“Deglobalization is a nice soundbite, but the reality is, we need more focus on risk management and mitigation.” – Philip Ideson, Co-Founder and Managing Director, Art of Procurement
When we say “deglobalization,” we often think of headlines, politics, or sensational predictions. But in procurement, deglobalization poses an operational challenge that shows up every day in contracts, categories, and conversations with stakeholders.
In this Art of Procurement podcast episode, my co-host Kelly Barner and I dig into what deglobalization really means on the ground. We explore how companies are adjusting their sourcing strategies, where China +1 strategies are falling short, and why talk of reshoring can sometimes distract from more pressing risks.
Below are some of our most important reflections on the realities we’re seeing today.
Deglobalization Is Not the Strategy. Risk Management Is.
"Deglobalization is a nice soundbite, but the reality is that we need more focus on risk management and mitigation. You don't just rebuild supply chains overnight. In fact, you probably can't ever rebuild some of them because of the outsourcing of expertise to these locations." – Philip Ideson
Diversification Might Be Just an Illusion
"Even if we go to the example of China +1, we would say okay, we can’t just completely pull out of China. So we're going to somewhat diversify by moving to another location. Then everybody started digging into the details and found out a lot of the companies in countries like Vietnam, for instance, are actually owned and operated by Chinese firms. So you’ve diversified in name only." – Kelly Barner
What We Talk About and What We Can Do Are Different
"If you look at what people are talking about, it’s 'Oh yes, everybody’s going to near-shore, re-shore, or friend-shore everything in the next 18 months.' But when you talk to the operational people and look at the viability, the recognition of what can actually be done (and the best way to do it without disrupting the whole operation) is very different from what we're all talking enthusiastically about doing." – Kelly Barner
Global Supply Chains Took Decades to Build
"We watched globalization happen. It doesn’t make it easier to unwind, but we understand the complexity and the drivers involved, and how long it took. It took decades. We’re not going to unwrap that in 12, 18, 24 months." – Philip Ideson
You Need People on the Ground
"When you have boots on the ground in all these locations, you have local relationships and insight into the risks – things you’re probably not aware of if you're operating from a satellite basis. Being on the ground means you can build those factors into your decisions." – Philip Ideson
Services Are Part of the Picture Too
"Deglobalization isn’t just about products or direct materials. It can relate to indirect services as well, things like where your data centers are or your call centers. Those are things you're really dependent upon as a business, and they’ve probably been contracted in lower-cost countries that are concentrated." – Philip Ideson
Small Suppliers Can Create Big Risk
"You can have something that doesn’t cost much money but is completely integral, like fasteners, for example. You have a specialty fastener that’s not just available off the shelf. I’ve been there. I’ve had the experience of a supplier in Taiwan with fasteners who could bring down an entire manufacturing facility." – Philip Ideson
Tail Spend Deserves More Attention
"We’ve always called it tail spend and treated it as tactical or transactional. But that’s where a lot of risks are missed. You can’t manage all risks at all times, but there are suppliers in the tail that are completely critical, and we overlook them." – Philip Ideson
Procurement Needs to Educate and Align
"The first kind of role that we have is to ensure that everybody is on the same page: engineering, program management, sales. Everyone needs to understand the cost of optionality, and the options of optionality, so decisions are made intentionally versus 'we’ve always done it like this.'" – Philip Ideson
Indirect Services Carry Strategic Risk Too
"When you're buying indirect services, the stakeholder is managing that relationship every day. So it's probably a little easier to bring them into conversations about risk. That’s where procurement can play a big role – bringing that awareness into real business decisions." – Philip Ideson
Duplication Brings Resilience, but Also Cost
"Flexibility, agility, resilience – it all kind of means the same thing. But it does usually increase the cost of getting things made, even if it’s just because you're splitting your volume. There's a cost trade-off in having a truly independent backup source." – Kelly Barner
Procurement and Sales Need to Talk About Price Tolerance
"If the cost of something is going up and we’re doing everything we can to control it, there’s only so much we can do. Procurement needs to ask: what will the market bear? That’s why having a closer relationship with sales is so important—we need to understand how much additional cost customers are willing to accept." – Kelly Barner
