Steve Geary is adjunct faculty at the University of Tennessee's Haaslam College of Business and is a lecturer at The Gordon Institute at Tufts University. He is the president of the Supply Chain Visions family of companies, consultancies that work across the government sector. Steve is a contributing editor at DC Velocity, and editor-at-large for CSCMP's Supply Chain Quarterly.
The machine that is the U.S. federal government—and, by implication, the Department of Defense (DoD) supply chain—can be difficult to understand, and the law-making process is not always pretty. As the old saying goes, "Laws are like sausages, it's best not to see them being made." Yet we really do need to keep our eye on the sausage making process because what comes out is a significant driver of our supply chains. Our lives in the supply chain are in many ways constrained, and often specifically directed, by what the U.S. Congress decides in Washington, D.C. If a company doesn't pay attention, it can be "blindsided."
The supply chain implications of the blindside hits can be significant. Consider the continuing trade tensions with China. The total value of bilateral trade between the United States and China dropped by nearly 14 percent in the first half of this year versus the same period in 2018, according to data from the U.S. Commerce Department. There are a variety of opinions on whether this is a positive development or a negative one. What is not in dispute is that the trade war has resulted in seismic shifts in some industrial supply chains, not a ripple.
Prepare for impact?
There may be another disruption on the way. On June 27, at the beginning of the summer, the U.S. Senate passed its version of the National Defense Authorization Act (NDAA) for Fiscal Year 2020. The Senate's version of the defense budget for the next year has an obscure feature built in. Section 831 provides for the "modernization of acquisition processes to ensure integrity of industrial base." In plain English, the way the government buys things will change, an attempt to better secure the industrial base data that supports DoD operations.
If the provision in the Senate version of the budget survives the reconciliation process with the House of Representatives, will Section 831 generate a seismic shift across the defense industrial base that cascades through the echelons in the private sector, or will it be just a ripple?
The focus of the bill is, "digitization and modernization." Specifically, "The Secretary of Defense shall streamline and digitize the existing Department of Defense approach for identifying and mitigating risks to the defense industrial base across the acquisition process, creating a continuous model that uses digital tools, technologies, and approaches designed to ensure the accessibility of data to decision makers in the Department."
This requires every organization under the secretary to identifynot only a framework for managing the risk but also the tools, technologies, and approaches for monitoring that risk. That monitoring provides decision makers with theability to identify a level of risk, compare it to a tolerance level, and rapidly identify mitigations to the risk.
Embedded supply chain risk—think Huawei's 5G technology—is influencing the thinking on Capitol Hill and legislation is in play to address it. Huawei is an obvious example of the embedded risk that Congress is trying to address, but the risk is bigger than Huawei. According to CNBC, "U.S. intelligence agencies have been backing away from China-made infrastructure for well over a decade, with companies such as Huawei and ZTE facing bans and skepticism." The U.S. Federal Government buys some of the most sophisticated, complex equipment on earth. From jet fighters to space shuttle components, the world's largest super computers, or leading edge medical devices, the government buys items made up of parts, These parts flow through a supply chains with tiers upon tiers of suppliers, pulling from every corner of the globe to create a capability.
A broadening scope
Section 831 of the 2020 NDAA directs the Under Secretary of Defense for Acquisition and Sustainment to take the lead in resolving this issue. Specifically, the under secretary will characterize and monitor supply chain risks, including the origin and vulnerability of the products, counterfeit products, cybersecurity sophistication of contractors, vendor vetting, and other risk areas as are determined appropriate. This risk characterization and monitoring extends through every tier of the supporting supply chain, beyond internal DoD structures to all supporting tiers in the commercial supply chain.
That is a broad directive.
Some industry experts support the bill. On a publicly accessible MITRE website, Peter Modigliani says, "There are critical risks across the industrial base which include adversaries stealing designs of critical systems to controlling and corrupting key elements of the supply chain. DoD must also develop contract strategies at portfolio and enterprise levels to minimize winner-take-all contracts that create a monopoly for key defense sectors and instead enable vibrant competition from many vendors from the primes down to all tiers of the supply chain. Digital solutions help DoD maintain an enterprise view."
While Modigliani and others may endorse the idea of the federal government being involved "from the primes [prime contractors to the department of defense] down to all tiers of the supply chain," there are contractors supporting the defense industrial base with a different point of view. Suppliers in the private sector often consider that type of information to be competition sensitive proprietary intellectual property; it's a basis of competitive advantage.
The bill directs the Department of Defense to take responsibility for the "characterization and monitoring of the health and activities of the defense industrial base." If this language passes, the Department can pass judgement on a company's profitability, investment, innovation, and technological and manufacturing sophistication, as well as the "culture of performance."
The world's best financial investors and venture capitalists attempt to do this daily, becoming experts in niche areas, trying to predict the outcome of a company's decisions in a specific market. Sometimes they get it right, and sometimes they don't. If the bill passes, Congress is assigning that same responsibility to federal employees who likely have dozens of contracts they are trying to manage, including vendor performance. Even using the same technology that the investors use to identify and rate risk, the magnitude of the challenge is significant.
The bill goes further. Currently individuals—not an office or a department—award federal contracts. There is a specific individual, known as the contracting officer, who generally has absolute final decision authority. Part of that final decision is the "responsibility determination," where contracting officers certify that, in their judgement, the contractor has the means and ability to complete the contract. If that determination is extended to encompass the risk associated with the tiers of the supplier's supply chain, however, the contracting officer might lack the skill, knowledge, and experience to accomplish the task.
The Senate version of the National Defense Authorization Act broadens the scope of the contracting officer's responsibility to include "consideration of the need for special standards of responsibility to address the risks." There is no definition of what is meant by standards of responsibility to address the risk; interpretation is left to the discretion of the contracting officer. A reasonable person could assert that the Senate wording isn't meant to be astandard; it's a catch-all. The "consideration" can be whatever the contracting officer wants it to be.
The issue of reliance on international sources of supply is real. Consider the need to prevent internationally sourced chips with snooper capability from being introduced into government equipment. The challenge lies in the implementation language. The complexity of requiring every commercial supplier to certify all tiers of the supply chain globally is prohibitive. Congress's approach is to use catch-all phrasing and expect the industry to figure it out. There is no consideration of the cost of implementing multitier oversight, certifications, and mechanisms (including insurance) to secure all tiers of the supply chains.
From the "spy chip" to foreign firms that pretend to be a U.S. firm, to the delivery of nonstandard parts, there are any number of nuances to the risk challenge. It is a complex problem. The largest producer of computer chips is China. Steel is also a vital defense commodity, and the United States imports substantial quantities from Russia. Another example is rare earth elements. According to the U.S. Government Accountability Office (GAO), "Rare earths are essential to the production, sustainment, and operation of U.S. military equipment. Reliable access to the necessary material, regardless of the overall level of defense demand, is a bedrock requirement for DoD." What the GAO delicately avoids mentioning is that China is the principal—and for some of the elements, the only—source.
Congress has a challenge. There is merit to both perspectives on Section 831. While we all like sausage, sometimes it's good to help make the sausage. If you have an opinion, share it with a congressional liaison, or pick up the phone and call Capitol Hill directly.
Editor's Note: A previous version of this article incorrectly stated that the MITRE Corp. supported the bill, it was actually Peter Modigliani writing on MITRE's website. His views do not necessarily reflect MITRE's.
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Businesses were preparing to deal with the effects of the latest major storm of the 2024 hurricane season as Francine barreled toward the Gulf Coast Wednesday.
Louisiana was experiencing heavy rain and wind gusts at midday as the storm moved northeast through the Gulf and was expected to pick up speed. The state will bear the brunt of Francine’s wind, rain, and storm damage, according to forecasters at weather service provider AccuWeather.
“AccuWeather meteorologists are projecting a storm surge of 6-10 feet along much of the Louisiana coast with a pocket of 10-15 feet on some of the inland bays in south-central Louisiana,” the company reported in an afternoon update Wednesday.
Businesses and supply chains were prepping for delays and disruptions from the storm earlier this week. Supply chain mapping and monitoring firm Resilinc said the storm will have a “significant impact” on a wide range of industries along the Gulf Coast, including aerospace, life sciences, manufacturing, oil and gas, and high-tech, among others. In a statement, Resilinc said energy companies had evacuated personnel and suspended operations on oil platforms as of Tuesday. In addition, the firm said its proprietary data showed the storm could affect nearly 11,000 manufacturing, warehousing, distribution, fabrication, and testing sites across the region, putting at risk more than 57,000 parts used in everyday items and the manufacture of more than 4,000 products.
Francine, which was expected to make landfall as a category 2 hurricane, according to AccuWeather, follows the devastating effects of two storms earlier this summer: Hurricane Beryl, which hit the Texas coast in July, and Hurricane Debby, which caused $28 billion in damage and economic loss after hitting the Southeast on August 5.