The United States is at an inflection point in its approach to supply chain management. Facing off against China, an adversary that has both a proven capability and willingness to weaponize supply chains against the United States and its allies, both the U.S. government and U.S. private companies are embracing a pivot away from efficiency to resilience.
Effectively managing this transition from efficiency to resilience, while ensuring that the United States is postured for the economic and national security threats created by hyper efficient supply chains, will require new modalities for public-private partnership.
Recent decades have demonstrated that market forces generally do produce very efficient supply chains. These supply chains, under private sector ownership, have resulted in a worldwide economy that is in some respects prosperous beyond the wildest expectations of the 18th and 19th century economists who initially pointed to the virtues of specialization.
However, this efficiency depends, in large part, on geopolitical stability. The quarter-century following the end of the Cold War proved remarkably stable. However, this stability is increasingly under threat, both by acute threats like Russia's war in Ukraine and the increasing tensions between Washington and Beijing.
A public-private approach—widely acknowledged as critical to overcoming these supply chain risks—is at the heart of a series of landmark U.S. efforts. This is demonstrated by the design of the Supply Chain Disruptions Task Force, Bipartisan Infrastructure Act, CHIPS and Science Act, and Inflation Reduction Act. Each embraces a partnership between the U.S. government and the private sector in addressing the supply chain disruptions that began with the COVID-19 pandemic and have evolved with rising U.S.-China competition.
The U.S. government has long recognized the value of public-private partnerships in addressing systemic challenges to supply chains. An example is the Advisory Committee on Supply Chain Competitiveness, which was established with the specific purpose of giving the Secretary of Commerce industry expert advice on a comprehensive national freight infrastructure policy. The potential of these types of partnerships is illustrated by this committee's role in raising awareness of systemic congestion and bottlenecks at ports in 2021.
However, there is often a disconnect between the public rhetoric of public-private partnerships and the reality of how they are implemented.
This is demonstrated most clearly, perhaps, in the difficulties that the White House has faced in effectively engaging with commercial actors in executing its landmark programs. As a prominent example, the CHIPS and Science Act has been criticized for picking winners and losers rather than filling gaps that the private sector is not equipped to fill. Missed opportunities for collaboration have resulted in mistrust.
Another missed opportunity is the White House's new Council on Supply Chain Resilience, which was announced with little private sector consultation. There is no doubt that coordination across U.S. government agencies, the primary mandate of this council, is indeed valuable. However, it is an open question whether this council can be effective without private sector collaboration. Building a private sector counterpart to this council, perhaps building from the model of Commerce's analogue advisory committee, seems like a policy worth considering. The three leading supply chain professional organizations—Council of Supply Chain Management Professionals, Association for Supply Chain Management, and Institute for Supply Management—could enable the objectives that this council seeks to achieve and provide a mechanism for monitoring supply chain performance.
Other examples of missed opportunities are in government-industry exchange programs. These should be ideal chances for civil servants and academicians to learn something about private sector decisionmaking. But, as documented in a 2022 report from the U.S. General Accountability Office, this has not been the case. Correcting this discrepancy would require a change to the Intergovernmental Personnel Act of 1970.
Building Resilient Supply Chains (PDF) from the Economic Report of the President (PDF) outlined the opportunities and challenges in 2022, and suggests both the need and the intent to support this kind of collaboration. However, for this collaborative public-private partnership to work, the individual interests of the private sector must be brought into alignment with the requirements of the collective good perspective and policy goals of the public sector. Both partners have useful tools and working examples to now make this vision happen.
Editor's note: This article originally appeared on the RAND Corporation's website on March 8, 2024.
