The lessons from America’s efforts last year to quickly build up manufacturing capacity for N-95 masks and hospital gowns at the peak of the pandemic are akin to a fable. It may not have much appeal to the story of the hare and the tortoise, but this story in the microcosm is all we need to know about the complexity of building supply chains in the 21st century. An article in the Harvard Business Review this summer described how Shawmates, a Massachusetts-based company, had taken several months to ramp up production capacity for N-95 masks, as everything from polypropylene fabrics to industrial machines to fabricate fabrics. was necessary for. And assembling a mask with nose closure etc., had to be imported from Germany and China. However, in the case of hospital gowns, most of the expertise was in the US. The ‘alliance’ eventually consisted of separate companies such as a high-fashion firm in New York, a manufacturer of climbing suits in Oregon, and even a mattress company, as a race would allow sewing capability. had begun to accelerate. “Schomut’s gown operation went from a sustainable start to an output rate of 350,000 gowns per month in just 90 days. Schmutt and his coalition partners supported the production of 11 million urgently needed isolation gowns.” Schmutt had to lay off some of his employees.
The supply chain, once a bastion of business-school case studies, is the subject of headlines today. In Los Angeles, earlier this month nearly half a million shipping containers were waiting to unload their cargo at the port, which is facing labor shortages, resulting in ports operating at about two-thirds of their capacity. Used to be. US President Joe Biden had to announce a plan to enable California ports to operate round-the-clock.
In China, Beijing’s order to provinces asking them to move to cleaner fuel sources led to a sudden drop in coal supplies and left factories in southern China, the epicenter of global supply chains, at risk of extended power cuts. Were.
There’s probably a stronger contender than supply chains for Time magazine’s Person/Year event in 2021, but it’s hard to think of one.
Two things have become clear from this round of stress tests. The first is that companies are heavily dependent on China in managing supply chains and thus seek to address global geopolitical problems. The second is that grand plans to create a “resilient” supply chain and favor domestic production, from Washington to New Delhi, are mostly made amid ignoring how dense and complex the supply chain is. Equally, Apple chief Tim Cook may regard inventory as “evil.” “, but ultra-lean inventory may be a thing of the past. Apple’s reliance on the assembly of its products in China, where its suppliers employ 3 million people, was questioned in 2015, according to The Wall Street Journal Some of its managers pushed for some production to be moved to Vietnam, but this was rejected by senior management.
Earlier this month, US Trade Representative Catherine Tai gave a loud speech at a think-tank in Washington. She regretted China’s entry into the WTO, as many do today, on the belief that Beijing had sabotaged the system. Tai observed that, “from the late 1970s to the mid-1980s, US exports to China nearly quadrupled, compared to less than 10 years before the Clinton administration paved the way for it in 2001.” Imports increased by 14 times.” Industries across America have been wiped out. Tai promised to work with allies “to facilitate a race to the top for market economies and democracies.”
So far, so much hustle. But there is little evidence that business is willing to meaningfully move production elsewhere, or that consumers will pay higher prices that result. For all the edgy-club brutality of the Chinese ambush of Indian soldiers on the border last year that claimed the lives of more than a dozen Indian soldiers, few Indian companies or consumers have changed their buying behaviour. India is dependent on China for almost two-thirds of its imports of active pharmaceutical ingredients. Last week, Foreign Secretary Harsh Vardhan Shringla said that bilateral trade between the two countries has grown by 49 per cent in the first nine months of this year. India’s bilateral trade deficit during that period stood at $47 billion.
Similarly, in the US, the Biden administration recently allowed companies to apply for exemptions to import from China, while US companies are lobbying to lift tariffs on Chinese products. China’s supply chains are a hindrance to our collective buying behavior. The Foreign Minister of Taiwan has been welcomed with open arms on his visit to the Czech Republic. The island republic has played a major role in helping China build industrial capacity over the past four decades. The Taipei politician, whom I spoke to this March for an article in Mint (bit.ly/2Zo5o8G), said he believes India should go ahead with a free trade agreement (FTA) with Taiwan. should grow and enable India to become a major link in global supply. Chains such an FTA would run the risk of angering China. Beijing is turbulent but has demonstrated both the speed and patience of the hare for the long game of turtle.
Rahul Jacob is a Mint columnist and a former foreign correspondent for the Financial Times.
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