United States has agreed to launch a pilot program for a supply chain early warning system in partnership with Japan and South Korea. The supply chain’s fate is often inextricably tied to geopolitics, much as any supply chain manager would rather it wasn’t. Sometimes, the result of global competition, or sometimes, concerns of instability, are the drivers. In the case of the latest agreement by the United States, it’s a collaboration to help prevent supply chain disruptions.
Partnering with Japan and South Korea, the United States has agreed to launch a pilot program for a supply chain early warning system. This would help all three countries avoid disruptions to production and logistics networks. The focus will be on essential materials that might interrupt the flow between the countries. Minerals and rechargeable batteries are an example of these materials. There is no official launch date for the program, but the federal government reports that steps are underway.
One potential outcome of the program would be a three-way pooling of resources such as critical minerals. The goal would be to offset China’s current dominance in mineral resources and processing. For instance, the minerals gallium and germanium are essential to the production of semiconductors. If the three countries wanted to, they could establish an early warning system to identify potential shortfalls. The United States has no gallium production plants and only a few that produce germanium, compared to China, which dominates 85 percent and 60 percent of the world’s gallium and germanium production, respectively. With such dominance, China controls the supply of these minerals at will, and the country has leveraged this position by placing export controls on them over the summer. This makes the minerals easy choices for the pilot program’s early warning system trials.
How the Supply Chain Early Warning System Works
The idea would be that if one of the three countries receives a warning that access to the minerals may become difficult, the partners could temporarily share the resources they have. South Korea, Japan, and the United States will need to work together with a mutual system of trust. Ideally, a private/public partnership within each country will contribute to the program, giving each country the best possible resources for information and the ability to respond as necessary.
In forming the early warning system, the United States and its Asian partners are complementing similar programs already established by the European Union. That program, known as SCAN (Supply Chain Alert Notification), is also designed to provide early identification of potential supply chain disruptions. Arising out of the pandemic and Russian invasion of Ukraine, the EU hopes to detect disruptions before they take place and react quickly to prevent them. Using a data-driven source of information across the supply chain, SCAN is designed to assist the seamless flow of products. Its earliest focus has been on the production of solar panels and other commodities affected by the Ukrainian invasion. Combined with the new U.S. program, the two programs offer the potential to greatly minimize future disruptions.