COVID19 changes everything
The disruption unleashed by the new coronavirus is at an unprecedented scale. As the coronavirus continues its march around the world, governments have turned to proven public health measures, such as social distancing, to physically disrupt the contagion. This has resulted in severing the flow of goods and people,stalled economies, and an impending global recession. The disruption to supply chains is likely to continue for many months, and it will be intensified by fear, shortage gaming, and the difficulty of restarting logistics and raw-materials suppliers.
No accurate forecasts for recovery
Experts are unable to accurately forecast the recovery, because the virus’ properties are not fully understood, the true rates of infection and immunity are uncertain, policy responses from governments and countries are delayed and incorrect, and how firms and households will react to all this is still evolving and is largely unknown.
The after effect are still unfolding...
• A third of the global population in some form of lock down.
• Mass unemployment, mass bankruptcies, and bail-outs are expected
• Geopolitics will lead to closed borders and new laws fueled by denial, xenophobia, & populist measures
There is hope...
There is some consensus that recovery will take until the beginning of Q1-2021; under optimistic conditions, it may be as early as Q3-2020.
Recovery depends on how COVID19 damages the world economy structurally in two ways:
1. Reduce financial liquidity in capital markets, which countries are addressing through bailouts, moratorium on loan repayments, etc.
2. Disrupt social capital formation, labor participation and productivity growth due to measures of social lock down and distancing – this is uncharted territory for the entire world
Social shift to low-touch economy
Experts are calling the post-crisis economy the Low Touch Economy. Regulations will continue on limited gatherings, travel restrictions, hygiene requirements, etc. Both people and organizations will discover the benefits of a new way of living and working – remote working, home delivery and service, e-Commerce, e-Health, etc. These new habits and behaviors will stick post-crisis.
Factors driving change in FMCG
Regardless of whether you are online, brick-and-mortar, or a combination of both models, COVID19 has only increased the volatility, uncertainty, complexity, and ambiguity for your business. Companies now need to optimize for agility rather than costs, and maximize the revenue potential from their inventory while minimizing wastages.
Companies should scrutinize granular, high-frequency data in their quest for agility, because aggregates, averages, and periodic statistical data will not reveal the faint signals of emerging change, or spot emerging trends. Managers should consider the extraordinary costs they are facing and identify actions now that will improve their agility and their resilience to future changes and shocks.
We believe that Agility will emerge as the most important supply chain capability that FMCG companies will need, to weather the COVID crisis and thrive in the post-COVID economy.
Four Algoshelf capabilities to help you build agility
Algoshelf understands and thrives under uncertainty, it prioritizes speed and automation. Our cloud solution is engineered to dynamically scale to large workloads and finish huge AI computations in just a few minutes. Here are four capabilities that illustrate how Algoshelf can help your business be more agile.
The time to innovate is now
According to research from Booz and Company, the 100 most innovative companies spend even more on innovation during a recession, while others were stalling. In the long run,these investments pay off majorly in profitability & growth. COVID-19 is going to be an unexpected catalyst for technology adoption, both for consumers and companies. Previously perceived technology obstacles and barriers to adoption will fall, as technology provides the only way to provide accessible and/or viable alternatives to consumers.
FMCG companies who want to survive and thrive in this post-crisis world must think about their ultimate goal, and then build a strategy to support it. Companies are looking to their executive team to create a sustainable advantage to survive the covid-19 crisis. What is needed today is bold action.