Q&A: Building the Supply Chain of Tomorrow
When the COVID-19 pandemic was in full swing in 2020, essential goods like toilet paper and face masks were in short supply. And it didn’t stop there—from medicine and food to lumber and automobiles, consumers had trouble finding the products they needed.
For many, images of container ships waiting offshore for weeks, empty grocery store shelves and long wait times for online orders were their first experiences with supply chains and the effects that disruptions can have.
In his latest book, “Reinventing the Supply Chain: A 21st-Century Covenant With America” (Georgetown University Press, 2023), Jack Buffington, academic director of the Supply Chain Management Program at the Daniels College of Business and University College, argues that recent supply chain disruptions are the latest symptom of underlying problems inherent to supply chains that stretch around the globe. He explores methods that have worked and failed and lays out how a transition from “long-tailed supply chains” to “community-based value chains” will build the supply chains of tomorrow.
In an interview with the DU Newsroom, Buffington explains the problems with global supply chains and what he sees as the best solutions. This conversation has been edited for clarity.
What did the COVID-19 pandemic reveal about the state of global supply chains?
The COVID-19 pandemic was a shock to consumers who expect low prices and high product availability. However, the weaknesses in the supply chain have been resident for decades, starting with the deindustrialization since the 1970s.
Growing up in Baltimore, I saw the impact [of deindustrialization] on my relatives and community. I saw family members lose their livelihoods and never really recover. I wrote about the weaknesses in our manufacturing and supply chain system in my first book in 2007, before the Great Recession of 2008. I did a book event in New York City before the recession and warned about these challenges, and I was considered an alarmist.
The root cause of what’s happening today wasn’t COVID-19, but rather the lack of understanding of the need for balance between supply and demand to support workers and citizens beyond being consumers and investors.
Why have long-tailed supply chains become such a prominent component of our economy?
The evolution toward long-tailed supply chains started after World War II. There was a rush to increase consumption that led to an out-of-balance situation between supply and demand. Ultimately, long-tailed supply chains became a great way to keep costs low and availability high.
For example, for a pair of jeans made in Asia, it costs less than a dollar to ship them to the U.S., and labor costs are $2 an hour versus $25, which keeps cost down and is advantageous to American consumers. Long-tailed supply chains are focused on transactional efficiency—the cost and availability of supply and demand that benefits consumers and investors. However, it isn’t beneficial to blue-collar workers who lose their jobs and middle-class lifestyle or to communities where the tax base is lost as a result.
To some extent, long-tailed supply chains have been good for the environment because they employ hundreds of millions, if not billions of people worldwide and have pulled them from extreme poverty, which is the worst condition for the environment. However, these long-tailed supply chains are powered largely by fossil fuels, which is not good for the environment, and they’re dumping millions of tons of plastic into our oceans. It’s not a simple ‘good or no’ answer; we need to fix the bad and seek more of the good moving forward.
What are the benefits of community-based value chains?
The concept of a community-based supply chain is to balance supply and demand to increase value for the community rather than simply being transactional to lower cost and raise profitability. If our only goal is to get clothing as cheap as possible, and then we lament over environmental and societal problems, such as under-employment, there is a disconnect.
My model focuses on investments in broadband, 3D printers and education to enable individual entrepreneurs and communities to compete against large, global multinational corporations. I am not in favor of eliminating large global supply chains, but rather to support others in competing against them to establish “value chains” that benefit workers and citizens.
For most of human history, demand for goods was greater than supply—until recently, when supply is so great, it chases away value, and this commoditizes goods, people, society and the environment. The concept of a community-based supply chain is the ultimate expression of free market capitalism in the 21st century.
How will technological innovation enable a transition to the supply chain of the future?
The good news is that technological innovation can catalyze the change needed to focus our supply chains on value rather than price, cost, consumption and waste. However, the greatest challenge will not be advances in tools such as blockchain and 3D printing, but rather whether we will get to the root cause of why our institutions aren’t working, and whether the solution is driven by large public (government) and private (multinational corporations) entities or by individuals and communities, which I propose.
Education will be the primary solution to the problem. When you understand the history of supply chains and the data, you can develop proper solutions for any problem. Business and government leaders must focus once again on structured problem-solving techniques that were employed in the early 20th century in America that led to our success. In my book, I explain how our supply chains became so broken and how they can be fixed, and it’s a rather obvious path if you understand the data.
Another important element of education is to address the deep-seeded digital divide that exists in the U.S. and other nations. For the economy to grow in a healthy manner, we need an educational system that allows all Americans to succeed in the emerging digital economy.
What is the most important takeaway from your book?
People are surprised to learn how interwoven supply chains are in their daily lives, not just as consumers, but also as workers, investors and citizens.
Reinventing how our supply chains work should be a benefit to us as consumers, but more importantly, for the overall health of our communities and our relationship to other nations and to the environment. For this to occur, the average American can no longer be in the dark about how these systems operate and their impact on these greater topics.
In reality, my book isn’t really about supply chains, but more so on the importance of the concept of value within the economy across all stakeholders.