Supply Chains: Raw Materials, Manufacturing, Resilience | Energy and Physical Infrastructure Literacy Tutorial

What a Supply Chain Is

A supply chain is the sequence of steps that takes raw materials and converts them into finished products in your hands. Every stage requires other inputs: energy, transport, capital, labour, intermediate goods.

A simple example: the phone in your pocket.

Mining            lithium (Australia, Chile), cobalt (DRC), copper (Chile, Peru), rare earths (China)
Smelting          processing into metals (mostly China, Korea, Japan)
Components        chips (Taiwan, Korea, US), displays (Korea, Japan, China), batteries (China, Korea)
Assembly          mostly China and Vietnam, with some in India
Distribution      global shipping, trucking, warehouses
Retail            local stores or direct shipping

A phone's supply chain touches dozens of countries and hundreds of facilities. Most consumers see only the last step; the rest happens out of sight.

This applies to nearly every product more complex than a cabbage. Modern life is the output of vast logistical systems.

Raw Materials

Everything physical starts with raw materials. The modern economy depends on a surprisingly small set of critical ones:

Energy minerals

Oil: liquid fuel, petrochemicals, plastics. Still the largest single commodity by value
Natural gas: heating, electricity, chemical feedstock
Coal: declining in rich countries; still major in some developing ones
Uranium: nuclear fuel; limited producers (Kazakhstan, Canada, Australia)

Industrial metals

Iron and steel: foundation of construction, vehicles, machinery
Copper: electricity, electronics, plumbing. Demand rising with electrification
Aluminium: packaging, vehicles, aerospace
Nickel, zinc, lead, tin: various industrial uses

Critical minerals for the transition

Lithium: batteries. Concentrated in Australia, Chile, China, Argentina
Cobalt: battery cathodes. Heavily concentrated in DRC; supply chain concerns about mining conditions
Nickel: batteries, stainless steel. Indonesia, Philippines, Russia, Australia
Copper: everything electric
Rare earths: 17 elements used in magnets, electronics, wind turbines, EVs. China dominates both mining and processing
Silicon: semiconductors, solar cells
Graphite: battery anodes

Chemicals and feedstocks

Natural gas as feedstock: fertiliser, plastics, chemicals
Phosphate, potash: fertiliser; Morocco, Russia, Belarus dominate
Chlorine, caustic soda, ammonia: basic chemistry

Supply-chain security for critical minerals has become a major policy concern. Countries are trying to diversify suppliers, reshore processing, or develop substitutes.

Manufacturing Geography

Where things are made has shifted dramatically over 40 years. Rough picture:

Electronics and mass-consumer goods: heavily China, some in Vietnam, Mexico, increasingly India
Automobiles: US, Germany, Japan, China, South Korea are majors; assembly plants global
Steel: China (~55% of global output), India, Japan, Russia, US
Chips: design in US/Korea; manufacturing in Taiwan (TSMC), Korea (Samsung), some in US, Europe
Clothing and textiles: Bangladesh, Vietnam, China, India, Turkey, Cambodia
Pharmaceuticals: mostly US, Europe, India (for generics), China (for APIs)

Manufacturing shifted East for decades because of cost advantages (labour, capital availability, infrastructure). It's shifting again now for different reasons:

Higher labour costs in coastal China: some moving to Vietnam, India, inland China
Automation: reduces labour cost sensitivity
Geopolitical risk: incentives to diversify from single-country dependencies
Shorter supply chains: faster response to demand, lower shipping costs

The result: reshoring and friend-shoring are real but slow. Most supply chains still optimise for cost.

Just-in-Time and Its Costs

Japanese manufacturers in the 1970s developed "just-in-time" (JIT) production: components arrive exactly when needed, inventory is minimal, waste reduced. It was a huge productivity win.

JIT spread globally and became standard. The tradeoff: JIT systems are fragile. Any disruption (supplier failure, shipping delay, raw material shortage) ripples through immediately.

The 2020s have been the JIT reckoning:

COVID disruptions: factory shutdowns, port congestion, demand shifts all caused shortages
Semiconductor shortage 2020-2022: delayed car production for years
Red Sea disruptions 2024+: rerouted shipping, longer transit times
Ukraine war: disrupted grain, fertiliser, metals, energy

Many companies are shifting toward:

Just-in-case inventory: more buffer stock
Multi-sourcing: not depending on a single supplier
Regional production: shorter chains
Vertical integration: owning more of the chain

These are all more expensive than pure JIT. The new trade-off being accepted: some efficiency for more resilience.

Key Chokepoints

Even well-diversified supply chains have single points of failure:

Taiwan Strait

TSMC in Taiwan makes roughly 90% of the most advanced chips in the world. A conflict or disruption in the Taiwan Strait would cut off the world's supply of modern processors. No substitute exists in comparable volumes.

The US CHIPS Act, EU Chips Act, and Japanese and Korean initiatives are trying to build alternative capacity. Takes years.

Suez Canal

~12% of global trade, ~30% of container traffic. Disruptions (Ever Given 2021, Red Sea attacks 2024) reroute shipping around Africa, adding 10-14 days and significant cost.

Strait of Hormuz

~20% of world oil exports. A conflict closing it would cause a global energy shock.

Panama Canal

Most Pacific-Atlantic trade. 2024 drought reduced capacity significantly; normal operation is fragile.

Rare-earth processing

China processes most of the world's rare earths, even rare earths mined elsewhere. Building processing capacity elsewhere takes years.

Pharmaceutical APIs

Many active pharmaceutical ingredients come from a small number of Chinese and Indian plants. A single outage can cause drug shortages worldwide.

Shipping as Infrastructure

Chapter 06 covered ocean shipping; it's worth restating in the supply-chain context.

~90% of international trade by volume moves by sea
Container ships, bulk carriers, tankers, car carriers
About 50,000 merchant ships actively trading worldwide
Crews often multi-national, often invisible to end consumers

Shipping is essential infrastructure that most people don't think about. Disruptions (COVID crew issues, Suez, Red Sea, port labour actions) ripple into supply chains everywhere.

Shipping is also a major emitter. International shipping is about 3% of global CO2 emissions. Decarbonising it is a slow project; chapter 09 touched on the options.

Inventory, Warehousing, Distribution

Once goods arrive in a country, they move through:

Ports and airports: entry points
Inland distribution: trucks, rail to regional centres
Distribution centres (DCs): large warehouses near population centres
Fulfilment centres: Amazon-style facilities for direct-to-consumer
Retail or last-mile delivery: to stores or homes

E-commerce transformed this. A typical online order now flows through fewer hands and faster than traditional retail, but requires massive warehouse automation, workforce, and transport capacity.

The DC network is an infrastructure in its own right. Amazon has hundreds of facilities in North America alone. Walmart, Target, and others have parallel networks. Companies that don't own DCs rent space from logistics providers.

The Human Side

Supply chains run on people, often in difficult conditions:

Mines: frequent safety and human-rights issues (DRC cobalt, various contexts)
Factories: wages, hours, safety vary enormously
Shipping crews: long deployments, isolation, occasional abandonment by bankrupt owners
Warehouse and delivery workers: intensive pace, injury risks
Truck drivers: long hours, regulations, driver shortages in many regions

"Supply chain" is a neutral term for something that's also human experience. Consumers rarely see this layer. Some of it is legitimately improving; much is not.

Resilience vs Efficiency

The big question of the 2020s: how much efficiency should supply chains give up for resilience?

Pure efficiency means:

Single suppliers (lowest cost)
Thin inventories (low capital)
Optimised routes (shortest shipping)
Global sourcing (wherever cheapest)

Pure resilience means:

Multiple suppliers
Thick inventories
Redundant routes
Regional or vertical integration

The honest answer: somewhere between. Every company and country is recalibrating. The COVID era shifted the optimum; the ongoing geopolitical tensions are reinforcing the shift.

Expect supply chains to be somewhat shorter, somewhat more expensive, somewhat more resilient over the coming decade.

Building Literacy Here

Useful skills:

Look behind the product: when you use something, ask briefly where it came from
Notice shortages: they reveal supply-chain structure. The chip shortage of 2020-2022 was a masterclass in how fragile advanced manufacturing is
Follow specific materials: lithium, copper, semiconductors over time. The stories are ongoing
Read trade journals occasionally: not daily; occasionally. They're where the real flows are discussed

Supply-chain literacy integrates the rest of this tutorial. Energy is a supply chain. Water is a supply chain. Transportation is a supply chain. Understanding each builds into a useful whole.

Common Pitfalls

"Made in X": usually misleading. A product labelled "Made in USA" often has components from dozens of countries, assembled finally in the US

"Just-in-time is bad." It's efficient. The question is whether the efficiency is worth the fragility. For some goods yes, for some no

"We should reshore everything." Some things, yes. Reshoring all manufacturing is expensive and often impractical. The target is strategic industries and diversified sourcing, not total autarky

"Globalisation is over." It's changing, not ending. Some flows are declining; new ones are emerging. The 2040 picture will be different from the 2010 picture but still very global

"China will dominate everything forever." Historically, dominant manufacturing centres shift over time. It doesn't happen overnight, but positions aren't permanent

Next Steps

Continue to 11-climate-and-infrastructure.md for what a changing climate means for the systems in this tutorial.