• Supply Chain
  • Blockchain
  • Security Standards
  • Agriculture

A Need for Secure and Reliable Supply Chains

Hannah Davis
Apr 20, 2021

Guidehouse Insights

The US requires resilient, diverse, and secure supply chains to support critical infrastructure industries while facilitating economic prosperity and national security. These industries are vulnerable to a variety of physical, cyber, and biological threats, extreme weather events, and geopolitical and economic competition. The 16 critical infrastructure industries are defined by the US Cybersecurity & Infrastructure Security Agency as sectors “Whose assets, systems, and networks, whether physical or virtual, are considered so vital to the US that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health, or safety, or any combination thereof.”

To protect and strengthen US critical infrastructure industries, in February 2021, President Biden signed an Executive Order (EO) 14017 to evaluate US supply chains and address risks and vulnerabilities. Within 100 days, the EO requires several federal agencies to perform a thorough review of several supply chains including a review of semiconductor manufacturing, advanced packaging supply chains, high capacity batteries, critical materials, and rare earth elements.

No Supply Chain Is Immune to Disruption

The disruption to trade caused by the Ever Given container ship stuck in the Suez Canal for 6 days in March 2021, is an example of the cascading effects that can stem from a disruption to critical infrastructure sectors and foundational supply chains. Although total fallout from the blocked Suez Canal has yet to be quantified, the effect will likely be huge as 12% of global trade passes through the canal each day, translating to $9 billion worth of goods. A key shipping route for oil and natural gas, the backlog in the canal resulted in a temporary increase in global oil prices as tankers carrying almost 9.8 million barrels of crude oil (one-tenth of daily global consumption) were stymied and an additional 3 to 5 million barrels per day were delayed. This event and its ripple effect further cement the need for resilient domestic supply chains.

Threats to US critical infrastructure supply chains are amplified due to reliance on foreign suppliers for critical goods. The COVID-19 pandemic shifted priorities and the auto industry is facing manufacturing issues from a shortage of semiconductor chips. During the early months of the pandemic, automobile manufacturing plants were temporarily shut down and semiconductor chips were diverted to consumer electronics industries to support the demand for remote learning and working during stay-at-home orders. Earnings estimates, reported by several of the large automakers, expect the chip shortage to negatively affect revenue between $1.5 billion and $2.5 billion in 2021.

Securing US Supply Chains Is Vital

Within a year, the EO also requires that federal agencies evaluate and identify areas where civilian supply chains are dependent on competitor nations, develop policy recommendations, and submit a report for the following sectors:

  • Agricultural commodities and food production
  • Transportation
  • Energy sector
  • Information and communications technology industry including software, data, and software services
  • Public health and biological preparedness
  • Defense

As a full evaluation is performed, it is important for policymakers to work with technologists and industries to develop a robust list of recommendations to secure and enhance US supply chains. Although a nascent technology, blockchain should be considered as one of the tools within the larger toolbox. Blockchain has the potential to transform supply chains in the future, as has already been evidenced across agriculture, the pharmaceutical industry, and logistics. The inherent characteristics of blockchain—security, immutability, and transparency—may offer significant advantages tracking the provenance and availability of critical materials are inherent and fundamental to stability of the nation.