Over the last year and a half, shortages in medicine, PPE, and household products strained global supply chains. In response to those shortages and strains, one of President Biden’s early actions was to sign an executive order calling for a 100-day assessment on critical supply chains. During this time, the government is to examine past and potential future supply chain risks and vulnerabilities. While many industries have been impacted by pandemic-induced supply chain disruptions, there are two areas that stand out – Active Pharmaceutical Ingredients (APIs) and critical minerals. Both are essential to various industries, and both currently require dependency on other countries’ supply chains.
Focus of the Assessment
APIs are the primary ingredient in drug products. As of 2019, the U.S. is the world’s largest pharmaceutical market, at 45% of worldwide revenues. However, only 28% of the facilities that produce APIs are located within the U.S. Reliance on manufacturing facilities outside of the U.S. is a result of various factors such as cost of labor, size of factory, and demand. While global pharmaceutical supply chains have been historically successful in improving cost and efficiency, failures during the COVID-19 pandemic brought to light an overreliance on materials and capabilities from other countries.
Critical minerals are used in several essential and emerging technologies. Most notably, semiconductors and large capacity batteries. Both are important to defense and technology such as computers, cars, and appliances. Like APIs, the U.S. depends heavily on other countries for the mining and refining of critical minerals. This dependence can result in supply chain concerns and is highlighted by the current global computer chip shortage, proving that alternative and creative supply chain methods must be considered.
During the assessment period, the Biden Administration is expected to evaluate vital supply chains like those discussed above, to determine their impact on other industries and set plans to align future goals and needs. There is no quick fix to the situation, but an understanding of the global network of supply chains and improving supply chain resilience will be crucial. This will require focused attention from both industry leaders and government agencies to assess the current supply chain gaps and develop alternatives, to mitigate current and future stressors.
Addressing areas of concern within current supply chains will take research, time, and investment. The US industry will need to take an analytical approach to improving supply chain resilience. This involves decreasing dependency on foreign suppliers and improving American infrastructure to alleviate the current strain on the U.S. supply chain.
Clear visibility into current and future needs will be necessary to select which aspects of the supply chain to bring to the U.S. and which should remain abroad. Forecasting and planning tools play a key role in providing supply chain visibility and providing a more a realistic outlook. Also, technologies like machine learning will continue to improve and assist in building more accurate models, which will allow data-driven predictions and recommendations.
Data gathering and mapping of the entirety of the supply chain will be key to prevent future breakdowns. Without a complete and wholistic view of both your own supply chain and products and markets outside of one’s core industry, supply chains are sure to fail. Take for instance semiconductors, which are used by many diverse industries. While computers, servers, and phones get much of the hype and appear to have minimal issues, computer chips are in everyday devices and equipment – the auto industry is facing production stoppages, missed quotas, and revenue loss because of the chip shortage.
Global supply chains are inevitable – some resources are only present in certain parts of the world. However, a focus on recycling programs could minimize some risk. By encouraging re-use in the critical minerals supply chain, older technology can be broken down and repurposed to create a stock of essential raw materials that would typically need to be imported. Today, these programs are scarce and only practiced by a few companies. However, as environmental concerns increase and global supply chains are stressed, these programs will be placed at the forefront.
Even though APIs and critical minerals are the focal points of this post and are certain to be central to the 100-Day Supply Chain Review, all supply chains should be examined through the lens of the COVID-19 pandemic. Therefore, this will help to minimize current and future vulnerabilities and strains. Supply chain leaders need to recognize the overlap between industries, and constantly assess the status quo for innovative ways to relieve pressure.
To learn more about Clarkston’s tools for the assessment of critical supply chains, visit our supply chain services pages.
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Contributions by Addie Schmidt.