Editor's Note: In this excerpt adapted from his book, Reinventing the Supply Chain: A 21st-Century Covenant with America, University of Denver supply chain professor Jack Buffington reimagines how U.S. supply chains could be structured. He argues that U.S. supply chains are currently optimized to meet private market objectives and rarely “consider the resiliency needed to ensure the public good in a time of crisis.”
He proposes that public sector investment could be used to develop community-based supply chains that would “advocate for their citizens through innovation and enterprise.” These community-based supply chains, or enterprise zones, would use advanced digital technology to manufacture and sell products first locally and then globally. Buffington argues that these enterprise zones are not meant to displace large companies such as Amazon and Walmart, rather they are to act as their future competitors.
Since the beginning of the 21st century, one of China’s goals has been to create a supply chain strategy that balances itself through “dual circulation,” which means keeping its economy open to the world when it is in China’s best interest to do so, but then pulling back from globalization when its necessary to stabilize its domestic markets. The concept is an intentionally vague term and does not seem to be clearly articulated in any detail in official Chinese government economic plans, but it has been a foundational strategy of the nation since it entered the World Trade Organization (WTO) at the beginning of the 21st century. It is sometimes described as “capitalism with Chinese characteristics.” …
To compete with this 21st-century model of globalization, the United States needs to develop its own version of dual circulation with American characteristics by creating a community-based supply chain system. … This would involve the creation of an enterprise innovation model that takes advantage of the strengths of the American culture and of a reindustrialization strategy to develop an American Silk Road of sorts. This model would consist of a networked collection of micro-manufacturing hubs at the community level using broadband infrastructure, advanced manufacturing techniques, and a modernized approach to American education. This model would leverage both America’s innovation engine and emerging 21st-century technologies.
This community-based supply chain systems would focus internally first and then project outward to the world, from localization to globalization, to create a “glocal” model. Compared to China’s approach of dual circulation, which controls the balancing of supply and demand through a centralized governmental system in which all roads lead back to Beijing, this American system would work through individualized producer and consumer channels. … The goal would be to reform markets through people, process, and technology, not bureaucracy and policy tactics.
America’s model should be for the public sector to incentivize nodal self-reliance, allowing the individual to express himself or herself through the market. This is a paradigm shift from large-scale global multinational corporations achieving economies of scale, often enabled by large institutions.
Through public investment in community-based infrastructures such as 3D printing and logistics centers, the United States could put communities that have been excluded from economic development for over half a century back on the map. … An entire glocalized supply chain could be constructed both by and for the community and networked across the planet. This networked supply chain could connect to the next town over, to an Asian corporation, to a seaport, or to any municipality worldwide. Such a model offers unlimited possibilities, all within the community’s own control rather than dependent on big government or business.
Think of this community-based system as one that mirrors the internet, a decentralized array of clusters, constantly changing, always connected. Its logistics are virtual algorithms rather than physical routes and destinations. … This model starts virtual and then is physical. Fulfillment in this new model is done virtually as much as possible before transitioning to traditional logistical forms such as warehousing, distribution, transportation, and retail stores.
Take, for example, West Baltimore, a crumbling community plagued by drug dealing and limited to remedial employment opportunities, such as retail food service at minimum wage. If West Baltimore had access to an upgraded broadband infrastructure, an open-source blockchain system to enable transactions, and an advanced manufacturing center to promote production, its schools could teach its students to act as nodes within a community-based supply chain system. A virtual logistics system would allow them to create a network across other communities through the internet. The planning, sourcing, and distribution of materials and services could be transacted through the blockchain. These materials and services could then be manufactured into products and distributed and retailed within a peer-to-peer model. Physical supply chains have flown over and around communities like West Baltimore; digital systems can reintroduce a communal and global approach or glocal virtual logistics.
A proposed glocal model is antithetical to what logistics professionals have been taught for decades: that optimization is a physical point A to B process primarily focused on cheap labor markets and technology. In this new model, let’s call it Logistics 2.0, supply chains will become more virtual than physical. Rather than optimizing from point A to point B to enable cheaper prices for consumers and producers, a digital supply chain system can eliminate these spatial challenges by eliminating these physical limitations and redefining who is a customer and who is a producer. Consumers and producers can be anyone, living anywhere, so as long as they are networked to do so. …
A national platform to kick off a community-based supply chain network would commence through incentives and subsidies for a public broadband infrastructure and public education reform. With this platform in place, a digital infrastructure would network each community in the nation and around the world, similar to how a national railroad system helped to create the physical network of the U.S. supply chain over a century ago. Then each state and local municipality could determine its separate economic development plan, perhaps through the seeding of business case funding for local communities to begin justifying their models. For example, the U.S. government could fund the infrastructure and educational strategy, and Maryland could fund the feasibility study and proof of concept of a community-based supply chain based in the city of Baltimore. If the feasibility study is justified, the federal and state governments could then offer further incentives or subsidies for local communities to purchase additional equipment for the community system, such as 3D printers, information technology equipment, and so on.
Through this model, local entrepreneurs—or nodes—are funded in an innovation-based approach, but one with lower barriers to entry than exist today (such as limits on significant capital funding requirements that make entrepreneurship a high-risk, entry-restricted endeavor). Building this 21st-century model of innovation, entrepreneurship, and supply chain through a community-based network model will take time and will require commitment. It will require iteration as the public and private sectors, as well as the nodes and existing businesses, learn how to compete against existing large multinational corporations. This is the real competitive advantage of this system compared to China’s state-owned enterprises.
[THIS EXCERPT FROM REINVENTING THE SUPPLY CHAIN BY JACK BUFFINGTON IS © 2023 AND REPRODUCED WITH PERMISSION FROM GEORGETOWN UNIVERSITY PRESS. ALL RIGHTS RESERVED.]
