By Kevin Baker | September 1, 2022
Editor’s note: In a report on industry for Orange leadership prepared this summer, Orange Silicon Valley analyst Kevin Baker examined the technological innovations driving transformation through the interconnection of physical and digital systems. The shift, referred to in this report as the fourth industrial revolution, will shape production and distribution in the years to come in ways we are just beginning to understand. This report is now being made available for our Orange Silicon Valley website readers in a series of five weekly articles. Part 3 looks at procurement and sourcing. Other articles in the series include part 1, introduction; part 2, strategy and planning; part 4, manufacturing; and part 5, distribution. For questions or additional information, please contact Kevin Baker.
Industry 4.0 — more than manufacturing, part 3: procurement and sourcing
Competition to manage risks in the procurement/sourcing of manufactured goods is intensifying
Years of increasing globalization has left the functionality of US supply chains vulnerable to incidents such as the Covid-19 pandemic and geopolitical turmoil originating from Russia’s invasion of Ukraine. Companies have been scrambling for short-term solutions. However, notable investments for manufacturing capacity on US soil indicate consensus among major worldwide manufacturers that supply chains of the past cannot be relied on over the long term. In 2021, companies announced investments totaling $200 billion for semiconductor, electric vehicle, and battery manufacturing in the US.
Biden administration pushes for domestic manufacturing, supply chain resilience
President Biden’s administration announced an executive order in early 2021 aimed at enhancing the resilience of American supply chains that identified increased domestic manufacturing capacity as a key objective to “ensure economic prosperity and national security”. Various authorities were ordered to conduct reviews on the resilience of supply chains within their respective offices. These reviews identified common vulnerabilities and weaknesses across US supply chains: insufficient US manufacturing capacity; misaligned incentives and short-term thinking in private markets; industrial policies adopted by allied, partner, and competitor nations; geographic concentration in global sourcing; and limited international coordination.This has been followed by a proposed AM Forward program which aims to make 3D printing more accessible for small- and medium-sized manufacturers. Through this program, the Biden administration hopes to lower costs for manufactured goods, create high-paying domestic manufacturing jobs, and further improve supply chain resilience. The program will be supported by a proposed Supply Chain Office, which will be established at the US Department of Commerce by the administration’s pending Bipartisan Innovation Act.