For some companies, global shocks have historically brought moments of truth. They can rapidly alter the business landscape and the terms of competition, often in ways that aren’t immediately apparent.
But companies that make bold moves during challenging times can turn adversity into advantage. Take the rise of e-commerce giants such as Alibaba and JD.com after the SARS outbreak of 2003; while companies such as American Express and Starbucks pivoted during the global financial crisis of 2008−2009 to digital operating models that enabled them to thrive and dramatically increase shareholder value.
In this sense, COVID-19 is likely to be no different from other crises. It will greatly accelerate several major trends that were already well underway before the outbreak and that will continue as companies shift their focus to recovery.
For instance, rather than heavily concentrating sourcing and production in a few low-cost locations, companies will build more redundancy into their value chains; consumers will purchase more and more goods and services online; increasing numbers of people will work remotely.
It is almost a no-brainer that the application of AI will be a key catalyst in helping companies adapt to these trends.
- Advanced robots that can recognize objects and handle tasks that previously required humans will promote the operation of factories and other facilities 24/7, in more locations and with little added cost.
- AI-enabled platforms will help companies better simulate live work environments and create on-demand labour forces.
- Through machine learning and advanced data analytics, AI will help companies detect new consumption patterns and deliver “hyperpersonalized” products to online customers.
- The ability to analyse immense volumes of data to learn underlying patterns, enabling computer systems to make complex decisions, predict human behaviour, and recognize images and human speech, among many other things.
- AI-enabled systems also continuously learn and adapt.
The most successful use cases will be those that seamlessly combine AI with human judgment and experience. Though success will not be easy.
Some companies have already launched AI use cases that will be helpful in the current crisis. The challenge will be to scale them up. Those that do will be better able to navigate uncertain supply and demand, adjust to disruptions in operations and supply chains, allocate their workforces, and adapt to sharp changes in consumer confidence and priorities.
Value Chain Redundancy
Typical in demonstrating how the global business landscape is changing is the area of ‘value chain redundancy’.
Not long ago, optimizing cost and time was the overarching objective in the design of global manufacturing footprints, supply chains, and logistical support. Often, that meant concentrating production in high-volume factories in one or two low-cost nations.
Inventory and excess capacity were equated with waste. But recently, rising economic nationalism and trade barriers began forcing companies to rethink their supply chain strategies and rediscover the merits of redundancy.
The COVID-19 crisis, which has disrupted global supply chains, has moved redundancy higher up on companies’ agendas as a means of reducing risk and weathering the next global shock.
But redundancy and duplication entail significant cost.
AI offers the potential for companies to build resilience into manufacturing operations and supply chains, while at the same time minimizing cost and damage to margins. Further, it enables manufacturers to optimize cost in each factory through predictive maintenance and better planning.
It also allows them to operate a larger number of small, efficient facilities nearer to customers - rather than a few massive factories in low-wage nations - by deploying advanced manufacturing technologies such as 3D printing and autonomous robots that require few workers.