The Biden administration has announced a huge plan to tackle issues plaguing the U.S. supply chain that covers several cross-government partnerships.
In announcing the plan Monday, White House officials said the strategy of using both domestic tools and international partnerships can help diversity and strengthen the U.S. supply chain. Citing supply chain disruptions from COVID, a White House official said, “We know hyper concentration of supply can be a problem.”
On the drug front, the Department of Health and Human Services (HHS) and the Department of Commerce are partnering to assess data to address foreign dependency and points of serious failure for critical drugs. The HHS will appoint a supply chain resilience and shortage coordinator, which will be announced at a later date.
President Biden will also issue a presidential determination to broaden HHS authorities under Title III of the Defense Production Act (DPA) to enable investment in the domestic manufacturing of medicines the president deems as essential to national defense. White House officials say that DPA will be released this week. HHS has identified $35 million for investments starting with the domestic production of materials for sterile injectable medicines. The Department of Defense will soon be releasing a new report on supply chain resilience in an effort to reduce high-risk foreign suppliers.
The Biden administration has also announced strides in the expansion of the Department of Transportation’s (DOT) digital information sharing system, Freight Logistics Optimization Works (FLOW) program.
FLOW began in March 2022 with 18 participants at a time when the ports of Los Angeles and Long Beach were crippled with congestion. The container backup created a massive imbalance of supply chain issues, which exacerbated supply and demand and pushed product prices higher. These costs accelerated inflation in early 2021 and the issue intensified into 2022. The program’s goal is to reduce inflation by connecting all facets of the supply chain so logistics managers will be able to identify potential bottlenecks and track their goods from the dock to the doorstep. In order to have access to the data companies, must participate in the data sharing partnership.
Time is money, so reducing delivery times and avoiding detention costs will help kick down the price of goods. The Federal Reserve has said several times that the inflationary costs of congestion is something over which it has no control.
In a briefing with reporters, Lael Brainard, director of the National Economic Council, referred to inflationary pressures and the decrease in inflation as the prices of logistics have drastically dropped.
“Inflation has declined by 65% from its peak,” Brainard said. “We are pleased with the progress on supply chains that we are seeing lower prices for everything from turkeys to gas.”
While administration officials have pointed to Biden’s initiatives as strengthening the supply chain, one cannot forget the precipitous drop in container prices and the pullback in consumption. The combination of the two would drastically lower inflationary pressures.
DOT officials say the digital sharing platform has expanded to five of the nation’s largest container ports, seven of the largest ocean carriers and four of the five largest retailers. Retailers Albertsons, Becton Dickinson, Best Buy, Costco, Dollar General, GE Appliances, Home Depot, Land O’Lakes, Lowe’s, Nike, Ralph Lauren, Samsung, Target, The Gap, Tractor Supply Co., TrueValue, Ulta Beauty and Walmart are FLOW participants.
The biggest hurdle in the initiative has been convincing logistics companies and port stakeholders to share their data. So far, all of the terminals at the Port of Los Angeles, the nation’s largest port, are participating in FLOW, as well as three of the four terminals at the Port of Long Beach. The East Coast’s largest port, the Container Terminal located at the Port of New York and New Jersey, and the fastest-growing port, Savannah, are also participating, as well as the Gulf’s largest port, Port Houston.
Many freight logistics companies have their own freight tracking systems and, as a result, create a silo of information. U.S. shippers use multiple platforms to gain a complete picture of their supply chain. Through FLOW, the DOT is serving as an independent steward of secured and shared supply chain data across the major points of trade: ports, terminal operators, truckers, railroads, warehouses and beneficial cargo owners (shippers). All of the stakeholder data is sourced, and through the analysis, a fuller picture of the supply chain is created.
Tracking freight is key for business success. A deeper line of sight into a company’s supply chain enables logistics managers to plan more efficiently. Any aides to the planning of the movement of freight could in theory help reduce costs which are passed onto the consumer.
“Since President Biden took office, we have made enormous strides to not just fix our supply chains from the disruptions of the pandemic but to make them stronger and more resilient to keep inflation down,” said U.S. Secretary of Transportation Pete Buttigieg. “Our new Multimodal Freight Office will lead coordination of our efforts to strengthen supply chains — including our unprecedented FLOW data initiative that is now helping companies and ports make better data-driven decisions that will ultimately move goods more efficiently and keep costs down for Americans.”
Monday also marks the inaugural meeting of the White House Council on Supply Chain Resilience and the launch of the congressionally funded Office of Multimodal Freight Infrastructure and Policy (Multimodal Freight Office). The Multimodal Freight Office will be tasked with overseeing the sharing of data for the FLOW system as well as maintenance and improvement of the country’s freight network and supply chains.
The Department of Commerce’s Supply Chain Resilience Center (SCRC), will be the first U.S. government entity designed to collaborate directly with private businesses to mitigate risk. The center will create an annual report on the vulnerabilities at U.S. seaports and conduct scenario planning to help mitigate threats to the supply chain. The SCRC will also work with businesses to help ease disruptions in their supply chains and ensure reliable and efficient deliveries of goods and services. The center will ensure CHIPS and Science Act recipients funding are prioritized in deliveries of semiconductor manufacturing equipment. The Department of Energy is also collaborating with the SCRC to conduct deep-dive analyses on clean energy supply.
“Our job is to cut points of friction, streamline lawful trade, address security vulnerabilities head on, and help ensure American consumers and business can access the products they need,” said Under Secretary for Policy Robert Silvers. “The Supply Chain Resilience Center will bring government and industry around the table so we can become more prepared and coordinated for addressing these challenges.
The White House Council on Supply Chain Resilience, will be co-chaired by the national security adviser and national economic adviser and include the secretaries of Agriculture, Commerce, Defense, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Labor, State, Transportation, the Treasury and Veterans Affairs; the attorney general; the administrators of the Environmental Protection Agency and the Small Business Administration; the directors of National Intelligence, the Office of Management and Budget, and the Office of Science and Technology Policy; the chair of the Council of Economic Advisers; the U.S. Trade representative; and other senior officials from the executive office of the president and other agencies.
The first quadrennial supply chain review by the council will be completed Dec. 31, 2024.
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