Proceedings of a Workshop

SUSTAINABLE AND RESILIENT SUPPLY CHAINS USING EMERGING TECHNOLOGIES: POLICY OPTIONS

Proceedings of a Workshop—in Brief

The coronavirus disease 2019 (COVID-19) crisis sparked concerns about the vulnerability of supply chains and the significant impact of their disruption on the economy and society within the U.S. and abroad. Issues around global supply chains existed before the pandemic but were also greatly aggravated by it. To consider these issues, the Science and Technology for Sustainability (STS) program, in collaboration with the Resilient America Program, Transportation Research Board, and Board on Atmospheric Sciences and Climate at the National Academies of Sciences, Engineering, and Medicine (the National Academies), held a series of four virtual workshops on February 3, 4, 17, and 18, 2021. In welcoming participants, Franklin Carrero-Martinez, senior director of the STS program, noted that the workshop’s consideration of the sustainability and resilience of supply chains is in keeping with the National Academies’ mandate to provide independent and objective advice to the nation.

As planning committee chair Klaus Tilmes, senior policy adviser and economic development consultant, observed, people have come to expect that global supply networks operate efficiently and seamlessly. Yet the reality, he pointed out, is that even before COVID-19, supply disruptions had become more frequent, severe, and costly due to natural disasters, climate change, trade disputes, financial crises, or cyberattacks. At the same time, global awareness about the environmental costs of global supply chains have prompted advocacy and corporate commitments to make changes.

Given this context, the workshop series was set up to address opportunities, challenges and environmental implications of increasing local inclusion and community participation in global value chain networks by using new technologies to strengthen resilience and sustainability in the face of recurring disruptions. The series was also designed to explore the feasibility of introducing advanced manufacturing, logistics and decision-making under alternative supply chain scenarios in different sectors, with a view to strengthening the resilience of communities and adopting far more environmentally and economically sustainable consumption and production approaches. Each of four virtual sessions was built around a theme: (1) state of global value chains and supply chains 4.0; (2) sustainability, resilience, and risk; (3) emerging technologies; and (4) consumers and civil society.¹

WORKSHOP I: STATE OF GLOBAL VALUE CHAINS AND SUPPLY CHAINS 4.0

Framing Remarks

Anabel González, Peterson Institute for International Economics, launched the series by considering lessons learned about global value chains related to supply and demand of personal protective equipment (PPE) during the COVID-19 crisis. Governments took action based on initial reactions not borne out by evidence, she said. Enormous shocks occurred due to forced reductions of production, steep increases in demand for critical medical supplies, severe transportation disruptions, and unprecedented business uncertainty. Faced with providing timely and affordable access to meet

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pandemic-related needs, most governments, including the United States, curbed exports while also imposing measures to facilitate trade.

Initial concern about overdependence on China led to initiatives to re-shore production, yet the data do not substantiate the need for trade restrictions. For example, despite periodic shortages, trade in medical goods grew by 15.8 percent in the first half of 2020 (even higher for COVID-19–related goods). Despite the fear of overdependence on China, only a few nations source more than 75 percent of their PPE from China. Alternative suppliers are spread around the world, and no G20 (or Group of Twenty) country has fewer than six suppliers supplying more than 1 percent of their imported needs. Many of these reforms and controls have no announced phase-out dates, she noted. Export bans increased internal prices of critical medical goods by 12.9 percent, with higher increases for such products as face masks and protective clothing.

González singled out two points from the evidence. First, global value chains allow countries to retain access to diversified sources of medical equipment. Second, there is no rationale for governments to push for de-globalization or reshoring. Trying to lessen dependence on global value chains would put the world’s population at risk by reducing access to essential supplies or making them significantly more expensive, she added. She warned against a potential “vaccine nationalism” tragedy from a bidding war that raises prices, limits supply especially to poorer countries, extends the pandemic, and breaks down the supply chain for raw ingredients, syringes, and vials. “Desperate governments may also strike short-term deals for vaccines with adverse consequences for their long-term economic, diplomatic, and strategic interests,” she said.

As a way forward, she said governments need to facilitate the operation of supply chains. As importers, she said they should eliminate tariffs, facilitate trade, and expand access to technical standards. “Export restrictions provide a false sense of security,” she said. “In reality, they are a lose-lose proposition.” She cautioned against export curbs on vaccines. In addition to domestic measures, she suggested global cooperation could be strengthened through actions within the World Trade Organization.

Sectoral Perspectives

Sarah Thorn, Walmart and planning committee member, moderated a panel session to provide an overview of sectors and issues related to global value chains and supply chains.

Using food as a lens, Nate Mook, World Central Kitchen (WCK), commented how logistics have advanced the global economy, but also result in a lack of understanding of “how things work” and greater reliance on others. WCK’s work in Puerto Rico after Hurricane Maria provides a stark example. About 50 years ago, the island produced most of its own food. In 2017, it produced only 15 percent. When the hurricane disrupted inbound transportation systems, causing airport closures and port delays, food could not reach the 2 million U.S. citizens who live in Puerto Rico. The U.S. government’s usual aid effort to ship pre-packaged food was paralyzed. WCK instead leveraged existing capacity. They worked with bakers and other local producers to provide fresh food. “This was faster, more efficient, and supported the local economy,” he said. He also noted the disconnect in cases where farmers are dumping crops while families need food. He urged finding ways for communities to become more resilient to include more local investments and innovation.

David Stieren, National Institute of Standards and Technology (NIST), described NIST’s Manufacturing Extension Partnership (MEP) network to build supply chain resilience in the manufacturing sector. Centers in all 50 states and Puerto Rico provide hands-on assistance to small manufacturers to implement data-driven business decision making. Related to pandemic response, some manufacturers pivoted to new products, customers, and markets to capitalize on opportunities associated with change. Many do not have visibility through the tiers of their supply chain, which is needed for resilient sourcing strategies. Given workforce safety concerns, interest has grown in advanced manufacturing technologies to maintain or increase productivity, typically associated with Industry 4.0 for virtual operations of factories. He concluded with the concept of a manufacturer’s resilience matrix (see Figure 1). “When thinking about resilience from the individual manufacturer to the entire supply chain, manufacturers need to consider their ability to recover from negative perturbations as well as capitalize on opportunities,” he said, adding they should use data, market forecasting, new relationships, and other processes to achieve the “upper right corner of the matrix.”

Anne Strauss-Wieder, North Jersey Transportation Planning Authority, described New Jersey as the most densely populated state in the country as well as the “supply chain state,” with more than 500,000 workers employed in transportation, logistics, and distribution systems not only for New Jersey but also for all North America and globally. Because the region has dealt with such massive functional disruptions as occurred with 9/11 and Hurricane Sandy, the region has essentially developed a “toolbox” that consists of coordination, communication, and collaboration. She additionally noted the three response phases: react, retool, and reshape. Despite preparation, she stressed, “You cannot anticipate the next big event and how it will affect you.”

She observed that from a supply chain perspective, COVID-19 was not an infrastructure event (though the health of workers needed to be protected). Rather, the pandemic was initially an abrupt change in product demand and supply. A “K-shaped supply chain disruption occurred”: abrupt increases in demand for some products, sharp decreases for others. In the initial “react” phase, the mandate was to keep critical goods flowing and people safe. With overseas manufacturing facilities closed in the early months, production and shipments were initially curtailed, followed by a sharp surge in movements as production resumed and goods shipped. Public/private teams, including the Council on Port Performance (formed after Superstorm Sandy) and teams assembled by the state of New Jersey, ramped up, and addressed issues related to freight movement, resident and business needs, and multi-state considerations. In the “retool” phase a few months in, the public and private sectors assessed operations. Freight flows, including surges, had to be managed, while still ensuring workforce health. In the “reshape” longer-term emerging new context, “COVID-19 was an accelerant of trends already happening,” she said. The pandemic accelerated the need to diversify production locations (including adding domestic capacity) and address increased ecommerce and “buy online, pick up in store” (BOPIS) activity. Adjustments to the amount of inventory on hand, the importance of information technologies, addressing workforce shortages, and enhanced deployment of automation are also reshaping the context in the future. “Generally, supply chains are thought of in terms of physical movement, information flows, and government regulations,” she concluded. “The criticality of information systems and the public sector roles are very important.”²

Gerald Galloway (NAE), University of Maryland, discussed the impact of disasters on supply chain resilience. According to the Global Risks Landscape of the World Economic Forum, extreme weather events, natural disasters, and climate-change events are perceived as top risks in terms of likelihood and impact.³ With examples around the country and the world, “nature is biting at our ability to have an effective supply chain,” Galloway remarked. In 2009, he was a member of a National Research Council (NRC) committee on disaster resilience, in which the committee defined as

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“the ability to prepare and plan for, absorb, recover from, or more successfully adapt to actual or potential adverse events.”⁴ He added, “it is a way to think differently—a culture.” Additional National Academies and other studies have built on this work. He noted that resilience does not just impact infrastructure but also has natural, financial, human, cultural, social, and political dimensions. New in the past few years, he added, is including labor force equity in considering value chains, as explored in the work of sociologist Intan Suwandi.⁵ Also, a 2021 World Economic Forum report emphasizes that “reliance on algorithms that exacerbate inequalities can damage well-being and amplify societal fractures.”⁶ “A new component of resilience that needs to be considered in the future is to look for the issue of equity and how to address it,” Galloway said.

Discussion

In response to a question from Thorn about the biggest takeaways from COVID-19 related to supply chain, Mook said it is important to consider the “entire cog of the economy.” WCK deliberately chose to use local restaurants rather than preparing food itself, even if it would cost more, to keep people employed. Strauss-Wieder said the crisis “brought supply chain out from behind the curtain.” Thorn noted the importance of transparency and data for Walmart’s decision making. Tilmes, referring to González’s presentation, said it is important to avoid the temptation to practice “tit for tat” and assign blame. He also noted Mook’s emphasis on re-imagining standard responses, MEP’s location-specific extension mechanism, the need for a multi-phase response as shown in New Jersey, and the equity and other dimensions related to supply chain resilience as expressed by Galloway.

WORKSHOP II: SUSTAINABILITY, RESILIENCE, AND RISK

Framing Remarks

Susan Lund, McKinsey Global Institute, summarized a recent study she led to estimate rising costs to industry value chains from disruptions and the feasibility of shifting value chains across borders.⁷ She said the study began before the pandemic when the vulnerability of supply chains was already clear. The study showed real value is at stake; on average, almost 45 percent of one year’s EBITDA (earnings before interest, taxes, depreciation, and amortization) is lost during a decade because of disruptions. The study also found that COVID-19 accelerated trends already in motion to invest in supply chain resilience and that opportunities abound, in that 15 to 25 percent of annual goods trade flows may shift to new locations over the next 5 years. The study also called on governments, CEOs, and investors to act.

Although the term is “supply chain,” she clarified that supplier relationships are usually more complex networks than linear chains, with thousands of interconnected suppliers, as shown in Dell and Lenovo networks (Figure 2). This means that a shock to any one supplier may disrupt the network in unpredictable ways. In looking at 23 value chains, such as aerospace, pharmaceuticals, and food and beverage, most are diversified in where they source their components. However, every industry has “outliers,” which are products produced and exported almost exclusively by one country, creating potential bottlenecks. External shocks are often impossible to predict but happen with regularity, Lund said. The average company can expect that some shock will disrupt production about 1 to 2 weeks every 2 years, with longer disruptions more infrequently but periodically. “Value chains have different exposures to shocks based on geographic footprint, factors of production, and other factors,” she said. Overall, among the 23 value chains studied, the average company would lose as much as 45 percent of one year’s EBITDA over a decade, as mentioned above. “When CEOs say, ‘Why should I invest in resilience,’ this number helps them put in perspective what they could invest and still come out ahead financially in the long term,” she said.

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Dual sourcing is the most common action to build resilience. Other options include holding more inventory and near-shoring suppliers to create more transparency and reduce logistics complexity. A trend has been the regionalization of different supply chains—e.g., within Asia, Europe, or the Americas. Playing forward, if this trend were to continue, trade would shift from 15 to 25 percent, representing $2.9 to $4.6 trillion.

In conclusion, Lund said, industry exposure to shocks varies; further, within an industry, companies’ exposures vary. Localized supply chains are not necessarily more resilient than globalized ones. But, she said, there is a huge opportunity to rethink supply chains and improve both efficiency and resilience. She noted she is often asked whether resilient actions will increase costs. She responds not necessarily because the systems being replaced or amended were not perfectly efficient.

Discussion

Tilmes asked Lund what policy makers need to understand about supply chain risks. She replied they must realize the opportunity in creating supplier ecosystems, not necessarily getting one company to relocate. Countries need to think strategically to compete at an industry level. In response to a question about resilience and sustainability, she said sustainability is becoming top of mind for companies. Earlier in the pandemic, she wondered if sustainability goals would lessen in priority but, if anything, they have increased in importance.

Impacts of Weather, Trade, and Pandemic-Related Events toward More Resilient Supply Chains

Patricia Gruber, independent consultant and planning committee member, moderated this panel’s deeper dive into factors that impact resilience in our supply chains.

Simon Evenett, University of St. Gallen, spoke about policy threats to global value chains by focusing on health products during the pandemic. Building on González’s presentation (see above), he noted many supply chain disruptions were government induced, although governments tried to shift the blame to the private sector. In the second quarter of 2020, there was a surge in export constraints by governments related to PPE and other products. Governments also liberalized in some cases; for example, 141 countries previously imposed import taxes on soap. Fifty-two countries continue to implement export curbs and import reforms, including the United States, with no phase-out dates for many of them.

Governments defend their decisions by blaming other countries or the private sector.

He called claims that China controls the market an “overdependence fallacy” refuted by trade data. Moreover, doubt about an overdependence claim lies in the list of drug shortages maintained by the Food and Drug

Administration.⁸ The overwhelming majority of shortages arose from demand increases rather than supply decreases. The challenge becomes how to scale up production quickly to meet demand. The gap is not because of global trade, he stressed. Health policy professionals tried to take over trade policy, and the solutions did not work. Governments should keep trade routes open, he urged. Like González, he expressed concern about a second round of export curbs related to vaccines.

Katharine Mach, University of Miami, spoke about climate change adaptation, which she described as intertwined with resilience. Preparation for current and future changes in climate depend on choices related to reducing greenhouse gas emissions. Risk in a changing climate is a function of changing hazards, vulnerability and exposure, and choices made.

Complex interactions can amplify or lessen climate risks, she pointed out. From the perspective of supply chains, it could be vulnerabilities in communications or transportation systems. Interactions unfold through time and space across continents, and the responses themselves create new complexities, she said. The Intergovernmental Panel on Climate Change (IPCC) identifies five major categories of risk: unique and threatened systems (e.g., the Arctic); extreme weather events; uneven distribution of impacts (e.g., food and water); aggregated totals; and large-scale singular events or tipping points.⁹

“We are behind the eight ball now,” she stated. Twenty-two disasters in the United States, with costs of damage at a billion U.S. dollars or above, caused staggering losses in 2020 alone. She stated the public and private sectors must interact on climate change adaptation. She noted that public health is coordinated from global through national, state, and local levels. In contrast, climate change has global and local players, there is little fully coordinated climate policy across state, national, or regional levels. In the future, there will likely be increasing institutionalized support, but now she sees a lot of “one-offs” in the form of consultancies or collaboratives and institutional structures still emerging, such as pressure testing planning.

From a logistics systems engineering perspective, Alan Erera, Georgia Institute of Technology, spoke of ways to optimize the resilience of supply chains through system design and operational controls. He defined a resilient supply chain system as one that can continue to cost effectively serve demand under disruption, and has flexibility and the ability to adapt. Lean supply chains are more cost-effective when there are no disruptions but usually cannot manage large unexpected changes. Supply chains may evolve to lack resiliency because they are extended geographically to get products at lower costs. They also become high volume, with lower unit prices throughout the production system. However, scale economies lead to systems with fewer suppliers and consolidation.

The U.S. food system has two major supply chains—food retail (e.g., grocery stores) and food service (e.g., restaurants and institutional facilities) with different products, labeling, sizes, packaging and other characteristics that are difficult to switch between them. In the pandemic, demand shifted to favor retail over service. Panic buying and channel re-alignment (e.g., online grocery and restaurant take-out) also occurred. Despite both supply and demand disruptions and some hiccups, he noted remarkable resiliency given the specialization of food supply chains.

Digital marketplace platforms, such as e-commerce ordering and fulfillment, have been critical to enhance supply chain productivity, resiliency, and sustainability, and they helped level the playing field for smaller retailers. Last-mile capacity—getting food to consumers—was a “major win” and crowd-sourced delivery capacity such as Uber became essential to the pandemic response by creating the benefits of resilience and access for consumers. A challenge is to protect workers. Improvements to automation and robotics may also be needed in the future. Operations research, data science, and automated decision support are key enabling technologies to prescribe better solutions, he concluded.

Emerging Issues, Opportunities, and Tradeoffs for Reducing Greenhouse Gas Emissions toward Sustainable Supply Chains

Transportation consultant and planning committee member Paul Pisano moderated a panel on sustainability. He clarified that while resiliency and sustainability are often considered together, “there is no guarantee that a resilient supply chain is sustainable. Non-sustainable solutions may be needed to respond to a short term crisis, but we understand that should be the exception and not the rule.”

Lauri Ojala, University of Turku, placed supply chains within the context of environmental, social, and financial sustainability. He stated that two main forces impact supply chains: (1) Regulatory, to include national and international laws and policies related to emissions, alternative fuels, and other issues; (2) Competitive, to include pressures from

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customers, suppliers, and competitors related to costs, product offerings, and processes. Firms usually adopt reactive and proactive measures to conform to these regulatory and competitive pressures. Different industries and companies conform differently, as Lund described (see above).

Transport accounts for approximately 25 percent of global CO₂ (carbon dioxide) emissions, and freight transport accounts for about half that figure, according to the International Transport Forum (ITF) of the Organisation for Economic Co-operation and Development (OECD). He noted initiatives to address emissions through the International Maritime Organization and International Civil Aviation Organization, as well as the ITF’s Decarbonizing Transport Initiative.¹⁰

Frank Hawkins, International Union for the Conservation of Nature (IUCN) North America, discussed investment decision making using natural capital data. As context, he stated humanity depends upon nature, with $44 trillion of global GDP depending on nature and its services.¹¹ “Nature is too big to fail,” he commented, “but it is failing,” as evidenced by extinctions and loss of biodiversity with around one million species at risk of extinction. In the World Economic Forum survey cited by Galloway (see above), respondents ranked biodiversity loss within the top existential threats to the planet over the next 5 to 10 years. If economic activity were reoriented toward conserving biodiversity, he said, benefits include reduced atmospheric emissions, jobs and revenue related to such activities as tourism and sustainable fishing, and a lowered risk of emerging zoonotic diseases.

The Species Threat Abatement and Recovery (STAR) Metric provides a way to map species loss as a metric for biodiversity loss.¹² The map shows concentrated threats in some areas, such as the Andes and parts of Asia, but losses exist everywhere. Causes include logging, agriculture, and livestock production, which can be influenced by management of value chains.

The organization TRASE is developing tools to link product sourcing—for example, for soy, beef, and other commodities and materials—with biodiversity loss.¹³ By drilling down to the site level, the “bad producers” can be traced to purchasers that can influence better performance.

Hawkins said the financial sector has become interested in the impacts of biodiversity to calculate risks for companies that are doing more or less harmful practices. Governments and regulatory bodies are also developing creative policies. A new Task Force for Nature Related Financial Disclosure is developing global rules on how to report risks. In addition, the United Nations is developing a Global Biodiversity Framework to set targets to reduce impacts on biodiversity, and he expressed hope that STAR will become one of the metrics used.

Allie Kelly, The Ray, described the nonprofit organization’s publicly accessible 18-mile stretch of Interstate-85 in western Georgia as a “living laboratory” to study sustainable, safe, and innovative transportation options. The goal is to share technologies as quickly and broadly as possible elsewhere. Currently, 21 agencies from 14 states are involved in 13 projects on The Ray. While rural, the highway is a strategic supply chain route with many major manufacturing and distributing centers off its exits. Given the contribution of freight transport to emissions, as noted by Ojala, there is a focus on medium and heavy duty trucks. The goal is to facilitate the hardware and software to enable the future of freight and supply chains. Examples include testing and use of data for autonomous vehicles and options for charging stations for heavy-duty electric vehicles as part of the Biden administration’s goal of building 500,000 electric vehicle charging stations. “Low-hanging fruit” tested on The Ray includes a partnership with a British group called WheelRight that provides drive-through service to evaluate tires, which improves safety and fuel efficiency. They are experimenting with how to recycle the 300 million scrap tires that accumulate annually, such as making rubberized asphalt. She noted that The Ray welcomes technology exchange and transfer.

Discussion

Pisano asked how to accommodate changes in policy directions, for example resulting from changes in U.S. administrations. Ojala suggested having an open eye to good examples happening globally, such as at the ITF, and accommodating them to national uses. Hawkins observed that pressure for policy change related to biodiversity is coming from the finance and insurance sectors, no matter who has political power. Kelly pointed out that the Interstate Highway System has many policies from the 1960s. A federal law prohibition on commercial activity at rest areas and welcome centers, for example, hampers more widespread use of technology related to electronic and autonomous vehicles such as charging stations.

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WORKSHOP III: EMERGING TECHNOLOGIES

Framing Remarks

Yossi Sheffi, Massachusetts Institute of Technology, said sustainability and resilience are supply chain issues. About two-thirds of carbon emissions of most companies occur in their upstream supply chain; thus, looking at a company’s direct environmental impact is misleading. Companies may also outsource their emissions. Since neither resilience nor sustainability are part of companies’ main reason for being, he asserted that many do “just enough to stay out of trouble.”

Extra inventory, multiple suppliers, and other potential resilience solutions raise costs and reduce quality. Related to sustainability, the problem is with consumers, he said. Sixty-six percent of global consumers say they are willing to pay more for sustainably produced goods and services;¹⁴ however, a study of actual consumer purchasing behavior shows only nine percent of consumers buy sustainable products. He charged companies with doing “pretend” sustainability—actions with little actual impact. With few exceptions (such as intentional eco-businesses), neither resilience nor sustainability investments are compatible with short-term profit maximization. Following the pandemic, many consumers are poorer and will further prioritize cost. Companies are less likely to invest and governments are constrained by debt.

For resilience, Sheffi urged more emphasis on flexibility and less on forecasting. For example, companies can reduce their long-term commitments, such as by contracting out and using spot markers rather than owning their own fleet or warehouses. While information communication technologies such as automation, 3D printing, automatic input, and computing can provide solutions, some advances are “hammers looking for a nail” and are not relevant beyond niche applications, he said (e.g., Radio Frequency Identification from 20 years ago). Relevant technological solutions have to do with identifying problems. Some technologies, such as the cloud can help companies in multiple ways. Rather than “fight the last war,” Sheffi said, the challenge is to respond to the next crisis.

In response to a question from Tilmes, Sheffi said that relying on behavior change is not sufficient to create measurable change. If we think a lack of sustainability is the existential threat that it is, he said, we have to invest in changing that. As shown with vaccine development, the government can step in with funding to make a difference. He also noted that some investments in research and development (R&D) will fail, but investing in multiple paths can provide enormous value.

Perspectives from Global, Corporate, and Local Levels

The panel moderated by Banning Garrett, Singularity University and planning committee member, discussed disruptions related to disasters and other crises, but also disruptive technologies that can bring positive and negative changes.

Daria Taglioni, World Bank, said in the past 25 to 30 years, global value chains blossomed within a relatively liberal environment for trade and investment, and firms and countries specialized in narrow slices of the chain. In doing so, they reduced poverty and increased economic growth. The World Development Report 2020 described two features that are special about global value chains: hyperspecialization and firm-to-firm relationships.¹⁵ Relationships can be long-standing repeated interactions that build trust through formal and informal channels. The relational aspect of value chains and their large scale of production are key to produce new technologies at affordable prices. For example, in mobile telecom, which she identified as a posterchild of globalization and a gateway to many other high-tech value chains, countries find their own niche based on very different core capabilities. The complex interactions on a global scale related to hardware, software, standards, digital content, and other aspects allow mobile telecom products and services to be that innovative and affordable. By the same token, global value chain can be a powerful accelerator of a global environmental transition at scale.

Global value chain trade expansion has slowed down since 2008, because of more uncertainty and resurgent techno-nationalism and protectionism, according to Taglioni. She said she had three predictions: (1) despite the media hype, hard data do not support the hypothesis that we are experiencing a de-globalization (which would lead to more expensive and less innovative products); (2) we observe instead more data-intensive services in all global value chains, suggesting that we are instead experiencing a new form of globalization—or re-globalization—centered around digitech services; (3) without a fundamental redesign effort we will not achieve an environmental transition at the scale and speed needed for material demand to be successfully kept within the earth’s limits. New technology is important, but a

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lot can be accomplished by changing financial and design processes, she suggested. For example, mature technology can be repurposed, assets shared, or products kept in service longer. “The environmental transition needs fast deployment of technology; experimentation with business models, products, and processes; and tailored finance and regulation,” she said, with a key role for investors and brands at the helm of value chains (Figure 3) beyond trade.

Taglioni called for globally coordinated reforms related to taxation of international firms, data flows, competition, and a view of the environment as a public international good to keep global value chains open and beneficial to all.

Francisco Betti, World Economic Forum (WEF) said technology helped companies manage disruptions during COVID-19 and will help in the disruptions in the future. Transformations accelerated during the pandemic were already taking place, related to new Fourth Industrial Revolution technology, climate change, and geopolitical tensions. Companies innovated rapidly, which minimized disruptions. Business leaders recognized that the top cause of non-effective supply chains was the design of their networks, and many are looking at redesigns. Leveraging advanced technologies positively correlated to the ability to adapt, and public-private collaborations gained in importance, Betti observed.

Three years ago, WEF and partners launched the Global Lighthouse Network. The network provides a window into the future of manufacturing and operations by sharing insights and experiences.¹⁶ Some companies have transformed their physical facilities, and others have connected and transformed an entire value chain. No company has reached global scale. However, they are setting new benchmarks for the global manufacturing community related to productivity, sustainability, agility, speed to market, and customization. New business models will emerge. For example, many companies no longer see operations as a cost center but as the foundation for future growth.

“Building with biology” was the challenge raised by Drew Endy, Stanford University. “Living matter is massively functional” and “(my) dream is to enable humanity to provide for itself, stabilize and recover natural biodiversity, take infectious and other diseases off the table, enable a culture of citizenship, and understand life via building,” he said. Synthetic biology breakthroughs already include “just-add-water” vaccines, new medicines, and new materials from agricultural products. This decade networked biotechnology and lineage agnostic biotechnology can be made real and would result in a regime where the interconvertibility of information and matter through DNA read-write lets humans take all of biology and all of biotechnology and deploy it across a network, he stated. Historically, civilization has been shaped by scarcity, but “design anywhere, grow anywhere” opens up new directions. Endy called for a global, $100 billion annual investment to open new possibilities. As an example, he noted an “all-of-nation” effort in The Netherlands to build a synthetic cell that will allow for a full understanding and operational deployment of the fundamental unit of life. He also suggested greatly expanded investment support for early to mid-stage translation of biotechnologies to reimagine and make real improvements to humans’ relationship with the living world.

Shireen Santosham, Plenty, discussed the benefits of the company’s indoor vertical farming system to improve the lives of plants, people, and the planet. It began in 2014 and now has 300 employees in three locations, including South San Francisco, CA, Laramie, WY, and Compton, CA, which will be the highest-output vertical farm in the world when it opens later this year. Plenty’s farms grow fresh fruits and vegetables. It is more like high-tech manu-

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facturing than a traditional farm, she said, and addresses a dearth of nutrition (not calories) in the United States, growing scarcity of land and fresh water, and increase in extreme weather events and food-borne illnesses. While big picture issues are important for society, she acknowledged that consumers care about flavor. The company now produces leafy greens for several grocery chains, and will expand next to crops like strawberries and tomatoes. Compared to traditional agriculture, the system increases yield 150 to 350 times per acre and saves more than 1 million gallons of water per week. It can also provide jobs all year around, not just seasonally. “A climate change agenda that does not include jobs will not be successful in the long term,” she said. Strong supply chains and short logistics networks get produce to the right places fast, even in a pandemic, she continued.

To support vertical farms through policy making, she suggested investing in upgrades to power grids with relative, redundant, and renewable power; providing government-based loan guarantees; updating the definition of farming to include at-scale urban farms to provide access to grant opportunities; and investing in at-scale urban agriculture.

WORKSHOP IV: CONSUMERS AND CIVIL SOCIETY

COVID-19 Impact on E-Commerce and Mobility as a Service

Catherine Ross, Georgia Tech and planning committee member, moderated a session that considered the transportation landscape of today and tomorrow.

David Estrada, Nuro, gave an overview of his company’s system to deliver goods to consumers. Currently they use autonomous Prius cars with safety drivers and are testing software for fully remote vehicles to launch this year. Self-driving can meet the demand for low-cost, on-demand, last-mile delivery that is both fast and affordable, Estrada said. The aim is for lower emissions, better health outcomes, jobs, and safer streets. On a larger scale, the estimate for self-driving delivery by Nuro and other companies over the next decade is 3.4 million jobs created and $4.1 trillion in U.S. economic activity; 348,000 fewer car crashes; a reduction of 407 megatons of CO₂, and an estimated 21 billion hours in saved time for people.¹⁷ He noted that tech companies have been criticized for skewing their innovations toward upper-income individuals. Twenty million people live in food deserts (more than the total population of New York State) with no ready access to quality grocery stores, and he said that lowering the cost of delivery could provide healthier food to these areas at no extra cost. Estrada closed by noting Nuro is working with cities and communities to learn the best local plan of action. They acknowledge they are only part of a solution and try to support a city’s other goals and partners in the public and private sectors.

Seleta Reynolds, Los Angeles Department of Transportation, noted in the early days of the pandemic, traffic cleared area roadways, but with only a modest decrease in ozone. The reason is that trucks continued to operate, and

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they contribute far more to air pollution than passenger cars and other vehicles. How people shop, such as buying online with smartphones, has changed over the past decade, which has impacted the movement of goods from the port and on the roads and created new business models. Reynolds said a challenge to policy making for cities is the absence of data. Companies will not share their data, and regulations are made in the dark.

Reynolds noted one area where she can collect data is along the city’s curbs. Parking spaces were converted to pick-up/drop-off zones or to accommodate outdoor dining. She is exploring how data can incentivize behavior, for example by charging private companies less when they deploy electronic vehicles. They are also communicating policy digitally through an Application Programming Interface (API) that render information into machine-readable, unambiguous form. In the future is a new age of commercial aviation; she noted private money is now invested in 70 different hybrid or electric aircraft types. Through “principles of the urban sky” now under development, Los Angeles hopes to avoid some of the mistakes occurring on the ground related to traffic. The initial use cases will be in goods movement.

Technology, Equity, and Urban Development

Adjo Amekudzi-Kennedy, Georgia Institute of Technology, discussed values and normative decision making processes to develop adaptive infrastructure systems and achieve equitable infrastructure. She noted the National Academies’ definition of resilience (see Galloway above). In addition, she and colleagues have developed a definition of a socially equitable infrastructure system as one where “the inputs, processes, outputs, and outcomes of the infrastructure system are comparable across different groups.”¹⁸ Resilience, she said, is strengthened by investing to adapt infrastructure equitably. The most vulnerable individuals and groups determine the resilience of a system; conversely, reducing or eliminating the vulnerabilities in a system strengthens resilience. Infrastructure investments also correlate with economic competitiveness, she added. Thus, investing to adapt infrastructure equitably is both an economic competitiveness and resilience strategy.

Amekudzi-Kennedy urged adopting value-focused thinking rather than “business as usual” alternatives-focused thinking as standard practice.¹⁹ A focus on values involves a framework to make values explicit from the outset, driven by opportunities rather than waiting for problems to arise, and unconstrained thinking. She and colleagues are applying this framework to compare social equity and competiveness in the United States, Japan, and Denmark. Preliminary data from case studies show how equity is treated in transportation investments. In the United States, the approach has been to avoid disproportionate distribution of benefits and burdens, which she termed impacts-driven. Japan works to create economic growth and correct disparities periodically, which is inputs/outcomes driven. Denmark applies equitable decision-making processes, which is process-driven. All three countries have had sustained GDP growth, but more equitable distribution in Denmark and Japan compared to the United States has occurred, as measured through the Gini coefficient of inequality.²⁰ In determining future decisions, a value-focused infrastructure investment framework can link relationships between institutions, the built environment, and decision makers’ values. Tools may need to be evolved, with social equity as one of the key decision-making criteria in the traditional transportation planning framework reflected in the vision, goals, objectives, development of alternatives, resource allocation, performance measures, and other elements of the planning and decision-making process.

Developing and building values-based infrastructure, as described by Amekudzi-Kennedy, is what should be happening, Jerry Hultin, Global Futures Group said and he focused on how this is happening in “smart cities.” This frame encompasses not just the government, but the whole ecosystem of how people live, including education, energy, retail, and other sectors, he explained. The concept of smart cities has depended on putting data in the hands of decision makers, although he said more recently, quality of life is becoming a more important issue than efficiency and data collection, such as Helsinki’s vision to be the most functional city and Paris’ 15-minute city plan.

It is not clear what will happen in the future, he said. “The way we engage people and shape the impact of technology on people’s lives is the important question. A number of technologies and systems are shaping cities and improving supply chain resilience.” Examples include satellite arrays that provide a more dispersed model to access the Internet, as well as services such as telemedicine and meetings. Production changes with large implications for cities include urban farming and 3D printing. He noted that the Global North and South are facing different circumstances and challenges, for example because cities are built in different ways in different places. The short-term benefits of urban

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technology to improve supply chain resiliency look good, he said, but longer-term prospects are murky. He sees 2030 to 2050 as a “rough transition” related to automation’s impact on jobs. If people need to be “smarter than robots” then education and skills training must be transformed so that everyone is smart, he stated. By the last half of the 21st century we have the potential of providing a high quality of life to everyone, but he urged scenario planning—and greater engagement with all citizens—in the future so it is not “nirvana for the rich, but many more are forgotten.”

Dara O’Rourke, University of California, Berkeley, and Amazon, said recent multiple cascading crises highlight the fragility of infrastructures, inequity of production and consumption, and lack of resilience. Disruptions occurred in all segments of the supply chain, but the distribution of these disruptions was not equitable in grocery and apparel as two examples, with the most vulnerable most affected.

It is not clear which changes in work, lifestyle, and consumption patterns will remain. Some companies compressed years of growth in a matter of months, as McKinsey and Company reported. A new consciousness for consumers in the face of supply chain disruptions has developed, expressed by management consultant Venkatesh Rao, who has called for a post-COVID-19 circular economy.²¹ A promising response has been an increase in personal resilience, O’Rourke said, such as through home-based production and maintenance and creative local substitution. Circular economy trends include positive generational changes, such as growing concern over environmental impacts and health conditions, and less “take-make-waste” of long linear supply chains. He said “building back better” will require investment in the re-generation of disrupted communities and strained ecosystems, but not going back to the past. There needs to be design for resilience and sustainability, with a focus on the most vulnerable points and centered around justice, equity, and inclusion. Governments have struggled over the past year, and global supply chains have proven to be very fragile. He suggested looking at the organizations that have done well and learn from them. It is also important to prepare for climate crises and disruptions, and to focus on climate justice and just transitions, O’Rourke said.

Concluding Thoughts from the Planning Committee

At the end of the final workshop, the planning committee members offered their individual perspectives on the sessions they moderated, focusing on future needs and opportunities for sustainable and resilient supply chains.

Workshop I: State of Global Value Chains and Supply Chains 4.0

Thorn noted the first workshop set the stage for subsequent discussions. She said a key takeaway for her is that as much as global supply chains are criticized, the data show they are a critical component of disaster response. Lessening dependence on global value chains could put the world’s population at risk by reducing access to needed supplies or driving up costs. Collaboration between governments and civil society is key—it does not work to try to “go it alone.” She noted the need for a change in mindset to create a culture of disaster resilience with governments that are both responsive and proactive, and that employ systems thinking to ensure both short term and long term needs.

Workshop II: Sustainability, Resilience, and Risk

Gruber said presenters on the panel she moderated on resilience and risks stressed that disruptions are a fact of life and they will likely increase in frequency. COVID-19 accelerated an ongoing trend by industry to invest in balancing resilience with growth and cost. Government claims of overdependence on other countries are not borne out by data, but have resulted in controls that further disrupted supply chains in many sectors, including for medical supplies. Technology, use of data, and public-private collaborations can enhance supply chain resilience planning and policy decisions related to climate change impacts, food supply, and other issues.

Sustainability was the theme of the panel moderated by Pisano. He stressed a resilient supply chain does not guarantee a sustainable supply chain, and vice versa. Regulations and competition are the biggest pressures on supply chains, and they need to be tracked and incorporated into investment decisions. In order to make these decisions, investors need transparency to track materials from origin to destination, and new tools and metrics are being developed to assist. As shown with The Ray, innovations can transform aspects of the supply chain for which sustainability is quite challenging, such as freight transport.

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Workshop III: Emerging Technologies

These and other emerging technologies were further discussed in the panel moderated by Garrett. He noted the speakers’ views that technology has made “networks of networks” of suppliers even more global. Extreme reshoring or bifurcation of the global economy are not feasible and could stunt innovation, competitiveness, and growth. New technologies, including biotechnology, could help achieve greater sustainability and resilience. While there is some skepticism about current efforts, others are more optimistic about the potential of emerging technology to enhance supply chain transparency, environmental sustainability, and resilience in the face of future disruptions. Realizing this potential, several presenters urged, requires regulatory reforms and greater funding for R&D.

Workshop IV: Consumers and Civil Society

Ross provided highlights from the final workshop linking consumers and civil society with supply chains. She said she was intrigued by the concept of custom-built vehicles and of the use of the municipal airspace, but the cost will continue to drive supply chains. She reflected on the need for a clearinghouse to integrate public and private data. A clearinghouse would allow public agencies to do a better job of serving the needs of the private sector and the public sector. Ross reiterated the importance of making values explicit in decision making about infrastructure so that benefits and impacts are comparable across sectors. Critical decision points can be opportunities to integrate more equitable thinking.

Tilmes acknowledged that coming up with new business models is complicated, but it is important to think of values and not just the next crisis. “The future is radically uncertain, but we can start to shape that future,” he said.

Summary Remarks

In conclusion, Tilmes said global supply chain networks have demonstrated remarkable resilience in the face of supply and demand disruptions, but many lessons have emerged in preparing for the next disruptions. These lessons include separating fact from fiction, and developing a central role for data to improve visibility and transparency. Technologies hold promise but there is no one-size-fits-all solution, and successful implementation requires software, behavior, decision making under uncertainty, flexibility to adjust, and the vitality of supply chain ecosystems, in addition to the hardware itself. Other promising areas of innovation relate to biodiversity, synthetic biology, and new decision-making frameworks, such as climate change assessment frameworks for policy makers.

Sustainability offers opportunities for redesigning supply chains, he stressed, which may be an area of future National Academies’ attention. Change, he said, will come from long-term financial investments, corporate commitments, consumer choices, and green competitiveness. The government has a role in investing to “build back differently,” setting an agenda for social equity, funding R&D, and public-private-community partnerships.

DISCLAIMER: This Proceedings of a Workshop—in Brief was prepared by Franklin Carrero-Martínez, Paula Whitacre, and Emi Kameyama as a factual summary of what occurred at the workshop series. The planning committee’s role was limited to planning the series. The statements made are those of the rapporteurs or individual workshop participants and do not necessarily represent the views of all workshop participants; the planning committee; or the National Academies of Sciences, Engineering, and Medicine.

REVIEWERS: To ensure that it meets institutional standards for quality and objectivity, this Proceedings of a Workshop—in Brief was reviewed in draft form by Adjo Amekudzi-Kennedy, Georgia Institute of Technology and Sridhar Tayur (NAE), Carnegie Mellon University. The review comments and draft manuscript remain confidential to protect the integrity of the process.

PLANNING COMMITTEE: Klaus Tilmes (Chair), Senior Policy Adviser and Economic Development Consultant; Banning Garrett, Singularity University; Patricia Gruber, Independent Consultant; Paul Pisano, Independent Consultant for Transportation Operations; Catherine Ross, Georgia Institute of Technology; and Sarah Thorn, Walmart. Staff: Franklin Carrero-Martínez, senior director, Global Sustainability and Development & Science and Technology for Sustainability (STS) Program; Emi Kameyama, program officer, STS Program; William Anderson, Transportation Research Board; Laurie Geller, Board on Atmospheric Sciences and Climate; and Steven Stichter, Director, Resilient America Program.

SPONSOR: This workshop was supported by the National Academies George and Cynthia Mitchell Endowment for Sustainability Science.

For additional information regarding the workshop, visit: www.nas.edu/sustainability.

Suggested citation: National Academies of Sciences, Engineering, and Medicine. 2021. Sustainable and Resilient Supply Chains Using Emerging Technologies: Policy Options: Proceedings of a Workshop-in Brief. Washington, DC: The National Academies Press. https://doi.org/10.17226/26193.

Policy and Global Affairs

Copyright 2021 by the National Academy of Sciences. All rights reserved.