- 13 April 2023
Nearshoring, friendshoring, reshoring, onshoring or slowbalisation – whatever you call it, the move to ‘deglobalise’ the world’s supply chain may not be the dramatic shift it was cracked up to be.
Over the last few years, ‘deglobalisation’ has become a bit of a buzz word among economists, policy makers and the business community. In the most basic terms, it means a decline in the amount of economic activity between countries.
Deglobalisation is a trend that is still playing out – though whether it will bring a radical change or merely a slight adjustment remains to be seen.
The end of hyper-globalisation
The years 1990 to 2008 were the era of ‘hyper-globalisation.’
The end of the Cold War started a rise in the number of nations adopting free market policies. In 1993, Tim Berners-Lee released the source code for the first web browser.
Suddenly, it was easier than ever to trade without borders. Multi-national corporations roamed the earth, trailing increasingly complex supply chains behind them.
But after eight months of financial market instability, in September 2008 the ‘too big to fail’ Lehman Bros bank crashed. Foreign exchange transaction rates soared.
Hyper-globalisation had come to an end, and deglobalisation is not the only term to emerge in the years since to describe the trends taking its place.
Adjiedj Bakas created a new word in 2015 to describe the increasingly protectionist attitudes of businesses and governments: ‘Slowbalisation.’ It soon gained currency: In 2016, the UK voted to leave the EU, and in 2018 then-US president Donald Trump set up barriers to US trade with China. His successor, Joe Biden, has kept those tariffs in place.
Bringing it all back home: Reshoring, onshoring and nearshoring
Reshoring happens partly in response to trade tariffs, though the pandemic highlighted how vulnerable the supply chain can be to transport disruption. Labour costs and shipping times also play a part in decisions to bring operations closer to home.
In general terms, reshoring, onshoring and nearshoring all apply to what happens when firms move to geographically shorten their supply chains. ‘Friendshoring’ is a politically motivated version of this. A number of US companies, for example, are shifting their manufacturing from China to either the US itself or to Mexico.
For third-party risk management teams, onshoring presents its own difficulties. New, more locally based suppliers will need to be subjected to due diligence procedures and vetted to ensure that one form of supply chain risk is not simply being swapped for another (perhaps greater) one. The legal and logistical complexity of ‘offboarding,’ or ending, relationships with offshore suppliers could be a process of months – possibly years.
Reshoring (by whatever name) is not likely to spell the end of global supply chains. Researchers have consistently found that diversification is a better way of mitigating third-party supply chain risks than any form of reshoring is.
The ‘hyper’ is over, but globalisation is here to stay
The structures put in place over the last century or so will continue to shape geopolitics and international trade. The benefits and challenges of globalisation are changing, however, and will require new approaches.
How we can help
At Thomas Murray, we have almost 30 years’ experience in managing risk and compliance in some of the world’s most complex industries. We combine that with our award-winning technology to provide our clients with continuous monitoring of their third-party risk, from onboarding to offboarding.
Our flexible and scalable solutions are relied on by organisations around the world to protect them and their supply chains in an ever-changing risk environment. Tell us about the challenges you’re facing and how you’re meeting them – we’re ready to help you navigate the shifting supplier landscape.