Geopolitics Has Riled Up Supply Chains

Manufacturers are waking up to the risks in their end-to-end supply chains. They are realizing that they are only as strong as their weakest link, especially if they do not have backup sources of supply that will jump in at a moment’s notice. As an international law expert says, if you are counting on China for manufacturing, you must “get out”. On the other hand, if it is one of your sources of supply for a high labor content product and you have backup sources ready to scale up rapidly and no IP/ security concerns, you are likely “covered”.

Speaking of the risks of China, the reason the Panama Canal has turned into such a contentious topic is because Chinese companies own both sides of the Panama Canal (Atlantic terminal and Pacific terminal), and they are building a bridge over the Panama Canal. Since the U.S. treaty requires the canal to remain neutral, there are concerns that the U.S. military and goods could be prevented from passing the canal.

Similarly, the topic of Greenland has also become contentious. Greenland has vast critical minerals and natural resources. These are absolutely essential to supporting the growth in manufacturing, regional supply chains, and artificial intelligence. Greenland is also located in a strategic position in support U.S. military. Since the U.S. is protecting Greenland, there is an interest in formalizing what’s going on in Greenland and its relevance to supply chains and the concept of “peace through strength”.

As the war of Israel vs Iran-backed groups and the Russia-Ukraine wars carry on, geopolitical issues continue to pop up. For example, the exploding pagers highlighted the importance of supply chains, North Korean troops on the ground for Russia raises questions, and China’s purchase of Russian and Iranian oil (providing funding for continued war and eliminating the impact of the sanctions) raises eyebrows. The war has also highlighted the cooperation of Russia, China, Iran, and North Korea.

Natural Resources Fuel Supply Chains

Supply chains will not exist without natural resources You can build miles and miles of semiconductor chip factories, but without the critical minerals such as silicon, gallium, germanium, arsenic, palladium, and rare earth elements, they will be useless. Pharmaceutical products are useless without the active ingredients. Manufacturing EV’s is impossible without lithium. Similarly, manufacturers cannot manufacture without energy. If you move manufacturing to the opposite end of the world and use a less environmentally-friendly process, you might theoretically improve the carbon footprint of your specific location; however, you have made the end-to-end supply chain’s carbon footprint worse. Thus, you must look at the complete picture when reviewing supply chains.

From the natural resources and critical minerals standpoint, Canada can be considered a treasure trove. This is one of the reasons that Canada’s manufacturing purchasing manager’s index (PMI) was in expansion territory the last several months when the U.S.’s index was in contraction mode (less than 50). For example, Canada has copper, cobalt, nickel, lithium, graphite, and rare earth elements in addition to significant oil and gas production.

With that said, the U.S. has a treasure trove of critical minerals and natural resources as well in Alaska and spread throughout the United States. The issue isn’t availability; it is deciding to mine and gain access to these resources and the lead times to set up operations. For example, when in Alaska earlier this year, I saw the Alaskan pipeline and saw an old video about getting the pipeline going. It was quite interesting, tough terrain, and not a quick process. Yet Alaska has vast resources and potential. Similarly, vast quantities of lithium have been discovered in Nevada, Oregon, and other states. These could potentially replace the lithium from China.

As AI will require at least 10 times the energy and the related electronics will require vast amounts of critical minerals and natural resources, this topic can no longer be ignored. Thus, Greenland and other opportunities enter the picture. There will also need to be huge investments in AI, related technologies, and the supporting infrastructure (manufacturing, natural resources, etc.). Companies are starting to invest eye popping amounts into AI. The same will start occurring with down-the-line supply chains.

Clearly, several of the Trump executive orders and communicated plans relate to securing supply chains. Refer to our recent articles in our relevant blog category for the latest details and download our latest special report to learn what experts recommend to successfully navigate these volatile waters.

The Future of Supply Chains

Clearly, several of the Trump executive orders and communicated plans relate to securing supply chains. Refer to our recent article to learn more about these strategies to encourage a transition to regional supply chains and entice manufacturing growth. In addition, proactive manufacturers are moving towards regional supply chains (reshoring, nearshoring, friendshoring, vertically-integrating) due to geopolitical risks, supply chain risks, cyber risks, customer requirements (delivery performance and timing, new product development timetables). At a minimum, they are ensuring they have backup sources of supply, are diversifying their supplier base, and they are formalizing contracts, supplier relationships and joint venture partnerships.

Companies are assessing their manufacturing footprint and end-to-end supply chains. Do they have the energy to power growth? Will growth be limited by the availability of water? Have they secured the critical minerals and natural resources to support production plans? Will their supply chains support their customer growth? Do they have know how to utilize their ERP systems and related technologies to stay ahead of changing conditions while optimizing costs and driving customer and/or product profitability? Are their SIOP (Sales Inventory Operations Planning) processes ready to support scalable growth? Will they predict supply chain strategy pivots? Make sure you are prepared with forward-thinking plans to keep your supply chain ahead of the curve. To read more about what experts think you should be thinking to craft tomorrow’s supply chain today, read our special report, FutureScape.

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Geopolitics, Natural Resources, & Impacts to the Supply Chain