SUPPLY CHAINSSupply Chain Uncertainty
Supply chains are extremely complex, to the point that almost no business or organization is likely to know the details of its supply chain below the immediate level. This opacity can result in vulnerabilities developing without the affected parties even being aware of them. There is thus a need to building resilience in the face of impending threats.
This report presents a 2023 analysis of supply chain uncertainty across four fundamental areas of supply chain vulnerability: the disparity between individual and collective good, the challenges of surge response, the problem of transparency, and the problem of coordination within an extremely complex system. The findings suggest broad causes of supply chain vulnerability and interdependence, particularly in areas for which there might not be a natural sponsor or specific stakeholder, and potential ways to better understand and mitigate these causes.
Intended for public- and private-sector researchers and decisionmakers in the areas of supply chain security and risk management, this report offers avenues for further inquiry to address gaps identified in the analysis.
Key Findings
· The dispersion of supply chains across borders and into different regions is a natural consequence of rational economic decision making by private-sector actors. However, that decision making does not necessarily aggregate to the collective level.
· Supply chains are oriented toward efficiently filling demand in the near term. Long-term consequences of disruption do not generally receive attention from organizations whose immediate interest is in filling an immediate need.
· Supply chains are extremely complex, to the point that almost no business or organization is likely to know the details of its supply chain below the immediate level. This opacity can result in vulnerabilities developing without the affected parties even being aware of them.
· Coordination of supply chain management is particularly challenging. The primary actors in supply chains are in the private sector, and they react to the specific needs of their companies. Even where incentives might exist for collaboration, the sheer complexity of supply chains makes doing so difficult.
· The systemic goal of increased supply chain resilience probably cannot be met if it is to be achieved by trying to impose significant cost and burden on the private sector. Resilience can be neither regulated nor forced. Mechanisms that allow for a diffusion of risk are essential, but these solutions have to be implemented in a way that does not assume unrealistic behavior by the private sector.
Recommendations
· Take steps to promote both better research and more effective implementation of mechanisms to promote supply chain security.
· Focus research on improvements to collective outcomes, not toward the outcomes that individual organizations might achieve.
· Focus on “futures” solutions to meet surge demand rather than on stockpiling.
· Focus supply chain mapping on areas in which varying incentives might have a significant impact on outcomes.
· Focus research on collaborative solutions that take into account differences between public- and private-sector incentives and restraints.
Bradley Martin is a senior policy researcher at RAND. This brief was originally posted the website of RAND.
