Reshaping Supply Chains for a Post-Pandemic World
Hello and welcome to today's webinar, reshaping, supply, chains, for a post-pandemic. World, i'm paul michaelman, editor-in-chief. Of mit sloan management review and i'll be your moderator, today. Our speaker today is yossi sheffie. Yossi, is the alicia, gray the second professor, of engineering, systems at mit. Director, of the mit, center for transportation. And logistics. And the author of the new, abnormal. Yossi, welcome, and over to you. Hi everybody. Uh this is a book that was written, at the breakneck, speed, warp speed you might say. I write you know. Every four or five years i get a new book. And. I was in about a year and a half into my to another book on logistics, innovation. In march, when. Supply chain around me was. Going through the biggest change in my lifetime. So since, end of march until, the. Beginning, of september. Kind of. Slept about four hours a night and, finished the book with the help of, two people and then the marketing, team at my center anyway. Let me quickly go through the. Book. And. Go through the. Some of the main ideas, there. So let's start with uh. You know there are many many disruptions. Many possible disruptions, and the tallest story wrote happy families are all alike every unhappy family is unhappy, in its own way, in anna karenina. And, you know every disruption, comes with its own. Reasons, and causes, and, miseries, no two are the same but, handling. The management, of disruption, of every risk and every every disruption, is actually similar. Even, pandemic. So let's see about what people did during the pandemic. That was. Similar, actually to many other disruptions. So. Good companies, said immediately, in emergency, management, center. It used to be, many companies had it in a. Physical, place you know with a lot of screen a lot of data, it all became virtual. Companies, paid a lot of attention, to communication. Good company, communicated, obsessively. To their. Employees. To their customers. To the, wall street, to them. You know, to the market in general, to the community, they're they're in, very important to communicate, even when you don't have all the information. So, frequent. Is much better than. Delayed. Uh even if you say i don't really know all the answers. Another, thing that happened in the emergency, management, center is, very clear decision making authority. This is something that company had to have to worry about. Beforehand. Because. In a case of a disruption, lots of people are trying to help lots of people are trying to get involved, and they. In fact make the situation, worse. So. We call it, swim in your own lane. Or as. Bill belichick, was the. With the um, coach of the. Local, football team that's the american football not the real football. Uh, is saying always do your job don't do other people job. Companies, have to review suppliers, to make sure who is still in business. Who has capacity, issue who has quality, issue one thing that we saw in. Many recessions. A lot of sub-par, products, are entering the market when companies very quickly try to get, new supplier, or press existing, supplier.
For More capacity, than they have. A. Companies, in many cases. Have to review, and the system that i'm talking in the book about the system to, prioritize. Which product which customer. Which product gets built which customer, gets served when you don't have enough. To fulfill, all the orders, how do you decide, which customer, you should. Uh which product you should build and which customer, you should serve. We are living in a we're going into recession, and it's always cash is key. But the one has to be very careful, in terms of. Supply, chain. Not to extend, term of payment. To supplier. Beyond the point, that will, make them. That will, you know have an existential, trade. Because. They also have a problem with a cash if they don't get paid. It can be a problem, for. Um. For the supplier. Uh. Many companies. Have. Done what we saw happening in other recession, is reduce the number of skus. This was done at the beginning of the pandemic, even before the recession. And here the example, general meal reduces the number of progressive, soup from 90 variety to 50 varieties. So the reduction, of stock opinion, with the reduction of variety, helps in two ways, first of all companies, focus on the, fast sellers those that must be on the supermarket, share. And also it reduces, the cost of manufacturing. Because it reduces, the changeovers. So you do less changeover. It's better for costs and finally. Good companies, are planning for the recovery, and planning for the recovery, by not letting, as they say any. Um. Problem, any, uh crisis, go to waste. Uh they're planning by. It's an opportunity. To get a tough look at the market you serve with the customer, you serve, at the. Division, in your company, and the employees, that you are, with, or going to do without. So. Companies are going to this uh strategic, exercise. When we talk about the shape of the recovery, we see that actually, china has gone through a v-shaped recovery, they went down, significantly, and up immediately. Um. We hope that the rest of the world is going to your recovery, going down and then up it doesn't look like this, we just saw this morning. Germany. France we're going to, significant, lockdown, spain, italy. Are, not doing well the united, states is not doing well at all, so we may be more of an l and waiting. More time for the recovery, or some. Observer. Thing is a w going up and down. I think it's actually we should look at the spatial, dimension. And it's going to be more like, a guacamole, recovery. What do i mean by this because the workable is the game that models come up and just, hit them. Uh, when they come up there'll be random flare-ups, shutdowns, and reopening, around the world. Because the pandemic. Is. Unpredictable. So at random, time random region. You'll have. Changes. In supply, and demand. Factory, closure. People going home, whatever, and then, it goes, right back up. It's an issue the supply chain managers, will have to contend with. Put in kobe 19 heat we know that it hits in terms of people it is the old people with comorbidity. With company, it also hit the weak company, that already were not in. Good situation. Over leverage. For example u.s department, stores. Were already going down from 1999. The uh. The, revenue of all us department stores was about 30 billion dollars, it was about. Eleven and a half billion dollars. In uh, in december, 2019. It's now way less than eight billion dollars. When. All these companies, have been. Going bankrupt, basically. So. How did company, adjust to the new normal. Well we saw. A lot of companies, were answering the call for example, auto companies, started making ventilators. For gm.
Flex, Another. The large contract manufacturer, also was making ventilators. Other companies, were making mass new balance, right here in boston. And, you know over a week and basically, started making mass, and this is yours truly, wearing the, no balance, mask that's what it looks like. Anyway. Etsy. The uh, that said all these. Selling, selling. Online. By. April, had 60 000 people selling masks, on their system, and 3m. Triple, its production, of the gold standard the n95. Masks. Um. And. Companies, did many other adjustments, for example, burberry. Started to use an app, when, you can talk to a salesperson. Mostly in asian markets, you can talk to a salesman, who will show you. What item to use with what, and match. Match your clothing. Service, is a loca, is a, local. Company, in nashville tennessee. Who makes. Custom. Leather jackets. And, what you see here, is not the, each one of those actually a video that shows you how to take measurements. And they show you how to take measurements. You send it to them and they send you, a custom. Leather jacket again going online. Uh sephora. Instead of people, going to the stores and having all this. Customer, service. Uh. Representative. Applying. The cosmetics. And showing women how to use it they move totally. Online. Again. Showing people how to use it, with, videos, and with chats. Ikea, developed. A. You know, augmented, reality, app, that you can look at each one of their. Furniture, items. And put it in your room and see, what this is going to look like. Again. Moving. Online. In general of course, e-commerce. Spike, went to the roof whether, i have some q2, revenue. Don't have yet on the q3. But you see walmart, for example, went up, nine percent in general. Almost, double, in terms of e-commerce, target, three periods e-commerce, and so forth and of course amazon, jd.com. Alibaba. Grew significantly. From a very large base. Uh shopify, is a company, that helps. Small read small and medium-sized, retailer, to get online. Done with its customers, and has now. Well. When i say now by. May june, and 1.3. Million customers, these are retailers, not, not consumers. Online, using their platform. We did some. Polls. During, june. Of this year. And, of course. What was accepted, expected, is home delivery, went from 13. People did it before, to about a third of the population. Interestingly. About. A third of the population. Are going to stay with their choice. They like the new. Using more e-commerce. And home, delivery. Uh how do, we also, are seeing that there's a new competitive, advantage, no area of competitive, advantage, after 9 11. You know we had to get people back to fly so we went to the airport what is now familiar, are the tsa, or the checks. Actually when you go to certain modes in certain country. I mean shopping mall when you go to uh. Sport event. You get tested, why. It allows people to start flying allow people to start feeling confident. We're gonna we're having the most, the same things now post coverage 19.. We have to create. Minimal, infection, danger for area when people congregate. Whether it's just be a retail store, an office. A university. Uh. Any place. Where people congregate. So what we're gonna do we're gonna, what people are doing, is they're doing testing of course. Temperature, testing. And quarantining. Those that are tested. Uh, positive, that's. It becomes a new competitive, advantage, companies, that do it well. Can get much better, much faster. Back to. Having people where they want. To. One of the, amazing thing that happened during. The coffee 19 pandemic. Is the adoption, of new system. Um, i, interviewed, a dozen of executives. Of all, this was uniform. Everybody, said that the, rate of adoption, and the new system accelerated. Significantly. Coping, the company were talking about, what they had planned to do in two three four years they were doing in two three four months.
Just Getting it done whether it's connectivity. Or, visibility. Of. Shipment and supply, all kind of optimization. Big data. A lot of automation. And. Everybody. A lot of people moving to the cloud, which makes it by the way a lot easier. To. Implement, new software, tools. So i'll give you one example of a company, that actually does very well during the. Independent, why because they help flexibility. Flexibility. Is the flexibility. And agility. Are important. When adjustment. To any disruption, in any change situation. So. Call it flexible, logistics, in the dynamic, world or in other words how can you compete with amazon. The problem with the warehousing. Industry. Is that it's asset intensive. With, custom design. And, meanwhile, as we say e-commerce, is surging, and changing it may or may not, you know as the pandemic. Subside, it may change, it may change a region of the world. At the meantime, it is the u.s view, amazon, is dominant. It's difficult to compete with. So how do you. Compete, against amazon, and i'll show some of the uh difficulty. And. You do it with certain platform. So, how you can, compete with amazon. This is the estimated. Amazon. Today. The e-commerce. The u.s e-commerce, market shares about 800, billion go to. Uh, 1.2, trillion. Amazon. Will grow and is growing. Uh. Why they have the widest selection. They have the lowest, price, they have the fastest delivery. And they have the faster delivery, because to deliver, fast. And consumer, want, faster delivery. You need lots of warehouse, let warehouse have to be close to the customer. So look at, amazon. Amazon, look at the number of fulfillment, center that amazon has close to 200. As opposed to walmart, best buy home depot. Now walmart is trying to compete by turning some of the stores, to uh, deliver, from store but it is not very, efficient, to do it. From store, so here and there that turning store is doing dark store, but this is just very small at this point. You can do fast delivery you can do two day delivery, with about three for freeman centers in the united states. One day you required, actually 15 or 16 fulfillment, center for same day delivery, you cry hundreds. And there's to be close to the customers. So how, can anyone, compete with this, this is where amazon, has, fulfillment, centers, all over the united states close to population. Center. And they can serve most of the u.s population. Actually same day. So how do you compete with this. So. It turns out that some warehouse, around the country have too much space it's not used because of the just start out they didn't fulfill it. Because of seasonality. Business move our business move down. At the same time other businesses, need more space. So, they need for a short time, for, longer for seasonality. Changing configuration. Because they grow they decline, whatever. So a company called flex. Is one example. The book has many examples of all kind of adjustments, a company called flexes. Has developed. On-demand, warehousing, network. So. They have. Agreement, with over a thousand. Warehouse, and fulfillment, centers, all over the united states. And they put their own operating, system, side by side, with the warehouse, management, system that this, fulfillment, center has already. And they do retail distribution. E-commerce, fulfillment. And inven. Can. Take care of inventory, overflow. Why does it work. It's basically, an airbnb. For warehousing, or cloud computing, for warehousing. So. They have massive reach, a thousand warehouse, compared to amazon's, the biggest has only 200, or less 179. So. If you want to to use their system. There are no startup costs and you don't have to use it everywhere you want to go to you want to serve, people, in, boston. So you use one or two warehouses, around boston. There are no fixed cost commitment. You pay. By the flow. A big thing is you have they have the same technology, platform, everywhere. So you have you can have one, view.
Into Your inventory. Wherever it is. You can open anywhere. Anywhere in the united state right now they operate only in the united states, you can open the fulfillment, center and serve the, community. And you have a centralized. Inventory, view i mentioned before. You can get up and running, very quickly. And it offers flexibility. You can get in and out of market depending, on your sales depending, on what's going on. Without, any fixed cost. You can also do some. One one more thing let's say you don't. What will happen if i'll offer one day service, in cleveland. At a certain price point i don't know what will happen it's very hard to forecast there are no models for this. So. Maybe try it out, so i'll go to, flexi. And ask them to, run. Two three warehouse, around cleveland, for. Two months. Put my product in there. Start. Advertising. It and see if i get what lift do i get from one day service, as opposed to two day service, as opposed to same day service. Whatever. They offer also fulfillment, services, the book transportation. Real-time, visibility. And a lot of analytics. Anyway, this is just one example, of course this company, does, very well and they develop. A lot more. When situation. Is, fluid, when there's a lot of, uncertainty. And dynamic, effects. Let's now. Change, gear and talk about what happened during the pandemic, and specifically. Some of my piv point is the media. Talking about failure of supply chain talking about the end of just in time talking about the end of relies in china. None of this is actually, happening. In terms of failure of supply chain i would say this was the finest hour. Think about the food supply chain change completely. The food supply chain. In one day. There were no restaurant. No institution, no universities. No industrial, park. And all the food that was going in bulk to these places. Not. Uh. Customized. In small packages, with the, all the uh, information, of them or the regulatory, information, of them, so. This is half the food in the united states. But not only this at the same time. There was a change in the item consumed at home, people stay home, and they start buying less fresh food, more canned food, more. What we call. Uh comfort food bread and pasta. The with plant closure. And still. The food kept coming, now sometimes you didn't have the. Cut of meat that you specifically, like or the granola, bar that you, like very much, but, you had other stuff it was not, out of, you you didn't have to go hungry with it. And the problem is that the media had this picture. And i took. You know. I called to some of my friends, in a. Certain. Publication, asking why did they do it. And i said i know what you did you went in the evening and took this picture, if you go to the same supermarket. In the morning, this is what you see because what you don't understand, is the cadence of, fulfilling. Supermarkets. And stores, and retail outlets. A truck leave the warehouse, overnight. With, a lot of. Pallets of the, of the staff. From midnight, to. 5 6 a.m in the morning people are breaking the planet putting the stuff on the, on the shelf store and people come in the morning that's what they see, but because of all the, headlines. People were, panicking. I should say that there was one area that was really shorted, and this is ppe, and medical supplies. But i look at this more as a failure of government, rather than failure of, of companies, and we can talk about it more. So i would say, supply chain managers. Acted. You know, deserve the trophy.
The End of just in time, just in time is not gonna end. Uh. Just in time is. People use the uh. The toyota production, system, as a. You know they talk about just in time what they mean is the tree of the production, system. But, it's it's. It's a very important. Supply, chain manufacturing, supply to innovation. Almost comparable, to the industrial revolution. So it calls for minimum, inventory. But it also results in resilience, and flexibility. Because people are connected, to each other's suppliers, manufacturers. Customers. Uh it's, actually the most important thing resulting, in high quality. Because you didn't have a lot of. Inventories. You could identify. Flaws, and errors, in the uh, in process, and, in part. It bro it resulted, in low s, avoid bottlenecks, and controlling, variability. Directed, in worker participation. So the result, was low cost and high quality, product. And if you are. A little on the older side, you remember that the. Toyota. Was toyota, and honda. Where. Uh, were offering. Voluntary. Quotas, when selling to the united states because they were going to decimate. The entire u.s auto industry. So. And, and they were using this time and we can talk later about you can actually in the book i. Explain. How to run. Just in time system. With, emergency, inventory. Out of china. Again i don't think so, many companies, are not in china do only to low cost. Diminishing, advantage, costs are going up, those that there are, like, garment manufacturer. Have been moving out of uh. China to other asian countries or sri lanka to bangladesh. But interestingly, those, those. Removing just the late the last stage of production, the cutting and sewing. Textile. Is actually. More of it is being, exported, out of china, also automotive, high tech. Aviation. Sophisticated. Industry rely on chinese suppliers, they're just too good, and over time. Companies, have invested, decades, in developing, their whole, ecosystem. Of supplier, and sub-supply, and their supply in china. It will take decades and billions of dollars to move out of china, and this. Supplies, are not easily found, elsewhere. And some companies, may balance procurement, in china with what they call, china plus one strategy. Having. Uh. Some incremental, investment. Out of china, but also some western suppliers.
Are Going into china and other countries. In order to balance. Investment. In the uh. In the west. Finally let's remember that china is still a very large and growing market. And, companies, cannot, afford. Not to be in china so i don't see a lot of companies moving out of china. Let me just quickly go to some issues of concern. Following the pandemic. The, first one is sustainability. Uh. Paul and, some of the listeners, know my view on sustainability. That, a lot of people despite, what they say are not willing to talk i'm not willing to pay for it which means that, companies, cannot invest, government, cannot, uh. Cannot make it happen. It becomes. As we go into a bad recession, becomes more of a luxury good than my fear is, that people will pay less attention. To sustainability. Even though i must admit in the book i have two parts, one, pessimistic. And one optimistic. About the future, of. Sustainability. Post profit 19.. We we may have more work from home. There may be new. New, white collar globalization. Because if i, my office in boston and i can work from buenos, aires or delhi. I may not want to be in boston, and i may have some companies, may hire people around the world. One of the settings, a lot of inequality. Exposed we talked about the k recovery. People, white color people who can work from home are doing, just fine. Versus service people, in. Factories, warehouses. Driving trucks in retail stores are not doing well, and. Losing in addition to this. There's a lot of inequality, between country. Countries. Countries in africa, countries and parts of. Latin america, and part of asia are moving backwards. In all kind of meta-economic. Public health. In all kinds of societal, metrics so also. Inequality, between countries, is growing. Politics, you know we see the rise of populism, and nationalism. And choose, the leader that you want to uh to focus on, but it seems to happen around the world. And we see industrial, concentration. The bigger getting bigger. And. Mainly i'm talking about tech companies, whether it's. You know facebook, or amazon, or. Google. Uh. And i don't see a solution for this despite, some recent move by the u.s justice department, davis law simply does not, is not conducive, to the current. Uh. Monopolies. The fake media the fake news. You cannot listen to the news because now we cannot even agree on the facts let alone an opinion. So. How are we going to move out of this i don't know and finally. The next pandemic, this pandemic. Is. Bad. But is not nearly as deadly, as ebola, or some of the sars variants. That are much more contagious, and much deadlier, the mortality, rate, of uh, coffee 19. Is, unfortunate. But not very high. And, i hope when we got out of this pandemic, we're not gonna feel that, the problem is solved and we'll get ready for the next one. So let me finish here this is you see some of my, all my last books the last the three one on the bottom are, dealing with risk and resilience. Emphasis, on supply chain but in business in general. You can go to my website, has a lot more information. A lot more. Um. Webinar, and, blogs. And. Whatever, so you can. Enjoy. So with this let me, stop the presentation. And turn it over to. Pope, thank you josie. There's an awful lot for us to chew over there i'm going to invite you to, turn on, um. Your camera, and we'll move, into. Um. We'll move into the q a i want to remind everybody, that you can submit your questions.
Via. The. Questions, module, in the go to webinar, control panel and we will get to as many as we possibly, can. We've got quite a few coming in already. So where should we begin you know see you know it's one thing to act, in a crisis. To revamp, on the fly as you've described. Um in order to survive, and maybe even prosper, somehow. Against, these dramatically. Changed. Conditions. But when we turn our attention, to the more permanent, changes, in our operations. Things become a lot more complicated, for one, when do we act when will we know enough, about the world, to return, to long-term. Planning. Especially, given the unknown, shape of the recovery. Or is that question entirely, missing the point. The question is not missing the point but i think the lesson from this and by the way past. Disruption. Is that you have to invest, in, flexibility. That as they said, the only thing that. Permanently. Change. And we will have. We are going into a period that's. Even, more volatility. One can think about. Regardless. Of who wins the us. Uh, the us election but we see what's going on in europe to see what's going on around the world. And, the problem with, global warming the problem with trade wars the problem with. Political. Uh opportunism. That there are so many issues that impart supply chain especially. Global companies, who are working. With global. Global network. That one has to, have. When one make plans. Plans have been rooted. In scenario, planning. You have to go in and start saying. Okay, in so many years or not we can have this in our disciplinary, scenario, now, it could be that none of this scenario, will happen. But going to scenario, planning, socialize, the organization. To think in terms of change. And have, what we call markers, in the ground to see where are we trending. And can we see. Where we are living. But. It cannot, be we have a plan a rigid plan, this is a rep, you know, this disaster. So you have to have. A. You know a certain scenario, in being silver plants actually. So clearly. Flexibility. Scenario, planning they're the new black when it comes to um. But, are there other. Traits or capabilities. That um, that are becoming either more important or perhaps less important. As we think about the new abnormal. Yeah. Companies, are investing, tremendous, amount, in. Technology. Uh, clearly, automation. Drones, autonomous, vehicles. All of these are. To affect first of all, they are. Uh making companies. More efficient, faster. Faster respond they're also, by the way. Making, inequality. Worse by throwing, a lot of people, who cannot, work. Of, all of the service people, of jobs. So. This is this is clearly, one. One, trend both. Good for companies, but worrying. Society. Uh uh. In general we'll have. You know a lot more. Pressure, from, companies we have a lot more pressure on a lot more issues. And. They worry about or for revenue and costs and now risk management, is becoming, a big deal, let me just mention, about. Risk management, and, resilience, i'm talking to many companies, many suppliers, in particular, will say. The customer, is coming to us and wants us to be more resilient. Wants us to have. Multiple, suppliers, want us to have more. Um. More inventory. The only one problem they're not willing to pay for it. And that's uh. That's a problem. The problem start with the consumers. Of course. Not willing to pay for. Being other. Anything, but low-cost. Good product. Um. Anything i don't know i forgot i think i i lost the line of, your question now, yeah.
It's All. It's all interconnected. Right we're talking about something. But, let's i mean but but let's stay on that point for a moment because you you know as you mentioned in your in the kind of the second to last slide i think it was and kind of the areas of concern. Um, we talked about sustainability. And with respect to luxury goods in particular, but since you've, kind of returned to that. Is. Um. You know if we have seen. Um, a. Um, a strengthening. Of cost, as the determining. Factor, in. In purchasing, decisions, during the pandemic. Is that, i mean should we view that as permanent, you said that you saw a case four and a case kind of against, sustainability. And you describe it in the book so let's let's talk about the case four a little bit you know this is near and dear to my heart of course, i know i know i know and i kind of i should have expected, this question, so, knowing. Knowing our, joint. Our mutual history. But. Let me talk about, you know some of the. Quickly, why. Pessimistic, and optimistic. Pessimistic, because of course, you know. Less attention. Talk about it nobody will have the money to invest government will not have the money to invest, custody. Countries, who are getting, you know, bigger their neighbor or mimi too, are going to create ill will, and. The point is that both global, warming, and pandemic. Are similar, the global, problem. They require. Global cooperation. And. As you know my. If they require investment, in technology. So, uh. Let's see. That's the parliament. What happened in kovit, is that. We went to technology. Once we went to this. Regular solution, changing people's behavior, it doesn't work. People don't change, despite. Despite. You know. Really. Life and death they don't change. And. So. As i always argue they also don't change. Foreign. So in independently. We went to develop vaccine, therapeutic. In global warming we already had some success in technology, renewables, and normal costs are coming down and that's great it's just not enough, we'll have to invest in getting. Ghg. Greenhouse gas out of the air and there are technology, for doing this, and now the good news. When the when the chips are down. When we saw real danger. We invested. In. Um. In the economy. In, dealing with with the pandemic, trillions of dollars, trillions of trillions of dollars. If we invest. Just a small amount of this, in the technology. Required. And, but we see that money is there. Let me tell you one more thing that they think is positive. We should have listened to the expert. They were, i'm not even talking about. Bill gates or medical vessel in the book i give examples, of, seven or eight covers of time magazine, they talk about the coming pandemic. There were also. Dozens, of covers, that talk about global warming. In both cases. In the pandemic. We had, we saw h1n1. And sars and ebola, they were, warning before. If nobody can see the warnings right now. They're blind. I mean if the warnings are there.
The Experts are telling us that it's coming, you know the scientists, the engineers, are all telling us that it's coming. So i hope. That. In the pandemic, we learn to listen to the engineer we learn that money is available. If the, uh if the problem is large. And, lastly. We had actually while we didn't have much cooperation, between countries. We had lots of cooperation, between scientists, and engineers. In fact, the the genome of the pandemic. Was replicated, over a thousand, times. Around labs in the world so such cooperation, can also bring. Technological. Help, for solving. Global warming anyway that's. That's my optimistic, side. I i. I, i much prefer the optimistic. Side but when you think about the parallels. What it took for us to understand, what a pandemic. Could do one shutters to think of what the climate parallel, might have to be. Um. But, but that's it. But, we see the start we see the fires in california, we see, the hurricane, season right now in the united states it's one of the worst that we ever had, so, the signs are already here. Uh well they, they clearly are and, let's, hope that we are learning some lessons, um from this as as you say. Um let's talk about um, technology, which has been, which is quite present, right in your, um. In your talk and in your work. Is it too late. For. Laggards. Say an iot. Or real-time, analytics. Or ai, adoption, now. Has the pandemic. Kind of created. A gap, between those companies that had made the smart investments, in technology. And those who have not that's, insurmountable. Or is there still hope. I don't think it's remarkable. And the reason, is that the, the availability. Of first of all, of a of the cloud, going through a lot of applications, in the cloud which means that you don't have all the integration. And all the. Time the, time that they do, second. You see your competitor, doing something. Now. Let's look for example domino, give you one example domino, develop. Dominopita. Develop app, that if you, that you can order your pizza, and you come to the stores, and then you follow your gps, and you come with your car somebody comes around, put the pizza in your trunk. Domino, is up 16. Year over year. And several of the competitors. Pizza hut, california, pizza are out of business. So. Clearly they did not invest in time however. If you are still standing. Still it means that, you're not in, totally bad situation. You can because. The time, to application. Exists, they are good by. By and large and you can work through the card so i don't think. It's too late i think you should move. As. One of my least favorite administration. Says in warp speed. So. That's how it should move. Have the you know have any technologies, kind of emerged, as, more, important. Um during the pandemic, or were emerging, and maybe have accelerated. Everything was accelerated. It's it's hard to think about something that was not there before. But everything, accelerated. We see a lot of companies, adopting. Visibility. Try to find where the stuff is. Try to look at, companies, start to um. Make sure they have a good look into the into what the suppliers, are doing so they have an early warning. If, staff, stuff is not coming to them moving to the cloud, of course. Lots of no, optimization. But. I think if i have to rank them. Visibility. Was, was number one optimism, certain optimization. And automation. Rpa. Robotic, process automation. You know, automating, office. Office function. Is big right now, so all of these are, moving fast.
You Know when we think about, um. Companies, ability, to. Manage, operations. Remotely, or semi-remotely. During the pandemic. You know has there been a particular, kind of revelation. Right or have you seen like i can't believe we actually can do x this way. Oh, god, yes. Absolutely. Yes, and in the book have many examples, but let me talk about a small example. A local. You know family, shop. That used to serve their 20 trucks. About. You know 50 million dollar. Business. In, chelsea. North of boston, that used to serve institutions. Restaurants. And in, in full truckload. The business, they lost 97, percent of the business the only three percent was prisons they still serve prisons. What do you do. Within, these are people who never. Knew how to write a website, how to design an email. I know this because i used them so then i used them in the book. Because i found out about them from, for my son, so anyway. Uh, they, started. Beginning. At the pdf, list. On the website, of the stuff that they have, to give and then. About four days later, they had pictures, of this stuff. But you still had to call them because they didn't they didn't, have a way to take, about four days later, you could click, and. Get the orders, but a week later they had tracking and tracing. Then they start sending. Sending email. It took them about, two and a half weeks. To completely, move, from serving institutions. Which is entirely, different, and, serving. Uh, serving consumers. And. And these are people who are not technology, they didn't have, you know, so the wife was the technology. You know the the chief technology, officer, and she kept her job and had two kids at home, so it's. To me it was an example, of how. Determined, and flexed and they rehired, everybody that they had to lay off. In the beginning. So this is kind of a heartwarming, story for me. They're all section in the book about them, because, it's the adjustment. The, you know, necessity, is the mother of invention. And you just do what you have to do. Uh, of course large companies, can do it in space, if unilever, move all day, instead of making. A lot of cosmetics, and other stuff that, started making disinfectant. And. Big companies, were able to move they have the resources. But for me it's the small companies that were adjusting. So so nicely that kind of. Nice story. Yeah it's a great story, and but it shares in common of course with some of the remarkable things that large companies, have been doing, they are externally, facing, right they're reacting, to changing customer, needs, or changing business conditions. What about thinking about looking internally. And not letting this crisis, be an opportunity. Miss with respect to improving, uh business, process. Yes. So. Good companies, are doing it they're using as i said don't let the crisis, go to waste, and they're looking at a lot of things they're looking at the customer, themselves, and the market that they're in the type of suppliers. They're under pressure to reassure. Someone, some do's, most of them don't but, they have to justify, what they're doing, they're subject to new political, pressures. So. Companies, are, adjusting. Internally. In terms of as i said market, regions, of, operation, products. Uh all of these are being adjusted they're also just adjusting, hr. It's an opportunity. To see who can work under pressure and who. Cannot. Company. Another interesting, thing that is not going to go away or two things that are not going to go in first of all. Once you do something, and the company, changes. Or adopts something quickly, you cannot go back. Because. The excuse, oh we have to check, three times with the cfo, and this and go through all the, this goes away, hey, we could do it in in two months so why are technically, take you know, six months to do it. So this is, some of these things. Are not changing, because. Even the. Psyche. That, things can be done. Is a. Very, powerful. Motivator. To keep doing things faster, and better. So, i i, think that's a very important. Facet, of what i've been doing. Great thank you, we have an absolute, flood of, questions coming in from the audience so i'm going to start kind of picking things somewhat randomly. To throw your way. What are are there any dark sides. To. Resilience, or maybe flexibility. In other words, is there a risk that companies, will will kind of. Over, index on being opportunistic. And flexible, during a crisis, and live to regret it later. And. And live to regret it later in other words if you can you can you go so far towards flexibility. That you lose sight of what is sustainable, over the long term. From an operational. Standpoint. Sure. Sure, because, what you do. There's always risk in. In moving too fast for example one with, you adopt all this, software, very quickly.
You Don't pay enough attention, to cyber, security. I mean you open yourself in the future. To other risks. You you, you. Approve something, very quickly, and later on you find out that. You have a problem. It doesn't work because it didn't go to all the chips, the quality is not what you thought it is, because you had to do it quickly. So one has to recalibrate. Following. For independent, i hope you don't go, back all the way you realize things can be done fast. But. You have to make sure that they're done right, at the same time and i understand the durian pandemic. Right or wrong, fast. Sometimes. Is more important than anything. Not in the long term in the long term, hopefully, you get. Faster, than before. But also. Quality. And, customer, service and all of this still keep. In good shape. So what does this thing just about the cadence, of our planning, right i think you know, there's already been a huge amount of pressure on kind of traditional, say annual budgeting cycles right and for a lot of organizations, that's been anachronistic. For for. You know for for decades. In some cases but others not, right so so, is it you know if, you're still operating, kind of, and not thinking so much about operational, planning but financial, planning because you can't really disassociate. Them. Um. You know how much pressure is there on organizations. To start, engaging, in different planning. Cycles. It's actually, a lot of it depends, on the industry that you're in, yeah, uh if you are in uh. You know. Long, clock speed, industry, whether you build you know aircraft, you build you know even automobile. It's very hard to to do monthly, or quarterly, cycles. If you're in retail if you're in fashion. You you better do quick. Quick cycles because the market, is changing so it really depends. Which industry. Which industry you are in but in general there is pressure but. I don't know if, as i said depending, on. Really depending, on the industry. How how much stock. Do we put into, what. Consumers. And. Workers, and business, partners. Are telling us today and, let me be more specific. Consumers, and workers, are are, both saying. That their behavior, has permanently, changed. They want to work from home more they want to shop from home more you reference, this they want to have more delivered.
But How reliable, should we view that sentiment, in the moment, it's pretty risky, to make too big of a bet on how people are feeling, as they live through something so completely, new and unfamiliar. Might there be a. V-shaped, recovery, with respect to behavior. The answer is of course. Uh people in the middle of, the pandemic. And you see. Some companies, are very careful look at the difference between. Korean, airlines, and delta, korean airlines, the only airline, that was profitable, during the last few months, because it basically, changed your cargo airbag. Uh. Delta american. United, would say man we're not sure how long it will last it's very expensive, to take the seat off to put it back on and i understand. It's it's the uncertainty. So. Uh. Now when we talk about consumers. Its psychology. Is even. You know, harder to decipher. But what companies are telling me that yesterday so they i reported the book with. Interviewing, dozens of executives, that they do continuous, polling among their employees. And they said, for example, work from home, they're basically two types of employees the employees they love work from home the employees, that hate it, that they need. The camaraderie. The working together. On these, companies, when i talk to companies, like google. They said it's not what people like or not but depending, on the job. They have a problem with. Design. New products. They say this we need the engineer in one room on one big. Whiteboard. It's not enough to work from home and the tools are not. Nearly good enough we need them to communicate, so, and i heard it from several companies, that innovation. Anything that tied to innovation. They're going to bring people back whether they like it or not. Now it may be hybrid, maybe. Not everyday but they're going to bring, uh, bring people back. So it's a it's depending, uh on the job and depending on the psyche of people some people are you know introverted. They like to be home some people cannot withstand. You know being at home and not seeing colleagues, not seeing people. All the time so. The answer, like a classic, professor, my answer is it depends. Let me give you another question that's probably impossible, to answer because they're the most fun. If we if we think about kind of industries. I'm coming and looking for a scale, of uncertainty. Right with respect, to how. Um. How the future, assuming, that we emerge, from this pandemic. And are able to. Are able to whether we do or not are able to engage in a lot of the behaviors, that we associated, with life and work. Um pre-2020. If maybe on one hand. You know you have, um, remote conferencing, technology. Right over here, and the aviation, industry over here as two that have been profoundly. Impacted, for better or for worse. What industries, do you think, really are you know indices, in between there what are the ones that have the most uncertainty. About how the recovery, or how the new abnormal. Will impact them. First of all let me say one thing certain about the aviation, industry. Because. There are many many cases there are trends that are just being accelerated, during coffee. One trend in aviation. Was going up, and it's going down and it's not gonna come back anytime soon and that business problem. Not so much economy travel but business travel. As you know i have centers, all over the world, and i used to go to a, you know board meeting in china and spend four or five days for a two-hour meeting, now i spent two hours for two hour meeting, and about twenty thousand dollars less. So. It's hard for me to imagine. That i'll keep going to all, of these cases and. Why would companies, approve it why the companies. Agree to do it. In the middle, are. The people who are most. Facing uncertainty. Are, certain retailers. Uh. We know we see restaurants, going out of business. Big time, hotels.
Interestingly. Some of them are doing okay. Again changing the business, quickly. You see hotels, in boston. Hosting. Students. They're basically, operated. As dorms, for students. So they find niches, in order to work doing. During the pandemic. Um. But. Company. Companies, are not very large, uh and i don't worry about you know. You know, even gea. Has a problem because they're selling to the aviation, industry. But they have resources. Uh. It's exactly, the same. Problem with countries, the u.s, eu. China and japan are going to do at the end they're going to find that the resources, the problem is africa, and south america and, countries that don't have resources the same thing small. Small companies, who did not move fast. Are. Are in danger, you know. And and are going. Going out of business. But it is so. Industry, related, because as you know in some industries, business is going down in others it's going to grow. So. You have two types of, demand. Problems to deal with, and the places where it goes down. Have to pivot, have to change and those that change, either, get, online, in some fashion. Or go to an adjacent, area like. Flying cargo instead of flying passengers. Are those that are making it. But. Uncertainty. Is third step right. Do we know about the vaccine, do you need one, two. You know one every year one every six months is it going to be, 50. Effective, 80. Effective. We don't know so it's. Lot of uncertainty. For everybody. Yeah. Um, so as we. I don't want to use phrases like come out of this as we just move into the future. Right, perhaps a future that's somewhat more predictable. Maybe just this much more, than it is today who knows. Is there any reason to think we might see consolidation. In certain supply networks, and supply chains. We always. It, well. It happens. Naturally. Because of recession. So some companies, are, the fate is not. Not handling it well and the stock price is going down, it presents an opportunity. For the strong companies. That that. Kind of happens, in every recession. Uh. It has certain that in the tech world you see. Companies, are buying smaller competitors, that's actually. The acting monopolistic. So this is beyond. What is what is good for everybody. Long term. But absolutely, we see. Uh we always see consolidation. But then it's an accordion, effect you know we see consolidation. And then. People are offering. You know, new people come people are offering more services. Sales people start saying oh we need to offer this variant that variant more services. Grow. So. It will happen here as well. In in a presumably, less predictable, world. I'd like to talk for a minute about kind of, companies, relationships. With their customers, and their supply, chain partners, um, as you mentioned, in your presentation, and as you've written about right companies, face some, very difficult, choices. About prioritizing. Customer, needs. Where whereas a time they may have been able to satisfy. A whole, their entire suite of customers, during the, during the pandemic. Um, there were times when they could not. Is that relationship, permanently, changed, um and i think um this is this is a tough question but i'm interested in kind of two things. How a company thinks about its own self-preservation. Versus those of its partners. And how they have conversations. With customers. When they have to make choices. Of one over another, can can, can you be a can. Can you can you go to a customer and say we're actually not gonna, we're not gonna we're not gonna serve your needs right now and actually expect to have an ongoing relationship, with them. No. It's very tough to go to a customer, and say, i know you have orders, but i'm not going to build the part that you need, and, good luck. However. It's really interesting, earlier this morning i had a. Another webinar, with converse. And with. Their supplier, in southeast, asia. Uh. Congress part of nike, and a whole host of suppliers, south asia, and some of these questions came up. And this, was. The oem, was there and the suppliers, were there yeah, my point was that companies, that did it well, first of all, decide. Who to serve or not to serve the people that you decide not to serve. In a crisis. Are people it's very hard that you're, to think you're in a long-term, relationship, and that may be good maybe it's the wrong customer, but you don't want to serve this customer, maybe, when you look at the, full, fully loaded cost this customer is not even profitable. And it's not likely to be profitable okay so you cut down the. Customer, you have to think about both short term, your preservation, sometimes you have to do it, and long term relationship.
And I, give the book a two by two you know. Management. Management school type. Decision, matrix how to. How to go about it but congratulations. Preservation, is important. The main, issue. Is not to do it abruptly, and to have conversations. To have conversation. Between, customers. And suppliers, to say look. This is my situation. I i you know i cannot, i can give you only 50. But this is what i'm doing so continuous, relationship, don't leave people. In the dark, and suppliers, who, have this relationship. Were doing well, in addition, to this. We found out that the. Very, important. Element. Is trust. You have trust and long-term relationship. That supplier. Will serve you, or, do their best to serve you if they cannot they talk to you and explain what they're doing and when they can serve you. So. You know in. In fact, during, a crisis, a trust is being challenged. Sometimes, because. Of this because we don't have enough. And we saw cases that are. Awful. We saw some. Garment. Sellers. Sticking, people, sticking. Really. Supplies, who cannot afford it. With, cancelling, orders, even after the supplier, bought the raw material. Well. My guess, is that, sometimes. Things will change, and the supplier, will be in the. Um. Drive, driving, driving the relationship. And then remember. So it is something that. Some companies, not too many companies did it i saw good companies. Were, absolutely, taking care of suppliers, and talking to suppliers, and suppliers were doing the same thing, but what was done to those. Garments. Um. Sewing, and. Cutting and sewing. In sri lanka, in bangladesh. Was really pathetic. And companies, who, did not have to do it did it anyway. Thank you. We have a couple of minutes, left and there's some interest in two particular, technologies. That the audience would like to hear your thoughts on with respect to their importance. Um. Going forward the first is digital twins and the second, is blockchain, and distributed, ledger. Technology. I. Digit, digital, twins, is something, that i expect, will be more and more important. Because, it lets you. Try. Doing scenario, planning, operationally. How are we going to operate. When. This is the situation, that is the situation. You know something is happening, something's not it's not happening so. Digital. Twins. It's basically. It's basically a simulation, technology, you simulate, what, what the situation would be like, and i expect this to be, more important rather than less.
Blockchain. Is the perennial. Three years from now it's going to be important. And it's always going to be three years from now. So, a. The technology, right now is, even though it's used here and there it's just not ready for prime time. It's too slow. And. It's not clear that you cannot, achieve. Many of the benefits, of, blockchain. With just regular, distributed. You know. Storage, so. Distributed, databases. So it's just not clear to me that the time, is to invest, big. In blockchain, right now. But. Let me just tell you when people ask me to, forecast, future of technology. That means poor say. It's a. Very hard to forecast, especially, in the future. And on that note yossi, thank you very much, this concludes, our program, thank you for attending, thank you yossi, cheffy. And thanks to our sponsor, amazon, business. Enjoy the rest of your. Day.