You don’t need an agile supply chain, you need a redundant one
A chain is only as strong as its weakest link. If you have an extremely efficient but thin and fragile supply chain, one small disruption can upend the entire system.
2020 was not a banner year for supply chains of any kind, but US businesses that faced some of the biggest bottlenecks relied on large fulfillment partners, which became unreliable as warehouses were shuttered and workers were afraid to come to their jobs. They watched in dismay as orders poured in, while products sat idle in their warehouses.
While many factors contributed to this situation, it was largely the result of a long-standing drive for more efficient supply chains. Customer expectations around speed and cost of shipping soared in the past ten years, and companies of all kinds abandoned the idea of running their own direct-to-consumer shipping channels. Instead, they sent their products to Amazon or another large distributor, which used massive scale to fulfill and ship orders with a maximum of efficiency.
This drive for efficiency was ubiquitous across the rest of the supply chain as well. Companies sourced the least expensive materials they could find, put them on ships, and waited for them to arrive. This kept costs low and margins high, but when global fleets were sidelined by the pandemic, supplies dried up, and businesses were thrown into confusion.
A chain is only as strong as its weakest link. If you have an extremely efficient but thin and fragile supply chain, one small disruption can upend the entire system. A single logistical failure soon blooms into an existential crisis. Such a situation doesn’t require a pandemic. It can be fueled by a shipping accident, a new regulation, or a civil disturbance in some corner of the world.
But the pandemic certainly focused the industry’s minds on the problem, and right now, the response has largely been a call for more agile supply chains. The idea is that businesses should use data to predict future needs and flexibly transition from supplier to supplier and partner to partner, as necessary.
Unfortunately, this comes with its own risks. No matter how good your data is, there are still major costs to ramping up new relationships. In addition, an agile approach requires predictive data, which always assumes that tomorrow will look much like today. The problem is that you don’t need an agile supply chain for normal times, you need it for abnormal ones, when everyone is scrambling for the same resources.
So, rather than putting all your eggs in the most efficient basket and hoping to make changes on the fly, you should consider using multiple partners and suppliers simultaneously — even in good times. That way, a business establishes solid relationships with multiple vendors. If one fails or suddenly becomes unreliable, the other is there to quickly pick up the slack, without any need to dial up a new operation from scratch.
In other words, we need to acknowledge the reality of the modern world. We have to stop looking for maximum efficiency in the short term and instead look to build in resiliency to mitigate the risk of catastrophic failure under the pressures that will eventually come.
This doesn’t mean that you have to resign yourself to mediocre results. The balance between suppliers and distributors doesn’t have to be 50-50 or 33-33-34. Instead, you could have a 95% efficient supply chain, and a 5% redundant one. You may use a large player like Amazon FBA to ship 95% of all of your product to consumers, but use your own smaller, more reliable operation to ship 5%. That way, if there is a disruption in the more efficient and inexpensive partner, you don’t need to pivot to an entirely new and unfamiliar one. Instead, you have experience with a different channel and can quickly and efficiently scale up processes, as necessary.
Simply put, we need to rethink our cult of efficiency. From boardroom to stockroom, companies need to understand the risks that go along with overly efficient supply chains. While it’s always tempting to squeeze out profits in the short term, we shouldn’t do so in a way that creates existential hazards down the line. Efficiency needs to give way to redundancy, at least in part, to ensure that businesses survive the inevitable disruptions when they come.
In 2015, blockchain (the technology that makes digital currencies such as bitcoin work) was starting to be explored as a solution for supply chains. It promised cost savings, increased efficiency, and heightened transparency, among other benefits. For that reason, many companies were happy to run pilots testing blockchain for themselves. Today, these small-scale projects have been replaced by large-scale enterprise adoption of blockchain-based supply chain solutions. There are plenty of choices now for blockchain supply chain products, platforms, and providers. This makes the option to use blockchain available now to nearly everyone in the sector. This wealth of choice does, however, make it more difficult to decide which blockchain integration is best (or, indeed, if your organization needs to use it at all). To find the right blockchain, companies need to consider three factors: cost, sustainability, and the ultimate goal of trying new technology.
Choosing the right blockchain for an enterprise supply chain begins with the most basic consideration: cost. Blockchains work by securely recording “transactions,” and in a supply chain, those transactions are essentially database updates. However, making such updates has varying costs on different chains. If a container moves locations, that entry is updated, and a transaction is recorded. Enterprises need to figure out how many products, containers, or pieces of information they will process daily. Each of these can be considered a transaction. Now, some blockchains cost not even $1 to record a million movements. Other chains can cost thousands of dollars for the same amount of recording. Understanding the amount of activity you will need to record against the cost of transactions is the first place for an enterprise to start when considering blockchain. Ask the provider which blockchain their product is built on, and its average transaction cost. This will help you find the most cost-effective product or integration.
The question of cost becomes even more important when your supply chain partners have other transparency obligations, like that of a “Protected Designation of Origin” product. This kind of requirement means that your adoption of blockchain will likely involve more transactions, or records, to serve your purpose, which means utilizing a blockchain with lower costs is imperative. This was the case for producers of Fontina cow’s cheese. This is a “Protected Designation of Origin cheese,” which means it must come from the Aosta Valley (and only the Aosta Valley) in Italy. Utilizing blockchain helps prove the provenance of this artisanal cheese to its customers and partners, which is one of the reasons it was adopted by the group responsible for its production (the Consortium of Producers and Protection of Fontina PDO). However, when reporting on their adoption of blockchain in their supply chain, they also acknowledged that the potential high costs of using the technology were a concern (but this was allayed by their choice of blockchain platform and design of their pilot).
The second consideration is sustainability. Supply chain partners are being pressured to deliver on ambitious environmental, social, and governance (ESG) targets across the board. The addition of new technologies to any system, especially technologies like blockchain and artificial intelligence (AI) that are known for their energy use, can be counterproductive to meeting these expectations. However, just as different blockchains have different costs to run transactions, so too do different chains have different environmental footprints. This can also be easily vetted by asking your provider if the chain is proof-of-work or proof-of-stake.
Proof-of-work is most well-known because it is used by bitcoin, and can cost an extremely high amount of energy and electricity to run. If the blockchain is proof-of-stake, it is more likely to be environmentally friendly. The good news is that many supply chain and logistics service providers are stepping in to offer these greener blockchains as an option for their projects. One of these is Finboot in Spain, which worked with the energy company CEPSA to implement blockchain to trace vegetable oil from its source to its end use in its biodegradable surfactant production. Still, ask for their sustainability credentials anyway. If there’s any reason to doubt that the blockchain being used or the solution being proposed is carbon-neutral, the solution has to be disregarded. There’s just no reason to adopt more technology if it will present more problems later on.
The final consideration is the toughest but also the most rewarding: the ultimate goal of adopting blockchain. What improvement is the most important to your business? Blockchain could address several of them. For example, there is a movement towards maintaining a fair trade for goods like chocolate and coffee. However, the true “fairness” of the provenance is only as good as the records. Blockchain can help here, as proven by the household Italian coffee brand Lavazza.They integrated blockchain to simplify and streamline the supply chain journey of its La Reserva de Tierra Cuba coffee bean, making it easy for consumers to see the journey from farm to cup. Each coffee bean harvest and reception, environmental data and processing information, quality control, and transportation are recorded on a publicly available blockchain for the company and the consumer to use. They are also using a carbon-neutral chain with low costs, helping them hit their sustainability as well as their fair-trade goals.
Improving internal provenance records is also a valid reason to adopt blockchain, making it easier to maintain a stringent, auditable record that can be provided to other departments, shareholders, governments, or regulators. This kind of provenance can be more detailed and more sensitive to attempts to access or change the data. So, using blockchain to certify medicine shipments, as one example, allows an enterprise to securely control a record of authentic, noncounterfeit medications. This is especially important if counterfeit medicines end up causing harm and government agencies investigate. Otherwise, blockchain can help make supply chains more resilient to digital attacks or intrusion, reduce costs of maintaining records, fight the threat of counterfeit goods, and more.
The supply chain sector is under pressure to be even more efficient and reliable despite a challenging economic and geopolitical landscape. Still,a recent report from EY stated that enterprises plan to “shake up their supply chain strategies to become more resilient, sustainable, and collaborative with customers, suppliers, and other stakeholders.” If that is the case for your organization, then certainly blockchain can help you. Blockchain’s internal provenance and integrity makes a supply chain more resilient, including by helping identify potential disruptions early, streamlining regulatory compliance and internal audits, and detecting counterfeit products and fraudulent activities. Blockchain is also a tool for collaboration with your stakeholders. Lavazza is just one example of how it can be used to give customers verifiable information about product origin, journey, and authenticity, building confidence and loyalty through transparency and traceability. And if you choose a blockchain that is itself sustainable, it can help achieve sustainability goals too. The most important filter, however, remains the ultimate goal. What do you want to improve or change about your operations? If the answer involves becoming more resilient, more transparent, or more efficient, blockchain can help. Use this goal to evaluate your options first, followed by an analysis of costs and its sustainability metrics. By considering these three factors, you are more likely to find a scalable, resilient, and efficiency-delivering use of blockchain in your supply chain business.
In today's economic environment, companies are continuously pressured to reduce costs to combat slower growth; to offset increases in material prices, energy, and transportation; and to counterbalance various other pressures, such as inflation. Despite these issues and the economic instability worldwide, companies must continue to differentiate themselves and find growth opportunities to compete in the global marketplace. For example, in order to boost revenues and fuel growth, many companies are now under as much pressure to reduce product life cycles and speed-to-market as they are to find savings and reduce operational costs.
After steering through the challenges of the COVID-19 pandemic, procurement continues to face new disruptions driven by geopolitics. For example, many procurement teams are continuing to deal with issues related to the ongoing Russia-Ukraine war that began in early 2022. More recently, the Israel-Palestine conflict and disruptions in the Red Sea and Suez Canal have forced global freight providers to reroute shipping containers around Africa, which has intensified costs and increased lead times.
The ever-expanding volatilities of global supply have caused many companies to revisit their procurement strategies and put more focus into multisourcing, nearshoring, and regionalizing their supply chains to improve resilience against such disruptions. In a recent Gartner survey, 63% of respondents said they were investing in multisourcing to “achieve greater resilience and/or agility.” Similarly, according to McKinsey’s “2023 Supply Chain Pulse Survey,” “almost two-thirds (64%) of respondents say that they are currently regionalizing their supply chains, up from 44% last year [in 2022].”
Multisourcing is a great strategy for responding to risks and threats by having alternative sources of supply or backup supply. Essentially, it is about diluting the risk over multiple suppliers. Sourcing diversification across distinct geographies and/or nearshoring can also mitigate the risk from sudden changes in import tariffs due to trade wars.
While this trend is pointed at enhancing the resilience of global trade in the face of disruptions, it is a colossal undertaking for procurement teams to reorganize complex global supply chains. Procurement now needs cope with new challenges, such as finding and qualifying new providers, cutting supply lead times, and reducing logistics complexities.
Most groups of companies or large multinational organizations which operate several establishments adopt some compromise between purchasing globally and buying locally, aiming to balance the advantages of centralization with the flexibility of decentralization. This transformation will require a strong focus on supplier relationship management to develop these reimagined supply bases and ensure that new suppliers meet the company’s standards when it comes to service levels, cost improvement initiatives, environmental key performance indicators (KPIs), and quality control.
For a real-world example, let’s consider Toyota. Famous for its “just in time” (JIT) production system, Toyota relies on long-term, strong relationships with its suppliers. By developing local suppliers and investing in their capabilities and capacities for years, Toyota has built trust and loyalty among its suppliers while achieving substantial stability in its supply chain. Local suppliers are more responsive and can deliver products faster than those located farther away. This approach has increased efficiency in production processes, enabling lower shipping and warehouse storage expenses. Thanks to this deeply integrated system with suppliers, Toyota has shown resilience against supply volatilities and maintained its leadership position in the global automotive marketplace. By incorporating local suppliers into its plans and managing inventory just in time, Toyota has gained a financial inventory benefit and cost advantage over its competitors. Furthermore, partnering with local producers is good for the environment, because it reduces global shipping and the company’s carbon footprint. “Glocalization” combines the global sourcing with the proximity of local availability of critical supplies. Think global, act local!
A more collaborative approach
This is why in more recent years much more attention has been paid to the development of “mutual” supplier-buyer relationships, where the benefits of doing business together arise from sharing and exchanging ideas. Effective and regular communication is the cornerstone of a strong supplier-buyer relationship; it aids in understanding each other's capabilities and expectations, and it fosters a sense of partnership. This is in complete contrast to short-sighted and adversarial relationships, where the focus is only on performing a financial transaction.
In the collaborative approach, the buyer organization seeks to develop a long-term relationship with the supplier. Establishing strong, enduring, and mutually beneficial relationships with a strategic supplier is a critical step in improving performance and ensuring consistent quality across the supply network. This is particularly important when adopting a glocalization strategy to build reliable supply chains that in turn benefit the customer experience.
The strategic view is that the buyer organization and the supplier should share a common interest, and both should seek ways of adding value in the supply chain that build a satisfactory outcome together. Both parties must invest in trusting and supporting the relationship with the intention of identifying and implementing improvements and innovations. Embedded in this approach is the commitment that any benefits that are achieved will be shared, a process not possible with a simple transaction. The organizations concerned will seek to come together and jointly set targets for overlapping interests.
This shift requires the role of sourcing to move away from a transactional one focused on materials and services management and toward a more strategic role, aligned to long-term business requirements. To be successful, supplier relationship management must play a pivotal role.
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An advanced transportation management system can help with route optimization, real-time tracking, multimodal management, and predicting potential supply chain challenges.
A transportation management system (TMS) is a critical tool for all supply chain and logistics practitioners. It provides shippers, third-party logistics companies (3PLs), and fourth-party logistics providers (4PLs) with the visibility they need to manage the supply chain and optimize the movement of products and goods. There are various types of transportation management systems, and while using a basic TMS is better than no TMS at all, advanced transportation management systems offer enhanced functionality and can scale with you as your business grows.
Getting the right TMS in place can have considerable benefits, as a TMS helps with planning and executing the movement of goods on a comprehensive level, which aids in reducing the risks of disruptions at every point in the supply chain. Companies that better manage risk will see significant savings. Data from the supply chain risk intelligence company Interos found that of the organizations they surveyed in 2021, the average organization lost $184 million in global supply chain disruptions. Similarly, a McKinsey study found that, within 10 years, the cost of supply chain disruptions adds up to nearly half of a company’s profits.
What Is the Difference Between an Advanced TMS and a Basic TMS?
Differences exist between TMS solutions, with not every organization or product offering the same features. More advanced TMS solutions go further, providing greater visibility and control. Consider some of the differences of using an advanced TMS for your logistics operation.
Functionality
A basic, or “lite,” TMS solution offers some nice features and enhances productivity. It offers features related to basic routing and order management, and it gets your products moving.
By comparison, an advanced TMS will include additional tools to enhance success, including:
Advanced route optimization to take into account changing conditions or specific factors related to your business.
Real-time tracking so you can catch and adjust problems early on or offer real-time solutions for unplanned delays.
Multimodal management provides organizations with more options to move products faster and more efficiently and affordably, depending on the factors that matter most.
Predictive analytics is yet another benefit of an advanced TMS. Its ability to predict potential supply chain challenges allows for better planning and mitigates risks.
Scalability
A basic TMS solution is typically best suited for small businesses. It does not provide advanced features to support more complicated needs. The more complicated your logistics needs are, the more robust the features on your TMS must be, including both in the planning and execution stages.
An advanced TMS offers more of what you need if you are a medium-sized business planning to grow or if you are a large enterprise right now. It offers solutions to adapt to more complex and intricate supply chain models. In high-volume networks, this is critical. If you expect to see significant demand increases, or your supply chain experiences seasonal demand fluctuations, an advanced TMS is the better solution.
Data Integration
Organizations also must consider how well their existing data and tools will integrate into a new system. A basic TMS will facilitate some options but tends to have limitations on what types of products and solutions it will integrate with overall. More so, it does not have the ability to take the data it has and provide you with comprehensive analysis, but rather just offers the data for you to analyze yourself.
An advanced TMS goes further by providing more advanced analytics, including opportunities to incorporate the tools you need as you grow, such as an enterprise resource planning system, warehouse management system, order and inventory management tools, real-time visibility tools, and accounting systems. It also offers more comprehensive reporting tools.
Unlocking Your Full Potential
Partnering with a 4PL or managed transportation services provider and implementing an advanced TMS is a strategic play that's going to have a very dramatic impact on the profitability of your business’s profitability and resilience.
An advanced TMS equips companies with essential tools to capture and leverage data effectively, offering enhanced visibility, and control over logistics processes. By enabling real-time insights, predictive analytics, and seamless data integration, an advanced TMS transforms complex supply chains into strategic assets. This level of supply chain optimization empowers businesses to address disruptions proactively, drive growth, and maintain a competitive edge in today’s dynamic global marketplace.
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Labor strikes can stop supply chains in their tracks unless companies take steps to build up resiliency.
Strikes and potential strikes have plagued the supply chain over the last few years. An analysis of data from the Bureau of Labor Statistics by the Economics Policy Institute concluded that the number of workers involved in major strike activity increased by 280% in 2023 from 2022. Currently, the U.S. East Coast and Gulf Coast ports are facing the threat of another dockworker strike after they return to the negotiating table in January to attempt to resolve the remaining wage and automation issues. Similarly, Boeing is continuing to contend with a machinists strike.
Strikes, or even the threat of a strike, can cause significant disruptions across the global supply chain and have a massive economic impact. For example, when U.S. railroads were facing the threat of a strike in 2022, many companies redirected their cargo to avoid work stoppages and unhappy customers. If the strike had occurred, it would have had a massive economic impact. The Association of American Railroads (AAR), estimated that the economic impact of a railroad strike could be $2 billion per day.
Similarly, although the U.S. West Coast ports avoided a strike in 2023, the labor negotiations caused companies to reroute freight. For example, companies with locations on the East Coast went through the Panama Canal instead of having their cargo land at West Coast ports. As a result, West Coast ports’ market share dipped during this timeframe. Now as the East Coast and Gulf Coast ports try to finalize negotiations to seal the deal with the International Longshoremen’s Association (ILA), companies are searching for alternative routes and transferring their shipments back to West Coast ports. The economic impact of the strike is estimated at $3.8 to $4.5 billion per day by J.P Morgan.
Labor negotiations also threaten to further exacerbate inflationary trends, which have been a key concern across the supply chain. The ILA and port operators reportedly reached a tentative agreement to increase wages by 62% over the next six years. Similarly, the Boeing machinist strike is mainly related to a request for a 40% pay raise, with machinists recently rejecting a proposed 35% increase. These demands come as companies and consumers across the spectrum are resisting increased costs.
Nor are these strikes completely focused on pay increases. The ILA is also demanding a total ban on the further automation of cranes, gates, and container movements that are used in the loading or loading of freight. This issue still remains unresolved. Such a ban would not only increase costs, it would also threaten the competitiveness as the U.S. ports, which are already some of the least competitive in the world. According to the Wall Street Journal, L.A. and Long Beach ports are about half as productive as China’s best port in terms of average container moves per hour.
Creating a Resilient Supply Chain
Labor unrest and strikes have caused executives to open their eyes to the volatility, uncertainty, complexity, and ambiguity (VUCA) in their supply chains. Many are responding to the volatility and disruptions by working to create more resilient supply chains.
No company can thrive in a supply chain disruption-ridden environment if it is not prepared to pivot as conditions change. However, preparation alone will not suffice. To thrive in a VUCA world, companies should be ahead of changing conditions or perhaps flip the situation on its head to become the disruptor instead of the disrupted. As the competition struggles to maintain customer service levels, profitability, and working capital requirements in the face of disruptions, companies with a more resilient supply chain will gain market share.
There are several strategies to create a resilient and proactive supply chain. The most successful approaches include rethinking strategies, upgrading business processes, and automating and utilizing advanced technologies. The bottom line is to create resiliency/flexibility, quick responsiveness, and upgraded performance.
Rethinking Strategies
Old strategies will no longer suffice in this more volatile world. For example, producing in China to reduce labor costs provides no resiliency when chokepoints arise in the global supply chain and/or as geopolitical risks surge. For example, the Red Sea crisis has created a supply chain chokepoint, delaying goods transiting from northeast Asia to the East Coast of the U.S. and Europe. Container ships have re-routed around the southern tip of Africa, adding cost, time, and other risks to the trip. As labor disputes and/or strikes arise, the risk increases that the product will get stuck or delayed in transit. If there are strikes on the East Coast and Gulf Coast ports, ships will have to divert to the West Coast and be shipped across the country, adding time and cost. By moving manufacturing closer to customers and consumers through reshoring, nearshoring, and vertical integration efforts, these risks are mitigated. If local disruptions do occur, companies can recover quicker due to the shorter distances, quicker lead times, and greater control.
Thus, proactive executives are rethinking their manufacturing and supply chain network. For example, Ascential Medical & Life Sciences last year expanded its domestic manufacturing footprint, opening a 100,000-square-foot facility in Minnesota that will specialize in developing custom manufacturing machinery and solutions for medical and life science companies. The facility is part of a broader reshoring effort by the company.
In a similar vein, many companies, such as GM, Samsung, and Dell, have followed a nearshoring (also called friendshoring) strategy to Mexico. By moving closer to customers, they not only are more resilient but also can take advantage of trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), as well as lower regulations and costs.
In addition to moving manufacturing, companies are also diversifying their supply base. They are pursuing strategies such as adding backup sources of supply, establishing strategic partnerships and joint ventures, and vertically integrating their supply chain.
Upgrade Business Processes
The most successful companies are aggressively upgrading strategic processes to support resiliency, customer success, and profitability. For example, rolling out an SIOP (Sales, Inventory, Operations Planning) process can help companies respond more quickly and proactively to changing customer demand and/or supply chain disruptions. Similarly, companies that have upgraded their demand, production, and replenishment planning processes are able to provide customers with higher service levels while also freeing up cash by reducing unnecessary inventory. These upgraded planning processes also improve margins by increasing efficiencies and productivity while reducing waste.
For example, a manufacturer of health care products utilized a SIOP process to better predict revenue and to create a better operational rhythm. The company’s demand plan was translated into machine capacity and critical raw material requirements. By taking this step, the company became aware that it needed to get a backup supplier to avoid a potential critical chokepoint in the supply chain. At the time, the manufacturer was purchasing all of its most important material from Brazil. Due to geopolitical risk in the region, there was the potential for supply chain disruption. To mitigate this risk and ensure reliability, the manufacturer began sourcing 20% of its material requirements from a backup supplier in the United States. Fast-forward a few years, and there was a port strike that made it difficult to receive the materials from Brazil. The manufacturer’s SIOP process provided a forecast of what was required to bridge the supply gap during the disruption. Because of the already existing relationship, the backup supplier was willing to ramp up volume to cover the manufacturer’s supply gap, even though the supplier was receiving an overload of requests from other companies. As a result, the manufacturer was able to maintain supply of this critical material and continue to meet its customer service levels. While its competition struggled, the health care manufacture was able to grow its revenue by 15%.
Automate & Digitize
Technology can also help companies respond better to disruptions and volatility. For example, advanced planning systems can help planners can quickly pivot with changing conditions, such as strikes. The most advanced of these systems will be equipped with artificial intelligence (AI) capabilities that will recommend changes on the fly to satisfy customer needs in the most profitable and least risky manner. For example, as strikes arise, the system will quickly assess changing conditions and recommend that the manufacturer move demand to plants and/or routes not impacted by the strike. The planning systems will also provide the planners with a better picture of requirements so that they can change production plans and ensure high service levels for customers.
In the same fashion, companies that automate their manufacturing processes, such as by using robotic welders, can more flexibly respond to changing customer requirements change while also mitigating costs. Similarly, companies that use additive manufacturing technologies can produce and customize on demand. By using robotics and automation equipment, manufacturers can run lights out, thereby increasing output and flexibility, while reducing cost. Therefore, if a strike occurs at the manufacturer, some level of production is likely to occur, as long as they can assign a resource to keep the robotics and automated equipment running.
In logistics, advanced technologies can seamlessly sort, package, and move products. These technologies can help companies quickly respond to changing conditions so that packages can be re-routed at any time. Similarly, transportation planning can use predictive models to optimize freight costs and rerouting shipments through the global supply chain in response to changing conditions, thus ensuring timely deliveries. For example, as strikes arise, the system will quickly assess a company’s transportation network, evaluate alternative routes, and recommend the optimal one. Changes will also be made to current routes for goods in transit so that they meet the customer due dates at the lowest cost.
Delivering Bottom Line Business Results
The bottom line is to create a resilient supply chain and craft tomorrow’s supply chain today. Companies that invest smartly in the future will be prepared to take market share as disruptions occur. There will be more opportunity than ever before for those that rethink strategies, upgrade business processes, and automate and digitize their end-to-end supply chain.
About the author: Lisa Anderson is founder and president of LMA Consulting Group Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. She recently released SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue & EBITDA Growth that can be found at https://www.lma-consultinggroup.com/siop-book/.
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Supply chain professionals should be aware of how the different policies proposed by the U.S. presidential candidates would affect supply chain operations.
For both Donald Trump and Kamala Harris, the revival of domestic manufacturing is a key campaign theme and centerpiece in their respective proposals for economic growth and national security. Amid the electioneering and campaign pledges, however, the centrality of supply chain policy is being lost in the shuffle. While both candidates want to make the supply chain less dependent on China and to rebuild the American industrial base, their approaches will impact manufacturing, allied sectors, and global supply chains much differently despite the common overlay of protectionist industrial policy.
Both Trump’s “America First” and Harris’ “Opportunity Economy” policies call for moving home parts of supply chains, like those that bring to market critical products like semiconductors, pharmaceutical products, and medical supplies, and strengthening long-term supply chain resilience by discouraging offshoring. Harris’ economic plan, dubbed the “New Way Forward,” aims to close tax loopholes, strengthen labor rights, and provide government support to high-priority sectors, such as semiconductors and green energy technologies. Trump’s economic plan, dubbed “New American Industrialism,” emphasizes tariffs, corporate tax cuts, and easing of regulations.
Supply chain policy differences in rhetoric and priorities will become a growing attack vector in the lead-up to Election Day. While political discussions focus on the economic benefits, corporate leaders need to understand the implications of policy changes and the effect on their firms’ ability to navigate risks and disruptions.
U.S. manufacturing base and supply chains
Trump’s emphasis on sweeping tariffs creates uncertainty over supply security and fears of inflation. Harris’ continued emphasis on “Bidenomics,” such as the Inflation Reduction Act and the CHIPS and Science Act, impacts multitier global supply chains and trade policy around the world. Under either plan, the net effect would be that free trade will continue to regress under the impulses of decoupling from high-risk markets, geopolitics, and regionalization. Both parties emphasize the opportunity to create new, well-paid jobs. At the same time, customers are likely to have to bear the higher costs, either directly by paying higher prices in stores or indirectly through subsidies financed by taxpayers’ money.
Labor, immigration, and the workforce
Trump’s emphasis on mass deportation of illegal immigrants will impact the manufacturing and agricultural sectors that already have labor shortages. Harris’ focus on labor rights will amplify organized labor’s influence in supply chain operations and thereby increase costs as seen in the recent longshoreman strike on the East and Gulf Coasts. Both directions will only strengthen inflationary pressures and cause organized labor to resist technological advances such as automation and artificial intelligence to replace jobs. The net effect is that organized labor sees its influence growing under either election outcome, resulting in more potential strikes, and the educational sector being called upon to develop the requisite training and development programs and public–private partnerships to address the manufacturing and supply chain skills gap. Access to top domestic and global talent will be critical to support a growing U.S. manufacturing base.
Sustainability
Trump would roll back some of the environmental regulations, climate initiatives, and decarbonization measures. Big Oil companies, such as Exxon Mobil and Phillips 66, however, have come to embrace the low-carbon energy provisions of the Inflation Reduction Act. Harris is expected to strengthen protections and enforcement alongside international allies and partners. In continuation of the Inflation Reduction Act, a Harris administration would continue providing incentives to green technologies and businesses. The net effect of both approaches would be that corporate leaders will stay committed to decarbonization measures that were set in motion years ago.
Regardless of the election outcome, the uncertainty around supply chain policy will continue well into 2025. In particular, there are growing concerns about costs and their inflationary impact on the deficit and national debt; reform of the de minimis exemption for low-value imports; the role of friend-, near- and re-shoring; and the renewal of the U.S.-Mexico-Canada Agreement in 2026. The authors are hopeful that supply chain policy steps announced by the U.S. Department of Commerce in September at the Supply Chain Summit will be institutionalized and survive leadership turnover. The election outcome will determine supply chain policy’s next form and shape the U.S. economy’s ability to compete in an increasingly uncertain global market.