INTHEBLACK November 2023 - Magazine - Page 21
“The goal is to have a resilient supply chain that is also cost-effective, that
you’re not compounding with wage increases, energy price increases and
massive increases in the price of raw materials.”
CHRIS COLDRICK, DELOITTE AUSTRALIA
whatsoever, because both suppliers are subject
to all the same pressures,” he says.
An organisation looking to manage its
supply chain in the new business reality must
first deeply understand their own suppliers,
and the supply chain risks and opportunities
When an organisation has a detailed picture
of its suppliers, the next step is to develop
an understanding of the real alternatives, as
opposed to the perceived alternatives.
“That understanding serves two purposes.
It lets you know whether you really do
have meaningful hedging. Then, with that
knowledge, you can understand a whole
universe of other risks in your supply chain,”
For instance, if a natural disaster occurs in
a particular part of the world, knowing that a
supplier operates there can help a business to
determine whether it will cause a disruption.
“A lot of folks have been blindsided by supply
chain disruption, but if they had an intimate
knowledge of the industry that was disrupted,
it wouldn’t have blindsided them at all.
“The linkages are very clear. A reduction in
fertiliser production, resulting in a shortage
in carbon dioxide, creates a bottleneck in the
production of chickens. This creates a shortage
of fast food that is clear to those who know
the poultry industry,” he explains.
Without that intimate knowledge, those
relationships are not obvious.
It also remains to be seen if meaningful
hedging can exist in a localised supply chain
Suppliers in the same region often share the
same supply base, Coldrick says, but this is
not a given. Hedging can also be affected by
geo-political stability and various other factors.
“There are a few different ways to think
about the challenge, including close political
affiliations and free trade agreements,”
Coldrick says. “There are also certain suppliers
where service is far more important than cost,
and, generally speaking, a shorter supply chain
can achieve higher service levels.”
IMPORTANCE OF LOCATION
The idea of selective deglobalisation or
meaningful hedging will be different
according to where the business, and its
manufacturing facilities, is located, says
Simon Ringer, pro vice-chancellor, research
infrastructure and professor of materials
science and engineering at the University
“In Australia, we’re hearing about the
National Reconstruction Fund being set up to
diversify and transform industry,” Ringer says.
“Other countries are doing similar
things and are much further ahead. The
onshoring exercise going on in the US right
now is incredible, particularly in additive
manufacturing. Many hundreds of billions
of dollars have been put into what the
US is calling the AM Forward [Additive
Manufacturing Forward] program. We
also know about the CHIPS and Science Act
2022, which is around their onshoring of
semiconductor manufacturing capability.
“We also see what Japan is doing, what
Korea is doing, and what various countries
in Europe are doing. This is all happening in
Australia, too, but even with all of this, saying
globalisation is coming to an end is too much
of a simplification,” Ringer explains.
Gavan Ord, business investment policy
manager at CPA Australia, agrees that
there has not yet been a full U-turn towards
deglobalisation, but that nations are clearly
showing greater self-interest than they did in
the recent past.
“Building or rebuilding sovereign capability
in certain industries like pharmaceuticals,
national security and renewable energy is
something many governments are pursuing, or
pursuing with greater vigour,” Ord says.
“One prominent example of this is
the US Inflation Reduction Act 2022.
The law authorises nearly US$400 billion
(A$619 billion) in support for renewable
energy and climate change initiatives in
the US over the next decade. The support
is designed to encourage private investment
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