The Rise of "Slowbalisation"

"Slowbalisation" marks the shift from globalisation as businesses and governments strive to reduce supply chain risk through localisation. reviously, global supply chains and just-in-time manufacturing were the norm. However, factors such as the pandemic, protectionism, and climate change have disrupted this business environment.

World Economic Forum reports reveal a shift from the peak of globalisation in the mid 2010s towards slowbalisation. Localising supply chains and reviving domestic manufacturing skills could be a solution, but these come with their own risks and costs.

Chris Coldrick from Deloitte Australia notes that local economies of scale can be challenging to achieve, especially in areas with smaller populations. Many businesses are exploring "selective deglobalisation," finding a balance between local and global sourcing. Coldrick’s clients aim for “meaningful hedging” in managing supply chain risks, which involves understanding their suppliers and the risks they face.

The location of a business and its manufacturing facilities also impacts the strategy for deglobalisation or hedging. For example, in the US, there is a significant focus on onshoring certain industries, supported by programs like the AM Forward and the CHIPS and Science Act 2022.

While some believe globalisation is ending, experts like Gavan Ord from CPA Australia argue that nations are simply becoming more self-reliant. Sovereign capability in industries like pharmaceuticals, national security, and renewable energy is a key focus for many governments.

Businesses need to be aware of the risks and capitalize on potential opportunities, like government incentives. However, they should also be prepared for changes in these incentives, especially during leadership transitions. A deep understanding of supply chains is crucial to navigate these challenges and opportunities.

source: intheblack