The Change Supply Chain Wants

On issues ranging from innovation to free trade, from security to unionization, the supply chain is looking to Washington to bring changes that will make the U.S. more competitive


Barack Obama had suggested during his primary run that, as president, he might threaten to opt out of NAFTA as a way of bringing Canadian and Mexican leaders to the table to discuss ways to ensure that labor and environmental standards are enforced as part of the agreement process. Political commentators at the time interpreted that to mean that Obama might be opposed in principle to free-trade agreements. However, Obama later clarified his stance, declaring himself a proponent of free trade and suggesting that he merely wanted to ensure that the United States drives the most favorable bargain possible when negotiating trade agreements. "We should make sure in our trade negotiations that our interests and our values are adequately reflected," Obama told Fortune Magazine in June.

Screening at the Border

Trade issues also touch upon national security concerns, especially at the U.S. ports that serve as the entry point for goods coming into the country. Proposals have surfaced periodically in Congress to institute 100 percent screening of all incoming cargo — meaning that every single container landing on America's shores or rolling across the border would have to be inspected to prevent any contraband, including weapons of mass destruction, from entering the country. "One hundred percent screening could be devastating for the supply chain," says Greg Humes, president of National Logistics Management, a Detroit-based logistics services provider.

Humes, who has nearly 30 years experience in the logistics sector, says that comprehensive screening could lead to increased costs of compliance and certification, greater congestion at ports of entry, and increased inventories as companies compensate for additional lead times. The resulting cost increases alone, he adds, could drive further consolidation in a third-party logistics (3PL) industry already hit hard by fuel price volatility and a weakened domestic economy. "There are over 28,000 small- and medium-sized 3PLs, and many of those companies are not going to have the deep pockets necessary to survive," he says.

Some level of increased cargo scrutiny may be inevitable nevertheless, as Humes says that political momentum appears to be driving the push for greater screening. However, he believes that the government should rely more heavily on screening, scanning and imaging technologies — and that the authorities ought to more heavily involve the logistics industry in developing security systems. "We need to bring in experts in supply chain and transportation so that we can do this the right way and use technology to our advantage," Humes says.

The incoming Obama administration appears to support this approach. The president-elect's policy agenda says that Obama "will redouble our efforts to develop technology that can detect radiation and determine the danger it poses, and he will work with the maritime transportation industry to integrate this technology into their operations so as to maximize security without causing economic disruption."

Changing the Mindset

Obama also has called for increased investments in the nation's transportation infrastructure as part of his economic stimulus proposal. This could be good news for the nation's supply chains, which currently must contend with ports, roads, bridges, airports and rail lines all in need of investment. The U.S. Department of Transportation, for example, has estimated that the unfunded backlog for highway and bridge repairs alone stands at $495 billion. Against that backdrop, the $60 billion over 10 years that Obama has called for to fund a National Infrastructure Reinvestment Bank to direct investment into meeting transportation infrastructure needs seems like a drop in the bucket. But the new funds would at least provide a down payment on building up the nation's logistics infrastructure to meet the needs of the 21st century supply chain.

Where many supply chain executives may find themselves at odds with the incoming administration is on the issue of unionization. Obama was one of the original sponsors of the proposed Employee Free Choice Act, also known as the "Card Check Bill." The bill would require the National Labor Relations Board to certify a union if a majority of the employees signed cards, the card check process, rather than requiring an election with a secret ballot. "The concern," Deloitte's Hanley explains, "is that the public balloting process could put far more pressure on employees [to support formation of the union] and significantly increase unionization, driving costs even higher at a time when structural costs in the United States already put U.S. manufacturers at a disadvantage."

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