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The Future with COVID-19

To discuss the topic of future expectations in the context of COVID-19, Robert Hull, Rensselaer Polytechnic Institute, introduced Gopi Billa, principal for Deloitte’s Market Sensing and Scenario Planning Offering and the U.S. Banking and Capital Markets Strategy Consulting practice. Following Billa’s remarks, Ned Thomas, Texas A&M University, moderated a discussion.

SCENARIOS FOR A POST COVID-19 WORLD

Gopi Billa, Deloitte

COVID-19 has created an unprecedented global health and social crisis that makes the future extremely uncertain. Despite rapid vaccine development, many questions remain about their availability, affordability, and efficacy. In addition, vaccination on such a massive scale will require overcoming supply chain, distribution, funding, and administering challenges. Billa discussed several possible future scenarios, trends that may be expected regardless of which scenario comes to fruition, and implications for manufacturing.

Possible Future Scenarios

Billa and other futurists came together to investigate possible scenarios to enable better-informed decisions in a post-pandemic future. First, they identified fundamental uncertainties across societal, technological, economic, environmental,

and political facets. The five areas of uncertainty they identified as most important are the overall severity of the pandemic, the level of collaboration both within and between countries, the response from health care systems, the economic impact (especially for workers), and the level of social cohesion.

Next, they combined these uncertainties in different ways to envision four very different future scenarios (Figure 7.1). With a strong collaborative response, as seen in Japan, Taiwan, and New Zealand, the pandemic could be merely a “Passing Storm” that is quickly and effectively contained. In the “Good Company” scenario, the severity of the pandemic is high, but collaborations, especially between large companies, help fill certain response gaps. “Sunrise in the East” is a scenario where the pandemic causes long-lasting problems in much of the world, but some countries, notably China, are able to recover faster and assume a larger global role. The “Lone Wolf” scenario reflects a situation in which the pandemic persists for several years and the resulting uncertainty leads to protectionist policies that limit countries’ immigration, social mobility, and financial resources.

While there may well be many other scenarios, Billa said the goal of the exercise is not to predict the particulars of the future but rather to understand underlying uncertainties in order to inform better decisions. Elements of each scenario have played out in the United States, and while the future is still unclear, it is certain that manufacturing and supply chains will continue to be affected.

Scenario-Agnostic Trends

Regardless of what scenario occurs, Billa said certain trends are likely to continue and potentially accelerate. First, the accelerated digitization across workplaces is transforming organizations. Second, increased virtualization of workplaces and schools changes the definition of where work and learning happens. Third, while people are still sharing personal information online, there could be a data-privacy backlash due to increased surveillance from contact tracing, remote health applications, and surveys.

COVID-19 has also slowed the pace of some recent trends, such as the rise of the gig economy, dedicated and globalized supply chains, and increased regionalism. While travel and hospitality have also declined, Billa posited that those sectors are likely to bounce back, especially as effective and widely available vaccines change the consumer outlook.

Implications for Manufacturing

Billa outlined several implications of these scenarios and trends for manufacturing and engineering supply and demand, which will in turn affect business and operating models, workforce skill requirements, and access to capital.

First, the pandemic is driving up demand for innovation. Telemedicine, virtual learning platforms, and online retailers have received heavy investment and increased their focus on customer experience. It’s possible that larger engineering companies could also increase their customer focus. Consumers report an increasing emphasis on trust and safety and may be willing to pay for them, but purchasing power is also down, meaning that in many sectors cost is still the deciding factor.

On the supply side, localization and regionalization have increased. Billa suggested this can lead to more collaborations as manufacturers consider pooling resources or sharing core services to increase efficiency.

In addition, a recent Fortune/Deloitte survey¹ showed that chief executive officers are increasingly focused on sustainable practices, especially in response to employee and consumer demand. They also reported concerns about supply chain redesign, an expensive and time-consuming process.

Closing, Billa said that although some indicators suggest opportunities for improvement, there is still a large amount of uncertainty moving forward regarding

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¹ Deloitte, 2020, “Fortune/Deloitte CEO Survey: October 2020 Highlights,” https://www2.deloitte.com/content/dam/Deloitte/us/Documents/CMO/fortune-deloitte-CEO-survey-october-2020-highlights.pdf.

public health, the economy, and society. Studying possible future scenarios can aid decision-making to prevent the worst outcomes.

Q&A Discussion

Asked how reshoring might impact the U.S. Department of Defense’s supply chains, Billa answered that from an engineering standpoint, raw materials are unlikely to be reshored, but some manufacturing and design could either come back to the United States or relocate nearshore. Diversified manufacturing, including subcomponents and assembling needs, could de-risk the supply chain, but he argued that it does not make economic sense to reshore the entire supply chain.

In response to a question about social mobility from K.T. Ramesh, Johns Hopkins University, Billa speculated that higher education will suffer significant impacts, especially given that pre-pandemic visa restrictions had already diminished the appeal of a U.S. education. Now, both domestic and international students are questioning whether they are getting their money’s worth from schools’ high tuition without the social benefits of attending college in person. Finally, Billa predicted there will be an engineering workforce shortage in certain sectors. This is compounded by the fact that, as noted by other speakers, a large portion of people holding doctorate degrees in engineering in the United States are not citizens and therefore cannot work in certain defense sectors.

Asked what pandemic-related trends he found most surprising, Billa noted that some businesses quickly created innovative and sometimes surprising solutions, such as sharing employees between companies during peak hours, or repurposing manufacturing capacity to fulfill health care needs. In addition, certain market segments are considering not reopening offices, such as professional services, insurance, and technology companies.

Thomas asked about the potential future implications of the disruption of the educational supply chain both domestically and internationally. Billa replied that the largest, best-funded, most well-known universities will be the least affected. The next tier of schools, however, may have to make difficult cuts to some departments. He expressed his view that students will continue to choose schools based on job placement possibilities, regardless of whether the lessons are in-person or virtual.