Companies are deploying varied strategies to help achieve supply chain performance

Manufacturers can use restructuring strategies to help ensure business continuity, balance costs, and facilitate access to favorable regulatory environments.Dual sourcing, or “supplier + 1”, and multi-sourcing approaches can provide extensive risk mitigation through diversification of the supply base, but may also provide greater access to end users and government incentives. Similarly, M&A activity, strategic partnerships, and new supplier agreements can help mitigate risks and enhance flexibility. Finally, companies are expanding their internal capabilities to build capacity, improve demand responsiveness, and foster innovation.

Many manufacturers are enhancing both their hardware and software solutions to help enhance operational resilience and increase visibility across the value chain.ⁱⁱ In addition to increasing supply chain visibility, investing in digital technologies can also foster innovation and strengthen stakeholder relationships. These investments could improve efficiency and competitiveness, ultimately leading to cost and operational benefits.ⁱⁱⁱ

The aerospace industry faced challenges in meeting post-pandemic demand due to supply chain disruptions.  Suppliers may need to be more agile moving forward to capture demand and may consider investing in emerging technologies and smart factory solutions to address supply chain challenges and optimize production capacity.

In fact, Deloitte’s 2023 “Exploring the industrial metaverse” revealed that 21% of those companies surveyed are incorporating metaverse technologies to improve their supply chain ecosystems.^iv Furthermore, a recent survey by Augury revealed that 41% of respondents identified supply chain management and optimization as the top use case for AI.^v By employing a range of strategies, manufacturers may improve their efficiency and competitiveness, potentially leading to cost and operational benefits.

Government incentives and industrial policy can impact growth of advanced technology supply chains

The United States government is using several tax and investment opportunities to help incentivize industrial manufacturing companies to reshore their most advanced operations. Many of these incentives target important advanced technology sectors, including critical minerals, green energy technologies, and advanced manufacturing.

The Inflation Reduction Act, a US$370 billion investment program, provides both direct funding and tax credit opportunities for companies domestically advancing clean technology manufacturing. This technology ranges from clean energy and clean vehicles to advanced manufacturing.^vi

One component of the IRA is the dedicated funding of US$2.1 billion for the US General Services Administration. The Act introduces an advanced manufacturing tax credit aimed at incentivizing domestic production of essential components for both qualified battery components and up to 50 critical minerals.^vii

The US government's focus on domestic production and advanced technology is further highlighted by the passage of the CHIPS and Science Act. This legislation committed US$52.7 billion to domestic chip production and advanced semiconductor research and development.^viii It provides further incentives for companies to consider advanced manufacturing operations for semiconductors in the US with a 25% tax credit on eligible capital investments.^ix

The trend of government incentives for advanced technology supply chains isn't limited to the United States. Japan and India are both leveraging government subsidies to incentivize regional production of semiconductors and these incentives are leading to investments within the regions.^{x xi}

Final Thoughts

As technology continues to advance, industrial manufacturing companies are maintaining one eye on the future while working to ensure their supply systems of the past. Many new government policies are incentivizing advanced technology or products for future demand. Companies in the sector could leverage a multitude of strategies, ranging from diversifying their suppliers and seeking new agreements to bringing capabilities in-house and implementing digital technologies, to help create resilient and efficient supply chains.

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