An original vision for using technology to transform supply chains into value chains in order to revitalize American communities.
Supply chain theory in its current form came of age in the aftermath of World War II, when for decades, the U.S. Navy essentially made the international seas safe for trade pretty much everywhere in the world. Particularly since the late 1970s, supply chain designers looked for ways to decrease costs and increase efficiency in order to fatten the bottom line. They succeeded beyond expectations, resulting in widespread offshoring of jobs and functions overseas, albeit extracting a huge toll on society in the process. This continued largely unabated until the COVID crisis, which exposed the weaknesses of such a strategy plainly for all to see.
James Howard Kunstler has referred to the 3000-mile Caesar salad, where the various components come to the U.S. from countries in South America and Asia – all to put a nice lunch or dinner item onto a restaurant patron’s plate. Such a tactic was actually a very effective way to lower supply chain costs for over half a century.
That has all changed. While the old solution was expedient, given as it was to increase corporate profits significantly, it was not sustainable. Certainly, it looked good on paper – which is to say the quarterly earnings statements. And why not? Any stock analyst will tell you the same thing.
COVID-19 tossed a monkey wrench into the system. It followed on the heels of multiple hurricanes along the Gulf and Caribbean coasts, which disrupted supply chains relatively briefly. Then Winter Storm Uri knocked out the Texas power grid for several days – however, once again, supply chains recovered fairly quickly. It took the COVID virus and its variants to demonstrate the long-term, far-reaching vulnerabilities of supply chain strategy as taught in business schools. As a result, we are entering a new era.
Perhaps, not surprisingly, the challenges reside most notably in rural and inner-city America. These are the areas that remain neglected – many of which have seen population declines for decades. Decreasing the number of residents reduces electoral clout and reinforces the downward spiral. In areas where this occurs, private industry has little incentive to intervene because profit opportunities are limited. When profit-seeking companies do engage with the community, it often takes the form of privatizing public assets, which cannibalizes local resources and further accelerates the descent. To remedy this, only publicly-supported efforts can provide a sufficient catalyst for re-development – much the way basic research and development requires public support in order to avoid underfunding. The path to profitability is simply too uncertain or too far into the future.
Jack Buffington’s recently released book entitled “Reinventing the Supply Chain” takes aim at the problems corporate America has unwittingly created and offers prescriptions for renewal. He proposes five pillars to revitalize U.S. supply chains:
- Expand broadband infrastructure and availability. Many people may not be aware that broadband service can be obtained virtually anywhere on the ground in the U.S. The catch is that such a service is very expensive – and that is where policymakers should focus. It’s not just about broadband – it’s about affordable broadband.
- Invest in K-12 digital and STEM education. Workforce needs in the U.S. will continue to grow as the country reindustrializes. STEM fields offer the most promise in terms of addressing the challenges we face in the 21st century, and the reality is that both work and education will retain important elements of spatial independence – which is to say that remote learning, working, and service delivery are here to stay.
- Research and development of blockchain technology as a peer-to-peer operating system. Although blockchain is still in relative infancy, Buffington argues that the digital network it eventually creates will be analogous to the 1956 Federal Aid Highway Act, culminating in unprecedented ground interstate access in the U.S. The same would be true for the digital highway infrastructure.
- Advanced manufacturing and 3D printer research and development. Repatriating key manufacturing industries to North America will serve as the foundation for a Renaissance in U.S. industrial dominance.
- Create a public-private partnership model through market initiatives. The private sector alone does not have the resources or the incentives to build out the framework required to sufficiently reinvent supply chains. Cooperation should be emphasized over the one-dimensional view of pure or hyper-competition. Maximizing shareholder value should be reconciled once and for all with maximizing stakeholder value – in the true interest of the greater good. These stakeholders go well beyond the shareholder class to include workers, suppliers, and the community.
No doubt other approaches than those listed above will be put forward by similarly thoughtful authors once the nature of our current situation becomes increasingly well understood. As always, the proper narrative depends on an accurate collective understanding of the events at hand. In many ways, the U.S. is on uncharted ground. Nonetheless, there are clues to help navigate the way forward. As Mark Twain once said, “History does not repeat itself, but it does often rhyme.”
As an aside, though Buffington correctly notes the ambivalent attitude the U.S. tends to have about rebuilding its aging infrastructure, he gives far too much credit to the Chinese economy. A big part of China’s GDP growth over the past few decades has been fueled by building infrastructure, whether it’s ultimately put to use or not. Between the ghost cities that may never be occupied to the hyper finance-driven growth model the country employs – which in turn creates massive overcapacity – there is no way around the fact that the country’s path ahead between now and 2030 will be troubled indeed.
Regardless, “Reinventing the Supply Chain” offers a compelling case as to how the U.S., specifically and North America more generally, can recapture its industrial prowess ceded for a time to China and the rest of Asia. Not everything we buy or consume will be produced locally, but the long-term trend is clear: globally far-flung supply chains, stretched to their limits in terms of cost and efficiency, will give way to more local and resilient networks better able to withstand pandemics and the myriad other potential disruptions awaiting us on the horizon.
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