We had a research leadership meeting the other day, and, in response to a request from Safeway, decided to outline a set of questions surrounding the implications of President Obama's ambitious policies for supply chain professionals. The outline, which is shown below, unedited, will be followed in time with answers drawing from our best analysts and from field research among our members. For now, I want to put it out there and ask any readers with opinions or insights to contribute at will.
The times, they are a-changing and we'd better think broadly about what it all means.
The Obama Effect
Trillions of dollars of new federally driven spending will pour forth over the next four plus years as expansionary policies coupled with ambitious structural changes combine to forever alter the dynamics of the US and world economy. This overview will break down the Obama-effect into five buckets of activity which will each drive many billions in revenue across industries and will, in the process, change forever the competitive playing field for companies.
Infrastructure
The big spend: Roads, bridges, pipelines, rail, ports, waterways, government and public facilities of all kinds are in line for a refresh. How much money will be spent and by which purchasing authorities? When will these projects happen and what criteria will govern selection of contractors and vendors? Who stands to win?
The new network: When the big build-out is complete how different will the supply chain be? Will new markets be accessible that were not before? Will new alliances emerge in a post-industrial US economy that change the way logistics is handled? Will global sourcing and manufacturing be easier, harder or just different?
The new rules: Following a generational public investment new rules can be expected to govern use, maintenance, and financing of our public infrastructure. What reporting and transaction requirements might this mean for supply chains? Will new standards accompany access to and use of infrastructure? Which will be mandated and which will emerge as market standards?
Energy
The big spend: The Smart Grid concept implies a massive, and integrated system of energy technology, generation, and transmission. Where and when will the money be spent and who will decide? Which technology and engineering standards will emerge and will these be based on science, politics, money or all three? Who will win the most business and control the platform for the future? What related spending outside of the Grid will matter – insulation, local power generation, batteries – and how will these evolve?
The new network: Assuming the Smart Grid comes anywhere near its potential, what are the implications for business? As consumers of energy, will business have new options for locations of its operations? Will energy sources be impacted enough to reduce oil price volatility thus dampening its effect on costs and profits? Will certain kinds of businesses be in position to generate positive net energy and how will this be managed as part of the supply chain?
The new rules: Again, new rules can be expected to govern use, maintenance, and financing of our energy system. What reporting and transaction requirements might this mean for supply chains? Will new markets emerge that price and move energy? Where will supply chain investments be possible that are net contributors to the energy system, and also synergistic with core operations?
Healthcare
The big spend: The scale of mess in our national healthcare system dwarfs even energy and infrastructure in terms of money needed. Up front overhaul costs for new information systems, upgrades and expansions of hospital and other care giving facilities as well as establishment of payment systems outside the unsuccessful private insurance industry will mean many billions in project work. Who wins this business and how? Looking ahead, healthcare, more so than energy and infrastructure, will demand massive ongoing spending. Who can offer enough efficacy with efficiency to establish lasting positions of power in the ultimate system and how do they prove their merits now to secure these positions?
The new network: How different will the ultimate system of healthcare be? Will big private drug or grocery retail participate and if so how? Will patients/consumers buy more online and if so, how will deliveries happen? What role will be played by public health providers? Will preventive medicine or holistic care emerge and if so, what products and services will thrive? How personalized will medicine become and what degree of custom delivery will the supply chain need to provide? How will medical science be impacted by the emergence of “downstream data” akin to the Wal-Mart’s effect on consumer product industries?
The new rules: If universal healthcare makes even a partial impact on
US
policy, how will government regulations expand to handle new accountabilities? Given dramatically deeper digital health records, what privacy and/or ownership issues arise around patient outcomes? What regulatory burden can be expected for new drugs, devices, and other innovations? How will dispensation rules evolve if retail becomes an important part of the healthcare value chain?
Education
The big spend: Although probably significantly smaller than the amounts spent on energy, healthcare and infrastructure Obama has been vocal about the need to improve education in the
US
The highest leverage investment potential in this realm revolves around better exploitation of information technology. Upgrades to communications networks, archiving systems, interactive learning and testing all offer potential to accelerate and democratize learning. Where and how will these investments be made? What software and/or content will be needed here and how will hardware evolve to accommodate it?
The new network: A US education system evolved enough to deeply exploit the efficiencies of the digital supply chain means new business opportunities for consumer companies of many kinds. How will companies be allowed to use this platform to influence consumers, especially children? What content or media services could piggy back on this education network and will these help school districts offset costs? Will the network extend to the home and what will this make possible?
The new rules: Digital education systems will have multiple constituents governing their use. What will school administrators allow? Will federal standards apply and if so, how? Will independent or consumer based watchdog groups emerge and how will they affect exploitation of this consumer channel?
Defense
The big spend: National defense is always a big spend, but with shifting geopolitical threats the new administration is preparing to change our basic strategy. In part this includes wider diplomacy with hostile regimes, and in part it means preparedness for new types of military threat. What weaponry accompanies these new strategies? Does it mean more or less consortium-type defense contracting? Will provisioning military personnel change and if so how? Are there changes in the balance of spending between armaments and information technology and if so, who wins?
The new network: What will the new military look like and how will its ongoing support requirements change? What new levels of technical proficiency will be expected of soldiers and staff and how will this be maintained? Where and how will US military operations overseas need support from private suppliers and how will this be maintained?
The new rules: Are changes in military strategy likely to change rules for procurement and contract compliance? Will smaller companies be more or less able to compete for military contracts? What rules will govern use of foreign companies further up the supply chain?
Conclusion
The election of Barack Obama, coincident as it was with the worst financial and economic crisis in the US since the 1930’s, means change on a large scale is expected and desired by most Americans. The administration is pushing faster and more successfully than many observers had thought possible to instantiate this change. If trends continue, the implications for business in general and supply chain strategy in particular are far greater than just a few new regulations. Change across the five dimensions outlined above could be multiplicative with new dynamics in infrastructure affecting defense and energy or new forces in healthcare affecting education, and vice-versa. Business as usual is unlikely to keep many companies competitive in this new world.