The U.S, although it has a GDP of about $22 trillion, depends profoundly on China and other countries for many of its critical supplies. Medical equipment, pharmaceuticals, and food production are often outsourced, as the U.S has organized its economy following the theory of comparative advantage (Ch. 2 in your Heizer/Render/Munson OM text), which simply means allowing other countries to provide goods or services using the best cost-effective strategies.
With the ongoing pandemic, the U.S. has just formed a public-private partnership to expedite the production of personal protective equipment’s (PPEs) and other supplies required. But these critical supplies were previously being outsourced internationally, exposing the U.S dependence on global trade. Even though the cost-effectiveness of locally manufacturing medical supplies may be impracticable, the events of recent times have shown that the pros outweighs the cons. Public health is a national security issue and the failure to retool critical supply chains blunders can put the U.S. at risk.
For example, the 2009 “swine flu” (H1N1) outbreak, a dry run for the coronavirus, found neither hospitals nor manufacturers nor the government making sweeping changes. Instead, each part of the medical industrial equation acted in its own interest and did not set aside resources that might have help prepare for the pandemic. The result: a shortage of 250 million N-95 masks needed per month.
To address these concerns, it is crucial to re-evaluate what essential products are and also redesign every aspect of the supply chain. This means a strategy to incentivize domestic production of critical materials through purchase commitments and other guarantees with robust, resilient, and secure manufacturing. As The Wall Street Journal (April 30, 2020) writes: “Supply chain issues are are among the most significant U.S. challenges, and a matter of national security.”