Federal Supply Chain Efforts: What’s Happened? What Comes Next?

December 26, 2024

Article

Bob Kolasky

Senior Vice President, Critical Infrastructure

On December 19, the Biden administration released the first ever national Quadrennial Supply Chain Review, capping a flurry of activities that the federal government has taken over the course of President Biden’s presidency to strengthen the trustworthiness and reliability of critical supply chains.

Quadrennial reviews have traditionally been focused on national defense and security efforts, and in some ways it is fitting that the administration has initiated a supply chain review given the importance of supply chains to national security.

The Administration View

Given the timing at the end of the administration, it’s not surprising that the Review takes a bit of a congratulatory tone. It highlights the transformational focus on strengthening critical supply chains and the related “enormous success, thanks to renewed investment in American manufacturing in these sectors, stronger economic relationships with our allies and partners, and improved capabilities within the federal government to monitor and respond to shocks that can disrupt supply chains.”

In an adjacent event intended to highlight the Review’s release, Lael Brainerd, the National Economic Adviser, highlighted evidence to support those claims — pointing to the Federal Reserve Bank’s New York Global Supply Chain Pressure Index (GSCPI), which is a measure of the relationship between supply constraints and economic outcomes. The Index currently sits at negative — from a high of more than four standard deviations from normal in 2021-22 — suggesting that, from an economic standpoints, supply chains are largely functioning normally and not providing a significant drag on the economy. This, however, is not necessarily a stable state.

Federal Priorities

The Quadrennial Review is as good a moment as any to analyze where federal policy is on supply chains. The Biden administration strategy has been to squarely set priorities for critical supplies, and use economic, trade, labor, diplomatic and security policy in ways to strengthen them — creating a boom in American industrial policy directed toward supply chains.

The Quadrennial Review highlights work in that area across 10 supply chains. Those supply chains are:

Energy
Advanced batteries
Critical minerals
Agriculture commodities and food products
Public health and biological preparedness
Pharmaceuticals and active pharmaceutical ingredients
Information and communication technology
Semiconductors
Transportation industrial base
Defense Industrial Base

How Exiger Has Helped

Exiger has supported most of the government agencies tasked with strengthening those supply areas and helped illuminate risks and opportunities in each. Our work has found that there are common supply chain risks across the entire group — concentration risk in critical nodes, heavy reliance on foreign suppliers that are subject to foreign ownership and control from potential adversarial nations, reliance on technology to produce critical functions that are subject to exploitation of digital vulnerability which can cause supply chain stoppages or loss of sensitive intellectual property, and use of forced labor, unfriendly environmental practices, and conflict minerals to produce supplies. Addressing those risks is essential for supply chain resilience.

The Quadrennial Review points to progress that has occurred — more aggressive use of trade restrictions and trade promotion, infrastructure and technology investment, cyber supply chain efforts, procurement reform, and increased supply chain visibility. It also highlights how the government has evolved to focus on these issues to include the creation of a Cabinet-level Supply Chain Resilience Council and several organizational units in the government, including a Supply Chain Resilience Center in the Department of Homeland Security.

What Comes Next?

With the Trump administration ready to take over on January 20, the next four years of federal supply chain policy will be developed by the new president and his team in conjunction with Congress. Many of the strategic priorities will remain the same, but the way that they are delivered and the urgency behind them will undoubtedly change. Even as the issue has been elevated and advanced in the last four years, the risk has not necessarily decreased, and it’s crucial that there is innovation in mitigation efforts. More aggressive use of tariffs, regulatory and permitting reform, opening procurement paths to new technology providers, and tax incentives for businesses that contribute to achieving national aims are likely. So, too, is enhanced efforts to enforce restrictions and penalize bad actors and pushback on adversary nations.

To do this effectively, it’s critical to rely on an understanding on the health of critical supply bases and their supporting industries, as well as a proactive analysis of emerging risks. Exiger will continue to support our government clients in doing this — but the success of the effort comes via the commitment of industry (many of whom rely on Exiger, as well). The Quadrennial Review highlights the need for private industry to continue to make investments in resilience and understanding of risk. That imperative will continue for the next four years, and we fully expect that supply chains will remain a national priority.

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