INTHEBLACK November 2023 - Magazine - Page 18
AT A GLANCE
The pandemic has
exposed weaknesses
in global supply chains.
Supply source failure is
among the top risks for
companies and governments.
However, deglobalisation
is not always the best
mitigation strategy.
THE RISE OF
“SLOWBALISATION”
Globalisation is on a negative trajectory as governments and
businesses increasingly look inwards to reduce supply chain risk.
However, no business is an island, and the challenge is to balance
localisation, cost and risk.
Words Chris Sheedy
18 INTHEBLACK November 2023
In the very recent past, just six years
ago, just-in-time manufacturing and
inventory systems were the toast of the town.
Supply chains were long, transport was cheap,
interest rates were low and international
relations had enjoyed a decade of calm.
What a difference a pandemic makes.
Its lingering effects – coupled with growing
protectionism, geo-political instability and
worsening effects of climate change, among
other factors – have created a business
environment radically different from
globalisation’s heyday.
Now, the momentum that has been
building since the close of World War II
seems to be unravelling.
A World Economic Forum report tracks
the dramatic increase in trade openness
between nations from 1945 to the mid-2010s.
This includes a so-called “hyper-globalisation”
period from 1990 to 2005.
The reversal in recent years has instead
been referred to as “slowbalisation”,
indicating a steady downwards trend.
“Today, ‘slowbalisation’ appears to be moving
towards deglobalisation,” the report says.
Deglobalisation – or localisation of supply
chains and re-onshoring of manufacturing
skills and capabilities – offers a solution, but
it is not without its costs and risks.
COST OF LOCALISATION
“Cost is becoming an overwhelming concern
for most of my clients, and deglobalisation
can be very expensive,” says Chris Coldrick,
supply chain and procurement practice
consulting partner at Deloitte Australia.
“Most manufacturing is premised on the
kind of economies of scale that you can’t
easily achieve locally, particularly if you have
a small population and are remote.”
Coldrick has observed what he calls
“selective deglobalisation” or “meaningful
hedging” among his client groups.
Certain aspects of specific industries in
particular territories are deglobalising,
but most are still looking to strike a
careful balance – for good reason.
