One lousy new flu bug and the world’s economy loses its shit. Or so my friend said to me.
Now Covid-19 is more than a new flu, the point on the world economy is accurate.
Let’s understand this right. The world shuts done for a month or so and suddenly nothing works. Most critically, and this will be seen over the coming months, the logistics systems will fail. Quarantine laws stop backpackers from planting one of four crops per year, meaning fewer tomatoes in September. Or $10 per tomato.
Everything is connected. Construction stops because plumbing parts cannot be sourced from overseas, meaning walls and floors and thus the whole show must stop. Contractors not paid. Workers laid off. Their suppliers suffer.
In 50 years we have created the most connected world. Everything you have comes from everywhere and anywhere. The lowest cost supplier wins. And all of this because no deal or supply contract has all the risk factors included in it. With the most ignored now being, what happens if we cannot supply? What if the centralised supply system fails?
The next evolution of the world economy is decentralised supply. Where you will have multiple suppliers from multiple locations. Where you will pay a premium for local supply, just in case, another virus hits. Because then the local supplier will only supply to those that were loyal.
Technology allows for decentralisation. It doesn’t mean small local companies win. It means that you buy from a Chinese supplier who proves that they have factories in China, Vietnam, Brazil and Poland. Decentralised manufacturing. It’s bad for China yet great for the world.
The new normal is fascinating. Costs may increase but not over the long term. And now is the time to start thinking long term. Start thinking risk. Start looking for new solutions to create sustainability.
That’s the word…sustainability.