Digitizing President Biden’s Supply Chain Strategy
Along with EPI, social distancing and the WFH, supply chain was one of the most pressing but confusing terms in the minds of business leaders in 2020. Its status and importance has been solidified. with Executive Order of President Biden designed to consolidate critical components and improve the resilience of U.S. supply chains. Although prompted by a lot of enthusiasm, a more robust and far-reaching program that improves supply chain agility through investments and incentives that encourage digital transformation would be better suited to achieve this resilience.
The need for supply chain resilience
At the start of last year, the pandemic forced most supply chains to shut down because demand has dried up or safety concerns closed factories and suppliers. Throughout the rest of the year, many experienced patchy reboots as the pandemic increased and decreased across the world. In this mix, an America First strategy urged companies to relocate manufacturing and supply chains as a patriotic duty and business imperative against future disruption.
Now, spurred by a global chip shortage that has hampered production of everything from automobiles to mobile phones, the Biden administration’s new executive order ultimately hopes to increase domestic production of critical materials. In the president’s own words: “We have to stop catching up.”
Initially, the order requires a 100-day review of supply chains in four key areas: semiconductors, high capacity batteries, pharmaceuticals and rare earth elements. President Biden is also calling for a future one-year review of supply chains in six major sectors that include technology and food production. This approach foresees that a combination of production incentives, vocational training programs, business loans and, possibly, restrictions on certain imports can encourage domestic production and avoid future shortages of essential goods for major products. consumer and commercial.
Digital transformation enables agility
While this approach can certainly be successful, it’s also a sort of band-aid that misses some of the biggest challenges of operating complex supply chains in a global environment. A challenge that becomes even more difficult when localized – or worse, global – disruptions can sabotage production.
To facilitate these operations and keep supply chains running smoothly without the need for political or commercial interventions, we need to accelerate the pace of digital transformation within the industry. While commodity shortages, armed conflicts, epidemics and other disruptions will be pervasive threats, an agile and digital supply chain will create the kind of resilience that can bypass these issues or supplement supply on the fly with a minimum of time and cost increases.
Of course, supply chains have a long way to go to achieve true digitalization and the promise of Industry 4.0. Supply chains are made up of a long continuum that begins with the design of the product and its choice of production processes and raw materials, continues with the sourcing of materials and the manufacture of products, and involves shipping. and logistics throughout.
In this complex interaction, several types of technologies are used and different levels of digitization in action today. Some companies still rely on phone calls and spreadsheets to place orders, while others engage online through custom APIs and a digital thread. Advanced manufacturers can take advantage of artificial intelligence and automation in the factory, while we have seen others struggle with basic WiFi setups.
In short, the challenges are strong but the needs and opportunities are enormous. This is especially true in times of crisis, when the benefits of a digital supply chain become evident.
Ultimately, every industry and business has unique supply chain requirements and constraints. It is not possible to take a one-size-fits-all approach to supply chain management, which means that only priority sectors or components can be resolved by mandate. So while the executive order of the Biden administration may be a necessary short-term solution, it must be complemented with investments and incentives that will produce truly long-term solutions.
The next phase of this effort should be to increase the planned 100-day review by committing to support investments by US-based companies in digital transformation efforts.
At a minimum, these investments should include grants for companies looking to make the digital transition, a commitment to improve broadband internet infrastructure and rural broadband access, benchmarks for education standards. technology from secondary school and manpower training programs. The keys will be to facilitate the relocation of companies and to ensure that our workers are ready to enter the new demands and jobs created by this transformation.
And given that 90% of the companies surveyed in the State of Manufacturing Report 2020 indicated that they wanted to adopt a digital strategy, but only 14% said they had adequate funding to activate their strategies, this increased support from the government would be strongly adopted by business leaders.
By modernizing U.S. supply chains, we can create resilience AND agility to help businesses weather even the most severe future disruptions and ensure a constant flow of goods. After all, only 30 years ago, Shenzhen, now considered the “factory of the world,” was a sleepy fishing village.