To understand more about what happens (and can happen) with the Logistics and Supply Chain area, let’s share some insights from our Future Design and Anticipatory Innovation team.
Next challenge: Logistics and Supply Chain
The biggest question in the logistics and supply chain areas is that it is much cheaper for the market to return to the model we were before: 30% of the world produced everything in China to lower operation costs.
This model that we know is highly dependent on globalization. Any reason that makes globalization stop – like a pandemic – for the world too.
This shutdown goes beyond the issue of the local economy. Today, there is an almost complete interruption in the production of goods. At least in the ways that we are used to seeing: on a large scale and in China.
What’s in the uncertainty?
We share the polarities that we identified in the uncertainty of how logistics and supply chain are in this pandemic and the post-pandemic.
- How to ensure hygiene, health, and non-contamination of goods in terms of shipping logistics?
- Going back to the globalized Chinese model – the cheapest so far – that has led us to a series of problems – excessive pollution, supersaturated cities, inefficiency in the disposal of garbage, exploitation of resources – is it a sustainable future? It is worth mentioning that, even before COVID-19, it was common to find people wearing masks on Chinese streets; some cities were already unbreathable.
- Society will be afraid of this centralized production model in China and look for ways to bring industries closer to home or search for new local suppliers of supplies and resources.
The cost of bringing production home will be high, as the infrastructure is not ready, and society is concerned about going through this shutdown again. However, even though it is expensive, it will enable the creation of new jobs, helping to heat up the economy in the post-pandemic.
- To complement the choice of the future you want to build. We will bring some very relevant trends when the task is to rethink and reframe the most sustainable way for logistics and supply chain operations.
Points of attention: what is important to write down
Before I start talking about this more conscious economy, let’s make something very clear: the circular economy is not against capitalism or advocates against profit. On the contrary, there are many invisible business opportunities.
This structure’s driving force is the ability to positively impact society and the environment while businesses develop and profit. In short, the circular economy will look at the way we produce, consume, and dispose or recycle. But it’s not just that. What we have here is a mindset, a new Industrial Revolution.
On average, the physical goods consumed have only 5% of the raw material used to produce them. Yes, 20 times more input is needed for products to be ready on shelves. It is quite obvious what we will talk about here, but it is necessary: resources are finite.
To transport the world’s production, air, sea, and land transport systems are overloaded, generating more pollutants.
Not to mention the struggle for a society free from plastic slavery. Where more than half of the packaging of all products in the world is made of this material, it is estimated that by 2050, there will be more plastic than fish in the oceans.
New business models
The new economy is already there! Understanding this change is a priority. Some spoilers of what should be rethought:
- Technology is the epicenter. It can promote the disruptions necessary for businesses to take the lead in their market and even create new markets to lead.
- We are moving towards the end of feudal competitions. Much of this, thanks to GAFA (Google, Amazon, Facebook, and Apple). These four giants dictate the market rules when it comes to cutting edge technology and pamper their users with enchanting experiences.
There is no escaping the migration to this new logic:
- More ecosystem and less company
- More abundance and less scarcity
- More horizontal and less vertical
Culture gains a lot of prominence too. It is what makes the transformation happen. After all, it carries how the company does it when no one is in the room looking. Yes, this is DNA; a culture that is only on paper does not change anything.
It is worth thinking about a transformation rule that takes us from classical to post-digital economics.
- Classical Economics: pyramidal model. Wide high dome. More centralized management – top-down. More linear and industrial. Many are already digitized, which does not mean that they run on the digital mindset.
- Digital Economy: small, lean, light, and innovative. As they are smaller, they have more decentralized leaders, which provides a lot of efficiencies. Automation and artificial intelligence underpin management. The era of startups has changed the face of companies a lot, and this type of business model is nothing new.
- Post-digital economy: this is the end of the journey for transforming business models, for now. Here, we have virtual companies. Yes, they exist if there are people working; but they don’t exist if you don’t. Its life cycle is also different from what we know: the high dome invests for a while and then leaves the legacy to society. There is no management; everything is done from emerging technologies, such as blockchain.
The Fourth Industrial Revolution is the phenomenon of adopting innovative tools, resources, and technological services to optimize the most varied industrial aspects.
This includes everything from design to automation of manufacturing processes, through the supply chain, among other aspects of operational and administrative daily life.
Experts point to four major forces driving the movement:
- Surprising growth in data volume (Big Data)
- The emergence of tools, resources, and methods for data analysis
- The innovative possibilities of human-machine interaction
- Improvements in the transfer of digital instructions to the physical world
We need to realize that it’s not just about implementing tools to automate business processes. It is something much more profound and superior to simple automation.
The era of the user experience gains even more relevance in times of transition. The consumer remains more aware than ever.
The search for links that are increasingly aligned with more sensitive values set precedents for questions, such as “what do companies do that is relevant to the world?”.
The need arises to overcome the organization’s barriers and commit to a mission that positively impacts the world.
For a while, consumers have demanded more from brands in exchange for their hearts. Products and services alone are not enough to develop a profitable and sustainable business for a long time.
Increasingly, customers tend to reject generic, mass-market products, are aware of the negative impact that exacerbated consumption has on the world, and are already looking to consume from small producers in their surroundings.
The reason for this has already been discussed here. It lives in exactly four letters: GAFA. The model is nothing more than the effect on society by the group Google, Amazon, Facebook, and Apple. The four tech giants have accustomed their users to have anything in the palm of their hand: with just one click on a smartphone screen.
Solutions for the future of Logistics and Supply Chain
The moment calls for a new look at the future – preferably optimistically. Thinking about how we can build much more desirable and aligned futures with more sensitive values that become increasingly part of our lives.
If you want to co-create futures for your logistics and supply chain area, we have listed some steps to help you.
Whatever your choice, you need to deep-dive and understand the change that your company will have to make to operate in this new model. Identify which technologies can enhance your processes and strengthen or even create the culture of your business.
Technology is the epicenter. It can promote the disruptions necessary for businesses to take the lead in their market and even create new markets to lead.
The supplier ecosystem is vital to the production of the core business. Today, most of them are in China. But bringing all of your production, or part of it, close to you will require a new portfolio of suppliers.
Open Innovation is a method of external collaboration that can help a lot with this task.
- It allows industries and companies to promote open ideas, research, and processes to develop innovative solutions
- Supports access to markets and audiences where partners have more adherence, and the company has limited participation
- Enables new commercial opportunities through R&D activities not explored internally due to lack of know-how until they reduce the time and cost of products and services
Data-driven factories, this is Industry 4.0.
The path is:
- Invest in technology to increase productivity
- Reduce equipment maintenance costs and energy consumption
You must be wondering what justifies this whole investment? The increase in labor efficiency.
The Internet of Things becomes essential to guarantee the ability of cyber-physical systems (parts support, assembly stations, and products), people, and intelligent factories to communicate with each other.
With all the data collected, it is possible to improve processes and decision-making at crucial moments, such as the one we are experiencing now.
Data Governance is the exercise of authority and control (planning, monitoring, and enforcement) on data assets management.
The lack of adequate data governance within a company guarantees one thing: insufficient data, which creates a database full of mistaken insights. This data manifests itself in inconsistent definitions, duplicates, missing fields, etc.
When will the new one arrive?
Zygmunt Bauman calls this transit that we live in times of interregnum. We are between what is no longer and what is not yet. The old model no longer serves us, and the new one is not, however, ready.
But don’t worry, we believe that many things will change for the better within this chaos and collapse scenario. This requires discipline and resilience to sustain these transitions until we are fully adapted.
We know that building this new normal is a huge challenge. It may not be easy, but it is possible. To that end, we at MJV have done a great exercise in thinking about learning and making these transformations together. We are working on a very extensive project called Post-Normal.
In this way, we are bringing all the implications of what Covid-19 means in several areas to try to understand the new forms of organization that may arise from its dissemination.
Let’s build the new normal together! Before they build it for us.