May 07 | 2020
Ramifications of Wholesale Reinvention
By Margaret Vaughan
BREAKBULK ISSUE 3 / 2020 – THOUGHT LEADER – ‘May you live in interesting times.”
This supposedly ancient Chinese saying was actually first used by a Briton in the early 20th Century, and although it may sound like a benevolent wish, it is actually considered a curse.
When have we not lived in interesting times? If one looks back over the past 100 years in the U.S. alone we have suffered through: World War I, the Great Depression, Dust Bowl, World War II, Cold War, Vietnam War, Asian flu, Watergate, oil embargo of 1970s, Three Mile Island, 1980s Oil Crash, AIDS, 1987 Black Monday, Iraq War, domestic terrorism, U.S. Embassy bombings, 1999 dot-com crash, 9/11/2001, Wars in Iraq (redux) and Afghanistan, 2008 housing crash, swine flu, Star Wars Episode 8, Don Lemon and the decline of objective journalism, mass shootings, losing both David Bowie and Prince in 2016, and now the combination of Covid-19, deflated oil prices, and another Wall Street crash.
Generally after each crisis, an analysis is made of the causative events and then legislative and/or behavioral corrections are instituted to eliminate similar future incidents, though perhaps not always for the better – there’s a tendency to throw the baby out with the bathwater. As it was said in the movie Top Gun: “A good pilot is compelled to always evaluate what has happened, so he can apply what he has learned.”
So, what have we learned from all this and where will it lead us? I have no crystal ball, but there are a few things that seem fairly clear. A recession is inevitable, but how strong and for how long remains to be seen? Our global supply chain is vulnerable. Its vulnerability will lead to an effort to bring it back into the U.S. especially in pharmaceuticals, medical supplies, and other key components. Strong support, at least initially, for bringing our supplies (and jobs) closer to home may cause an upswing in U.S. manufacturing.
But the U.S. appetite for cheaper foreign-made goods, which has been the bedrock of our consumer economy, will only increase as the U.S. government raises taxes to pay for the multitrillion-dollar Covid-19 relief bill. Most of the major oil companies have already announced suspensions of capital expenditure projects for the foreseeable future. Mergers, takeovers and bankruptcies will increase, and the job market will be much like what it was after the 2008 housing crash. The unemployment rate will surge and possibly for a longer period than people would want. And crime will escalate as it always does during times of high unemployment.
On the other hand, gas prices will be lower, and people will certainly be cleaner and possibly healthier. This crisis may lead to a diversification in existing manufacturing industries, as companies like Ford and GM churn out ventilators and other medical devices. The forced experiment in telecommuting may change the way we do business in the future. Certainly there will be innovations across all industries. We’ll just have to wait and see – “may you live in interesting times.”
Margaret J. Vaughan has more than 30 years’ experience in all facets of supply chain management.