While the COVID-19 pandemic caused many struggles for businesses across the globe, many manufacturers continue to face significant supply chain disruptions. A combination of skyrocketing costs, truck driver shortages, lack of goods available, and delays at ports have wreaked havoc for many manufacturers, no matter the location, size, or nature of their business.

With many predicting that such disruptions could continue throughout or even beyond 2022, the Biden Administration is continuing its efforts to strengthen the country’s supply chain. Last February, the Administration released the Executive Order on America’s Supply Chains to begin addressing some of these struggles. One year later, on February 24, 2022, they released the Biden-Harris Plan to Revitalize American Manufacturing and Secure Critical Supply Chains in 2022.

Order Overview

The 2021 Executive Order called for research, discussion, and planning to identify and mitigate risks in key areas of the supply chain, such as semiconductors, advanced packaging, high-capacity batteries (including for electric vehicles), critical minerals, and pharmaceuticals. Further, the Order set forth a plan to review the supply chains related to the defense industrial base (including goods for which the US is dependent upon other nations), public health and biological preparedness, information and communications technology, emergency sector, transportation, and agricultural commodities and food products.

Through this research, the Order hoped to identify risks including capacities, geographic locations, supply concentration, climate change impact, and others that could impact the resiliency of the American supply chain. Further, needs related to the workforce’s skills, research and development, and transportation were to be identified.

Biden-Harris Plan

As initial research called for in the Executive Order has now been completed, the Administration has detailed actions it has begun taking, including increasing support to solve current challenges, investing in the supply chain, and institutionalizing resilience through the improvement of collaboration between federal agencies. Further, the Administration recognized that additional actions are necessary, including:

• Proposing that the Export-Import Bank (EXIM) provide financing to certain manufacturers, an initiative to be voted on in Spring 2022 by the EXIM Board.
• Unlocking funds through the Small Business Administration (SBA) and Department of Treasury to provide access to capital for certain manufacturers.
• Working to scale innovative technologies, promote workforce initiatives, and taking other actions to help Manufacturing USA Institutes strengthen supply chains.
• Using the Bipartisan Infrastructure Law to update infrastructure that can be used to transport goods more expediently.
• Reducing foreign dependence on certain critical minerals.
• Using measures granted under the Bipartisan Infrastructure Law, American Rescue Plan Act, and Buy American Act to support the improvement of supply chain resiliency.
• Working with trading partners to build supply chain resilience, prepare for future crises, and mitigate future disruptions.

Manufacturers currently facing supply chain disruptions are looking for quick answers. However, it is unlikely that these companies will see immediate relief due to the Administration’s plan. Instead, manufacturers should view this Plan as a long-term strategy that may help resolve long term issues or prevent their recurrence.

As a result, manufacturers should consider taking actions to strengthen their own individual supply chains. These actions may include:

• Maintain communication with suppliers. Communicate your needs and request updates regarding open orders or market information.
• Where possible, consider engaging multiple suppliers for critical goods. Work actively to ensure that those suppliers are not sourcing from the same supplier; having a single source anywhere in your supply chain may reduce the effectiveness of your efforts to dual-source.
• Revisit your purchase orders. While just-in-time inventory is a strategy used by manufacturers, potential disruptions in the supply chain can cause the need for higher inventory quantities.
• Prepare for cost increases. With inflation continuing to rise, manufacturers should expect costs of goods to increase. Be prepared to pass those increases to customers as appropriate.
• Keep a close watch on your cash. With increasing costs and the potential need for higher inventory levels, the potential for cash flow issues rises. Create a cash forecast to help you manage it.
• Set expectations with your customers. Keep them abreast of anticipated cost changes as well as goods’ availability. While it will not increase the resiliency of your supply chain, it will help you maintain a higher level of customer satisfaction.

To discuss options to manage your supply chain, please contact a member of HBK Manufacturing Solutions at 330-758-8613 or manufacturing@hbkcpa.com.