Executive Briefings

What Does Obama Mean to the Supply Chain World?

Certainly we expect the new president to favor legislation protecting consumers as well as incentives to reduce job losses to low-cost manufacturing countries. But it is not clear how much of an effect he will be able to have, at least in the short term. We do expect to see significant investments in infrastructure/public works projects and a continuation, for now, of recent defense spending levels.

The manufacturing industry is understandably anxious about the transition in Washington, DC. Rather than the taxpayer checks favored by the Bush administration, we expect more investment in infrastructure and public works projects, which opens new opportunities for construction and construction supply manufacturers. We also expect a continuation of Bush administration defense spending levels for the near term-or at least until the Obama administration announces a detailed plan for ending the Iraq war. In the election campaign, Obama also proposed doubling the funding for the Manufacturing Extension Partnership that works with manufacturers across the country to improve efficiency and implement new technologies to ensure the competitiveness of U.S. manufacturers globally.

Offshoring

Profitable proximity sourcing, when companies take a bigger picture look at total costs, and even in the absence of legislative incentives, has received a renewed interest in manufacturing in the U.S. This is partly due to the economic transition that is changing low-cost countries into emerging markets. With that transition come wage increases to reach globally fair wages (thus blunting much of the workforce cost advantage for all but the most labor-intensive industries like high-tech). The other factor that may bring manufacturing back to the U.S. is the increasing role distribution costs are playing in the overall supply chain cost of a product. It is also important to point out that global demand is shifting-away from a "western dominated" and more to an "eastern evolving" profile-and profitable proximity is also about balancing supply and demand. For IT investments, companies should take advantage of supply chain applications to optimize their networks and make them as efficient as possible.

Energy/Sustainability

Manufacturers need incentives to change to renewable energy with a transition period that allows U.S. manufacturers to remain cost competitive. There are many opportunities through new IT investments-in the short term driving as much efficiency as possible through governance/risk/compliance, manufacturing execution systems and product lifecycle management applications. While we do expect the incoming administration to take a more proactive environmental stance than their predecessors, it is naïve to assume that the economy won't initially take front and center in the priority list. On the IT side, there's the obvious connection to environmental, health and safety applications, but also new applications that help with tracking greenhouse gas emissions and collaborative tools that lead to better decision-making across the organization.

The Outlook

Domestically and internationally, the view of Barack Obama's election victory is quite positive. The general view-rightly or wrongly-is that the new administration will take a less protectionist theme (thus being more friendly to international manufacturing), be more nurturing of international opinion/input, and be a better friend to the environment than the current regime. What this means in terms of new regulation remains to be seen, although it seems likely that things will get more complicated, not less. The wild card, of course, remains the economy, and all these other issues will take a back seat to repairing both the credit markets and consumer confidence.

The manufacturing industry is understandably anxious about the transition in Washington, DC. Rather than the taxpayer checks favored by the Bush administration, we expect more investment in infrastructure and public works projects, which opens new opportunities for construction and construction supply manufacturers. We also expect a continuation of Bush administration defense spending levels for the near term-or at least until the Obama administration announces a detailed plan for ending the Iraq war. In the election campaign, Obama also proposed doubling the funding for the Manufacturing Extension Partnership that works with manufacturers across the country to improve efficiency and implement new technologies to ensure the competitiveness of U.S. manufacturers globally.

Offshoring

Profitable proximity sourcing, when companies take a bigger picture look at total costs, and even in the absence of legislative incentives, has received a renewed interest in manufacturing in the U.S. This is partly due to the economic transition that is changing low-cost countries into emerging markets. With that transition come wage increases to reach globally fair wages (thus blunting much of the workforce cost advantage for all but the most labor-intensive industries like high-tech). The other factor that may bring manufacturing back to the U.S. is the increasing role distribution costs are playing in the overall supply chain cost of a product. It is also important to point out that global demand is shifting-away from a "western dominated" and more to an "eastern evolving" profile-and profitable proximity is also about balancing supply and demand. For IT investments, companies should take advantage of supply chain applications to optimize their networks and make them as efficient as possible.

Energy/Sustainability

Manufacturers need incentives to change to renewable energy with a transition period that allows U.S. manufacturers to remain cost competitive. There are many opportunities through new IT investments-in the short term driving as much efficiency as possible through governance/risk/compliance, manufacturing execution systems and product lifecycle management applications. While we do expect the incoming administration to take a more proactive environmental stance than their predecessors, it is naïve to assume that the economy won't initially take front and center in the priority list. On the IT side, there's the obvious connection to environmental, health and safety applications, but also new applications that help with tracking greenhouse gas emissions and collaborative tools that lead to better decision-making across the organization.

The Outlook

Domestically and internationally, the view of Barack Obama's election victory is quite positive. The general view-rightly or wrongly-is that the new administration will take a less protectionist theme (thus being more friendly to international manufacturing), be more nurturing of international opinion/input, and be a better friend to the environment than the current regime. What this means in terms of new regulation remains to be seen, although it seems likely that things will get more complicated, not less. The wild card, of course, remains the economy, and all these other issues will take a back seat to repairing both the credit markets and consumer confidence.