This week has been buzzing with news of federal legislation intended to bring stability to the supply chain, as President Biden calls for a review of U.S. supply chain weak spots. This announcement comes on the heels of instability brought on by an enduring pandemic and recent Texas Freeze – sobering reminders of what hangs in the balance for the supply chain and infrastructure.
The Shared Assessments and the greater third party risk management community have long regarded supply chain instability as a constant that always exists in the risk ecosystem and, accordingly, strategize about best practices that support resilience. Panelists in this August 2020 discussion pointed towards the need to examine supply chain vulnerabilities from the same standpoint that the Biden administration is pursuing; namely over reliance on China for production goods and pandemic shortages.
Here are some key facts – Biden’s executive order calls for:
- 100-day reviews of global producers and shippers for computer chips used in consumer products; large-capacity batteries for electric vehicles; pharmaceuticals and their active ingredients; and critical minerals used in electronics.
- The order also calls for yearlong reviews for six sectors: defense, public health, information technology, transportation, energy and food production. (Politico, 2021).
Biden’s directive is likely to result in prioritizing U.S. manufacturers in order to reduce reliance on China for critical manufacturing, and is clearly an effort to avoid shortages of goods seen as critical during the pandemic. While the order will allow federal agencies to make recommendations to address supply chains risks unearthed by the reviews, any long-term policy implications have yet to be defined. As a former Clinton administration official William Reinsch told the Washington Post, “A review is just a review— no immediate consequences.”
How should businesses be thinking about the administration’s supply chain review? What might the business impact look like of this executive order?
Gary Roboff, Shared Assessments Senior Advisor, cautioned that “the pandemic has revealed the extent to which issues in a single category of suppliers can cascade and have a serious impact on production. The administration’s initiative is a first step to understanding strategic gaps in the United States’ supply chain. Individual businesses, if they’re not already, should begin a similar analysis.”
Health and environmental crises have brought supply chain criticality out of the risk office and onto the front page of newspapers coast to coast. Planning for supply chain stability is integral to good Third Party Risk Management (TPRM) practice. Observations from this high level national review should help to inform the supply chain decisions of companies in the sectors that are central to the President’s executive order, to everyone’s benefit.
Full scope of the executive order is available here from the White House Briefing Room.