Question

The coronavirus pandemic has exposed a significant weakness in our supply chain. The United States had not produced penicillin since 2006. Up to 93 percent of our antibiotics come from China. 50% of all the face masks produced in the world come from China. Apple could not produce IPhones because the only factory making the screens was located at the epi center of the virus in China and was shut down. Most electronic first tier vendors are located in China. The list goes on. Side note – in 1941, the largest trade partner to the US was Japan.

1. How should the US view strategically important products in a global marketplace? Should we allow our primary adversary to be the sole source? Why or why not? Options?
2. Should the US focus on being self-sufficient with regard to medical products?
3. How did the supply chain become so vulnerable? What steps would you recommend to prevent this from reoccurring?
4. The use of JIT in the supply chain has had many advantages. Unfortunately, any interruption is catastrophic. What options should be put in place to mitigate this risk?

Answer 1

There is a saying goes, "Don't put all your eggs in the same basket", is applicable here. Depending too much on any country for any particular supply is not good. Any conflict of interest might stop them from stop supplying you. The same happened here. The US should regulate the outsourcing of important products among 3 or more countries so that there can be a redundancy.

I think it is not problematic to outsource any critical product to adversaries but allowing primary adversaries to be a sole source is something that should be avoided. Adversaries can stop the supply, especially China being a communist country can stop the supply anytime in case of political conflict. So, allowing the primary adversaries to be the sole supplier of the critical product should be avoided.

Focusing to be self-sufficient is always a good idea. This allows to reduce dependencies on any country and thus saving oneself from strain on the supply of critical products. It might not be possible to be self-sufficient in one day, but, promoting homegrown solutions, imposing economic reforms that promote indigenous supply will help to become self-sufficient. Medical products being critical to any country should be the primary focus of any government to be self-sufficient. This way, the US can face any political conflict without having to bow to the terms and conditions of any foreign country.

Supply chain became vulnerable because of lack of

• Supply Chain Visibility: Delivery chains are becoming highly vulnerable to instability, from natural catastrophes to the freezing of global credit. The need for the visibility of real-time demand-supply is obvious. Without alignment into the supply chain, it takes days, weeks or even months to convey information about demand and supply through the supply chain. This time gap allows the market signals to be compounded, as one travels farther away from the end customer's actual source of market. That's what's called the bullwhip effect.

• Supply Chain Agility: Supply chains are far less flexible than those of five years earlier. They are more robust and fragile. Some of the technologies guided by the leaders of the first generation (tightened supply chain convergence, lean process management systems, eProcurement and online bidding) make the supply chain stronger; but for others, there has been an implicit trade-off of decreased agility.

To mitigate the supply chain risk, businesses are increasingly focused on enhancing the reliability of their supply chains. Companies like Intel, P&G and Unilever are setting up increased knowledge of the multi-tier supply chain and integrated network security tools to be resilient in the face of these disruptions.

Because it is value chains, and not individual firms, that compete in today's marketplace, there is a growing need for cooperation and exposure in the supply chain.
Shortening commodity lifecycles puts ever more demand on supply chains to change quickly to respond to the overall market strategy. For other categories of markets, the policy is most impacted by volatility of demand and supply. Imagine, for example, a market where competition is very strong and the processes of manufacturing are changing. Adding mobility to supply chains and using technologies to exchange knowledge, organize and follow postponement standards would undoubtedly deliver positive steps.