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25

Jan

How the U.S. Government Shutdown Affects Supply Chains

Author: Rene Garcia

govt shutdown

At the time of this writing, the United States federal government will have been partially shut down for approximately four weeks. While the effects of the shutdown are still being calculated, nothing catastrophic appears to have affected supply chains. However, that could soon change depending on how long the government shutdown continues, because key agencies may not be running to provide essential paperwork services or data that supply chains rely on for accurate pricing, timing, and risk management.

Lack of Data and Slow Processing Increases Risk

When supply chain managers talk about having visibility, what they mean is having accurate data. That data doesn’t always come from suppliers directly. Often, it’s the federal government that provides the needed information.

Jonathan Starks, an analyst and forecaster for heavy-freight and truck equipment markets, recently wrote, “Planning for the future requires knowing what is happening today.” He then listed data that “has been delayed due to the shutdown”. The list includes:  

  • Advance goods deficit
  • Advance inventories
  • Agriculture prices
  • Construction spending
  • Factory orders
  • New-home sales

Starks doesn’t state that there have been any dire consequences yet, but it’s obvious that delayed data will eventually lead to inaccurate speculations regarding future supply chain activities that could lead to a disruption. Similarly, supply chain operations may come to a halt due to paperwork issues. For example, organizations and workers that need specific permits and/or licenses from shuttered government agencies will simply not be able to operate. For example, Delta Airlines had planned to begin flying the Airbus A220 on January 31, but is still waiting on approval from the FAA, which has been affected by the shutdown.

Some Supply Chain Risk Endangers Everyone

The Food and Drug Administration is another federal governmental agency that has been affected by the 2019 shutdown. Since the FDA inspects roughly 80 percent of the United States’ food supply, there are worries of an outbreak happening without the full protection of the FDA.

Having the agency fully functional is better than anything less than that. Marion Nestle, a professor of nutrition, food studies, and public health is more worried about how a prolonged shutdown could affect food supply chains in the absence of routine inspections. She sums her worry up with “when the cat’s away, the mice will play.”

Regrettably, global supply chains are at the mercy of current political turmoil in the United States federal government. Until that’s resolved, the best supply chains can do to manage risk is to partner with reliable suppliers who focus on safety, carry the proper insurance, and have all the right documents and certifications to perform the necessary work. Organizations can build that supply chain with Avetta. See how joining the Avetta network can help you choose the right suppliers to partner with.