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We are living through some extraordinary times but none of it should be too shocking if you didn’t buy into the popular notions of the last 50 years, which were characterized by various views of optimism. Technological optimism was a big part of those years, where we were led to believe that science and its technological advancements would usher in a kind of golden age, where the typical challenges faced by our predecessors would fade into history as odd curiosities. Like most half-truths, there were some legitimate elements of that which unambiguously validate it but much of it is in full reversal.
We find ourselves having put polio and smallpox to flight but global pandemics, where millions perish despite highly advanced medical science, communications abilities, and the availability of various healing technologies like respirators are still with us. We fought the “war to end all wars” decades ago yet tanks still roll into modern towns and deliberately shell civilian populations, leave mass graves and level perfectly working infrastructure all around the world in dozens of nations, the latest of which Pope Francis is said to have labeled “infantile”.
So, we must ask the serious question, how can we protect our supply chains from pandemics, natural disasters, and the current and future “infantiles” of every kind? This is no easy task since our supply chains are global, coordinated by lots of separate companies and by various technologies (both on earth and orbiting the earth). These chains must be visible to find buyers and sellers as well as distribution suppliers (like truckers or rail movers). Some pathways of global supply chains must pass through areas vulnerable to disruption such as the Suez canal, Cape of Good Hope, Panama Canal and others. Many goods move by intermodal transportation where a container ship offloads cargo which is placed on a waiting lory or railcar. Disruption to one of those elements, such as the recent closure of the port at Shanghai results in delays, potential spoilage of goods, broken contracts and substantial increases in costs.
Other challenges are more nefarious. Whether they be coastal pirates, terrorists, hacker groups, hedge fund operators shorting a brand to manipulate prices, or social media influencers etc., it doesn’t really matter as they have a couple of things in common. They are positioned all around the globe and have easy access to various tools to create substantial challenges through every kind of creative sabotage, false flag, computer virus and misinformation one can imagine, usually requiring only the will to do it and for most, just keystrokes on a keyboard, though some actors have a war chest of lethal armaments. It really is that simple, and unfortunately pervasively possible. We live in an age where constraints to such behavior are lessening by the week.
The COVID-19 disease pandemic will go down as the crisis which made the next phase possible and maybe inevitable. As wage rates skyrocket, investments in labor saving technology are ramping up quickly and we are beyond merely imagining lories, autos, giant container ships, aircraft, drone delivery vehicles and rail systems operated totally without a human being on board, much of it is being launched right now. However, when humans disappear, crime, malfunction and manipulation seem to gain a foothold. So, let’s lay out some of the big changes we are likely to see over the next decade or so and then in future articles we can pick apart some of the details.
First, technology will drive all future supply chains, from production all the way through to the final consumer. That means that sooner or later, technology companies will surpass current coordinating entities and effectively manage everything within the supply chain as well as every supporting entity. There is a simple reason for this: they will know where everything is (in fact they most already do), who wants it, who has it or can produce it and how to get it there at the least cost. There are some who believe technology companies will surpass governments in power since once they manage and control supply chains, they can exert tremendous pressure to get their will.
Second, this same move to end-to-end management by technology companies will likely make things like banks completely unnecessary. Purchasing power and facilitating transactions will all be electronic and pass in secure block-chains with cryptocurrencies providing the kind of security needed to ensure global commerce. This one is not hard to believe as like many of you perhaps, I have not been inside a bank for years; have not written a check by hand in a long, long time; I rarely use any cash and get no bills or statements in the mail anymore. Everything is electronic. This form of supply chain integration can certainly solve a lot of problems, but it doesn’t come without substantial vulnerabilities.
Third, there will be a lot of surveillance as it will be necessary to make the processes work properly. Successful supply chains must be able to both assess and predict demand, know in real time where supplies, work-in-process and finished inventory is located, along with its now and future availability and quantities, and be able to move both goods and resources over geographies to supply production needs and consumer demand. Letting all of that (and so much more) be subject to the vagaries of multiple separate companies, each with their legacy software systems, and power to disrupt the process with any number or types of failures to perform, along with diseases, overreactions to diseases, local government interference, criminal activity etc. and you have an aggregated risk profile that is not sustainable. The investment in future global demand fulfillment is too large to leave all of that to current risks. We are going to be facing an extended period of inflation and wage escalation, so this is the perfect time to begin a rapid and serious reorganization of how we move things around. It has already begun.
