May Santa Claus Solve the Supply Chain Problem!

Covid-19 has ignited one very destructive economic issue now - disruption to global supply chains. In 2020, the virus prompted shutdowns of industries around the world, resulting lower consumer demands and reduced industrial activities.

Now that the lockdowns are lifted, demand goes up and supply chains are not bouncing back. There is chaos for manufacturers and distributors due to lack of raw materials, worker shortages, border controls, higher input costs, employees’ safety, cyber security, etc. Many countries forecast that the situation will only get worse before they get better.

Every company in the globe is experiencing the impacts of the global supply chain disruptions, some more than the others. Information Technology industry is no exception.

Over the past couple of decades, the boundary between business and technology has blurred. Technology has become the business in most cases. Whenever challenges emerge, technology has been the enabler for business innovation. In the spirit of finding new revenue streams and address customer expectations, the business and technology should solve the supply chain problems that the post-covid world is experiencing now.

When Supply and Demand play catchup, what happens to the IT industry?

On the one hand, demand for IT services has exploded exponentially in the form of (a) establishing contingency plans (b) faster adoption of NextGen technologies, especially cloud, data and AI (c) Remote work (d) increased digital content consumption (e) digital health solutions (f) Cyber security, etc. Economy across the globe is slowly returning to pre-pandemic levels. IT spending because of consumer spending is rising. Gartner predicts that $4.5T will be spent on technology worldwide in 2022 on transformation initiatives to survive a post-covid world. There is no doubt in anybody’s mind on the perceived demand in the next year.

On the other hand, supply struggles big time.?

1. Remote work innovation that solves the demands of the post-covid world is still at its experimentation. There is no certainty or conclusion how the service models would address the productivity demands in the new normal.
2. A significant number of people who were laid off early in the pandemic because of closures haven’t gone back to work, even as more businesses reopen. Many of them are reassessing the risks of the virus and the household family issues. Though US has added 540,000 jobs per month since January 2021, there are still 9.6M jobs not filled up as of Aug 2021.
3. Demand for resources, coupling with Great Resignation results in higher unit rates previewing a cost-optimization cycle in the immediate horizon. ?
4. Businesses struggle to hire talent quickly across the globe. When supply of workforce is unpredictable, disruption in services, missed timelines, penalties etc. will be common, impacting the brand.
5. All these challenges will spur innovation and competition. Emergence of low-cost and/or creative alternatives will force a brand-new cycle in the global delivery/sourcing models.

Well. As a business leader I want to be a part of the solution here. There is a sense of optimism because this is not the first time, the industry is facing a struggle like this. Every time there was a challenge, the industry has started a new S-Curve with more promises to all of us. As JP Morgan’s Jamie Dimon says “Supply chain hiccups will soon ease, points to extraordinary consumer demands”.

Like we are all worried, Santa Claus must be worried as well. There is no better expert than Santa when it comes to supply chain. He would be thinking now how to solve the current supply chain problem, especially that Christmas is close by. So, leave it to him. ?