In an interview from Motley Fool Live, recorded on July 7, Jay Jacobs, U.S. Head of Thematics and Active Equity ETFs at BlackRock (BLK -0.64%), answers a question about how the global supply chain is being reimagined following the pandemic, other world events, and government regulation.
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Jay Jacobs: I think it's really two things that are changing, and the first is the default over the last several years has been globalization. How do we find the lowest cost source of labor or how do we find the most efficient way to produce something overseas to bring it over to the United States, or to Europe, or to another more expensive destination.
Then secondly, I think the trend has also been just assuming that the systems will work constantly and having razor-thin margins for error in that system, not having a buffer for if there's weather events, or social events, or government regulation that changes the frictions within that system. Obviously, with COVID-19 it challenged both of those notions.
Globalization has been more challenging because we've seen localized breakouts of COVID-19 that have shut down the entire economy, or we've seen changing regulatory environment which has meant that the free flow of goods is not moving as freely as it used to. Then on top of that, we had no margin for error and we needed a lot of margin for error because we've seen a lot of fits and starts within the system.
So, the supply chain has been completely upended in a sense, all the things that we thought were true about how supply chain should operate is now being flipped on its head. What's happening is a lot of countries, whether it's the United States or entire continents like Europe are really rethinking what that global supply chain looks like.
Increasingly, we're bringing manufacturing back to the United States, reshoring manufacturing to not depend so much on a global supply chain, to not depend so much on international relations for the free flow of goods and services. But in doing so, we have to make it more efficient.
The United States has not seen a lot of growth in manufacturing over the last several decades. How do we use automation and robotics to keep costs low and to automate all the things that robots are capable of doing now? How do we improve our infrastructure so that when we are building all these different products within the United States, that we can move them around the country very easily without a lot of friction and transportation?
Then finally, how do we use really revolutionary technologies like autonomous vehicles to move things across the country? We had an 80,000-person trucker shortage in 2021, which meant that a lot of supplies simply couldn't get across the country. Can we automate some of that transportation through autonomous vehicles so that it alleviates some of those bottlenecks as well?
I think there's a completely tearing up the old playbook in terms of supply chains and really trying to rebuild supply chains that are more robust through any sort of conflicts that we may experience in the future.
