51吃瓜

The Biden administration has convened an interagency council to help solve America鈥檚 supply chain problem, an initiative that University of Pennsylvania Wharton School professor welcomed as an effort to try to reduce inflation by increasing supply.

鈥淚n terms of a grade, I would give it an A-plus for what it鈥檚 trying to do, but obviously an incomplete because they鈥檙e just starting. So, the devil will be in the execution details,鈥� Fisher said during an with Wharton Business Daily on SiriusXM.

The new White House Council on Supply Chain Resilience was last month as part of nearly 30 new actions to strengthen supply chains described as critical to economic and national security. The actions include using the Defense Production Act to increase domestic manufacturing of essential medicines, along with a number of administrative measures to share data and develop a better strategy to deal with the types of disruptions that left store shelves bare during the worst of the COVID-19 pandemic.

The pandemic has subsided, yet the shortages persist, raising concerns about offshoring and higher prices amid dwindling supplies. From 2021 to 2022, retail food prices rose by , the largest increase in 40 years, according to government data.

Fisher, a professor in the department of operations, information and decisions, said Biden鈥檚 plan is a bit of a 鈥渘ovel approach鈥� to attacking inflation. Typically, the Federal Reserve takes the lead on combating inflation by raising interest rates to temper demand. The Fed has raised the benchmark rate since 2022.

鈥淲hat is inflation? It鈥檚 an imbalance between supply and demand,鈥� he said. 鈥淪o far, we鈥檝e focused on reducing demand. But this gives us a second approach: Let鈥檚 make sure also that we improve supply by avoiding disruptions to supply chains.鈥�

What production is essential?

Offshoring has always been around, but it became widespread across industries in the late 1970s when China began investing in low-cost manufacturing, Fisher said.

鈥淚nstead of getting something from 100 miles away, you鈥檙e getting it from halfway around the world. And that鈥檚 when you realize that it鈥檚 low-cost, but it鈥檚 also very vulnerable,鈥� he said. Factories can shutter for a host of reasons 鈥� natural and man-made disasters, war, political instability, the list goes on.

Bringing more production back to the US would help with shortages, but Fisher said the new council will have a tough time figuring out what products are so essential that they should be made on American soil. He described himself as a 鈥渟keptic鈥� on domestic manufacturing and pointed out the many advantages of participating in the global economy. Trading with other nations creates allies and builds influence. In that context, Fisher said, the US has more to gain from being friends with China than enemies. The same goes for many Central and South American nations from which immigrants come seeking greater economic opportunity.

鈥淭here鈥檚 a saying that when trade crosses country boundaries, armies don鈥檛,鈥� he said. 鈥淎 critique I have of generally bringing manufacturing home to the US is there are also advantages to sourcing from other countries and having strong relationships with as many countries as we can.鈥�

Fisher is also critical of what鈥檚 missing in Biden鈥檚 plan: specific mention of the less developed nations that make much of the world鈥檚 goods, such as Bangladesh. Instead, Canada, Mexico, the European Union, the United Kingdom, Japan and several other developed economies are named.

鈥淲hen I look at the list of countries involved in this initiative, I would add to that list less developed nations, which are important to developed nations as a source of low-cost supply,鈥� he said.

Supply resilience is in vogue

Fisher has spent more than 35 years studying supply chains, examining industries as diverse as transportation and fashion. Before joining Wharton in 1975, Fisher was a systems engineer in the Boston Manufacturing and Distribution Sales office of IBM and on the faculty of the University of Chicago Graduate School of Business. He doesn鈥檛 recall a time during his experience when supply chains were part of daily conversations among Americans as they are now. Recent product shortages of antibiotics, baby formula, computer chips that power most electronics, and other everyday items have people talking.

鈥淏e careful what you wish for,鈥� he said with a chuckle. 鈥淎ll my career, I鈥檝e pretty much labored in obscurity, studying supply chains. Suddenly, it became front-page news, but not exactly good news.鈥�

[ first published this piece.]

The views expressed in this article are the author鈥檚 own and do not necessarily reflect 51吃瓜鈥檚 editorial policy.