Securing U.S. Supply Chain


Aug 29, 2005

This commentary originally appeared in United Press International on August 29, 2005.

The next time you buy a low-priced DVD player, pause to consider that you are the final link in a vast global network. This network spans seaports, railroads and trucking routes to deliver products, like the DVD player, to store shelves.

This supply chain is responsible for moving raw materials, parts and finished goods into, through, and out of the United States. Its global reach and efficiency helps America's economy compete in the global marketplace. But because of rapidly increasing volume and neglect, the U.S. links of the global supply chain are reaching a breaking point. It is time for a coherent national policy to maintain and improve this critical national asset.

Congestion off the southern California coast illustrates the problem. Last October during the height of the Christmas shipping season, more than 90 ships — almost double the usual number — were backed up at the twin ports of Los Angeles and Long Beach, the nation's busiest shipping complex. This forced more than 100 ships to be diverted to other West Coast ports. The delays slowed corporate supply chains and increased costs. Port operators expect this year to be worse.

Other links are strained, too. Rail transit times have become longer, a result of growing traffic and aging infrastructure. Shortages of skilled port workers and truck drivers are compounding efforts to expand service. The system is operating at capacity and there is no relief — only more traffic and neglect — on the horizon.

The threat of terrorism amplifies the challenges to operating and strengthening the supply chain. Right now, maritime container shipments create a gaping hole in the nation's security efforts. A small-scale attack could be economically catastrophic. An attack disabling a critical seaport or rail interchange could instigate a cascade of events bringing the supply chain to a halt, much like how an electrical transmission line failure in Ohio in August of 2003 quickly resulted in a widespread blackout across the Northeast.

Since the terrorist attacks of Sept. 11, 2001, several efforts have been put in place to address the security issue at the nation's ports. But as we recently reported in a RAND Corporation report, the effectiveness of these reactive programs is unclear. Moreover, there is no national strategy for addressing the threat.

The private sector acknowledges that the federal government would close ports in the event of an attack, significantly disrupting the international economy. Despite these concerns, there remains no national plan for how to restart the system should it be closed.

Resolving these many issues poses strategic choices best addressed at the national level, rather than through local or regional initiatives alone. Improving the supply chain poses important economic choices about the type of trade America wants to foster. Expanding deep-water ports might spur more trade from China and other Asian nations, while investment in railroads may foster markets in Mexico and other parts of Latin America.

Increased trade with emerging economies also can affect supply chain security as many of these nations, such as Indonesia and Malaysia, have limited financial resources and face challenges from Islamic terrorist elements.

Despite the national implications of these issues, most decisions about components of the national supply chain fall to local and regional officials. A national approach to the supply chain would allow policymakers to develop a method to evaluate the impact these local decisions have on national policies.

A national approach also should consider economic and security issues together, and focus security resources where the threat is greatest. Finally, a national policy should provide technological leadership to help local officials understand which of an array of new technologies should be embraced.

The most likely outcome of federally directed supply chain policy will be public-private partnerships to improve performance of the system, tighten security and increase U.S. competitiveness. Most of the physical and transactional components of the network are either privately owned — such as the nation's freight rail and banking systems — or locally-controlled — such as local port authorities.

Since our interconnected supply chain amplifies local and isolated private-sector decisions into national economic effects, we need a policymaking apparatus that focuses on our national needs while preserving private, local and regional control over the resources.

“Outside View” © 2005 United Press International

David Ortiz and Henry H. Willis are researchers at the RAND Corporation, a nonprofit research organization.

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