The Brookings Institution recently released a report entitled How to Build a Safer and More Resilient Next Generation of U.S. Supply Chains, saying that the coronavirus epidemic has accelerated the exposure of the vulnerability of the U.S. supply chain system. U.S. enterprises and governments urgently need to take measures to build the next generation of supply chains, improve the flexibility and security of the supply chain, and ensure that The United States continues to maintain its technological, military, economic and geopolitical dominance.
According to the report, since the 1990s, many enterprises have realized the globalization of procurement and production. However, with the transfer of supply chains overseas and the acceleration of globalization, the supply chain risks faced by enterprises gradually increase.
The COVID-19 pandemic and its accompanying economic crisis have accelerated this trend and fully exposed the vulnerabilities and structural problems of modern supply chains. Governments and enterprises recognize the urgency of reshaping supply chains and should improve their flexibility and flexibility.
The report believes that building a flexible supply chain should follow five important principles – improve supply chain agility to respond quickly to emergencies and return to normal as soon as possible; achieve “end-to-end” and data-driven supply chain management; ensure inventory, including emergency inventory, safe inventory, and diversified procurement; and with public and private Supply chain stakeholders maintain cooperation; effective demand planning.
According to the report, some TNCs have long recognized that managing supply chain risk is essential to maintain competitiveness, but the relevant risk management tools have not been widely used.
Over the past decades, excessive focus on operating profits and asset efficiency has led to a large “outflow” of domestic supply chains in the United States and become very fragile.
In response to the statement of U.S. policymakers that the supply chain of key products (especially medical supplies and high-tech products) should be transferred to the mainland, the report believes that in the context of globalization, restructuring the supply chain alone cannot solve the problem, which may reduce the competitiveness of American enterprises, harm the interests of consumers and weaken American innovation. Leadership.
The report said that the design and operation of the supply chain are highly dependent on products, and the United States needs to configure the appropriate supply chain model for different categories of products.
For example, for functional products with long service life and stable demand, “offshore supply chains” can be deployed according to cost-effectiveness; for innovative products with short life cycle and rapid market demand changes, “market-responsive supply chains” need to be designed; and products that are critical to defense, safety, health and national competitiveness (e.g. Rare earth metals, artificial intelligence, hypersonic weapons, 5G technology, etc.) need to lay out relevant industrial chains in the United States.
The report believes that improving the resilience and security of the supply chain of key products is essential to maintain the national security of the United States.
The government needs to design and develop supply chain systems including research and development, planning, procurement, manufacturing, distribution and maintenance, and create a national manufacturing ecosystem composed of small and medium-sized enterprises.
In order to create a more flexible and competitive supply chain, the report believes that the U.S. government should take the necessary interventions according to the operational characteristics of specific industries, and makes five recommendations in this regard.
First of all, draw a “map” of the supply chain that is vital to public health and economic security in the United States, and strengthen risk monitoring and early warning;
Secondly, promote the layout and construction of national logistics infrastructure, including “hard” infrastructure (ports, highways, railway networks) and “soft” infrastructure (service industries that support logistics), focusing on improving customs efficiency, supply chain reliability and service quality, network security, etc.
Third, use intellectual property law, R&D incentive mechanism, education and training and other means to support the innovation ecosystem and accelerate the process of creative implementation;
Fourth, establish a “one-stop” government agency, coordinate the implementation of relevant regulatory measures, and formulate a comprehensive national strategy to improve the competitiveness, safety and flexibility of the U.S. manufacturing supply chain;
Fifth, further invest in public-private partnerships to support product “full-cycle” research and development to promote the transformation of innovative technologies to scalable, competitive and high-performance domestic manufacturing capabilities.
The report also mentions that the Belt and Road Initiative is reshaping the global supply chain system, which is designed to promote more cross-border trade and integrate developing countries into global value chains.
The report concludes that the United States should work with trading partners to strengthen the competitiveness, security and resilience of supply chains and further enhance its global technical, military, economic and geopolitical strength.