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Global Supply chain at Inflection point
Context:
Global supply chains are at an inflection point. While the COVID-19 pandemic shifted the focus from efficiency (just in time) to resilience (just in case), two developments in September 2024 indicate that another shift is underway in how supply chains are envisioned and operationalised — this time towards security (just to be secure).
Evolution of Supply Chain Models :
- “Just in Time” (Efficiency-Focused)
- Definition: The JIT model optimises supply chains for cost efficiency by minimising inventory and relying on timely deliveries, thriving in stable global conditions.
- Pre-2010s (Efficiency): Cost-saving through global supply chains, particularly from China.
- Example: Apple’s Global Supply Chain — Apple uses JIT by sourcing components globally (mainly from China) and assembling them in China and Taiwan, reducing costs and maximising profits through minimal inventories.
- “Just in Case” (Resilience-Focused)
- Definition: The JIC model builds buffers (e.g., stockpiles, diversified suppliers) to reduce reliance on single regions, addressing vulnerabilities exposed by disruptions like trade wars or pandemics.
- Late 2010s-2020 (Resilience): Disruptions led to supplier diversification and reshoring.
- Example 1: COVID-19 and Medical Supply Chains — Countries faced shortages of medical supplies, prompting a shift to local manufacturing and larger inventories.
- Example 2: 2020-2021 Semiconductor Shortage — Companies like Ford and GM diversified chip suppliers and stockpiled to avoid future shortages.
- “Just to Be Secure” (Security-Focused)
- Definition: This model focuses on securing supply chains from national security threats, like intellectual property theft and technological espionage, especially in critical sectors.
- 2020s (Security): Increasing focus on securing supply chains from espionage, cyberattacks, and sabotage, particularly in technology and defence sectors.
- Example 1: Banning Huawei from 5G Networks — Countries like the U.S. and India banned Huawei from 5G development over concerns about surveillance.
- Example 2: U.S. Ban on Chinese EVs (2024) — Chinese EVs with connected technologies were banned due to fears they could be used for espionage.
- Example 3: Israeli Pager Attack on Hezbollah (2024) — An attack on Hezbollah’s pagers raised alarms about vulnerabilities even in basic technologies, prompting deeper scrutiny of supply chain security.
Recent Geopolitical Events that triggered Just to be Secure strategy:
U.S. National Security Concerns Over Connected Vehicle Systems
- Recently, the U.S. The Department of Commerce proposed new rules to prohibit the import or sale of connected vehicle systems associated with China (PRC) and Russia.
- These measures, citing national security threats, specifically target software and hardware in vehicles with external communication capabilities.
- The primary focus is on Level 3+ autonomous vehicles, which are seen as potential risks due to their ability to act as “mobile listening posts”.
- The concern is that during future conflicts, these vehicles could be exploited for espionage or sabotage, either by collecting sensitive information or being remotely hijacked.
Israeli Pager Attack and Supply Chain Security Vulnerabilities
- Recently , Israel conducted a targeted supply chain attack on pagers and walkie-talkies used by Hezbollah in Lebanon, resulting in the deaths of over 30 individuals.
- The attack revealed vulnerabilities in even basic communication devices, highlighting the risks embedded in supply chains globally.
- This incident reignited global concerns about supply chain security and emphasised the importance of scrutinising the technology integrated into essential systems to mitigate risks of exploitation by adversaries.
India and Supply Chain Security
India faces the challenge of securing its supply chains without resorting to extreme measures like total bans on tech imports or rigid reliance on resilience strategies. A two-pronged approach can ensure both security and resilience:
- “Just to be Secure” Strategy
- Trust but Verify: Technologies used in critical sectors like communications and transport should undergo periodic audits, on-site inspections, and compliance with national and international security standards.
- Zero Trust: Highly sensitive technologies (military, intelligence, cutting-edge research) should be subject to stringent security measures, assuming potential compromise by default. These checks would include thorough vetting during procurement and ongoing monitoring.
- “Just in Case” Strategy
For less critical technologies, diversifying suppliers and engaging in “friendshoring” (partnering with trusted countries) can help reduce vulnerabilities and ensure resilience in the event of disruptions.
