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Friday, August 22, 2014

Sequestration Will Also Slow the Supply Chain

Air Traffic Control

Sequestration could result in layoffs of large numbers of federal employees, affecting supply chains. Source: Sean MacEntee

IMT Machining Journal has previously noted (also here) that the looming sequester, $85 billion in automatic cuts to the federal budget set to trigger if Congress cannot forge a deal by Friday, March 1, could negatively impact defense contracting. Many of the cuts will impact the Department of Defense, which will cause a contraction of federal orders for defense contractors. However, other analysts and industry professionals are warning of broader impacts to manufacturing and machining.

Some of the spending reductions involve federal layoffs in several critical occupations, including air traffic controllers, customs officials and border crossing guards. All of these occupations directly impact supply chains, especially for companies that source products and components abroad. Homeland Security Chief Janet Napolitano seemed despondent describing the delays that could occur if sequestration enacts because of the few major border crossings along the U.S.-Canadian border, Canadian Manufacturing reported.

“In fact, trade-wise, [the few major Canada-U.S. crossings are] probably the Number one or two crossing places in the world. As sequester evolves and we have to furlough people who are port officers, and not fill vacant positions, and not pay overtime, we’re unfortunately going to see those lines really stretch.”

“It means less overtime and the ability to hire port officers, so longer lines there,” she continued. “It means really the same at the TSA (Transportation Security Administration). So longer lines there.” Canadian Manufacturing described Napolitano as later burying her head in her hands when asked about sequestration’s possible impact on the Department of Homeland Security.

As of publication time, no deal on the sequester has been reached.

Brian Lane

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