How New White House Plan To Address Supply Chain Crisis Will Impact Companies
As a follow-up to the executive order President Joe Biden signed in February to assess the vulnerabilities of the country’s supply chain, the White House today released the key findings from the reviews directed by Biden. It also announced the actions his administration will take “to strengthen American supply chains to promote economic security, national security, and good-paying, union jobs here at home.”
The findings of a new White House task force’s assessment of the national supply examined semiconductor manufacturing and advanced packaging; large capacity batteries, like those for electric vehicles; critical minerals and materials; and pharmaceuticals and active pharmaceutical ingredients.
The White House said the administration, “… is taking immediate action to address vulnerabilities and strengthen resilience with the launch of a new effort aimed at addressing near-term supply chain disruptions. And, pursuant to E.O. 14017, it is crafting strategies for six industrial bases that underpin America’s economic and national security, which will be completed within a year.”
According to a fact sheet from the White House, the Biden administration has taken steps to address vulnerabilities in the supply chain, including:
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Expanding the manufacture of vaccines and other essential supplies
Working with companies that manufacture and use semiconductor chips to identify improvements in supply chain management practices
Increasing investments in the mining of rare earth elements outside of China
Addressing critical cyber vulnerabilities to U.S. supply chains and critical infrastructure, including issuing last month E.O. 14028 on “Improving the Nation’s Cyber Security”
Impact On Companies
Johnathan Foster is the principal consultant at Proxima, which analyzes supply chains, logistics and infrastructures. He said today’s announcement “… will open dialogue about constraints that are hamstringing all supply chains…” He predicted it will impact three areas that impact most companies and every U.S. supply chain: ocean container capacity, driver constraints with regulations, and delays in supply chains
Patrick Penfield is a professor of practice for supply chain management and director of executive education at the Whitman School of Management at Syracuse University. He said White House’s supply chain announcement, “is going to greatly impact the U.S. semiconductor, high-capacity battery, mining and pharmaceutical sectors.
“Companies within each of these areas will need to review the announcement’s directives, initiatives and incentives to understand how it will impact their organizations specifically from a tax, regulatory and profit standpoint,” he noted.
Changes Won’t Happen Overnight
“Unfortunately,” Penfield said, “many of the organizations within these sectors are publicly traded and have made significant investments of time, resources and money in outsourcing, sourcing and establishing supply chains in low-cost regions such as Mexico, China and India in order to maximize shareholder value.
“Changes to their supply chain processes will not happen overnight and it will take a considerable amount of time, energy and effort to develop these ‘new’ domestic supply chains. However, today’s announcement could help facilitate and accelerate the pace of these supply chain changes.”
Plan Will Influence Future Business Decisions
Penfield said, “In my opinion, this is a strong statement and plan by the Biden administration and will influence the supply chain practices and business decisions leaders in these sectors will need to make in the future. The White House’s focus on these industries is critical to the success of the United States.
“This announcement could give the U.S. manufacturing base a renaissance and also create a ‘ripple effect’ of creating even more domestic manufacturing jobs within other industries or sectors,” Penfield observed.
More Than Just Talk?
Tony Nuzio is the CEO and founder of ICC Logistics Services, a supply chain consulting company. He said the government’s report on critical supply chain vulnerabilities “is really a recap of what we have known for quite some time now.
“The U.S. has been much too dependent for way too long on foreign sources of supply for key products especially in the area of medicines, batteries and key minerals needed for the production of semi-conductors. So for one thing, ‘we’ve seen this movie before.’ The real issue is whether or not the federal government will have the stomach to challenge these foreign governments in the area of trade policies, tariffs, taxes, etc., especially when it comes to China. I’m afraid that this will become another one of those efforts where there is a lot of talk, but very little, if any, action,” he said.
According to Nuzio, “As far as the impact of this report on today’s business leaders is concerned, if new government support is offered to train employees and help strengthen their supply chain networks, those business leaders will certainly be listening to what the Feds have to say.
“On the other hand, if these efforts ultimately become an effort to further stifle the free market, those same business leaders will be turning a deaf ear to anything the government has in mind in that regard,” he predicted.
Addressing Common Symptoms And Issues
Proxima’s Foster noted that, “Freight and supply chain issues tend to be agnostic with common symptoms and issues. Solving for one issue naturally solves for another.
“Strategically though, it is important to lift these constraints on strategic items such as computer chips to impact the automotive industry which helps many types of industries beyond the chip industry such as the steel, rubber, plastic, and of course the supporting manufacturing sectors. It is equally important to solve many other issues which help everyone’s supply chains,” he said.
Advice For Business Leaders
Foster noted that, “Supply chains have never been more important to companies and their respective health/viability of these supply chains are now considered a national interest.
“If companies have not invested in improving their talent, strategies, and visibility in this area they are impacting the long-term health of their respective companies. Supply chain leaders are needed and deserve a seat at the respective decision table,” he advised.