Regional Supply Chain Analysis

During the nadir of COVID-19, states, regions, and communities (indeed entire countries) found themselves lacking much-needed supplies. Facemasks, hand sanitizer, and ventilators were essential items that were hard to find or rationed. Additionally, less essential items were difficult to come by such as bicycles, appliances, and kids’ desks. 

More recently, shipping delays have bottlenecked the supply chain. Now a continuing lack of workers, along with challenges on the West Coast—port worker union negotiations and the implementation of AB5 in California (that all but bans the common owner-operator model of trucking)—and it seems supply chain woes may not be going away any time soon.

Much of the discussion on the issues has focused the macro: how can some of the downsides of globalization be mitigated? How can global supply chains be adjusted to better handle future shocks? What are the national security implications of a weak supply chain? 

But for local communities and regions, the question is less about these macro forces and more of how the local economy can be improved with a more regionalized supply chain. This is one of the questions a community in Washington state was seeking to answer.

Tri-City Development Council’s target industry supply chain analysis

Tri-City Development Council (TRIDEC) was organized for the purpose of promoting and advancing the economic strength and diversity in Benton and Franklin counties in Washington. This includes the Tri-Cities, the closely linked cities of Kennewick, Pasco, and Richland, at the confluence of the Yakima, Snake, and Columbia Rivers.

Recognizing the role a supply chain plays in a labor market, TRIDEC included a targeted supply chain analysis as part of its industry and labor market analysis. As the study notes, “Supply chain analysis is a process by which the inputs and outputs of an area’s industry clusters are evaluated—which goods and services are being bought and sold, in what quantities, and where theyare being bought from or sold to.”

The goal is to identify segments of the supply chain that may be absent (supply chain gaps) from a region’s industry clusters, then fill these gaps through expanded capabilities of existing businesses, new business starts, or recruitment. This strengthens the industry cluster and may also support non-related industries.

Sales show in-region sales and exported (out-of-region) sales for each industry cluster. Demand shows the total demand in the Tri-Cities for the goods and services offered by each industry cluster. Not shown in the breakdown above are industry purchases. This is different than demand. Industry purchases break down the sectors and sub-sectors a particular industry purchases from.

For instance, in the Tri-Cities region, the food and beverage manufacturing industry purchases roughly $1.25 billion in goods and services. About 66% of these were imported and the remaining 34% were sourced in-region. A neat aspect of this industry is its connection to local producers. As the study notes, “The food manufacturing industry in Tri-Cities is well-connected to regional agriculture as it sources over 63% of crop production inputs in-region.”

Conversely, packaging and packing represent an opportunity for the region to purchase more in the region and localize its supply chain. 

Part of the 3-digit Machinery Manufacturing sector, $27.9 million in purchases of packaging machinery manufacturing (NAICS 333993) are made, 94.5% of which are imported. Similarly, $28.8 million in purchases of corrugated and solid fiber box manufacturing (NAICS 332211) are made, 100% of which are imported. Fabricated metal product manufacturing is also a heavily imported purchase, with over $29 million in goods imported accounting for 97% of purchases.

Knowing that such a large portion of a particular industry relies on an external supply chain, economic development leaders can work with existing companies to expand their capabilities to meet this demand or target recruitment efforts toward a manufacturer with the capabilities. Meeting supply needs locally will make a region more resilient, less susceptible to shocks, and benefit more local residents (the primary goal of economic development).    

TRIDEC worked with the Lightcast Community Consulting team on the labor market and supply chain analysis, as well as a number of impact scenarios—an examination of how the local economic activity and supply chain would change as the result of a particular change. Our consulting team would love to work with your community as well. 

However, if you’re interested in exploring the supply chain of your region, Developer has a number of reports that can provide an initial analysis.

1. Industry Purchases

The quickest way to get an understanding of your supply chain is this report. Again,  industry purchases describe the purchases a given industry makes from all other industries—an industry’s supply chain—and also estimates whether those purchases came from within or outside the region.

2. Regional Requirements

In this report we are able to see the amount spent by industries and consumers on essential goods inside and outside the defined region. So while the Industry Purchases report tells us where industries are sourcing their inputs, Regional Requirements tells us where a community is sourcing its needs.

3. Industry Diversity Map

To have a healthy local supply chain a region needs a certain level of industry diversity. The less diverse local industry is, the more reliant it will be on imports. A region with a broad range of industries, in theory, can provide the broad range of inputs needed within industry clusters, and the products and services the community needs. 

The Industry Diversity Maps uses C2ER’s Diversity Index, to rank industry diversity by state, metro MSA, micro MSA, or county. Diversity measures the number of industry and occupation types in a region and the evenness of employment across these industries and occupations.

Examining the local industries from the perspective of employment gives a different view than the above reports. And we can drill down into a region and see the makeup of the region’s industry diversity; specifically, which industries could be bolstered to improve employment diversity.

Know the details

Strengthening a local supply chain makes existing industry clusters stronger, resulting in greater prosperity for residents. And with external supply chain woes likely to continue, regions would be well served to see where they can improve their supply chain internally. This may come from varying import substitution tactics: expanding existing business capabilities, recruiting new businesses to fill gaps, or spurring startups in a particular industry. But any strategy begins with knowing the details of the existing supply chain.