America Needs Smart Supply Chains—Not Isolationism | Opinion

It's not often a president dedicates one of their first executive orders to supply chains. Recently, Biden made history by reminding Americans that supply chain security is national security.

The pandemic has shown that when it comes to semiconductors, personal protective equipment or vaccines, America's supply is vulnerable.

The isolationism President Joe Biden is calling for, saying, "We shouldn't have to rely on a foreign country," has its limits. We can't build a "fortress America" to eliminate foreign supply chains risks. We can reduce risks, while maintaining the benefits of global trade, by making our supply chains smarter.

Investing in global, tech and AI-enabled supply chains can allow Americans to get what they need from around the world, while being able to predict the unpredictable (like a pandemic).

Last year the U.S. realized the vulnerability of supply chains. It started with empty shelves when Americans went shopping for toilet paper and groceries.

It was in health care that we realized how high the stakes are, when China pulled back its exports of personal protective equipment to focus on its domestic distribution.

The health care supply chains have also been tested when it comes to vaccine supply. Americans are relying on jabs manufactured abroad, to save American lives. Unsurprisingly they are uneasy about that dependency.

The trigger for Biden's intervention, however, was not toilet paper or face masks, but semiconductors.

A shortage of semiconductors, a key ingredient in all electronic and IT hardware production, has led to a downturn not only in the supply of laptops but in key U.S. industries like car production.

Ford's production has fallen as much as 20 percent, and General Motors have also had to stop. Overall, global automotive manufacturers—including American ones—could produce 672,000 fewer light vehicles in Q1, according to an estimate from IHS Markit.

The U.S. is almost entirely dependent on foreign semiconductors, mostly from China, which is likely to be the country "that doesn't share our interests or our values," mentioned in Biden's executive order.

The order makes good headlines, but it doesn't mention that even if America did create massive expansion of its own semiconductor manufacturing (which is possible) it cannot create the raw materials on American soil that are needed for semiconductors, like cobalt.

Even if the U.S. made costly investments in domestic mining, the supply would never match the demand.

We will always be significantly dependent on global supply chains—the question is not how to eliminate this dependence (because we can't). Instead, we should ask which systems can mitigate the risk of that dependence.

This is a matter of national survival, which means we need more supply chain experts cooperating with the White House. The new administration needs to craft policies, not chase headlines.

Biden
President Joe Biden holds a meeting in the White House. Samuel Corum/Getty Images

Access to semiconductors will be the new oil; they are the primary resource that drives the acceleration of renewable energy, AI and the internet of things.

America is a world leader in producing consumer and electric goods, but it is less of a world power in terms of semiconductor production. According to the Semiconductor Industry Association, the U.S. accounts for just 12 percent of global semiconductor production capacity.

China's "Greater Bay Area" is positioning itself to dominate the global supply, and Chinese firms control most of the world's cobalt too.

If the U.S. wants to compete in the growing industries of AI, machine learning and the internet of things, it will need stronger semiconductor supply chains.

Strength comes from intelligently managing global relationships, not cutting them off and trying to go your own way. The technology to achieve this already exists—we haven't adopted it en masse—yet.

Connected devices from lorries to warehouses can process and develop information at every step of the supply chain. If there is a disruption or unforeseen event in one place in the chain (like a pandemic outbreak leading to increased demand for semiconductors), this will be communicated automatically from the source of the disruption to the distributor and the supplier.

This is much faster than human decision-making—especially corporate or governmental decision-making. Not only are smart supply chains faster, but they are self-corrective, autonomously placing orders from alternative suppliers in real-time.

The White House's attention on supply chains is long overdue and welcomed.

I've been a supply chain expert for over 30 years, and I can't remember the last time a president used the term.

The solution lies in making our supply chains smarter—not more isolationist.

Dr. Cyrus Hadavi is CEO and chair of Adexa. He previously was adjunct professor of operations management at Columbia University.

The views expressed in this article are the writer's own.