The ever-evolving landscape of global trade is showing a trend towards ‘slowbalisation’. Slowbalisation is tipped as an ethical and sustainable strategy for procurement. While Australia sets its sights on Carbon Net Zero and Social Procurement, Slowbalisation is prompting Australian businesses, who rely on global imports, to pivot their procurement processes.
As it stands, many international supply chains are facing challenges such as geopolitical instability and climate-related issues.These complex issues are nudging procurement professionals to seek alternative strategies that find the right balance between cost efficiency and risk mitigation.
Understanding Slowbalisation and Deglobalisation
Slowbalisation exists in opposition to globalisation. Globalisation is when countries, people, and businesses around the world are connected through the marketplace, sharing things like goods, ideas, and money. However a criticism is that focus on finding goods and services from anywhere globally often prioritises securing contracts with the lowest financial cost, without factoring in environmental and ethical/social costs.
Slowbalisation, on the other hand, is a movement towards localising supply chains and bringing manufacturing capabilities back onshore.
Hedging in Procurement
Chris Coldrick, supply chain and procurement practice consulting partner at Deloitte Australia explains that 'meaningful hedging' emerges as a strategy to navigate the challenges of deglobalisation.
Hedging involves diversifying suppliers and understanding the real alternatives that are available. Coldrick emphasises that, "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."
Steps for Australian Businesses
To thrive in a deglobalised environment, businesses are being urged to adopt the following steps towards Slowbalisation:
- Map Supply Chains: Conduct a thorough analysis of primary, secondary and even fourth or fifth-party suppliers.
- Understand Alternatives: Develop a detailed understanding of real alternatives, ensuring that hedging efforts are meaningful.
- Consider Local Realities: Acknowledge that meaningful hedging may vary based on the business’s location and industry, taking into account external geopolitical factors.
Opportunities for Australian Businesses
Despite challenges, there are plenty of opportunities for Australian businesses and procurement professionals to foster Slowbalisation, including:
- Government initiatives: Leverage government decisions, policies and incentives, considering potential relocation of production to markets aligned with these initiatives.
- Strategic Alliances: Capitalise on free trade agreements, consider careful and nuanced decision-making in the onshoring of skills and capabilities.
- Diversification: Explore opportunities in sectors aligned with global trends, such as renewable energy, defence, and health research
Slowbalisation could be a successful strategic shift in how Australian businesses approach ethical and rigorous procurement. Tactical hedging, understanding supply chain dynamics, and leveraging local opportunities are crucial. While challenges persist, informed and value-based decision-making can put Australia in a position of success in the evolving procurement landscape.
Source: https://intheblack.cpaaustralia.com.au/business-and-finance/how-high-performing-businesses-adjust-slowbalisation
