The Interdependence of Supply Chain Stability and World Peace

I’m going to get straight to the point here (highly unusual for me, I know). Supply chains and world peace are codependent—one cannot exist without the other. They go hand in hand because every country on the planet needs resources acquired from other parts of the world. Whether it’s labor, food, raw materials, transportation, or another area of the Plan-Source-Make-Deliver (PSMD) supply chain continuum, all countries and businesses must be in sync with each other to survive. No country has—or ever will have, for that matter—a monopoly on 100% of its needs. A cascaded “chain of chains” rules the world—every country, every industry, every business has customers and suppliers; no one organization can exist in a silo. It just doesn’t work.

Inserting any company, country, material, etc., into the chain of chains illustration (Exhibit A) provides a clear representation of the potential repercussions when these links are disrupted.

Just as there is no single country that is entirely self-sufficient from a supply perspective, there is no single company that has a lock on everything it needs. As hard as companies may try (and it’s been attempted numerous times), it simply cannot be done. While almost any organization can forego certain products or services obtained from other players, most—if not all—would go broke without an overseas supplier. Is it realistic to think a company president would ever forfeit revenue to which shareholders have grown accustomed? More importantly, the quality of healthcare would suffer without a free-flowing, reciprocal chain of chains. All organizations and countries regardless of their size must Plan-Source-Make-Deliver (PSMD) their goods and services to the entire world.

A supply chain with foreign components is essential for survival in today’s world, regardless of the base location or product included in the PSMD continuum. About 40% of the world’s gross domestic product (GDP) involves China. Whether a product is made there, shipped there, or purchased from there, China has become a dominant player in the world’s chain of chains. The United States and its allies are dominant players as well, controlling a considerable portion of the global GDP. In my more than 40 years of experience working in various markets (automotive and chemicals to medical devices), I have seen an incredible interdependence among all countries, regardless of industry. This co-dependency, I contend, is a leading reason for the improved standard of living in much of the world over the past four decades; the Earth’s inhabitants exist in a planetary chain of chains and the species improves or declines together. That decline can be quick, however, if the world becomes destabilized, as is the case with the Russia-Ukraine conflict, North Korea’s saber-rattling, and China-Taiwan tensions.

Not too long ago, I attended a conference and met with a supply chain professional from Russia who was interested in utilizing technology from the United States. That professional also wanted to bring contract manufacturers to Russia and leverage their capabilities to supply other parts of the world from there. I would be lying if I didn’t admit it was enticing—the country had, after all, hosted a successful and peaceful Olympics less than a decade ago (2014). I’ve had similar discussions and successful partnerships with many other supply chain professionals around the world, including those from Costa Rica, Puerto Rico, Mexico, Ireland, much of Europe, and Asia. I know from first-hand experience that the world’s countries and companies exist within a chain of chains that rely and more importantly, depend on each other. Russia’s invasion of Ukraine exposed the vulnerability of the world’s supply chain of chains; it showed the chains are so intertwined that they are only as strong as the weakest link. When one link becomes weak, the whole chain suffers.

This scenario has played out numerous times in the past, most recently with the World Bank assisting financially insolvent countries (remember the dire situation in Greece?) Even the smallest countries can upset the entire world order under the chain of chains law. Without strong links, there is no chain.

Think about the kinds of goods and/or services medtech companies acquire from foreign countries. These firms also source numerous raw materials from small suppliers abroad or a remote part of the world, leaving them susceptible to political unrest, totalitarian regimes, natural disasters, and economic hiccups.

In every company for which I have worked during my career, I have stressed the importance of leadership stability and supply sustainability in regards to specific countries. At one large organization, I suggested establishing a Supply Chain Intelligence Officer (SCIO) position to keep constant tabs on the relative health of the global chain of chains. I called it “imploded leverage.” Like most Fortune 50 companies, we were heavily leveraged on some raw materials sourced from abroad. Due to internal role description politics, however, the official SCIO title was never created but the officer was tasked with monitoring the company’s players and suppliers abroad and anticipating potential (disruptive) issues. I have always stressed the importance of color code mapping the chain of chains to clearly track the domino effect one broken link can have on the entire chain. Consider the supply chain impact from Russia’s invasion of Ukraine earlier this year—the same thing could easily happen with additional geopolitical unrest.

Do I practice what I preach? I do. In the mid-2000s during my tenure as president of ATEK Medical (a medical device contract manufacturer later acquired by Vention Medical), the company wanted to expand geographically to meet OEM customer needs. Rather than ship product from the United States to other parts of the world, these customers preferred to have “intra region suppliers”—a common supply chain need among multinational OEMs. Intra region suppliers will likely become more important if energy prices continue climbing and OEMs seek to minimize transportation logistics costs from the United States. A key criteria for ATEK Medical’s expansion was sustainability of the sourcing country’s leaders and its “chain of chains” suppliers. We looked throughout the world before landing on Costa Rica, which has turned into a supply staple for the entire healthcare industry. A word of warning: ATEK Medical would not have selected Costa Rica without considering the stability of the country’s chain of chains and its leadership, which was gleaned through personal conversations with the country’s president and his cabinet.

A Fortune 50 company president I worked for once told me, “All decisions are generally good ones at the time you make them because nobody wants to make a bad decision. But only the decisions that stand the test of time are the good ones.” That was very sage advice, and I’ve always relayed it to my teams and clients. I can say with great confidence that the Costa Rica decision was a good one. But, can it change on a dime like Russia did for many European companies depending on Russian supplies? Will Asia’s chain of chains weaken over rising tensions between China and Taiwan? Will the Middle East’s political turmoil destabilize Israel’s supply chain? Can Latin America fill the gaping holes in the world’s supply chains? Only time will tell. 

Russia’s invasion of Ukraine clearly illustrates the significant risk of a global interdependent chain of chains. It should also validate the need for an SCIO within medtech companies (title or not) as supply chain stability is becoming more important by the day. We’re not living in a Jack Ryan movie, such as “The Sum of All Fears,” but rising world tensions is currently a reality. Companies that haven’t yet color coded their chain of chains should do so now to better understand the ramifications of the PSMD Supply Chain continuum and their various interdependencies.

I’m convinced there has never been a more important time to have solid leadership across the world and government officials who can get along with each other. It should start here in the United States. I truly pray that our leaders in Washington can bury their differences and find some sort of accord so they can collectively get along with the rest of the world—much like what Ronald Reagan did in the 1980s. If Congress cannot work together to solve the nation’s problems, America stands no chance of getting along with other countries. The chain of chains is in their hands. Let’s hope they do the right thing and work in unison to fortify the world’s weakening links.