What Will Supply Chains Look Like Under the New Administration?
Published on 27 January 2021
A roundup of expert prognostications on how the new U.S. presidential administration could impact the way the world’s supply chains are established and run.
When the dust settles on the tumultuous U.S. political environment and businesses begin to ask themselves what the political power shift really means for their companies and their customers/suppliers, the supply chain will likely be at the center of many of those conversations.
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That’s because over the last 12 months the world’s supply chains have been put under a microscope the likes of which most companies have never experienced. From the global pandemic to the subsequent supply chain shortages to the uncertain tariff environment, companies came into 2021 ready for a change and eager to gain more control over their global supply networks.
For some, the answer lies in the reshoring, nearshoring, or “China plus one” manufacturing approach, the latter of which found companies adding an alternate country (other than China) to their list of manufacturing hubs and/or supply sources.
In other situations, companies added more automation to their supply chain operations with systems such as WMS thus offsetting labor shortages and gaining efficiencies, worked to reduce their overall supply chain risk, and implemented other strategies that would help them avoid the unprecedented challenges presented in 2020.
What’s on the Agenda?
With President Joe Biden already promising to roll back some of the decisions made during the previous administration, and with the power shifted within the congressional ranks, more changes could be ahead in 2021 for supply chain operators.
“While medical supplies and equipment are our most pressing and urgent needs, U.S. supply chain risks are not limited to these items,” President Biden’s website states. “The U.S. needs to close supply chain vulnerabilities across a range of critical products on which the U.S. is dangerously dependent on foreign suppliers.”
To close those gaps, the president says America needs a “stronger, more resilient domestic supply chain in a number of areas, including energy and grid resilience technologies, semiconductors, key electronics and related technologies, telecommunications infrastructure, and key raw materials.”
Caught at the Center of the Shockwaves
In analyzing how the new administration may advance policies that allows supply chains to withstand monumental shocks like COVID-19, Atlantic Council points to three key things that need to happen: existing trade agreements should be analyzed to ensure that implementation is taking advantage of the free flow of commerce intended in the original agreement; the “spaghetti web” of Western Hemisphere agreements can be better utilized; and the U.S. should engage in “consultations and create formal institutional mechanisms to ensure a common agreement among essential industries in the case of another major disruption.”
Highlighting how 2020 was marked by intense instability and a host of challenges the world had not experienced in recent history, Atlantic Council says that the pandemic continues to take its toll on human life, livelihoods, and entire economies. “Caught at the center of the shockwaves are supply chains, which have experienced, and continue to experience, some of the most severe disruptions they have ever faced at such a global scale.
Though different supply chains and industries have had to adapt differently, the lessons the world learned from 2020 will have lasting repercussions for the years ahead. It adds that for the new administration, one key priority will be building greater cooperation among partners and allies in the Americas. “How it does so will be a determining factor for the future of supply chains, and the Americas overall.”
Strengthening Supply Chains
In assessing the Impact of a Biden Administration on Global Supply Chains, Gartner’s Michael Uskert says the new guard has already thrown down the gauntlet about using the Defense Production Act to increase U.S. national stockpiles of personal protective equipment (PPE) and that it wants to “strengthen supply chains in areas of national interest.”
Those include critical areas like medical supplies and equipment, plus the supply chains of energy and grid resilience technologies; semiconductors; key electronics and related technologies; telecommunications infrastructure; and key raw materials.
“The Biden administration aims to do this through use of the federal government’s purchasing power based on the authority in the Procurement Act of 1949,” Uskert points out. “The focus will be on a combination of increased domestic production, strategic stockpiles sized to meet national needs, a crackdown on anti-competitive practices that threaten supply chains, implementing plans to surge capacity in a time of crisis, and working closely with allies.”
More Reshoring Ahead?
In Biden Has a Plan for Supply Chains and U.S. Manufacturing – But Will It Work?, The Reshoring Institute’s Rosemary Coates also shares her views on the impact of a new administration on the world’s supply chains, cautioning that “high-level statements made by incoming administrations are just ideas and typically lack execution and implementation detail,” SCMR reports.
“But at this time in American history, we are at a critical crescendo in manufacturing and global supply chains, and new policies by the incoming Biden-Harris Administration are important for us to understand,” Coates adds. For example, early initiatives will clearly be focused on ensuring that the U.S. doesn’t face shortages of critical products right now, and that the federal government is focused on securing the supplies, treatments, and vaccines needed to combat the pandemic.
The Brookings Institution has come up with its own predictions about the new administration’s impact on global supply chains, noting that reshoring could hurt U.S. companies’ competitiveness in the global market and reduce the appeal of domestic products in foreign markets.
“The design and operation of a supply chain is highly dependent on the product,” Brookings points out. “Functional products with long life cycles and relatively small demand variability require cost efficient supply chains that can be offshored. Innovative products with short life cycles and relatively high demand variability require market-responsive supply chains with nearshored or domestic sourcing and production.”
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