The Executive Order on Supply Chain Risks
We need more ideas to mitigate supply chain risks, not just reshoring.
What’s the state of the American Supply Chain? Over the past 12 months, you probably noticed that some of your favorite items were harder to find or no longer available at your local store. You may have also noticed that the prices of many products have increased. Though the supply chains in the United States never wholly failed, it’s safe to say, they don’t feel as reliable as they were.
Many pandemic factors have led to production tailing off. One of the biggest takeaways from the pandemic was that the United States depends too much on China for critical products like large-capacity batteries, pharmaceuticals, essential minerals, and semiconductors. Mix that with workplace social distancing, friction with China’s totalitarian government, and seemingly ubiquitous cyberattacks, and you have a recipe for extensive product shortages as well as price hikes.
The big questions remain, how do we bulletproof our supply chain? and is reshoring enough?
How the Biden Administration is Responding to Product Shortages
In February, the Biden administration issued an executive order requesting a 100-day review of the United States’ supply chain. Soon, we’ll know the answers to this review. The review promises to focus on all potential supply chain vulnerabilities. In particular, this analysis zeroes in on those previously noted four essential products Americans need to maintain their living standard. Semiconductors are crucial to computer functionality. Batteries are vital for making electric vehicles (EVs) that will help the United States shift away from environmentally harmful fossil fuels to rechargeable battery-powered vehicles.
Reshoring & Security
The Biden administration is likely to suggest reshoring the production of batteries used for electric vehicles, semiconductors, and even some pharmaceuticals. The sad truth is the vast majority of these items and other consumer products purchased by the United States are made in other countries. To be more specific, many are made in Asian countries with totalitarian governments.
Our extensive reliance on China for our supply chain is a national security vulnerability. Take microchips, for example. In 1990 about 37% of microchips were manufactured in the US, and today, 12% are made in the USA. This concentration has created a significant backlog of microprocessor chips for phones, electronics, and laptops in the US over the past 12 months.
When medical supplies, pharmaceuticals, microchips, and other vital products came up short during the COVID-19 outbreak, it served as a wake-up call to the US. Certain medications became unavailable because there was not enough material to produce capsules to hold the medicine.
It simply does not make sense to rely on other countries’ cheap labor to produce the medications our taxpayers need. A significant amount of thought and planning will likely result in recommendations around reshoring to build resilience in our supply chains.
Additionally, there is sure to be a renewed focus on cyber-security. In late 2019, while the world was on the verge of a pandemic, the SolarWinds software breach occurred. In early 2020, the software company sent out updates to their software with the hacked code. Customers unknowingly installed the hacked code, which then leapfrogged to Office 365 accounts, with some emails hacked. Beyond that, there is a serious concern around the security risks involved with semiconductors and microprocessors from foreign suppliers. It doesn’t take much to understand the security risk with trusting secure and vital information on foreign-made chips.
Ideas to Strengthen the U.S. Supply Chain
If the United States is to regain its status as the dominant global world power and avoid future disruptions, we’ll need a stronger supply chain. The Biden administration’s potential actions detailed above are only part of the solution.
Modernizing the supply chain and increasing in-transit asset visibility are low-hanging fruit that we should leverage as we look to the future. Real-time transparency builds resilience during critical events. When the flow of products from the point of production to the point of delivery is accessible, supply chain managers can understand where breaks occur. Increased transparency requires collaboration across suppliers, but with modular and cloud-based solutions, this is totally realistic.
Software as a Solution (SaaS) options like our own Total Visibility Anywhere can be leveraged to provide real-time data on assets anywhere in the world. Because it was built for use by the UN Military, TVA can be accessed from any device anywhere. Business today is done on the move, and TVA provides the information supply chain managers need across all systems, using visualizations designed to make comprehending information quick and easy. The right data at the right time allows supply chain managers to make better decisions on their supply chain.
A Cloud Strengthened Supply Chain
Why do cloud-based systems strengthen our supply chain? Because, as long as the internet is working, cloud-based systems are accessible. The cloud centralizes information, making it easier for all authorized parties to access data, heighten efficiency, reduce costs and ultimately hasten the velocity of the supply chain. Updates relevant to the supply chain can be made in the cloud in real-time, ensuring all appropriate parties are provided with quick updates and also have the opportunity to proactively collaborate with other key parties to ramp up supply chain efficiency.
Cloud-based asset visibility empowers all relevant parties to locate specific products at every stage of the shipping process and lifecycle. This expanded visibility bolsters supply chain efficiency and makes it much easier to gather information about supply chain delays and bottlenecks. The result of cloud implementation is easier and more effective supply chain management, particularly when it comes to mitigating the impact of supply chain disruptions.
Where Do We Go From Here?
Two years ago, the thought of a microprocessor shortage or issues with medication supplies was laughable. Unfortunately, the US realized the downfall of sending so much offshore.
With this upcoming executive order in place, Federal Agencies will evaluate the risks and potential disruptions that will cause future supply shortages. Businesses nationwide should do the same, incorporating actionable changes to increase visibility, modernize the software, and proactively manage supply chains now. We all need to take the necessary steps to ensure our systems are ready for the following critical events.
Don’t let asset visibility opportunities pass over your systems as technology changes. For more information on software modernization and supply chain improvements for your organization, or a consultation on any of Tactical Edge’s solutions and services, contact Peter Vitale, COO at Peter.Vitale@tacticaledge.us