Here is a 7-step strategy for diversifying yourself and your business to weather the storm, and emerge with new potential revenue streams that can work now, and continue in the future.
That strategy will include the following, and more:
- Redeploying: Repurposing your human capital and existing resources to meet current and emerging needs
- Investments 2020 - 2022: New investments in manufacturing and capacity building in response to COVID-19
- Selective import substitution: global supply chain resilience with local results
- Economies of scale revisited, this time with smart technology
- Comparative advantage revisited: this time with smart technology and local markets
- 7-Step Plan: Identifying new revenue sources and diversification opportunities
- Aligning your assets (human and physical capital) with emerging needs
Background and Contexts
In the span of a mere few months, the much of the world went from a state of exuberant self-actualization to the most primal level of survival (health, food, shelter) insecurity. Import-dependent island economies were perhaps the first to run out of food, water, medicine, and other necessities. Even even the largest economies faced and will continue to face tremendous supply chain ruptures that are of such a scale that they could usher in severe shortages of basic necessities of food, medicine, medical equipment, transportation and warehousing that could result in widespread hunger, disease, and structural unemployment.
Link to the PowerPoint presentation (pdf format):
http://www.zenzebra.net/podcast/repurposing-capacity.pdf
Link to a video recording / podcast of the PPT presentation. :)
Virtually every country in the world has been plunged into the same situation, resulting in a common outcry, “Never again will we be reliant on sole source supplies!” and the desire to establish multiple sources of food, medicine, and essential products, as well as re-engineer production so that shuttered businesses can pivot and provide needed services. Countries and communities are recognizing that they must have blended and balanced economies in order to weather pandemics, massive natural disasters, and conflicts.
From 2020 through 2022, the old supply chains will move from disarray to reconfiguration due to factory closures, raw materials shortages, insufficient quantities of the correct type and size of transportation and storage, labor shortages, protectionist walls of tariffs that seek to block exports of food, medicine, and strategic goods, critical shortages of spare parts, and asymmetrical collapses of demand.
So, while some industries will essentially cease operations, while others will be unable to achieve needed capacity to satisfy demand. Industries that will cease or at least greatly reduce operations will include oil and gas drilling and exploration, refining, air travel, hospitality, tourism, large-scale manufacturing.
Investment: 2020-2022
The vulnerabilities will be addressed by investing in local manufacturing to bolster local or regional food, medicine, transportation needs in order to avoid supply chain issues. Instead of a heavy reliance on Just-In-Time, there will be a new emphasis in the following:
- Small manufacturing, food processing, and storage
- Water processing and storage
- Flexible manufacturing (3D printing, etc.)
- Pharmaceuticals precursors
- Intermediary warehouses (can be repurposed Big Box stores and mall spaces)
- Medical equipment and supplies
- Equipment for work / live / study at home (computers, video cameras, productivity apps, arts and crafts supplies, dumbells & kettle bells & yoga mats)
- Equipment for home and small acreage farming: equipment, seeds, hoop houses, green houses, etc.
Pandemic-devastated industries may survive by generating cash flow by pivoting into other operations. Industries that will cease or at least greatly reduce operations will include oil and gas drilling and exploration, refining, air travel, hospitality, tourism, large-scale manufacturing.
- Oil and gas exploration, production, transportation: Reuse equipment and capabilities; switch to generating electricity for on-site manufacturing / server farms
- Pipe and valves? Now home gym equipment and gardening tools?
- Refining: Switch to the grades where there are still needs in long-haul transportation and generators
- Manufactured homes / structures for supervision? Pivot to greenhouses and gardening storage buildings
- Tourism: Transform for safety?
- Air Travel: Convert to cargo?
- Hospitality: Convert for flexible labor needs? Traveling workers?
In the past, import substitution was negatively viewed. Now selective import substitution offers a number of benefits:
• Safety net for the supply chain
• Strategic reserve for critical food, energy, medical, equipment supplies
As a form of protectionism, import substitution was perceived as inefficient and ultimately too expensive for the consumers, and it also encouraged bloated, inefficient, and outdated local manufacturing. However, during and after a destructive and disruptive pandemic when the sole sources are no longer available, having at least 3 potential suppliers is vital. Having multiple sources of supply helps weather ongoing flare-ups of the pandemic, regional lockdowns, shortages of container ships or port facilities, lack of storage. Seeing the economic devastation caused by the pandemic, it becomes clear that without exception, all nations of the world are vulnerable.
Using Technology to Improve Economies of Scale
When some of the massive poultry and pork processing plants in the U.S. were forced to shut down due to a COVID-19 stricken workforce, a large percentage of the country’s meat / protein supply was placed in jeopardy. Compounding the problem was the fact that pork farmers had no place to send their mature animals and faced the possibility of having to slaughter them. Not only was this absolutely horrifying from a humane perspective, the fact that doing so would trigger shortages for late 2020 and early 2021 is a real possibility. What is the solution? Using distributed applications to transport the pigs, plus process them in alternative locations the key.
Economics of scale apply to marketing / distribution as well. For example, if you've recently pivoted and how market storage sheds instead of wellsite trailers, you can partner with larger distributor to get the word out. If you are now selling kettlebells and dumbbells for home gyms, you can market through Amazon as well as directly. You'll also need to work with someone for a social media blitz -- keep in mind that in today's global pandemic, social media presence is a "must."
In this case, we're looking at pork processing. However, it is just one example that could be modified and used for other industries:
OPERATION PORKLIFT
An intervention to help the pork processing plants that are having to shut down due to lack of a healthy labor force and safe conditions.
• Identify the beleaguered pork processing facilities
• Needs assessment: what do they need? Are substitute slaughterhouses needed?
• Alternative processing (will let people know when they have space for the pork)
• On-demand transportation (Pork Lift)
• Warehousing (repurposed restaurants?)
• Alternative retail? (Insta Cart for Operation Pork Lift?)
Rethinking Comparative Advantage
We import from countries because they have comparative advantage and can produce goods so that the cost to import them, even with transportation and storage, costs less than to import the product.
For example, pineapples can be grown in Hawaii and shipped to stores in the continental U.S. for much less than it would cost to grow pineapples in a greenhouse. But, what happens if the ports are closed and there are no container ships to transport the pineapple? Then, comparative advantage falls apart.
For some foods and essential products that are in high demand, it is worthwhile to produce them at home, even though it is not always the lowest possible price. It is at that time, too, that countries that have gamed the system by manipulating their currencies or by subsidizing their exporting countries will begin to show their vulnerabilities.
Why have they played such an expensive game? Usually the short-run response is that they want to keep their labor force fully employed (and out of mischief), and the long-run end-game is to destroy the competition to result in being an oligopoly and being the sole-source vendor for which there is no substitute.
But, in a pandemic, the vulnerability makes countries very unwilling to rely on a sole source, particularly when it is a foreign country that could easily become extortionate. Perhaps this would not be the case for pineapples, but it certainly could be for important precursors to important / vital medicines such as antibiotics.
Countries that do not have balanced economies and rely on exports (primary products, manufactured goods), imports for intermediary goods (re-export), services (tourism, financial services, hospitality) are particularly negatively affected, and their unemployment numbers are staggeringly high. Without a blended and balanced economy, the unemployment can quickly become structural.
Operation Rescue: Repurpose Existing Capacity, Rescue Economies from Sole Source and Sole Client Dependency
Step 1: Needs Assessment: Identify “Pain Points”
What are the most urgent needs that have the highest level of negative consequences?
- Food Supply
- Cleaning supplies
- Medical supplies / oxygen equipment, etc.
- Labor supply // workers at the right skill level
- Clothing / shoes (especially for growing children)
- Car parts / truck parts / spare parts
- Farm and industrial equipment, etc – spare parts
- Construction equipment / building materials
- Home work and study tools (computers, cameras, arts and crafts kits)
- Home and small acreage gardening (tools, storage buildings, greenhouses, irrigation systems)
- Industrial / commercial-scale disinfectants and sprays for grocery stores, essential services, and later for night-time disinfecting for all shared spaces
- Home gyms (exercise equipment, dumbbells, kettle bells, yoga mats, balance balls)
a) inventory of what you have on hand
b) inventory of what you can get
c) inventory of what we would like to have
d) storage capacity (for storing other things?)
e) informal new warehouses? What can we use? Goodwill, empty Family Dollar, empty restaurants, mall stores, Tulsa Promenade, OKC Crossroads
Step 3: Where are the most urgent needs, and what are the steps to get there?
Identify the need and propose local alternatives
What’s keeping it from happening?
What are people lacking?
Substitutes
Step 4: Proposing solutions
Short-term
Identify and place in warehouses / identify substitutes and warehouse them / distribution. This is the stage for proposing solutions in general terms, to start envisioning where and how the solutions can be implemented.
Challenge conventional wisdom!
Challenge the “eternal verities” of economics, finance, human relations. Here are main categories:
- Labor Solutions
- Transportation Solutions
- Food supply solutions
- Medical / pharmaceutical solutions
- Home productivity solutions (work, study, gardening)
- Home and small acreage gardening (home and urban gardens / coops)
- Small scale food preservation (canning, drying, freezing solutions)
- Storage solutions (freezers, refrigerators, small sheds for supplies)
- Selective import substitution
- 2 or 3 contingency sources (adequate substitutes) for each product
- Blended economy with imports, exports, manufacturing, and service
- Improving economics of scale so that small factories are profitable
- Rethinking comparative advantage: Small, local, flexible – now economic
- Small-scale manufacturing that is flexible and near markets
- Using machine learning / analytics to work with economies of scale
- Flexible factories with 3D printing, adaptable manufacturing
- Rethinking comparative advantage: Small, local, flexible to meet local needs quickly
- Simple, easy-to-modify, accommodates multiple raw materials and substitutes
• Which imports wreak the most havoc when they are unavailable?
• Where can we use technology to make small scale operations more flexible and economic
• Where can we “export” our production ??
• Repurposing uneconomic / dormant capacity: if you have an oil industry processing / transportation, etc. – can you use these for other industries? The “survival industries”?
• Agility-Maker: Proactively develop contracts and agreements and MOUs for the “new” business arrangements; help be a facilitator and also negotiator … insurance, permits … what kind of package will this require?
Selective import Substitution in the Informal Economy: The Mexican Drug Cartel Shakes its Dependence on Imported Precursors
This is an intriguing example of how agile criminal networks can be. It is useful to study because if amoral (I would argue "immoral") organizations can innovate, so can positive, moral ones!
- Pharmaceutical precursors (now manufactured in India and China and exports are blocked) – setting up new pharmaceutical labs.
- According to Ben Westhoff, author of Fentanyl, Inc. (2019), most precursors for cartel-traded methamphetamine and fentanyl comes from a now-shuttered state-supported chemical plant in Wuhan, China.
o Question: if the informal economy can be so agile, why can’t the legitimate formal economy follow suit, but do so for good, and not evil ???
• Recycling / reusing containers: While blow-molding low density polyethylene facilities are expanded, and 3D printing centers expand, in the short run it is a good
Step 6: Re-opening Recently Closed Larger-scale Manufacturing:
Which ones are most necessary, and where are their components coming from? Which plants can be reactivated? Are there any “old school” shuttered plants that can be opened back up—even though they may be circa 2012 or later? 2019?
Let’s look at every plant shut down in 2019 and see which ones we can open back up quickly. Granted, some will be obsolete, and the products may not be competitive in the world market, but if there is a local need, it is possible that the initial investment could be recovered in 18 or 24 months.
This is particularly true if supply chains continue to broken and there is worldwide protection of strategic or key products required for the survival of the people of a country.
• Manufacturing: tires, parts, HVAC, water processing, refrigeration units, gardening supplies, home fitness, etc.
• Food processing: packaging, desiccators, drying, etc.
• Hospitals, motels, etc.: Multi-purpose for telemedicine centers, etc.
• Pharmaceuticals: precursors for key medicines; delivery systems
* Converting small buildings and manufacturing into storage sheds, greenhouses, home and small-acreage gardening supplies, home-based gyms
Step 7: Temp-Army for Tyson’s (and other “make or break with labor” industries)
With high unemployment, but still undetermined labor mobility (is housing available for temporary workers?), there is no need for crops to go unharvested, meat packing plants to be empty, or for key industries to shut down due to lack of healthy workers.
It must be pointed out as well that many unions and other groups use the pandemic as an opportunity to pressure management into capitulating and agreeing to increased pay, benefits, and work conditions.
• Work Alert! app or repository for listing urgent, short-term labor needs
• Optimize labor mobility, and build redundancy in our system
• Reward the temp agencies for filling the vacancies
• Bonuses for free agents
• Resolve labor disputes and unreasonableness on both sides
• Evaluate the workplace and modify it to make it safe
• Give the workers the equipment they need to be safe; and provide training (for example, installing a sneeze guard? Be sure to wipe it down with bleach at least 3 times a day!)
* Obtain industrial-scale disinfectants
General Suggestions for Co-Existing with COVID-19:
Dealing with painful messages – maintain a solution-centered approach
Communication skills – conflict resolution, accepting messages, listening, spacing out the information intake (step away & think about what you want to say)
David Burns – the “Feeling Good” book and the “Feeling Good Handbook” …
Evaluations and “look back” studies – learn from our challenges
General Needs / products
Mask Dispensers for places of business
Electrostatic cleaning for quick, effective disinfecting
Don’t have a mask? Buy one here for one little dollar bill! (or credit card or Apple Pay or Venmo or CashApp)
Selective use of cobots for the most high-risk part
Food Supply Chain:
Crops: Planting & harvesting
Food processing:
Transportation: Getting the pigs to the processing plant? Getting milk to the cheese factory?
• Milk-Moove
• PorkLift
• Food-Move (match the specialized transport with the need & look at what can be adapted from other industries) …