by John Monarch, CEO of ShipChain, a Greenville-based blockchain-based logistics platform
The death of the single-source supply chain will mean a rise in nearshoring — that is, bringing manufacturing closer to Greenville and America. The beneficial results of this move can be boiled down to a not-so-simple word: information.
COVID has dramatically undermined global confidence in using Asia as the sole location for manufacturing. It’s well past time. During the height of the virus, for instance, New York Governor Andrew Cuomo highlighted the fundamental problem: States were competing with the federal government to purchase protective equipment from Chinese manufacturers. For the record, that’s a double whammy: higher costs and dependence on manufacturers nearly 7,000 miles away.
But the national security considerations were more daunting. Consider: 97% of all antibiotics used in the United States are currently manufactured in China. Social distancing may help limit the spread of COVID, but not against a superbug. Without the facilities, the know-how and the supply chains to develop and distribute cures to future pandemics, America is in a perilous situation.
The obvious conclusion is that the United States must bring manufacturing home. But there’s a rub: America cannot fall into the same trap here that companies currently face in China — namely, relying too much on one country for key resources. We’ve already seen that South Carolina and New York can be shut down as quickly as Shanghai or Wuhan.
We need a balance, including considering new investments into Mexico and Canada. To begin, the United States already has a signed, mutually-beneficial international trade agreement with these countries, with low, predictable tariffs. What’s more, we continue to maintain a cooperative stance vis-a-vis them, as opposed to our competitive posture toward China.
But one of the major benefits of investing in Mexico and Canada is our ability to harvest new troves of information from their supply lines. For instance, there is already a direct rail connection via Kansas City Southern from Monterrey, Mexico, to Laredo, Texas. Every day, thousands of trucks move quickly and easily across the border. Manufacturers have the tools, using blockchain-based track-and-trace technology, to know precisely where those loads are. Both sellers and purchasers can access temperature and humidity levels of sensitive products and can integrate all of this information seamlessly into shipping networks.
Very little of this information exists for global marine shipments coming from southwest Asia.
One result is that there will be a significant reduction in the amount of theft and lost cargo across the network. Each year, American companies lose more than $9 billion due to theft and fraud, according to the FBI. Reducing that by just 10 percent would mean almost $1 billion — a major boon for the bottom lines of American businesses.
Expanding North American rail and road shipments increases redundancy and provides new reams of information — all of which makes America more competitive globally. If past is prologue, new pandemics will arise. But hopefully, we will have the local supply chains and information to keep our economy moving forward.