Today 44 million people work in the United States work in supply chain roles. In contrast, manufacturing employment is 15 million. The average wage of a service worker in a supply chain position is $63,000. During the pandemic, supply chain effectiveness grew in importance.
The need for skilled supply chain professionals is growing. Supply chain positions quadrupled since 1995. In 2025, there will be a shortfall of skilled labor by 10-15%. While the supply chain opportunities are increasing, Washington’s political discussions are single-threaded, focusing on manufacturing opportunities. Most miss the more extensive supply chain management opportunities.
On January 25th, President Biden signed the “Made in America” Executive Order (EO) to strengthen the federal government’s policy to buy American products. Biden’s team is making good on their campaign promise, but the problem is that the EO misses the mark to strengthen supply chains. The narrow focus on manufacturing (with a touch of nationalism) does not address the larger supply chain management issues that entangle manufacturers every day.
Industry 4.0. Fourth industrial revolution. Digitalization of modern business process and using … [+]
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Learning From History
Two years ago, the German Government sponsored the Industry 4.0 Act. The goal was to revolutionize manufacturing and associated supply chain capabilities. The German Government drove adoption of the Industrie 4.0” (Industry 4.0 (I40)) through the Ministry of Education and Research (BMBF) and the Ministry for Economic Affairs and Energy (BMWI) through the European Union. The focus was to drive digital manufacturing forward by improving the interconnection of products, value chains, and business models. The goal was to boost the international competitiveness of German production and enhance job creation. The employment of 15 Million Germans is directly linked to supply chain management. The impact was an investment in factory automation. Industry 4.0 had little to no effect on the improvement of supply chain management. The issue? The act did not have a wide-enough scope to unleash the greater opportunities in supply chain management.
Manufacturing is one of several functions within a supply chain. Supply chain management is the holistic management of source, make and deliver together. The Industry 4.0 scope was too narrow.
The Opportunity
Today’s supply chain is opaque lacking transparency. The success of critical initiatives like track and trace, compliance to corporate social responsibility initiatives or adherence to fair labor policies requires a redefinition of supply chain capabilities.
Without visibility, supply chain leaders manage through brute force. Nothing is easy. Trading partners interoperate mainly through email, spreadsheets, and portals. Data moves slowly, there is no universal set of protocols, and waste abounds.
Individual manufacturing companies try to drive improvement, but their focus is limited to initiatives within their four-walls. To drive a step-change in competitiveness, there needs to be a focused effort to build effective networks to drive insights and accelerate trade between and amongst manufacturing trading partners. Here are the top five actions that I would take:
Streamline Onboarding. Network onboarding of suppliers takes an average of three weeks. The labor-intensive onboarding process adds time to receivables and requires significant back-office effort. The issue? There is no interoperability between commercial networks like Ariba/SAP, Coupa, GT Nexus/INFOR, E2Open, Elemica, IBM
IBM
IBM
IBM
IBM
Legal Entity Authentication. Supply chain modernization requires businesses to have legal identities for manufacturing and distribution locations. To understand the concept, let’s take some examples. For United States citizens, the social security number is a legal identifier. In travel, the passport number is a legal identifier. Financial supply chains have legal identifiers in routing/account/SWIFT numbers to streamline transactions. There is no legal entity authentication for businesses in manufacturing beyond an Employer Identification Number (EIN). The United States systems track labor and tax compliance, but they do not facilitate trade. There needs to be a legal entity authentication for each manufacturing and distribution location to enable programs like track and trace for fair labor and food safety. The EIN is not sufficient.
Build Port Infrastructure. With the decline in commercial airfreight capacity, there is more dependency on ocean freight for supplies and outbound shipments to customers. The problem is that the lack of digital infrastructure—legal identities and unique identifiers for freight, makes tracking shipments a manual task. The answer? Assess port capacity issues and streamline the digital authentication of bookings.
Spur Innovation. There needs to be a focused building of intellectual property and innovation in manufacturing. Digital supply chain innovation enables the rethinking of the atoms and electrons of the supply chain. Current government grants are too limiting to spur the next-generation of innovation. Instead, there needs to be a set of focused initiatives to explore the possibilities of 3-D Printing and the circular economy. We need to drive a step-change in thinking. Should a product be produced in a conventional manner or are there other more viable alternatives?
Actively Design American Supply Chains for Warfare and Wellness. The focus needs to be on the continuous design and modification of critical supply chains. The first step is classification. Certain supply chains—military equipment and healthcare—should be classified as essential United States supply chains. The President should then build a task force to ask hard questions:
How do our manufacturing strategies tie to delivering goods and services from these mission critical supply chains and their connection to national security? Today, we do not have the domestic resources to build tanks/ships and supply hospitals in a pandemic.
We should consciously design these critical supply chains based on domestic capabilities to ensure the American people’s safety. This analysis should be a part of the annual budget review focusing on private/public partnerships.
Wrap-up
Manufacturing is a critical component of supply chain effectiveness, but manufacturing by itself cannot close the gap for manufacturers. There is an even more significant benefit by embracing digital supply chain transformation opportunities, requiring government intervention—to drive a step-change in value.
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