Coronavirus spotlights perils of the global supply chain

Americans don’t do shortages. Sure, there’s the occasional weather-calamity-inspired run on milk, bread, toilet paper and (in the event of a hurricane) plywood, and there was that whole gasoline-line unpleasantness in the 1970s. You could even include war-era rationing as an example of shortages impinging on daily life.

But even that didn’t bring American life and society to a halt. The instances of perpetually vacant shelves, long lines to purchase what few basics and essentials are available, food riots, electricity service that is unreliable and often unavailable, those are regular features of life in other corners of the world where simple survival is a constant challenge. They’re virtually unknown in this country.

The coronavirus outbreak may prompt some rethinking of complacent assumptions that it can’t happen here, but not because of the readily visible runs on basic staples as well as face masks and hand sanitizer. More ominous is what the virus has done, is doing and might do to the global supply chain that feeds our economy and provides, for many of us, a comfortable way of life.

Whether it’s the trucks on I-5, the container ships gliding into and out of the Port of Tacoma, the trains lumbering into town with carloads of grain from the Midwest, the cargo planes flying into and out of SeaTac, they’re all part of a huge, intricate and immensely complex global supply and distribution system. For all of its points of vulnerability, the supply chain is remarkably resilient. Disruptions are temporary and fixable.

And so it will be too with the coronavirus, or at least that’s the way more optimistic thinking goes. The virus will eventually burn itself out, people will return to work, production will resume and life will get back to whatever normal is.

But what won’t dissipate so quickly are questions about whether we ought to be so reliant on that global supply chain, whether we’ve made ourselves more vulnerable to massive disruptions that can lead to sustained shortages and economic calamity.

Those questions were being debated well before anyone had heard of coronavirus or COVID-19. The Council on Foreign Relations posted a blog item headlined “U.S. Dependence on Pharmaceutical Products From China,” which cited a Department of Commerce statistic that 97 percent of all antibiotics in the U.S. came from China.

The date of that post: Aug. 14, 2019.

The very concerns debated then in articles and papers and conferences (along with issues of product quality, national security and technology transfer) are the ones being illustrated in real time now. What happens if the raw materials that go into products assembled, fabricated and finished in this country are no longer available because they aren’t being made in the source country?

The easy response is to say, “We should never have ceded so much of our manufacturing capacity to China. We’ll just pull all that back to the U.S.” Indeed there has been a movement, albeit small, to reshore production. It’s nowhere as easy as it sounds. It takes time to shift components of the supply chain, assuming that the capacity and expertise even remain here. Often, report manufacturers that are trying to reshore, they don’t.

But if the economic pain resulting from the coronavirus outbreak is as nasty as the more pessimistic forecasters are warning, it might just be enough to prompt some serious consideration and concrete action to reconfigure the global supply chain and reclaim manufacturing capacity and capability. Diseases that threaten literal health have a way of prompting dramatic change in those who survive. The long-term effect of the coronavirus, one that will endure long after the contagion itself is dissipated, may be even more dramatic and consequential for economic health among those who would prefer not to go through that again.

▪ Jack Welch, who died recently, didn’t invent the modern era of the celebrity chief executive, but he was a prime exemplar of the trend. His name and face were featured not only in the business press but throughout general media, and his management style and pronouncements were copied in executive suites worldwide.

The celebritization (if that’s a word, and spell-check says it isn’t) of the corporate CEO has been a harmful trend for American business, but the more damaging portion of Welch’s legacy at General Electric were the ideas about corporate management he promulgated. Welch’s philosophies included an unhealthy pursuit of short-term returns and a belief that it didn’t matter what business you were in as long as you were a dominant player within that line.

Hence GE, once an industrial-equipment and consumer-electronics powerhouse, wandered off into such businesses as financial services, which worked out so well when the Great Recession hit. Meanwhile, the management style that earned Welch the nickname “Neutron Jack” – named for a weapon that supposedly wipes out people but leaves buildings standing – spread through corporate America, often to ill effect.

Even before one of Welch’s protégés – James McNerney – took over, Boeing (under Phil Condit and Harry Stonecipher) was under thrall to the Welch/GE management ethos, and a case can be made that the company’s current travails can be traced in part to that influence. Welch’s stature and reputation is considerably different from the days when he ran GE and was the darling of the corporate world and business media. So maybe that is his lasting contribution and legacy – a cautionary tale that long-term management success is not measured by the number of magazine covers you accumulate.

This story was originally published March 7, 2020 at 7:00 AM.