Department of Commerce Unveils New Tool to Inform Supply Chain Risk Mitigation

The U.S. Department of Commerce unveiled a groundbreaking analytic risk assessment tool to inform the U.S. government’s efforts in mitigating supply chain risks. Launched at the inaugural Supply Chain Summit hosted by the Department of Commerce and the Council on Foreign Relations on September 10, 2024, the SCALE Tool marks a significant milestone in the U.S. government’s broader commitment to strengthening the U.S. supply chain ecosystem. 

The SCALE Tool

The SCALE tool is designed to provide critical insights into vulnerabilities across the supply chain ecosystem, enabling the U.S. government to be more proactive and strategic in addressing issues related to supply chain security. Utilizing data sets from various U.S. government agencies, the tool employs over 40 indicators across geopolitical, logistical, and technological categories to provide an in-depth evaluation of criticality, vulnerability, and resilience. Additionally, the tool assesses a wide range of factors affecting supply chains, including climate challenges and geopolitical tensions, creating a comprehensive "spider web of risk." By identifying and addressing these risks, the tool allows for a nuanced understanding of structural and systemic supply chain vulnerabilities down to the component level.

In practice, the SCALE tool will guide U.S. government decision-making and policy development, facilitate data-driven conversations with industry stakeholders, identify systemic and geopolitical risks, foster international partnerships, shape manufacturing and trade policies, and support investments critical for supply chain resilience. Although the tool will not be available to the private sector, the U.S. government will engage with industry representatives to collaborate on its findings.

In its current version, the Department of Commerce has outlined four primary uses cases for the SCALE Tool:

1. Generating unique insights to help the U.S. government’s current efforts to build supply chain resiliency,
2. Informing the U.S. government’s priorities and agendas,
3. Pricing and quantifying risk, and
4. Understanding foreign adversary risk.

These use cases will help the United States maintain a competitive edge in global markets while assessing national security and economic implications.

The Commerce Department is already using the SCALE tool to identify critical vulnerabilities in key U.S. industries. Specifically, SCALE has pinpointed supply chain risks in critical materials for AI data centers, identifying six materials with the most vulnerable supply chains, including backup generators, printed circuit boards, next-generation cooling technologies, cement, networking equipment, and semiconductors. In turn, the U.S. government is taking proactive steps to collaborate with the private sector and share information, particularly with the Advisory Committee on Supply Chain Competitiveness.

Additionally, the tool has identified the chemical and emerging technology sectors as vitally important to the U.S. economy. As a result, the government will be conducting two tabletop exercises in 2025 with these industry stakeholders.

The Commerce Department wants the SCALE tool to be iterative and improve over time and aims to engage with stakeholders to ensure it is an effective tool in supply chain security and economic competitiveness.

Additional Initiatives

In addition to the launch of the SCALE Tool, the Commerce Department is expanding its partnerships with industry to better inform policies aimed at addressing structural supply chain risks and increasing U.S. global competitiveness. New partnerships have been launched with key trade associations and institutions including:

• National Small Business Association
• Association for Supply Chain Management
• Council for Supply Chain Management Professionals
• Institute for Supply Management
• Industries Studies Association
• Carnegie Mellon University
• Georgetown University.

What This Means for the Private Sector

The new SCALE Tool will provide the government with greater visibility into key vulnerabilities in supply chains across the U.S. goods economy. Particularly for the private sector, this tool will help enhance opportunities for public-private partnerships, as the government will have better data to proactively work with industry to solve supply chain problems before they become disruptive. Additionally, this tool provides the government with greater clarity and transparency into supply chains from top to bottom, facilitating strategic investments that support research and development in critical sectors.

While the tool is a significant advancement in the way the U.S. government approaches supply chain resiliency, it has limitations. Primarily, the government is not able to access the most accurate data regarding industry supply chains, as this would require private companies to disclose confidential information. The tool is also not a real-time tracker of disruptions. Rather, it focuses on structural and systemic risks to identify broader vulnerabilities in U.S. supply chains. Thus, it serves to guide the government on where the potential bottlenecks could happen, not where they are currently happening in real-time. Finally, the success of the SCALE Tool in informing U.S. policy will be dependent on the longevity of its development beyond the current administration. For the tool to produce effective policy, it must be continuously updated and enhanced with more accurate data through long-term efforts.

Looking Ahead

While the Biden-Harris Administration has focused on strengthening supply chains across the U.S. goods economy, the next steps involve institutionalizing these initiatives to ensure they are long-lasting and effective beyond this administration. For instance, the Commerce Department plans to use the findings from the SCALE Tool to inform quadrennial reports across U.S. agencies, with the expectation that these reports will be used to guide future U.S. government priorities.

Additionally, there is currently legislative support for institutionalizing a supply chain resiliency program, as demonstrated by the Promoting Resilient Supply Chains Act—a bipartisan bill aimed at establishing a comprehensive framework for monitoring and responding to disruptions in critical industries and supply chains. This bill has already passed the House and is currently under consideration in the Senate.

The Crowell & Moring International team is actively engaging in this area and identifying government efforts to engage the private sector and opportunities for partnership to mitigate supply chain risk.