Director of Consulting
Supply Chain Executive Order: What It Means for Your Organization and What to Do Next
We’ve learned a lot of lessons about business continuity and operational resilience since we first heard about the coronavirus more than a year ago. While most of these lessons provide opportunities to explore how we can do what we do better, few may have bigger impact on what we do—and plan for—than the lessons we’ve learned about how fragile our global supply chain can be.
And while the pandemic remains front-of-mind as a significant supply chain disruptor, what we’ve seen during the past decade is a growing number of events, such as natural disasters, that can significantly impact one region of the world with cascading global effects.
In fact, according to a supply chain survey by Gartner, almost 90% of respondents say they now plan to make investments related to supply chain resiliency in the next two years, with another 60% admitting their existing supply chains are not designed for resilience.
The trend across American manufacturing for decades has been on finding and sourcing products at the least possible cost, regardless of where those suppliers are located and often without taking into account specific events that could cause disruptions with product flow from those suppliers.
In the coming years, respondents indicated, agility will come more into focus, but cost will continue to be a priority. Yet, only about 30% of respondents say they’re ready to make a move away from a global supply chain to one that’s more regionalized.
Identifying and Remediating Supply Chain Weaknesses
As such, it’s not surprising to see the recent developments with a new executive order from the U.S. president addressing America’s supply chains.
At the end of February 2021, President Joe Biden issued an executive order designed to help secure supply chains for the U.S. and make them more resilient and diverse. The order directs federal agencies in certain areas to review existing supply chains for critical services and make recommendations about responses to resolve existing and future resiliency issues.
There’s a pending 100-day review period for key areas such as pharmaceuticals, semi-conductor chips, large batteries, and rare earth minerals (for example, minerals used for devices such as cell phones).
And then, within a year, similar reviews for areas of public health, defense, information technology and communication technologies, energy, transportation, and agricultural commodities and food production.
The goal is to identify weaknesses in the supply chain to establish plans that shore-up delivery channels for core necessities, thereby making the U.S. less dependent on external suppliers, as we are accustomed to now, for example, the heavy dependencies on suppliers from Asian countries.
Essentially, the order is to establish plans that ensure Americans have access to necessities, regardless of disruptive events happening around the world.
The result could likely lead to a shift back to more Made in America products or building more relationships with allied nations that share U.S. values.
While this approach sounds great on the surface, it creates a number of issues such as the likelihood of increased costs associated with supply chain de-globalization. These costs are among leading reasons why more U.S.-based companies haven’t led the way in bringing supply production back to America.
What to Focus on Now
While federal agencies begin their reviews and recommendations, now is not the time for your organization to remain idle and wait for end results. Instead, it’s time to go ahead and shift focus toward improving processes that ensure you have a resilient supply chain now and in the future—regardless of disruption type, length, or severity.
This transition highlights the emerging operational resilience approach already evolving within the business continuity industry and can serve as a guidepost for how we integrate customer needs and supply chain issues into a more inclusive approach for continuity.
By looking at your core products and services, mapping their delivery from end-to-end and understanding the role third-parties play throughout the process, you can have more insight into efficiencies, gaps, and single points of failure in your delivery models.
Understanding geographical concentration of third parties and single points of failure will help highlight where there are vulnerabilities that regional or global events could affect, and whether the events are delays, disruptions, or all-out loss of suppliers in a given geography.
For example, before the pandemic outbreak, one of our clients evaluated its critical services and discovered it manufactured more than 90% if its products through third-party suppliers in a single country—China.
As part of these evaluation, they mapped out their value chain from a starting point of acquiring raw materials, to design, tooling, manufacturing, and assembly. A vast majority of these events were both occurring in China and by contracted third-parties. It wasn’t until the company was ready to transport and distribute products to retail locations that key activities performed as part of the value chain shifted outside of China.
When the initial reactions to the pandemic forced China into lockdown, the company was in a lurch for weeks. Luckily, however, because they had already tackled core supply chain mapping, they were able to adjust before supply chain issues worsened. While this company was able to react and leverage safety stock to avoid major disruptions, it still recognized the vulnerability of its supply chain and is now examining manufacturing options in other southeast Asian counties.
What we can learn from this is the value of taking a more resilient approach to supply chains—before an event occurs.
By better understanding your end-to-end chain, you can more easily identify risks associated with consolidating suppliers in a single area and make plans for fast adjustments before supply chain shut-downs.
By taking this end-to-end model, including customer expectations and needs into account, you can better develop proactive strategies, such as the value of embracing geographic diversity, as part of your business continuity planning, which, in turns, helps make your organization more agile and resilient at all times.
Need help evaluating your current supply chain needs for resiliency or adding supply chain plans to your business continuity program? Please schedule a call with our team today.
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