouse efficiency by 40%, leading to significant cost savings.

Are you ready to take control of your supply chain costs? Leverage Oracle SCM to optimize your expenses and stay ahead of the competition. Book a call today to learn more.

Conclusion

Rising supply chain costs in APAC present a serious challenge, but they don’t have to dictate your profitability.

By embracing AI, automation, and strategic cost-saving measures, you can stay ahead of rising expenses and build a more resilient supply chain.

Now is the time to take action. Adapting today will set you up for long-term success in an increasingly complex logistics landscape.

Frequently Asked Questions

1. What is the difference between Oracle ERP and SCM?

Oracle ERP (Enterprise Resource Planning) and Oracle SCM (Supply Chain Management) serve different but complementary purposes in business operations.

Feature	Oracle ERP	Oracle SCM
Focus	Manages finance, HR, and business operations.	Optimizes supply chain, logistics, and inventory.
Functions	Handles accounting, procurement, HR, and reporting.	Manages inventory, logistics, supplier collaboration, and demand planning.
Scope	Covers internal processes across departments.	Focuses on supply chain flow from sourcing to delivery.
Users	CFOs, finance teams, HR managers.	Supply chain and logistics managers.
Goal	Streamline financial and operational processes.	Improve supply chain visibility and efficiency.

2. Which tool is used for SCM?

Oracle offers a suite of SCM tools to optimize supply chain management.

The Oracle SCM Cloud provides AI-driven demand planning, real-time logistics tracking, integrated procurement, and predictive analytics for cost forecasting.

Additional tools include:

• Oracle Transportation Management (OTM): Optimizes freight and logistics.
• Oracle Warehouse Management System (WMS): Enhances inventory control and automation.
• Oracle Procurement Cloud: Streamlines supplier management and purchasing.

These tools streamline supply chain operations, reduce costs, and improve efficiency across industries.

3. How can Oracle SCM help reduce supply chain costs?

Oracle SCM optimizes demand forecasting, automates procurement, and improves logistics efficiency with AI-driven solutions.

Oracle SCM helps enterprises reduce overstocking, lower shipping costs, and gain real-time visibility into their supply chain. This further helps in preventing unnecessary expenses.

4. Is nearshoring a better alternative to sourcing from APAC?

Nearshoring reduces transportation costs, avoids trade route disruptions, and improves supply chain resilience.

However, APAC remains a key region for many industries due to its skilled labor force and manufacturing infrastructure. The best approach depends on your cost structure, supply chain goals, and risk strategy.

5. Why are supply chain costs rapidly rising in APAC in 2025?

Supply chain costs are rising due to inflation, labor shortages, higher freight rates, and stricter sustainability regulations. Port congestion, warehouse shortages, and compliance costs all contribute to the increasing expenses.