Suez Canal Blockage Illustrates Lack of Resilience in Global and U.S. Supply Chains
Published on Friday, April 16, 2021 by Expansion Solutions Magazine
A container ship stuck in the Suez Canal vividly demonstrated the lack of resilience in the global and U.S. supply chains, as 400 freighters sat idly waiting or were forced to divertaround Africa, holding $10 billion in global trade hostage every day. Undeliveredcontainers worsened the container shortage. Delayed ships missed their next cargo loadings. The Ever Given’s canal obstruction is one of a string of recent events connectedespecially to the pandemic, but also fluctuating fuel costs, inclement weather and environmental surcharges, all of which increase the cost and risk of long supply chains. One analysis suggests Up to $4 Trillion in Revenue May Have Evaporated in Supply Chain Disruptions.
The U.S. is taking steps to shorten and localize supply chains. President Biden has ordered a review of four classes of essential products for which American manufacturers rely heavily on imports: semiconductors, high-capacity batteries, pharmaceuticals and PPE and rare earths. Additionally, he has initiated a Buy American campaign. These necessary moves are not enough. The administration also needs to formulate an industrial policy that emphasizes price competitiveness.
For decades, most economists and many politicians havewarned against picking industry winners and losers. We have become so dependent on imports that we need to choosespecific essential industries, as Biden has, but most important, we need to choose the manufacturing industry itself as a winner. If we create a competitive environment for manufacturers in general, then we can let economics pick the winners. We will not need to make huge investments to catch up from decades of neglect. The U.S. needs to keep improving competitiveness until the trade deficit disappears.The best single policy change is to reduce the value of the US $ by 20% to 30%. This article makes the case: How Can Biden Bring Back Manufacturing Jobs? Weaken the Dollar
3D Manufacturing and COVID-19
The global pandemic may return the U.S. to regional manufacturing, simplifying supply chains and making us more self-sufficient. “The optimal manufacturing location by 2022 is regional or local rather than global…The result of this is a supply chain that is no longer big, complex, and global.” Supply chain disruptions have highlighted the need for more direct digital manufacturing, which integrates 3D printing with traditional manufacturing methods and uses fewer resources to create entire parts or products, making distributed and regional manufacturing sustainable. (The Reshoring Initiative would love to hear of and promote reshoring cases enabled by 3D printing.)
Manufacturing has the highest multiplier effect of any sector of the U.S. economy
Every $1.00 spent in manufacturing adds another $2.74 to the economy, the highest multiplier effect of any economic sector. In addition, for every worker in manufacturing, another five employees are hired elsewhere. (Source: NAM calculations using 2018 IMPLAN data.) Recent research suggests that manufacturing’s impacts on the economy are even greater when we consider the entire manufacturing value chain plus manufacturing for the supply chains of other industries. That approach estimates that manufacturing could account for one-third of GDP and employment. The same research also estimatesthe total multiplier effect for manufacturing at $3.60 for every $1.00 of value-added output, with one manufacturing employee generating another 3.4 workers elsewhere. (Source: MAPI)
Rebuilding and Reshoring: What the U.S. Government Must Do
At IMTS.com, Harry Moser lays out the groundwork: “To reverse the trend of goods trade deficits and to boost competitiveness, the United States should acknowledge that a revitalized, price competitive, manufacturing sector is its first priority, necessary to accomplish other key objectives.”
Bye Bye, ‘Buy American’ Policy
Carey Smith, founder of Big Ass Fans, says that President Biden’s Buy American plan will not get the job done. Instead, we need to educate government and corporate buyers to stop buying on the basis of lowest price and put more emphasis on quality, delivery and the benefits to our country. The Reshoring Initiative’s TCO Estimator is available free online for that purpose.
2021 BDO MANUFACTURING CFO OUTLOOK SURVEY
The 2021 BDO Manufacturing CFO Outlook Survey presents a thorough review of the specific steps that companies are taking to address innovation, supply chain, skilled workforce and more.