Investment is driving the need for regional supply chains. In this Supply Chain Byte, Lisa Anderson explains how increased investment is shifting manufacturers toward regional supply chains and why those that align their operations regionally are better positioned to capture growth opportunities, improve responsiveness and strengthen long-term competitiveness.
There have been announcements of between $8 trillion and $20 trillion into the U.S. manufacturing, data centers and artificial intelligence, shipbuilding, and mining. Read more about the investments related to this manufacturing renaissance in our recent article. Recent reports say that there have been at least 30 groundbreakings and momentum is brewing. We are seeing the same ramp up occurring at clients with quotes escalating with potential on the horizon. These investments are driving additional needs in manufacturing, logistics, energy and rare earths. Thus, regional supply chains must ramp up.
With this backdrop, recent geopolitical events take on additional meaning. Venezuela has the largest proven oil reserves in the world. Although oil production has been at a low point with recent politics (as several U.S. oil companies have lost significant money in Venezuela and are skeptical), there is vast opportunity for advancement to support regional supply chain needs. For example, supporting energy needs with the increase in artificial intelligence alone will be no easy feat as the estimated requirements are multiple times current usage. Refer to our Supply Chain Byte, Energy: Fueling Our Future.
From a rare earth minerals point-of-view, China cut off access to the world during the trade and tariff discussions, and since they are used in everything from defense to electronics, the region must ramp up availability. The U.S. has made several trade agreements with access to rare earth minerals with countries including Japan, Australia, Malaysia, Thailand, Cambodia, Kazakhstan, and Ukraine. In addition, Greenland has become a focus point for its strategic location for defense in the hemisphere and its rare earth deposits. In fact, it has one of the largest undeveloped REE deposits in the world outside of China. Regional supply chains are gaining momentum.
So, what should we be thinking? Focus on your end-to-end supply chain. Review customers, your customers’ customers, suppliers, your suppliers’ suppliers, and dependencies. Since you are only as strong as your weakest link in the supply chain, if an essential item or material is cut off, you must have multiple alternatives. Look for opportunities for growth. For example, as manufacturing, mining and shipbuilding ramp up, there will be opportunities for supply chain partners. Utilize SIOP (Sales Inventory Operations Planning) to align demand and supply so that you can successfully serve customers while maintaining and improving EBITDA. Ensure you have the “right” partners that you can rely upon when times are rough for your critical items/ materials. Customers will not wait. National defense will not wait. Patients cannot wait for medical devices and pharmaceuticals. Be prepared for what’s likely to come down the pike. Consider strategic supply chain partners. There might be opportunities to partner with unlikely partners such as competitors if you can make 1+1 = 22. For example, refer to our article, Strategic Partnerships in the Medical Supply Chain.
If you are interested in reading more on this topic:
Maximizing Performance and Margins with SIOP