With supply chain issues expected to stretch well into next year, lawmakers are looking to centralize Washington’s response and encourage more companies to bring manufacturing processes closer to home to better insulate the U.S. from catastrophic disruptions like the COVID-19 pandemic.
“Looking at these issues and preventing something from happening again in the future is key for U.S. security,” said Natalie M. Scala, associate professor and graduate program director of supply chain management at Towson University, “as well as just for the well-being of American citizens to be able to get the products when they need it.”
The proposal follows steps taken by the Biden administration to address supply chain weaknesses exposed by the pandemic. The president announced a Supply Chain Disruptions Task Force in June and appointed John Porcari, former Maryland transportation secretary and U.S. deputy secretary, as ports envoy.
The White House also issued a 250-page report outlining goals for reviving domestic production of semiconductors, large capacity batteries, critical minerals and pharmaceuticals amid shortages along every stage of the supply chain.
The legislators’ move last week reflects Washington’s heightened focus on supply chain issues following the pandemic, which snarled supply chains across many industries with factory closures and canceled orders, followed by a period of peak demand related to a historic rise in e-commerce.
“COVID-19 showed us all how critical resilient supply chains are for consumers and businesses,” Bourdeaux said in the announcement. “All across my district, small business owners and manufacturers have told me about the challenges they face in accessing basic materials critical to their products.”
Cheaper labor in China, India and other countries has long presented inherent barriers to reshoring, and many U.S. companies have limited domestic inventories to maximize profits, said Sanjay L. Ahire, co-director of the Operations and Supply Chain Center at the University of South Carolina’s Darla Moore School of Business.
Ahire told Supply Chain Dive companies are realizing the need to look beyond the “sticker price,” as he called it, to what’s known as the “total cost of ownership,” which includes hidden costs of faraway manufacturing.
“The back-end cost of managing those inefficiencies, many times outstrips the initial savings that you think you’re going to get,” Ahire said. “That’s the reason why many companies actually are now trying to reshore. A big part of that is also the cost of transportation, the availability of oil and all of those kinds of things.”
A top takeaway from the pandemic — which likely won’t be the last, Ahire noted — has been that domestic supply chains tend to be more reliable than international ones, he said.
“Your supply chains will become only more reliable if you have suppliers that you have more control over,” Ahire said. “Having your suppliers domestically means you can exert more control, because it’s the same country, the same policies, and so on.”
Post time: Oct-21-2021