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Broken link in a chain

Reinforcing the Weak Links

March 28, 2022
One very notable consequence of our supply chain woes: No one is taking semiconductors for granted anymore.

The semiconductor was once a mostly overlooked commodity—cheap and plentiful for manufacturers and little understood by the consumer. No longer. That little chip that makes the Digital Age possible now is at the center of the discussion about how and where everything will be made.

For the longest time, semiconductors were manufacturing at select global sites, and everything ran fairly smoothly. It was a cost-effective and efficient system. After geopolitical disruption, supply chain fracturing and a fire at one of the leading manufacturing facilities in the world, the system was thrust into chaos and the chip drought affected both the price of everything from automobiles to phones. People who had never heard the term “supply chain” were suddenly talking about it.

It also forced manufacturers and distributors to re-examine the supply chain itself. As Machine Design recently reported, the announcement of Intel’s initial $20 billion plant investment in Ohio earned the sort of fanfare usually reserved for new football stadiums. And like football stadium announcements, once the fanfare ended, there still was an empty space where the press conference had been held.

It will be three years until the first chip comes out of the Ohio manufacturing facility, so the solution to the semiconductor shortage will remain with us. It has forced manufacturers to look within their own organizations and their own geographies to better manage the chip supply chain. At the intersection of political influence and business profits, both sides are under pressure to deliver a better solution.

The chip shortage is one of the most visible of the supply chain issues all manufacturing economies face today. The tangling of that supply chain has been a driver of inflation and a strain on productivity. The solution is not going to be found strictly by bringing all manufacturing back inside our continental borders, but by better rationalizing what can be made where.

This isn’t the first time in this century we’ve faced this issue. The 2008-09 Great Recession brought the issues of transportation and logistics costs to the fore. We must deal with similar questions again, keenly aware we allowed ourselves to relax in the mid-2010s when things got much better.

The good news is that supply chain experts suggest that by the end of this year, we should see a normalizing of product flow. When that occurs, it should serve to harden our effort and reinforce the weak links in the chain.

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