Remarks by Assistant Secretary of Commerce for Industry and Analysis Grant T. Harris at Supply Chain Summit “A Proactive and Strategic Approach to Supply Chain Resilience”

Washington, DC

August 26, 2024

As Prepared

Thank you, Matt, for that introduction, and thank you to Ambassador Froman.

We are thrilled to be able to partner with the Council on Foreign Relations on this supply chain summit. When thinking about who to partner with to discuss such an important global topic, no place felt more fitting.

Listening to Secretary Raimondo speak on the last panel brings me back to an early conversation with her a little over two years ago.

It was a Saturday in April of 2022. I was on vacation with my family and preparing to hit the ground running as the new Assistant Secretary for Industry and Analysis.

At 6am the phone rings and I check to see who was calling so early. It was the Secretary.

I tiptoed out of my hotel room to not wake my kids and answered the phone. She was calling to congratulate me on my confirmation.

After a quick hello she said: "Listen, I am so thrilled to have you on the team. You are going to be leading a critical business unit at Commerce, and I have big hopes for what you and the team can achieve. You know that securing supply chains is a vital national interest and key focus of the President's, and I want you to be 'Mr. Supply Chains.'"

She continued to point out that the Administration was working tirelessly to address the supply chain issues caused by the pandemic and doing a great job reacting to the crisis, but what we needed to do was to think beyond the immediate issue: How do we get ahead on the supply chains that matter most to America's competitiveness and security?

Her charge - and its urgency - made a lot of sense. So, that is exactly what I and the team set out to do - to try to address how the U.S. Government can be more proactive and strategic in developing supply chain resiliency.

It was a big task, but the Secretary knew, and I quickly could see, that the Industry and Analysis business unit was uniquely positioned to take on such a challenge.

The team already housed the broadest set of industry experts available in any one place in the U.S. Government. We already covered over 90% of the U.S. economy - from raw materials like critical minerals, to vital components like semiconductors, to finished goods like autos and airplanes - giving us a unique understanding of upstream and downstream supply chains. This small but mighty team had been leaning in for decades to strengthen the global competitiveness of U.S. industry, and their sectoral insights and analytic capabilities were exactly what we needed.

The Industry and Analysis unit, for example, was the first team in the U.S. Government to sound the alarm on competitiveness in the semiconductor supply chain and spring into action. They mapped out chokepoints, created an early warning system, and helped drive tens of billions of dollars in investments. This work helped lead to the creation of the CHIPS and Science Act, which is having a profound effect on the industry and creating thousands of jobs.

Secretary Raimondo wanted us to tackle a monumental problem, to disrupt the normal course of action. So, we decided to treat ourselves like a start-up - to be innovative and not confine ourselves to the old way of operating.

As any good start up does, we began asking the underlying questions around where gaps exist in current efforts, where we have a comparative advantage we can leverage, and how we can get access to the data and other resources we need.

After a lot of reflection, research, and consultation with stakeholders, we came to believe that a proactive and strategic approach requires these elements:

• Leveraging data and industry expertise to identify systemic economic and geopolitical risk.

• Deep-dive analysis on critical products and industries of strategic importance.

• An ability to anticipate and prevent, where possible, or otherwise quickly analyze and respond to disruptions to minimize their impact.

• Strong international partnerships to develop global solutions.

• The ability to play offense on supply chain risks and opportunities in emerging technologies to commercialize technologies to the benefit of U.S. jobs.

• Actionable and evidence-based policy recommendations that drive smart policies.

• And finally, you need to support investments and R&D to effect change in the market.

  • This also recognizes that, at the end of the day, it is primarily the private sector that manages supply chains, and private sector decision-making is therefore crucial to driving resiliency.

Underlying all these efforts, first and foremost, we saw the criticality of enhancing the government's ability to systematically assess supply chain risk across the entirety of the U.S. economy. Filling that gap would strengthen all other elements. We needed something that would allow us to see the vulnerabilities and weigh where our greatest risks lie - and then drive towards solutions.

We pulled together a dedicated team to fuse qualitative and quantitative insights, to think cross-sectorally, and develop the tools and playbooks needed to help us get ahead. That team became our Supply Chain Center, charged with creating data analytics tools, driving efforts to go deep on industries where we see vulnerability, and working with trading partners, stakeholders, and U.S. Government colleagues to strengthen supply chain resiliency.

This approach has paid dividends. Today, I want to particularly draw attention to one of our early successes - a new, first-of-its-kind data analytics tool coming out of these efforts. It's called SCALE, and we are thrilled to be launching it here at the Summit.

This tool utilizes a comprehensive set of indicators to assess current or prospective supply chain risk across the U.S. economy. It is a data-driven, objective way for the U.S. Government to assess systemic risk in supply chains - especially economic and national security risk. It tells us what to be most concerned about and points out specific vulnerabilities so that we can seek to address them.

We do that by measuring criticality - how important the industry is to the U.S. government; vulnerability - how exposed the industry is to disruption; and resiliency - how difficult it is for that industry to recover from a disruption.

We do this using over 40 indicators across these three buckets, capturing geopolitical, logistical, technological and other types of risks, as well as indicators of resiliency like how substitutable a product is or how long we project an industry takes to recover from different types of disruption.

Together, these indicators - using thresholds and weights set by our industry and economic experts - allow us to look across the economy at a heat map of risk, with the riskiest industries showing up as red and the least risky appearing in green.

[Now, rest assured, we're not just talking about a bubble chart or a heat map.] Now of course this is just showing a small fraction of the analytical horsepower of the tool. It's the equivalent of, say, just the title page of your favorite data analytics textbook.

We can also examine the economy top to bottom, ranking industries from most to least risky, helping us to identify which industries we should be most focused on as a government.

Once we identify an industry of interest, we can dig into the findings for each of those 40+ indicators, like the two represented here, to understand what's driving those risks.

We can pull up a picture of risk for any given industry and see immediately which indicators are flashing red; and for many indicators, which specific products within that industry are flashing red and gain insights about why. We can also compare risks across products from different industries.

In short, SCALE is revolutionary because it allows us to do two things that the U.S. Government has never been able to do before.

First, it weighs supply chain risk across the entire U.S. goods economy, identifying both economy-wide risks as well as which specific industries and products are most risky relative to one another.

Second, it provides an in-depth diagnostic assessment of what's driving risk in any industry, by providing a comprehensive, analytical framework that considers dozens of factors simultaneously.

Think of it as your annual physical combined with X-rays, MRIs, and blood tests. It helps identify problems before symptoms appear, while helping to diagnose any issues found.

If we had this tool five years ago, SCALE would have flagged PPE as facing systemic risk and needing more attention. Previously, the U.S. Government had no such tool.

To be clear, this is about structural and systemic risk, not real-time tactical movements or disruptions. SCALE is not a disruptions tracker - it will not tell us where disruptions are taking place or their real-time impacts. It's also different from commercial tools that are focused on helping companies ensure their products get from point A to point B.

Given the national security-related and other factors that it contains, Commerce will not be publicly sharing a risk-rating dashboard or showcasing the internal mechanics, but, in the coming weeks and months, we will be sharing key findings.

Building the tool was admittedly daunting and difficult. Wrestling with how to define and quantify concepts like vulnerability and resiliency and confronting gaps in availability and comparability of data are not simple tasks. Embracing a startup culture, though, the team created a prototype, met with hundreds of stakeholders to crowdsource and road test their ideas, and iterated. This was no easy endeavor - it was a moonshot. We know that this tool is no panacea, but we will continue to improve it with the best available data and inputs we can find.

So, what is the path forward for SCALE? We envision at least four use cases.

First, although it is only a month old, SCALE is already generating unique and powerful insights to inform our efforts on supply chain resilience.

For example, recognizing the effect that artificial intelligence will have on the U.S. economy, and its importance to U.S. technological leadership, Secretary Raimondo asked that we explore the potential underappreciated supply chain risks related to the rapid expansion of AI data centers.

We conducted a deep dive into the materials needed to build and operate these data centers - everything from building materials like cement, to printed circuit boards, to networking equipment, and emerging cooling technologies. Leveraging SCALE alongside our in-house industry expertise and broad engagement with dozens of companies and experts in the space, we identified where the greatest vulnerabilities exist.

SCALE helped validate some of the risks that we heard from industry, and it also gave us leads and insights that we wouldn't have had otherwise. This helped us merge qualitative and quantitative findings and drove our focus on specific components of the AI data center supply chain.

It worked exactly as we had hoped, and now Secretary Raimondo will be gathering the relevant stakeholders in the coming months to drive action.

This is one of several industries that our teams have been working on, including areas like broadband, chemicals, and home appliances, just to name a few, where SCALE is providing new insights. We'll be digging in further with colleagues across the government and will discuss those and other sectoral and cross-economy insights with industry and others in the coming months.

Second, we will also use SCALE to inform the U.S. Government's priorities and agenda.

For example, we will share findings and policy recommendations with the White House Council on Supply Chain Resilience, Congress, and other departments and agencies. We are already using SCALE to help inform the White House-led Quadrennial Supply Chain Review that will be published later this year.

And we already used it to help identify key goods and sectors for potential cooperation under the Indo-Pacific Economic Framework for Prosperity Supply Chain Agreement.

Third, SCALE will also help us facilitate data-driven conversations with industry on pricing supply chain risk - enabling us to work with companies in entirely new ways.

We know that we cannot achieve U.S. supply chain resiliency without the private sector - as Secretary Raimondo and Tom Polen discussed on the last panel. Creating a more quantifiable understanding of supply chain risk - including geopolitical risk and what we would call national security risk - is key to driving real action.

Finally, we believe that SCALE will give us a more holistic understanding of foreign adversary risk and help us address it. Just as strenuously as we seek to create resiliency, U.S. adversaries seek to create dependencies to the detriment of U.S. industry and national security. We cannot let that happen. That's why having a more accurate and nuanced understanding of foreign adversary strategy is so important.

We are not stopping here. We will continue to improve the tool and are seeking more ideas and input from all interested parties. Today, we're announcing new strategic partnerships, and we are planning to launch a competition aimed at developing new data or analysis that can be used to further develop SCALE.

This Summit is meant to act as a springboard for action, not a readout of good work completed. It will take all of us working together to create a more economically competitive and secure nation.

We believe that Commerce, specifically the Industry and Analysis team, has shown strong ROI on our efforts so far. But for us to continue to scale our supply chain work, we will need to leverage these partnerships and more, along with sustained investment, to build on our progress, and ultimately achieve our shared mission.

When it comes to supply chains, an ounce of prevention is worth a pound of cure. And not only that, but smart supply chain policy isn't just about playing defense or buying down risk - we have opportunities to build, innovate, and strengthen supply chains to the benefit of U.S. economic and national security, technological leadership, jobs, and the health and quality of life of Americans across the country. To do so, we must work quickly and collectively to meet the moment.

Thank you all for taking the time to join us for this inaugural Summit. I hope our conversations today help drive action. We'll have many more consultations and convenings to come in the weeks and months ahead, and the Commerce Supply Chain Center and the rest of the Industry and Analysis team also look forward to reconvening next year to take stock of progress and tackle the next frontier in supply chain resilience.

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