Is now the time for public-private partnerships in the supply chain

Last week, I recorded the first two episodes of The Rebound, a podcast I’m co-hosting with Abe Eshkenazi, the CEO of the Association for Supply Chain Management.

I mention that not as a shameless plug (but, hey, you can listen wherever you get your podcasts, including supplychain24/7), but because of one of the things Abe said he is watching in the coming year. It’s this: Some of the issues facing industry in general and the supply chain in particular are going to be too big for business to tackle on its own. While there may be no political will in an election year, Abe believed that, like putting a man on the moon, we need public investment.

That theme was echoed in a recent conversation I had with Steve Bowen, the chair and CEO of the consulting firm Maine Pointe. Bowen and I were having a similar conversation about what he’s hearing from clients when he said, “I’ve been thinking about this, and I have one idea that I want to share. Now, this comes from me, but there’s a high potential for serious change, including a vastly different form of public-private partnerships.”

The predicate for that statement was an observation that about 70% of the clients Bowen was talking to were saying things like “I thought my supply chain was doing OK, and now I realize that we have to revisit all of our processes.”

How is that going to happen? Bowen wondered. He noted, for instance, that there is a significant infrastructure issue that impacts supply chains. Take railroads, which are challenged with capacity and infrastructure issues. The logistics and transportation side of the industry is developing autonomous vehicles, including driverless trucks to address the driver shortage: The amount of R&D required to make that a reality, along with changes to the transportation system like dedicated highway lanes, will be massive. Airports are in need of makeovers, especially if they now have to inspect people for infection or other signs of illness, in addition to the usual safety concerns. And don’t underestimate the investment in digital plumbing needed to support the automated supply chain, including AI, 5G and even 6G.

“The need for automation is so important because we have to redeploy the human capital we have into much smarter and more productive jobs,” Bowen said. “It’s infrastructure investment that will allow us to do it, and there’s no way that business alone can absorb that.”

For change on that scale to occur, Bowen believed there will have to be a reconfiguration of financial structures, including taxes, that allows entrepreneurialism and government to co-exist while still generating a return for business. “There has to be a way to make this attractive for everyone,” he said.

There’s a lot of discussion about re-balancing the supply chain today, Bowen added. Often, that discussion is related to shortening supply chains by re-shoring or near-shoring, and by adding suppliers to reduce the impact of a supplier failure. Bowen took that one step further. “When I think of re-balancing, I’m thinking beyond the supply chain,” he said. “For instance, I think companies are going to have to turn over the rocks with their local, state and county governments to look for opportunities, because global supply chains may become regional and local supply chains.”

The last piece is the partnerships that will form among companies doing business with one another; not just the manufacturers or retailers and distributors, but raw materials, components and parts suppliers at all of the tiers along the supply chain. “In the future, I’m going to need to look from my customer demand all the way through my supply chain to make sure that everyone is profitable in this private-public partnership,” he said. “It’s a massively different way of thinking.”

I don’t know if Bowen or Eshkenazi are right, but it’s pretty clear from the financial hardships exposed by COVID-19, and the issues around inequality that are now part of the public discussion following the death of George Floyd, that the way we manage our supply chains, and our businesses, is going to change. What it will look like is anyone’s guess right now, but public-private partnerships may be in the cards to address underlying issues.