As the world enters it’s third year with COVID, this seems like a good time to evaluate predictions made at the start of the pandemic. In March of 2020, I wrote a column for our newsletter with some thoughts on how COVID would change work and business. I got some right, some close, and some far off.
The first prediction was pretty easy: It is certain that the pandemic will cause companies to change how they conduct business. That one has been accurate across the board. New business practices of all types have emerged. Increased automation has streamlined operation, efficiencies have replaced many back-office and customer facing operations. Some of this has been good where it reduces frictions. Some not so good. One not so good is the increase in spam e-mail marketing we all see, but that was inevitable anyway.
as remote workforce, increased automation, artificial intelligence, and sustainability. Remote workforce has become the norm for most office work and we’re seeing more use of automation for traditionally in-person operations, such as bank tellers, insurance agents, and so on. It now appears that the hybrid workplace will overtake the always in the office environment. What is likely to come next is a greater use hybrid work schedules which accommodate a geographically diverse workforce, and more flexibility across the board. However, the growth of artificial intelligence applications and drives to sustainability seems to be mostly unaffected by COVID.
and more dispersed supply chains, increased local presence, greater customization, new business models, and so much more. It’s hard to disagree that supply chains are undergoing a seismic shift away from concentration for economies of scale and towards dispersion for resiliency. That same drive is creating new business models to leverage and manage a more dispersed supply chain. If anything, I believe we will see more shortening of supply chains and more built-in resiliency.
and some of the fittest will emerge stronger by incorporating new operating practices into their strategy. The Competitive Intelligence question this presents is much less about how a company will survive the pandemic and much more about how it will thrive in the post-pandemic world. The absolute number of businesses, many smaller ones that anchored commercial districts, which failed in the past two years is only countered by the number of new ones with different services and business models emerging in the last year.
So, it’s time for some predictions to cover the rest of 2022. I believe this year will bring in some big changes, not just in how business is done but in society and geopolitics. COVID has served as a Grey Rhino* and exposed cracks in the global system. Perhaps for the first time since the Cuban Missile crisis of 1962 or at least the end of the Cold War in 1989, there is a tangible threat of great power competition. This threat is more than enough to put an already strained global economy in a tailspin.
Since our focus is on the business world, I’ll leave out the geopolitical considerations. The potential impacts of actions in the Far East and Central Europe, to say nothing of the continued inability of western democracies to function at more than survival levels, is will beyond the scope of this prognostication.
A first prediction is that we will see more “protective” stockpiling of raw materials by businesses. Many companies will move for a “Just in Time” supply chain to a “maintain my buffer” supply chain. This will be done to mitigate against supply chain disruptions and to give companies better control over production rates. A side impact is that the current supply chain bottlenecks will shift from finished products to intermediates. Such a move will also lead to increased automation in warehousing tasks and potentially increase employment in shipping and transport.
site. This in turn will reduce the need to keep semi-finished and even finished goods in stock. Using 3D printing will contribute to less supply chain disruption and shift higher value finish work closer to the end users. This will also impact the overall supply chain distribution of products, with more of the lower value, high bulk material filling most of the chain and high value production moving closer to the end customer.
The third is related to the first two, and that is growing localization of production and consumption. COVID has illustrated the impact of global disruptions on energy and transportation costs. To counter that, where possible production, will move closer to the customer. One of the big implications of this change is in the overall distribution process. As production moves closer to consumption, there will be less need for large, centralized distribution centers, and those that remain will be more focused on intermediate products. Finished goods production and distribution will move to more localized centers aligned with final production and customers.
Food preferences have also shifted due to COVID. While it is likely that there will always be a place for the mega-markets (Costco for example) and large national brands, there has been a marked shift towards locally produced food products. This will mostly impact the larger national brands who may chose to buy up smaller local brands, keeping them local and more responsive to the local demand, including shifting sourcing to local rather than national partners.
One negative of the changes above is that prices and costs will go up due to lower efficiencies throughout the supply chain. Some of this may be offset by a diffusion of higher skilled labor, which will move closer to the customer.
* A grey Rhino is a highly probability/ high impact event that is ignored until it is too late to stop. This is in contrast with a Black Swan event, which is a low probability/ high impact event. It makes sense to prepare for a grey Rhino since it is highly likely, while it is nearly impossible to prepare for a Black Swan as it is not likely to happen at all.
Thank you for reading,
Erik Glitman, Founder and CEO