Posted on December 4, 2023
After the industry has been talking about supply chain resilience for years, President Joe Biden on Monday convened the first meeting of his newly launched Supply Chain Resilience Council. (See the White House fact sheet.) The goal of the council is to “strengthen America’s supply chains” and “lower costs for families.” The council announced 30 actions to improve access to medicine and needed economic data and other programs tied to the production and shipment of goods. Although the council includes the who’s who of the different government bodies and agencies, where is the participation of the industry, the folks who know what is going on and can help solve these issues?
I like the way the White House is seeing the importance of supply chains, something folks within the industry were always aware of but somehow others never noticed until COVID hit. According to the White House, “robust supply chains are fundamental to a strong economy. When supply chains smooth, prices fall for goods, food, and equipment, putting more money in the pockets of American families, workers, farmers, and entrepreneurs.”
It is great to see the U.S. government continuing its focus on the U.S. supply chain in its efforts to further reduce inflation, which was partly caused by kinks in the supply chain. Inflation has decreased from 9.1% at the high in June 2022 to most recently 3.1%. And although companies are faced with inflation and higher logistics costs — the U.S. Business Logistics Cost increased by 19.6% in 2022 — the president referred to companies using “price gouging.”
Overall, supply chain companies have witnessed lower profit margins and reduced cash flows in the past year, which is quite contradictory to the so-called price gouging that should result in higher profits. Even the shipping lines that were making record profits during COVID have seen rates tumble and as a result had to do cost-cutting including massive layoffs. Supply chain costs have increased from higher wages due to labor shortages and labor disputes, higher insurance rates, disruptions from strikes, higher cost of raw materials due to geopolitical impacts, etc. So, while I don’t agree with the president’s observation, I do agree that the government needs to step in to help improve infrastructure and collaborate with supply chain organizations to improve the overall health of the industry.
As part of its actions to strengthen the supply chain, the government plans to establish new partnerships with private-sector stakeholders to “avoid bottlenecks, shorten lead times for customers, and enable a more resilient and globally competitive freight network,” the White House said in a statement.
And the plans go beyond the U.S. Several initiatives focus on global efforts to boost the supply chain, including partnerships with the European Union, Japan and South Korea to establish an early warning system for semiconductor supply chain disruptions.
The United States is also seeking emergency trade pacts with Canada and Mexico, while strengthening trade throughout the Western hemisphere through the Americas Partnership and several other international efforts.
And technology will play a large role in this endeavor as well. New cross-governmental supply chain data-sharing capabilities and cross-government partnerships will be put in place to improve supply chain monitoring and strategy. The Department of Commerce’s new, first-of-its-kind Supply Chain Center is integrating industry expertise and data analytics to develop innovative supply chain risk assessment tools and is coordinating deep-dive analyses on select critical supply chains to drive targeted actions to increase resilience. There are many opportunities to work with the industries to leverage visibility data platforms like project44 or Mojix and risk management tools like Everstream Analytics.
Additionally, Commerce is partnering with the Department of Health and Human Services to assess industry and import data that can help address foreign dependency vulnerabilities and points of failure for critical drugs.
The Department of Transportation’s Freight Logistics Optimization Works (FLOW) program, a public-private partnership that brings together U.S. supply chain stakeholders to create a shared, common picture of supply chain networks and facilitate a more reliable flow of goods, is announcing a new milestone.
The participants are beginning to utilize FLOW data to inform their logistics decision making, helping to avoid bottlenecks, shorten lead times for customers, and enable a more resilient and globally competitive freight network through earlier warnings of supply chain disruption.
These new analytical capabilities will enable the council to coordinate a more complete, whole-of-government critical supply chain monitoring function.
Exciting times are ahead, and I predict that if government and industry can work side by side, we will see a lot of progress in 2024. As the economy will seek to recover as well in 2024, this should set the entire industry up for success in 2025.