How To Solve Our Supply Chain Problems

Just two months ago shelves were empty. A lack of toilet paper, cleaning supplies and other household necessities combined with headlines about food supply shortages left consumers concerned — and at times, stockpiling. 

Kaeleigh Johnston, who manages multiple yoga studios in New York, is just now working on her reopening plan as her non-essential industry has been closed. She’s worried about the long-term effects of inconsistent access to supplies. 

“I’m concerned about getting the cleaning supplies to keep my family safe, but also having the needed products to be able to open business and keep my students safe,” said Johnston. “I remember seeing empty shelves when Superstorm Sandy hit, but I knew once power was restored the stores would replenish supplies. This situation feels different, I don’t know what needs to be fixed. And that uncertainty makes it very difficult to not start stockpiling supplies while I am still able to get them.”

Consumers Have Real Concerns

Consumers have real concerns about feeding their children, keeping loved ones safe and also keeping their families and themselves occupied while they wait out the pandemic at home. Home improvement projects are the top of many lists but shortages are possible as manufacturing of non-essential products has practically come to a standstill. 

A more serious situation is the continuing scramble to obtain medical supplies as healthcare professionals are reusing and repurposing equipment. Many of those deemed essential workers still lack the tools to keep themselves safe while performing the tasks that keep everyone else safe, fed and working.

The global coronavirus pandemic  has exposed problems with our global supply chain. Supporting domestic manufacturing is the only viable solution.  

The Problem With Our Existing Supply Chain

We now realize that in an event such as this there is no tolerance for failure. Sourcing and manufacturing have come under renewed focus, as has the push to reshore and improve domestic manufacturing. We don’t lack the ability or the technical know-how, just the compelling event to actually do it. 

The way to recover from this round of COVID-19 and future threats is to start building. From an economic perspective, supporting a robust manufacturing base is unbelievably important. If we look at the countries which have experienced impressive economic growth over the past 100 years, we’ll see that that growth was due to the development of a strong domestic manufacturing industry.

In his book, Growth: From Microorganisms to Megacities, Vaclav Smil calculated that $1 in revenue generated by a manufacturer creates $1.37 of revenue for other service businesses. By comparison, every dollar generated for a services company creates 0.60 cents in revenue.

But over the past 40 years, manufacturing has been sent to wherever production is the cheapest. That has always been a losing proposition. Once a country’s economy improves, manufacturing becomes less competitive and then moves to another low-cost region—which is to say, where labor is inexpensive—and the same dynamic repeats. To maintain competitiveness, these growing economies must reinvent their processes to keep a healthy manufacturing base, and they do that with high-precision manufacturing which enables hyper-efficient production and thereby keeps costs low.

A Focus On High-Precision Manufacturing

In the U.S., we must develop the same focus on high-precision and high-quality manufacturing near to where products are consumed. There are clear benefits for domestic manufacturing that we should be using to our advantage. Domestic manufacturing benefits communities with job creation and brings money into local economies, provides environmental benefits thanks to shorter delivery journeys, and benefits consumers because manufacturers are able to offer better customization.

Shirish Pareek, leader of the recently launched the Manufacturing Coalition, said the time to act is now—we need to begin by simplifying the supply chain. “The United States supply chain is in crisis,” he said. “We know how to make this a reality as manufacturers across the country are joining together to solve this crisis.” Leadership within the manufacturing industry will create the strong supply chain needed to reopen and reboot the economy.  

Building Resilience Into Our Supply Chain 

We rely heavily on foreign countries to supply our products, or the components need to make them. This is a potential disaster in many scenarios, not just the current pandemic. If California has a major earthquake, we’ll need massive amounts of safe, high-quality building supplies and we’ll need them quickly. Can we rely on international production? Or if China experiences a catastrophe that destroys a significant amount of its manufacturing infrastructure, that would cause a major disruption to the global markets. As it currently stands, we would not be able to quickly replicate lost production domestically, if at all.

We need to build resilience and redundancy in our supply chain so that we can quickly adapt to these situations and ensure we can meet the needs of our society.

There is, of course, the argument about price. Price will always be the dominant factor. Some consumers will pay more for locally made products but most consumers will not choose the more expensive option.

What Can We Do To Make U.S. Manufacturing Competitive? 

Technology is the answer. Manufacturing technologies that enable innovation and automation are efficient, secure and reliable. They will also help solve the skills gap that our manufacturing industry has already been facing, and is projected to worsen. They are the only solution to making domestic production viable again.

For example, the price of constructing a nuclear power plant has increased by over tenfold since the 1970s because of the lack of suppliers manufacturing parts. This means that a clean and what should be an inexpensive energy supply is not, at the moment, economically realistic because of the lack of parts. This is nonsensical with today’s technology and capabilities.

Manufacturing technologies also ameliorate labor costs. It doesn’t matter if someone overseas is paid $1 an hour and an American worker is paid $20 an hour for the same job—if the overall labor component to the cost of the product is near zero, domestic production can be competitive. This is where data analytics creates a competitive advantage by optimizing the production cycle so that it is as efficient as possible, using a minimal amount of time, material, energy, and labor. Once data analytics are part of the production process, the competitive advantage is no longer price but who is the best at making a product.

Shifting Away From Decentralized Supply Chains

There are many unknowns to COVID-19. We do not yet know what our “new normal” will be and the adjustments we will have to make to our daily lives. But one thing has been made abundantly clear—a completely decentralized global supply chain has now been proven to be unbelievably brittle. It is too fragile to withstand these kinds of disruptions, whether that’s the continuing coronavirus or other viruses, diseases, climate change or major disasters.

Our ideas around manufacturing and supply chains will be forced to change, and we need to think now about how we are going to create a better future that is resilient to these types of shocks and helps rebuild our economy with good quality, well-paid jobs. And so, we must build the technologically-advanced factories to create the future we need.