SUPPLY CHAIN RESILIENCE AND STORE FULFILLMENT / BOPIS

Is retail store fulfillment / #BOPIS a Supply Chain anti resilience approach with its dependence on people as compared to technology in warehouses? Just asking.

COVID-19 VACCINE—A SUPPLY CHAIN OPERATIONS PLAN

 

A vaccine for CoViD is getting much attention.  There are several firms in different countries working on it.  Now there are articles on a macro view of the number of planes needed to transport and the required temperatures for a vaccine. These and other articles are interesting with their high-level view. 

But they are not actionable.  What is needed is an end-to-end (E2E) global supply chain operation plan to distribute the vaccine across the world.  This is complex in what must be done, the geographic scope, product requirements, and the time pressure to do it.

With a world population of 7.8 billion and possibly 2 doses per person, this is a huge undertaking to move it around the globe.  Upfront, the availability of potential transportation and storage resources seems insufficient.  That adds to the challenge and need for a plan—to be ahead of the game and to minimize as many problems—and there will be problems.

Presented here is a plan, rough perhaps, with many unknowns at this time.  It is a working document that can be updated as more details/information arises as to product requirements, production location or locations; country demand; transportation, storage, and logistics resources; and other specifics evolve. Please note, the names of any transportation, warehouse, or logistics firms will not be mentioned. This is about the plan. Names will arise with the design and implementation.

A very important point.  This project defines VUCA—volatility, uncertainty, complexity, and ambiguity. The standard approaches will not work.  Change will be a dynamic constant to the point it could be considered organized chaos.

Again, 7.8 billion people in 100+ countries, possibly 2 doses each, a potential vaccine that requires temperature protection at below freezing temperatures or face vaccine degradation. Protecting the vaccine from manufacturing through to injection is the underlying concern with the project and will require more than transportation and storage.  VUCA. A project that defines challenge.

·       Prepare a list of contacts at receiving countries who will coordinate, both medical and supply chain. Collaboration is important for such an end-to-end undertaking.

·       Err on the side of caution with developing and implementing the plan.

·       Start with vaccine raw materials/ingredients (active and inactive)—where sourced, production rates and quantities, how to ship, what is required for handling & storage, including space.  Do not forget vials and/or ampules, caps, labels, and packaging.

·       Understand production batch/lot sizes and production rate, including any as to language for labels.

·       Establish a plan that covers the entire timeline--from launch period through to expected production to satisfy worldwide needs. 

·       Know the product distribution plan—ship how many to where and the sequencing/prioritization.  That is a starting point.  With this is recognizing how to pack the shipment to maintain temperature.

·       Measure time from door-to-door for each origin-destination.  This is critical for product temperature protection.

·       Understand that transportation space and availability and cold chain storage space will influence shipment sizes.

·       Track vaccine drawdowns. This is important for shipment scheduling and to not have more product at a destination than there is temperature protection space.

·       Recognize destination and origin-destination differences. This is not a one-size-fits-all approach. It must understand and adapt to the product and operating realities.  This is important.

·       Assign countries to ship to if there are multiple production sites.

·       Collaborate and coordinate with destination supply chain people on transport and warehouse issues, space, local nuances, providers, and other issues.  This should be ongoing.

·       Determine special needs as to cold chain and/or cool chain temperature for storage, transport, sanitary, chain of custody. Do this for each tier of transport and storage for vials unopened and opened.  Chain of custody is important to manage the product requirements, operational events, and to prevent criminals from theft, and to restrict counterfeits.

·       Analyze space and service needs for air cargo and cold/cool chain storage.

·       Calculate for each destination as to shipments sizes, ready release dates, and the number of shipments.

·       Calculate storage needs at the origin, including production rate and build inventory timing and releases/drawdowns.

·       Calculate storage needs for each destination.

·       Focus on door-to-door speed.

·       Minimize the number of handlings, stops, and transfers of products to mitigate temperature and contamination problems.

·       Understand destinations—airports, adequacies for storage and moving vaccine safely.

·       Define what carriers, warehouses, and transport/logistics providers can do as to product requirements, shipment/storage over the total timeframe, and sanitary conditions. Do it for origin, destinations, and intermediate locations.

·       Secure contractual firm space and service commitments by origin-destination (not by an aggregate or macro basis) to meet what is required for product requirements and time to perform, including variation, for transport and warehousing.  Lock it up.

·       Conclude transport and storage capabilities with production and distribution plans.

·       Set the technology to follow the movement of the vaccine—bar code, RFID, or other.

·       Maintain temperature integrity. Track end-to-end temperature.

·       Monitor chain of custody.

·       Achieve maximum E2E visibility, technologies, and technology integration.

·       Understand Customs requirements at destination airports to speed movement and quick handling from planes landing and shipping to end destinations.

·       Quantify that hospitals, doctors, and other medical/pharmaceutical places that will dispense vaccine can handle for safe handling and storage.

·       Ensure needed supplies of syringes, swabs, bandaids, gloves, and other needed PPE at each dispensing destination location.

The above would present the ideal, Plan A model.  But the best-laid plans, including expected shortages of air cargo and cold chain storage infrastructure and capabilities and stability, a Plan B, a C, and even D or more to have the needed scope and viability, are useful to be ready for the just-in-case and to cover all the needs, especially temperature related. 

Here the purpose is to identify, assess, and mitigate risks/problems. This would include:

ü      Identify areas/points where there are inadequacies, including destination alternatives in  the event of transport and/or storage shortcomings.

Analyze potential performance problem areas.

ü Review ways to improve performance door-to-door and mitigate delays. Big ways to lesser ways. For example, for customs clearance and freight payment.

ü Assess gaps between needs and space availabilities.

ü Evaluate technology gaps, such as for visibility.

ü Create alternative lanes for transportation routes and storage for coverage.

ü Develop cooling alternatives and how and where best to use them.

The plan that is developed for the vaccine also has to be prepared for other events that can affect the operations.  For example, what if there was a global demand surge for CoViD monoclonal antibody therapies that would compete for many of the same supply chain resources as the vaccine?

There is much work to be done.  Much is at stake here.  And much to do it--the required process, technology, organization, and logistics infrastructure.  A supply chain team in place early to design a program—then to manage it.  The size and complexity of the project demand it. 

TWO BIGGEST CHALLENGES IN SUPPLY CHAIN MANAGEMENT AND LOGISTICS / TRANSPORTATION

There are two ongoing, large critical challenges for supply chain management, procurement, logistics, maritime, air cargo, trucking, transportation, intermodal, rail, warehousing:

1. Pandemic
2. Climate change

You must deal with them.  There is no other viable option.

CHINA BELT AND ROAD

China. Belt And Road. Good article. Step back. BRI as a trade & logistics effort? Grow & dominate in these areas? The size now of COSCO. Asia-Europe rail. Drive China's role globally. This view of logistics & trade impact can be significant. Watch it.

The Imperial Overreach of China’s Belt and Road Initiative

Xi Jinping’s signature foreign project is poorly defined, badly mismanaged and visibly failing

By Jonathan E. Hillman

Oct. 1, 2020 9:27 am ET

The Wall Street Journal

Pundits often describe today’s China as uber-strategic, seeing its every move as carefully coordinated, guided by history and focused on the long run. But Chinese leader Xi Jinping’s signature foreign-policy vision, the Belt and Road Initiative, is actually poorly defined and horribly mismanaged. As China pushes ahead with this colossal infrastructure-building spree, it is following in the footsteps of past empires and seriously overreaching.

The Belt and Road “is neither a Marshall Plan nor a geostrategic concept,” China’s top diplomat, Wang Yi, said in 2018. In fact, it is even more ambitious. The Marshall Plan harnessed the equivalent of $130 billion to rebuild Western Europe after World War II. Since the Belt and Road’s announcement in 2013, China has signed $460 billion in construction contracts across more than 140 countries, according to the American Enterprise Institute. The initiative now reaches into Africa, Latin America, cyberspace and even outer space. And as China is learning in place after place, it is much harder to develop economies than to rebuild them.

In the first place, Chinese officials will likely come to regret making Pakistan, in their words, the “flagship” of the Belt and Road Initiative, with some 40 projects, valued at an estimated $25 billion, under way there. Beijing believes that it can succeed in transforming the country after Washington has struggled for decades there. But it shouldn’t count on it.

In the 1950s, Western economists arrived in Pakistan and tried to help the newly independent country fashion a long-term development plan. But as poorly coordinated aid poured in, Pakistani officials resisted setting priorities and making difficult reforms. “When I went to Pakistan, I had the $60 million to spend and no plan, no program, nothing,” recalled John Bell, who oversaw U.S. foreign aid to Pakistan in the mid-1950s. Asked for a list of priorities, the head of Pakistan’s Economic Planning Ministry replied, “No, we need everything, we need everything.”

Intended to last 18 months, the foreign advisory mission launched more than a half-century ago essentially never ended. Eventually, the World Bank stepped in as well, and over the years, the U.S. has provided Pakistan with more than $80 billion in aid. Last year, the International Monetary Fund bailed out Pakistan for the 22nd time. If neighboring Afghanistan is the graveyard of empires, Pakistan is the black hole of foreign assistance.

Hubris partly explains why Chinese officials have bet big on Pakistan and other risky markets. China’s own rise, after all, has been fueled by dramatic infrastructure spending. Its top leaders have all ascended in a system that rewards GDP growth, which they have learned to boost through building infrastructure. After weathering the 2008 financial crisis, during which Western institutions struggled so visibly, Chinese leaders concluded that their playbook was superior and would work abroad.

In its zeal to build, China has backed projects that the U.S. wisely avoided long ago. In 1973, Pakistan asked the U.S. to build a port in Baluchistan, its largest and least-populated region, and offered to provide the U.S. Navy with access to it. “This would probably cost some hundreds of millions of dollars, and the political impact of the project will depend in part on its not being a white elephant,” Henry Kissinger cautioned in a memo that year to President Nixon.

Decades later, China granted Pakistan’s wish and built the port, but very little has arrived at its docks, which remain largely disconnected from urban areas inland. Meanwhile, China’s activities have angered India, which rejects the Belt and Road’s path through territory in the north that Pakistan and India both claim.

China faces even more checks on its power abroad than its imperial predecessors. In June, a Kenyan court ruled that China’s contract for a $3 billion railway between Nairobi and Mombasa was illegal because it violated public procurement practices. When Britain built the first railway between those cities more than a century ago, it didn’t have to contend with international standards, local courts, investigative reporters or cellphone cameras.

Belt and Road also suffers from a gross lack of transparency and accountability. China has no firm criteria for what qualifies as a project and keeps lending details secret. This allows Beijing to make friends in high places abroad, but it also raises the likelihood that commercially dubious projects will get the green light. And once Belt and Road projects are approved, China often struggles to monitor them.

On the ground, China’s massive state-owned enterprises, which include seven of the world’s 10 largest construction companies, run the show. These bloated giants often have more personnel, technical expertise and local relationships than the government officials charged with supervising them. Desperate to find new work, these firms want to build projects as soon as possible, regardless of their commercial viability or strategic value.

China’s loans extend its influence into foreign capitals, and critics warn that Beijing is using “debt trap” diplomacy, lending so that it can seize the recipient countries’ strategic assets. They point to a Sri Lankan port that China financed and built, for which it now has a 99-year lease—the same length that Britain once secured for its control of Hong Kong. No one needs to draw this connection for Sri Lankans, who won their independence from British colonial rule seven decades ago.

But the “debt trap” accusation is actually too generous to Chinese officials, casting Beijing’s embarrassing mismanagement as a strategic masterstroke. In Sri Lanka’s case, like other hot spots along the Belt and Road, Chinese officials lent recklessly to projects that other lenders avoided and are now scrambling to salvage what they can. When projects fail, Beijing suffers in both its finances and its reputation.

Indeed, China is walking into a trap of its own design. Globally, most large infrastructure projects cost more than expected, take longer than expected and deliver fewer benefits than expected, according to Oxford University researchers. To further raise the likelihood of failure, China has picked dangerous partners: Most countries participating in the Belt and Road have sovereign-debt ratings that are either junk or not rated.

The Covid-19 pandemic is exposing the difficulties that Chinese officials face in changing course. In June, China estimated that 20% of Belt and Road projects were “seriously affected” by the pandemic, while another 30% to 40% were “somewhat affected.” Bangladesh, Egypt and Tanzania had recently canceled or indefinitely postponed big-ticket projects. But incredibly, the Chinese official making the announcement was careful to note that China wasn’t aware of any major projects being canceled.

As in so many earlier imperial adventures, China is struggling to cut its losses, even as fewer new projects are announced. A debt crisis in emerging markets is looming, and historically, most infrastructure booms go bust. But the Belt and Road is enshrined in the Chinese Communist Party constitution like a tattoo gotten during a drunken binge. It cannot be removed or even called ugly. It is Mr. Xi’s vision, and until he leaves power or says stop, Chinese officials will march forward with it.

https://www.wsj.com/articles/the-imperial-overreach-of-chinas-belt-and-road-initiative-11601558851?mod=searchresults&page=1&pos=1

END-TO-END SUPPLY CHAINS AND THE TRANSPORTATION CHALLENGE

E2E Supply Chains are having transport problems--upstream & downstream. Capacity--both actual & controlled. Creating a reverse demand shock with failure to perform--by providers & shippers. What is it doing to end-customers & economic rebound? maritime Last Mile trucking

LET'S TALK SUPPLY CHAIN RESILIENCE --Think of Business Continuity--

CoViD-19 had barely hit when the buzzword "resilience" arose.  And, more exactly, supply chain resilience, aka, to be prepared for and to be able to quickly recover supply chains during future global pandemics of new viruses. 

Now, some say agility or agile for pandemic resistant supply chains.  But I do not count them.  That term was used pre-CoViD to mean supply chains doing more than they were designed for.  So no credit for double-dipping on a buzzword.

Comments aside, this is important.  Supply chain management is central to business continuity. The pandemic validated its strategic importance and criticality.

The pandemic presented two shocks.  First was the supply shock as manufacturers/suppliers/exporters shut down.  Then was the demand shock as buyers/importers locked down or had curtailed operations.  The totality was global supply chain chaos and disruption.

Supply chain management is about the end-to-end movement and handling of inventory—finished goods, products, parts, components, and assemblies. That is what supply chain resilience must be built on.

As you build supply chain resilience, you decrease supply chain risk.  Please note, creating resilience is not an overnight project.  Not by any stretch of a buzzword.  There are two key parts to the achieving resilience endeavor.  And these two parts are not separate and distinct. They overlap.

PART 1. Call this the product side of your resilience effort with all its nodes, links, and contact points. 

The first step is to understand your end-to-end supply chain.  If you do not do this, then your efforts can be hit and miss.  There are two sections to it—upstream where suppliers are and where supply chains begin and downstream which is the more recognized area.  And in keeping with the spirit of things being in twos, work within the supply chain is planning and operations.  As planning was turned on its head, we have learned during coronavirus, operations—keeping the supply chain and the business running—is more important.

This is not a purely hypothetical endeavor.  You have the experiences of CoViD-19 as a reference. But if there is another pandemic, it may be different on where and how it strikes and spreads.  So do not limit your work to what has already occurred.

Start your assessment upstream—the inbound supply chain—where the supply of supply chains begins, has the greatest complexity and size.  There are many stakeholders and players upstream.  All this means upstream is at great risk—and hence your need for resilience. 

Look at it in terms of its components:

·       Transportation and logistics

·       Suppliers

·       Products

Transportation, logistic, warehouses—both yours and those of outsider  providers—are your supply chain infrastructure.  They are an integral part of what the supply chain does.

Think of this as bills of materials.  The products and their components.  You want to identify and prioritize.  Rank critical products—and their components/assemblies.  Determine key suppliers.  Select the must-have transportation and logistics service providers.  Be diligent.  Go deep.  The unseen are hidden risks.

That means looking at suppliers' suppliers. And to their logistics, transportation, forwarders, and ports.  If your supplier network and their network has problems, then you have problems.  Risk flows down. 

Map your upstream supply chain and the supply chains within supply chains.  Look for gaps, missing step/players, and weak links.  That may be the critical items you started with or revised ones based on your analysis. The mapping can identify new risks, such as suppliers or suppliers of suppliers for multiple or key products or components. 

Minor ports or small transport or logistics providers could be problems.  Not everything is done by large, MNC provider corporations who are not immune from problems either. 

Another point in the assessment is the chain of custody.  You want to see the flow of products.  Who does what, where, and how?  Gaps in the custody can be red flags for your analysis.

Your mapping and assessment will show areas where to prioritize that can go beyond your initial ideas.  This work is similar to risk reduction with one notable exception.  It is broader in scope.  Supply chain risk, thanks to the insurance view, is often about assets.  That is a narrow take and limits the intent of what should be done. 

The downstream supply chain is built around your company facilities—factories and/or warehouses/distribution centers.  You know what happened there. 

Then add the extensions of mostly your transportation and logistics providers.  How was each provider affected by CoViD?  Is the story about more than layoffs?  What are they doing to restart?  While they may not be your direct responsibility, you may want to work with your customers as to their providers and resilience. 

With the analysis of the upstream and downstream supply chain segments come hard questions about what your suppliers, service providers, and their suppliers and providers and respective approach for resilience.  You may face decisions on changing some of these.  Remember, increased resilience means reduced risk.

Part 2.  This is about technology.

Here come technology and its current silver bullet resilience status.  Think of TV commercials and you hear—contactless.  It makes it harder to spread coronavirus.  Implicit in it too is that technology is contactless and will not be impacted by a pandemic.  It will not become ill.

Digitization may be the best place to start.  Supply chain management can be document heavy. Those documents can be viewed as analog.  Moving away from that paper and into digital provides important data.  That data can be used as input with other technologies.

Recognizing all documents is necessary.  Think of purchase orders, bills of lading for various transport carriers and modes, purchase invoices, freight and logistics invoices, packing lists, customs documents, and so on.  Remember too, documents for suppliers' suppliers and their transportation/logistics providers. 

Now you look at other tech applications:

·       Robotics for warehouses/distribution centers

·       Drones for transportation. You may not be using them now, but you need alternatives and flexibility, especially at critical locations.

·       Blockchain with suppliers and transportation/logistics providers.  Again, go beyond your visible tier of suppliers and providers.  There are also gaps in the number of participants in and order-shipment and current blockchain application. 

·       Supply chain visibility, end-to-end, where digitization and blockchain—integrated—can be used, along with your internal warehouse management system. Again, there may be holes.

·       Artificial intelligence has been offered more in analytical/planning uses, such as with inventory positioning and buying of products and services.  Developing AI to anticipate operations actions and alerting when events are not going as planned.  The latter lets you use what may be limited resources to priority areas.

·       The cloud, within the context of resilience, has a place. From cloud versions of WMS and other technology.  It may give you ways to integrate various technologies both internal and external to your supply chain. 

Present technology does not address and solve everything.  Do not go into it as your resilient silver bullet.  But it is a vital tool for your resilience effort.

Final Thoughts. Building resilience across your supply chain starts with knowing your supply chain, its critical and weak areas, its suppliers, products, infrastructure, and service providers.  This includes identifying all the players and stakeholders.  Technology then works with understanding your end-to-end supply chain—and going beyond--with the upstream segment. 

Some key points for your project:

P  Your total supply chain has contact and contactless elements.

P  Remember, orders can be digital.  But products, components, assemblies, and materials are not.  That is why your resilience program must be more than technology.

P  Go upstream beyond your suppliers and transportation providers.  Problems with their suppliers and logistics firms are your problems, especially during a pandemic.

P  Be diligent.  Go deep.  Look for gaps.  By definition, they are risks.

An unknown is the time frame—how long with a next pandemic take from start until it is contained, and a vaccine is available.  That unknown is a serious challenge to your plan.

Lastly, there is the implementation.  Selling it up, down, across the company, and outside to your stakeholders.  Those firms may have other customers.  Develop and manage an implementation plan, including tasks.  Prioritizing where to start.  Sequencing.  Collaboration. Milestones.  And more.

Good luck.   

DEINDUSTRIALIZATION / RESHORE / ONSHORE AND SUPPLY CHAIN MANAGEMENT

 To take back deindustrializationn and to reshore/ onshore. It is about supply chains. Supply chain integrity starts with understanding Supply Chain complexity, mapping, & risk assessing it. Upstream to suppliers & their suppliers—supply chains within supply chains. Then prioritizing and...

ARGUMENT

In the New Cold War, Deindustrialization Means Disarmament

Chinese security threats offer the chance to rethink the U.S. economy.

BY JACOB HELBERG

AUGUST 12, 2020, 12:49 PM

In 2011, then-President Barack Obama attended an intimate dinner in Silicon Valley. At one point, he turned to the man on his left. What would it take, Obama asked Steve Jobs, for Apple to manufacture its iPhones in the United States instead of China? Jobs was unequivocal: “Those jobs aren’t coming back.” Jobs’s prognostication has become almost an article of faith among policymakers and corporate leaders throughout the United States. Yet China’s recent weaponization of supply chains and information networks exposes the grave dangers of the American deindustrialization that Jobs accepted as inevitable.

Since March alone, China has threatened to withhold medical equipment from the United States and Europe during the coronavirus pandemic; launched the biggest cyberattack against Australia in the country’s history; hacked U.S. firms to acquire secrets related to the coronavirus vaccine; and engaged in massive disinformation campaigns on a global scale. China even hacked the Vatican. These incidents reflect the power China wields through its control of supply chains and information hardware. They show the peril of ceding control of vast swaths of the world’s manufacturing to a regime that builds at home, and exports abroad, a model of governance that is fundamentally in conflict with American values and democracies everywhere. And they pale in comparison to what China will have the capacity to do as its confrontation with the United States sharpens.

The question today is not whether America’s manufacturing jobs can return, but whether America can afford not to bring them back.

In this new cold war, a deindustrialized United States is a disarmed United States—a country that is precariously vulnerable to coercion, espionage, and foreign interference. Preserving American preeminence will require reconstituting a national manufacturing arrangement that is both safe and reliable—particularly in critical high-tech sectors. If the United States is to secure its supply chains and information networks against Chinese attacks, it needs to reindustrialize. The question today is not whether America’s manufacturing jobs can return, but whether America can afford not to bring them back.

America’s superpower might was made on the factory floor. The nation’s vast industrial capacity carried it to victory in World War II and gave it a commanding advantage over the Soviet Union. As recently as the early 2000s, iMacs—a symbol of American high-tech dominance—were still made in Elk Grove, California. But since the 1970s, more than 7 million American manufacturing jobs have evaporated—over a third of the country’s entire manufacturing workforce. In the first decade of the 21st century, more than 66,000 manufacturing facilities closed down or moved overseas. America’s share of the world’s printed circuit board production has dropped 70 percent since 2000; China accounts for around half of global production today. The high-tech industry is hardly exempt: As of 2015, Chinese factories produced 28 percent of the world’s cars, 41 percent of ships, more than 60 percent of TVs, and a staggering 90 percent of the world’s mobile phones. Indeed, Apple’s Elk Grove plant is now an AppleCare call center.

Left: Plant workers gather after hearing that their metalworking company, Revere Copper Products Inc., in New Bedford, Massachusetts, will close March 6, 2007. The company, founded by Paul Revere, once provided copper sheathing for the city’s whaling fleet but shut down because of foreign competition. PETER PEREIRA/THE NEW BEDFORD STANDARD TIMES/THE ASSOCIATED PRESS  Right: Apple employees work on iMac computers at an Apple manufacturing plant in Sacramento, California, on May 24, 1999. GETTY IMAGES

At the same time, a new Silicon Curtain has begun to descend. As FBI Director Christopher Wray recently pointed out, China does not seek a world where its companies lead alongside other global companies but one where its companies exploit a domestic monopoly at home to drive other companies out of business everywhere else. In the energy sector, China’s vast web of state subsidies supporting its domestic solar-electric industry dropped world prices of solar panels by 80 percent between 2008 and 2013. A report by the U.S. Senate Foreign Relations Committee echoed this trend in more cutting-edge technologies: “Foreign technology platforms are restricted from operating in China, allowing Chinese platforms that offer similar services to thrive and expand into new markets.” The report also highlighted examples of Chinese “national champions” expanding internationally thanks to unfair government support and subsidies, noting, “Huawei’s price was so low that, absent the subsidies the company had been provided, Huawei would have been unable to even produce the necessary network parts.” Beijing’s “Made in China 2025” initiative outlines in blunt terms China’s ambitions for dominance in artificial intelligence, robotics, aerospace equipment, and biopharmaceuticals—high-tech industries that represent the future of the global economy.

The United States’ industrial overdependence on China poses profound national security threats.

The United States’ industrial overdependence on China poses two profound national security threats. The first is about access to the supply of critical goods. As I warned in June, U.S.-China relations are now more volatile than at any time since Tiananmen, and it is an open question whether decoupling will be slow and soft or hard and fast. As the bilateral relationship further deteriorates, American companies face a growing risk of experiencing sudden delays or disruptions to their supply chains, either as an overt retaliation by the Chinese Communist Party (CCP) to U.S. policies or in the form of gray-zone tactics to kneecap U.S. companies and promote Chinese alternatives to fill the void in the global supply for key goods.

This risk, once deemed far-fetched, recently came to life when Arm, a U.K.-based chip designer, recently appeared to have suddenly lost control of its China-based joint-venture subsidiary, Arm China. As Business Insider reported, “Arm fired Allen Wu, the head of Arm China, but Wu refused to acknowledge the decision and has continued overseeing operations of the business unit, according to Bloomberg. Arm China also reportedly won’t let members of the UK parent entity onto its premises.” It has been seven years since the Alliance for American Manufacturing released a list of critical military hardware, with both offensive and defensive applications, that are susceptible to supply chain interference. American missiles depend on Chinese propellant; American night-vision goggles depend on Chinese metal.

During the pandemic, the Chinese government is also believed to have given preferential treatment to its domestic semiconductor companies, allowing Yangtze Memory Technologies to continue operating, all the while requiring all foreign-based chip makers, such as Samsung, to completely halt their operations. This is what political scientists have dubbed “weaponized interdependence”—exploiting control of critical nodes in the global economy to exert geopolitical leverage over one’s competitors.

The second risk of U.S. industrial dependence on China is about the integrity of powerful dual-use commercial technology products: civilian goods such as information platforms, social network technology, facial recognition systems, cellphones, and computers that also have powerful military or intelligence implications. These products are increasingly becoming a “perfect weapon” for U.S. adversaries such as Russia and China that continuously seek asymmetric ways to weaken the United States. The Senate Foreign Relations Committee report noted, “the suites of new and emergent digital technologies … —including 5G infrastructure, social media, block-chain, digital surveillance, and genomics and biotechnology—are all widely acknowledged as being on the cutting edge of this new competition.” China’s command over critical nodes of the world’s supply chains provides it with vast strategic leverage over the integrity of critical hardware products.

A 2018 Bloomberg investigation reported that Chinese operatives had inserted a miniscule microchip into the servers of Supermicro, a company whose systems are used by institutions ranging from major banks to the Pentagon. Though all parties involved denied that such a breach occurred, even the possibility of such a hardware hack sent shudders through Silicon Valley and the U.S. national security apparatus. Even if disputed, the report laid bare the dangers of outsourcing American manufacturing to an American adversary.

Public concerns over the integrity of Chinese-built technology systems recently reached a boiling point in the software world, with the U.S. government calling on ByteDance, a Beijing-based global technology company, to divest from TikTok, its U.S. subsidiary. In some cases, senior government officials, ranging from President Donald Trump to Senate Democratic Leader Chuck Schumer, went as far as floating the possibility of a complete suspension of the app.

The public’s justified concerns trace back to China’s civil-military fusion doctrine, which blurs the line between the CCP and China’s private sector. Under China’s 2017 National Intelligence Law, the CCP could compel an individual engineering employee at TikTok based in China to provide the party with intelligence assistance and keep that assistance entirely confidential, without any of TikTok’s U.S.-based executives even being aware.

In effect, this means companies based in China could be subject to a dual reporting and corporate governance structure—their company’s executives on the one hand, and, on the other, a shadow governance structure reporting to officials from the Chinese Communist Party. China-based companies must effectively answer to two masters. Arm’s U.K.-based executives learned this the hard way. But the principles were spelled out in broad daylight by Chinese President Xi Jinping himself when he compared the relationship between Chinese citizens and the CPP to “stars revolving around the revered moon.” “Listen to what they say,” the Taiwan-based analyst Ben Thompson cautioned.

The United States’ slow drift toward deindustrialization is not a threat to Democrats or a threat to Republicans—it’s a threat to the United States.

The United States’ slow drift toward deindustrialization is not a threat to Democrats or a threat to Republicans—it’s a threat to the United States. Addressing it will require an American solution that transcends party lines. It will require an extensive collaborative effort between the government and private sector to take inventory of the products salient to national security—determining which high-tech and vital goods must be produced domestically, which can safely be sourced from allies and friendly democracies, and which can still be imported from the global market, including from authoritarian states like China. Carrying out this strategy and operationalizing it will take time and substantial resources. Still, a few elements for such a strategy are worth highlighting.

Before the creation of the Strategic Petroleum Reserve in the 1970s, the United States was vulnerable to geopolitical blackmail by OPEC nations. Eventually, public investments in expanding the country’s domestic alternative sources of energy helped move the country toward energy independence. Similarly, the United States must define and reconstitute a “minimum viable industrial capacity,” based on the production capacity it needs not simply to meet a national emergency but to wage a long-term competition. A potential initial area of focus for such an effort could be the production of semiconductors and microchips, given that high-performing chips are indispensable to make headway on nearly every other front—AI development, robotics, computers, cellphones, and more. Currently, Taiwan—which China dubs a renegade province—is home to Taiwan Semiconductor Manufacturing Company, which accounts for half the global supply of computer chips used in everything from F-35 fighter jets to Apple devices. The United States cannot afford to ignore China’s plans to eventually seize control of Taiwan and the consequences this would entail for the entire U.S. technology industry.

 Reconstituting America’s domestic production capacity will be contingent on procuring a reliable, abundant supply of key natural resources at a low cost, building up a large talent pool of skilled industrial workers, and making substantial investments in fostering hotbeds of innovation.

For starters, the goal of reopening factories won’t be economically sustainable if the United States can’t ensure cost-effective access to natural resources and raw materials those factories need to produce finished, manufactured products. China has made acquiring premium access to resources such as zinc, cobalt, and titanium a national priority. By making investments and loans worth hundreds of billions of dollars across the developing world—particularly in Africa—it has established a model of trading technology and infrastructure for resources. In one such case, China struck a deal with a Congolese mining consortium, Sicomines, to secure access to critical minerals for electronics like copper and cobalt in exchange for investing in essential infrastructure projects like hospitals and highways.

To compete, the United States and its allies will need to play a shrewd game of macroeconomic chess, offering their own funding for infrastructure and development, but without the predatory debt-trap qualities that often accompany Chinese funding. Many African countries have interlocked their economic futures with China because they see little alternative—if Chinese loans once came with few strings attached, they now often require adherence to a variety of CCP norms. Last month, the Senate Foreign Relations Committee offered one idea: an International Digital Infrastructure Corporation that would offer these countries the financial incentive and support to buy and install American-made hardware. Providing that alternative—assistance and financing that authentically empower recipient governments and benefit the local population—could shift the economic orientations of nations that would prefer to be less entwined with an expansionist authoritarian power. It could also serve as a powerful tool to supply U.S. and allied manufacturers with critical raw materials needed for the production of strategic hardware.

Like a tech startup taking on an incumbent company, if the United States is to take on China’s dominance in global manufacturing, it will also need to staff the so-called American team with a skilled and innovative workforce. This means reversing the current suspension on H-1B visas to once again enlist the world’s best and brightest minds. This also means addressing the so-called trade skills gap, which has left vital manufacturing roles—such as machinery and welding—unfilled. In a 2019 survey by the National Association of Manufacturers, almost 3 in 4 manufacturing employers cited “the inability to attract and retain a quality workforce” as their most significant business challenge. “We shouldn’t be criticized for using Chinese workers,” one Apple executive told the New York Times in 2012. “The U.S. has stopped producing people with the skills we need.”

Washington must take note of these realities and invest in low-cost and specialized, skill-based workforce training for employees in vital industries, in addition to deepening its pool of advanced scientists and engineers. Bureaucratic reorganization could help focus government attention and cohesion on this problem: Consolidating the Department of Education and Department of Labor into a Department of Education and the Workforce would create a single entity dedicated to endowing Americans with the skills they need throughout the full continuum of their professional lives. And while it’s true that not all jobs will return, focusing training on high-tech manufacturing will prepare a workforce that attracts new, potentially higher-paying jobs to U.S. shores.

Although policymakers’ natural instincts—and political incentives—might push them to spread reshoring investments in a large number of cities across the country, some of America’s most successful global hubs of economic activity have been geographically concentrated: Wall Street, Hollywood, Silicon Valley, the Motor City. Geographically concentrated regional hubs unlock network effects from the powerful forces of platform economics and could become growth engines for their state and the rest of the country.

Much like magnets, hubs attract, in a self-reinforcing loop, talented individuals from around the world who self-select to relocate closer to their industry’s center of gravity. This clustering of specialized expertise increases the connections between the participants of the ecosystem, allowing them to compound the institutional knowledge of the companies they work for and pattern-match problems and solutions more quickly than elsewhere. Together, the government and private sector could work to build manufacturing centers to rival those of China’s Shenzhen.

Once this new baseline is established, the United States and friendly democratic states must create an Allied Industrial Free Trade Area that maintains America’s industrial base and strengthens it across democracies, forming a new democratic bloc that preserves the benefits of efficiency and competition while helping American global companies’ wean themselves off their demand-side dependence on the Chinese market. The foundations for such a bloc are already becoming apparent through ideas like U.K. Prime Minister Boris Johnson’s proposal to expand the G-7 to a new D-10, a 10-nation democratic coalition that can collaboratively fund and create alternatives to reliance on Chinese 5G technology.

For a long time, we assumed U.S. deindustrialization was inevitable—today, the coronavirus crisis has given Americans a small taste of the sour realities that result from decades of industrial neglect and disrepair. The United States’ supply chains and information networks are precariously dependent on, and exposed to intrusions by, a hostile foreign government bent on undoing liberal democracies. U.S. policymakers and technology executives should consider what might happen if, as the historian Yuval Harari warned, “Beijing knows the entire medical and personal history of every politician, every judge and every journalist in your country, including all their sexual escapades, all their mental weaknesses and all their corrupt dealings?” Neglecting to quickly safeguard the access and integrity of American supply chains and information networks in the face of successive warnings would be a costly strategic mistake and a blow to U.S. national sovereignty.

https://foreignpolicy.com/2020/08/12/china-industry-manufacturing-cold-war/