Analysis: Is supply chain a government issue?

By Sean Ashcroft
The US Federal Trade Commission is demanding supply chain data from key businesses, prompting questions about governments' role in managing supply

So the US Federal Trade Commission (FTC) has ordered nine major retailers and wholesalers to hand over their supply chain data, as the Biden administration seeks to understand the nature of supply chain disruptions affecting the country.

The FTC has demanded - not requested - that nine companies hand over data relating to supply chain problems. The companies include: Amazon, Associated Wholesale Grocers, C&S Wholesale Grocers, Kraft Heinz, Kroger, McLane, Procter & Gamble, Tyson Foods and Walmart. 

They have 45 days to respond, and will have to provide internal documents relating to supply chain strategies, pricing decisions and supplier selection. The FTC wants information concerning primary factors disrupting procurement, transportation and the distribution of products - as well as any disruptions work-around steps being taken.

FTC wants to shed light on supply problems

"Supply chain disruptions are upending the provision and delivery of a wide array of goods, ranging from computer chips and medicines to meat and lumber," FTC chair Lina Khan said in a statement. She added she was “hopeful” that the FTC’s “study” will shed light on market conditions and business practices that may have worsened these disruptions. 

Her use of the word ‘study’ is interesting. Most ‘studies’ involve information being offered voluntarily, and yet with the FTC’s approach there’s more than a whiff of subpoena in the air. 

It might even be said the FTC data-grab is a mirror opposite of China’s recent intervention on shipping data. There, under draconian new data laws (is there any other kind of law in China?) the state will no longer make vital container-shipping data available to shipping companies outside of China - making it even more difficult for those businesses to plan global logistics.   

Back with the FTC, the big question is what will it do with all this supply data? As an independent agency of the US government, presumably its findings will inform federal policy on supply, which begs a further question: what might such a policy look like? 

Will FTC move herald intervention?

Is the FTC move a precursor to interventionism on the part of the Biden administration? President Biden has already shown he’s not averse to stepping in on supply issues. Only last month he urged the Port of LA to operate 24/7 in order to help clear the container congestion caused by supply chain problems. Only time will tell. 

As for the nine companies, how they feel about the FTC’s data demands is unknown; thus far none has commented. But it’s safe to say they won’t be clicking their heels with glee.

Most business people will agree that the management of supply chains is the remit of commerce, not government. In democracies, private companies expect their government to not dictate how they run their businesses. 

The market can't solve all supply problems

And yet the pandemic has shown us there are problems with supply chains that can not be resolved by market forces. Examples include:

  • The spike in demand for medical equipment and supplies was not easily met by individual companies. Governments had to intervene on that one, for example.
  • Agriculture producers, who ended up ditching mountains of produce because restaurants were shut down, and they were unable to establish new distribution channels.
  • Small and medium enterprises connected to regional and global supply chains facing liquidity problems, and going under.

Government response on these and similar issues has typically been to improve and optimise around border regulations, and tariffs and taxes. They have sought to nurture an environment in which it’s easier for SMEs to plug into regional and global supply chains. 

Government policy designed to keep things moving in this way is entirely understandable. Welcome, even.

But when government begins to wield big sticks, and demand data from private companies, then businesses can be forgiven for worrying about what, exactly, lies ahead - that it’s all a bit ‘Big Brother’.

 

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