Recommendations outlined for building better supply chains, revitalizing manufacturing and fostering broad-based growth

The White House has released reviews from the Departments of Commerce, Energy, Defense, and Health and Human Services in response to the president’s Executive Order on “America’s Supply Chains.” Vulnerabilities in supply chains were assessed in four key product areas: semiconductor manufacturing and advanced packaging; large capacity batteries; critical mineral and materials; and, pharmaceuticals and advanced pharmaceutical ingredients. The report makes the case that more secure and resilient supply chains are essential to our national security and economic security, as well as technological leadership.

The report, Building Resilient Supply Chains, Revitalizing American Manufacturing, And Fostering Broad-Based Growth, reinforces that the pandemic and resulting economic dislocation revealed long-standing vulnerabilities in the supply chains. Democratic and Republican administrations have raised concerns about the defense industry’s supply chain vulnerabilities and notes that innovations essential to military preparedness require an ecosystem of innovation, skills and production facilities that the U.S. currently lacks. It goes on to say that years of prioritization of efficiency and low costs over security, sustainability and resilience, has resulted in the risks identified in the report and that to rebuild for resilience with a renewed focus.

“As multiple reports note, the United States maintains an unparalleled innovation ecosystem with world-class universities, research centers, start-ups and incubators, attracting top talent from around the world,” it states. “The Administration must double-down on our innovation infrastructure, reinvesting in research and development (R&D) and accelerating our ability to move innovations from the lab to the marketplace.”

The report identifies drivers of supply chain vulnerability across the four product areas outlined above. The vulnerabilities include:

1. Insufficient U.S. manufacturing capacity.
2. Misaligned incentives and short-termism in private markets, including market structures that fail to reward firms for investing in quality, sustainability or long-term productivity.
3. Industrial policies adopted by allied, partner, and competitor nations.
4. Geographic concentration in global sourcing.
5. Limited international coordination.

Noting that it will take a concerted effort over time to adequately address the vulnerabilities, the report provides a series of recommendations that are grouped into six categories, with much greater detail available in the full 250-page report:

1. Rebuild our production and innovation capabilities.
2. Support the development of markets that invest in workers, value sustainability, and drive quality.
3. Leverage the government’s role as a purchaser of and investor in critical goods.
4. Strengthen international trade rules, including trade enforcement mechanisms.
5. Work with allies and partners to decrease vulnerabilities in the global supply chains.
6. Monitor near term supply chain disruptions as the economy reopens from the COVID-19 pandemic.

A letter preceding the report’s findings notes, “The work of strengthening America’s critical supply chains will require sustained focus and investment. Building manufacturing capacity, increasing job quality and worker readiness, inventing and commercializing new products, and strengthening relations with America’s allies and partners will not be done overnight.”

It also states that the second phase of the supply chain initiative that is to review six critical industrial base sectors the underpin America’s economic and national security is underway and will be reported on by Feb. 24, 2022.