Our supply chain woes didn’t start with the pandemic

This holiday season, Americans have a new reason to stress: the dreaded supply chain crisis. The bottleneck of goods has many people doing their holiday shopping early while worrying about rising costs and shortages. Increased consumer demand, production stoppages due to COVID-19 lockdowns and a dearth of truck drivers are all new factors that have put immense pressure on the supply chains that stock our store shelves each December. 

But these short-term disruptions are tied to deeper structural problems that didn’t emerge overnight — and are likely to get worse. Public and private leaders need to address several ongoing vulnerabilities in our supply chains instead of proposing Band-Aid solutions to get us through the holidays. We need durable strategies to avoid further economic volatility, respond to a worsening climate crisis, create better quality jobs and livelihoods and increase equity in access to those opportunities. 

Shippers and retailers would have been better able to cope with this year’s challenges if public and private leaders had not been so laser-focused on minimizing short-term costs such as labor and inventory. With supportive export-oriented policies and financial deregulation, companies have spent 30-plus years reducing warehousing space, subcontracting and outsourcing production, restructuring work arrangements to cut costs and delaying investments in transportation infrastructure.

In other words, we thoroughly starved the redundancy and agility out of these systems and dramatically increased our reliance on imports, because doing so delivered shareholder profits and “just-in-time” access to cheap goods — until the day our supply chains couldn’t deliver. So it is not surprising that we now face a broken system with no easy fix.

Without a bold response to address these systemic challenges, the economic uncertainties in our supply chains will get worse. Mounting climate risks and costs are disrupting ports and the flow of goods more often. Surging demand and deteriorating working conditions are leading to high labor turnover and “shortages” all along the chain, including truck drivers. Our $28.1 billion goods trade deficit with China also carries geopolitical risks that could escalate quickly and trigger more disruptions. The costs of these uncertainties will eventually get passed along to American consumers.

While there are some short-term strategies that could dull this pain — including “pop-up yards” and upgraded inspection facilities as outlined by the Biden administration — the fact is that we need to prioritize longer-term strategies that rebalance and strengthen our supply chains so our country can be resilient in the long run. Ideally, this will involve accounting for the hidden costs of long-distance supply chains (e.g., environmental costs, increased risk, declining job quality) into the price of imported goods; reshoring more production capacity to the U.S. to diversify supply and create jobs and local business opportunities; and leveraging once-in-a-generation federal investments to jump-start a more innovative, inclusive and clean economy. The Biden administration’s explicit commitment to addressing historical inequities in infrastructure, relief and economic development investments is promising, but good intentions are not enough. 

For starters, how we manage and operate supply chains geographically needs recalibration. While our global value chains will continue to be an economic asset, that doesn’t mean we can’t better price goods to reflect the true costs in the short and long term. For example, public and private sector leaders at all levels can build more capacity for stronger regional food systems by changing institutional procurement practices. This would not only help avoid situations like the one we have now, in which some schools cannot get food for lunches — it would also support local farmers and food processors, recirculating capital in the community that otherwise would flow out to multinational companies and their shareholders. 

Second, the climate emergency adds renewed urgency to account for the cost of high carbon emissions in our supply chains, as we ship components and finished goods across long distances, often multiple times. Our physical infrastructure systems, including roads and ports, are overstressed, degraded and outdated. They need to incorporate new designs and technologies that reduce emissions, minimize flood risks and address many other problems. The new infrastructure bill holds promise in supporting just that, but these efforts should not end there. Producers, shippers and financial services companies have a role to play too, as we’re seeing with the potential implementation of new carbon border taxes to account for the climate costs of goods with bigger carbon footprints. 

In addition, staffing our supply chains should not just be about quickly hiring or licensing more low-wage, temporary workers for the holiday season. We need to be cultivating a more diverse pipeline of the logisticians, engineers, entrepreneurs and managers of tomorrow. Employers, policymakers, educators and other leaders need to ensure that more jobs pay a living wage and build more pathways into them. Expanding access to earn-and-learn opportunities, strengthening support for small and medium-sized businesses and increasing access to career information, professional networks and supportive services like child care can all help. Federal, state and local leaders can look to the new American Rescue Plan Act and infrastructure bill dollars to support these goals. 

Unfair competition within supply chains for many goods is also a growing problem. Over time, large companies have come to dominate the market for many products and services, such as food retailing. They are able to use their outsized market power and greater access to information to squeeze upstream or downstream suppliers, stifle competition, raise prices on consumers, limit the bargaining power of workers and extract capital that would otherwise recirculate in a city or region. Antitrust legislation in the U.S. does not address many of these negative impacts — but it should. 

To move beyond short-term solutions, the nation should look to produce and buy more domestically, including more locally. And we need to invest in the people, infrastructure, technology and supportive institutions that make that possible. It is time to recognize that unfair competition is a culprit too, and it has largely been out of view in the clamor over logistical bottlenecks and empty shelves. 

Making the economy and society more resilient to all kinds of shocks is a policy choice. And it is imperative for policymakers to act now, before the risks of climate change, geopolitical conflict and other disruptions escalate further. If we do nothing to address these deeper problems, we risk losing a lot more than the convenience of cheap goods for the holidays.   

Annelies Goger and Joseph W. Kane are fellows at Brookings Metro.