The importance of the supply chain versus competition in the supply chain

Most recently, supply chains played a prominent role in both the new National Security Strategy and the White House Accelerating Infrastructure Summit. This is another example of the importance of supply chain vs. supply chain competition to the modern economy. As if the plethora of Nobel Prize winners and supply chain-related headlines over the last few decades wasn’t enough validation.

In the 48-page National Security Strategy, the word “supply chain” appeared 19 times, both as a weapon to be (abused) by rival states and as an arrow in the quiver of democracy that requires empowerment and investment. An example of supply chains that features prominently in the national strategy is the Indo-Pacific Economic Framework for Prosperity with its four pillars: trade and digital economy, supply chains and resilience, clean energy and decarbonization, and taxation and anti-corruption. The National Security Strategy reiterates the importance of appropriate talent, resilience and security in supply chains. This is supply chain management elevated from the business function to a strategic advantage.

As I sat in the Zoom Peanut Gallery of the White House Accelerating Infrastructure Summit, I reflected on how I’d waited most of my 30 years in transportation, logistics, and supply chain for a meaningful investment in America’s transportation infrastructure . Minister Buttigieg has been a frequent speaker lately and is a polished and confident speaker; His words that impressed me the most were: Keeping it made in America.

I immediately associated much of what was said at the summit with the National Security Strategy and recent headlines about developments in China and the European Union. We as a world are deglobalizing and cutting back to some degree. Some countries can even deindustrialize to some degree.

The most recent headline, showing the power and potential chaos at play in the supply chain vs. supply chain competition, concerns the new US export controls on semiconductors. The US Department of Commerce now requires a license to ship equipment to China that can be used in supercomputers or to make semiconductors. The move takes advantage of China’s economic weaknesses, particularly the lack of talent. Many US citizens, residents and green card holders work in Chinese companies trying to build their competitiveness. The chaos will also reverberate in the US. Nevertheless, the overall situation makes it clear how dependent high technology and innovation are on freely communicating social networks and strong educational institutions freed from state controls.

That doesn’t mean big trading entities like China and India will disappear from US trade, but the US has never had the high levels of global trade dependence that many other countries have shown. Before Covid, the ratio of US trade to GDP was around 27%, a number that fell to 23% in 2020. Thanks to its unique geography, rich natural resources, and strong domestic supply and consumer markets, the US is uniquely self-sufficient, bearing in mind that certain key industries are heavily dependent on foreign trade. China’s trade-to-GDP ratio in 2021 was 37% and the EU’s was 86%. It seems likely that the US ratio will fall a little further.

The supply chain vs. supply chain competition has entered an era where it is vital to international rivalries. US semiconductor restrictions will inspire other countries to use similar tactics, especially when many countries have to pay down record levels of debt at a time of elevated inflation and lower demand.

Supply chain managers need to be prepared. This implies an era of increasing scarcity coupled with increased friction and costs of doing business internationally. Overall, this is worse news for the rest of the world than for the US

About the author

Michael Gravier Michael Gravier is a professor of marketing and supply chain management at Bryant University with a focus on logistics, supply chain management and strategy, and international trade. Follow Bryant University on Facebook and Twitter.

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