WHY ARE OUR SUPPLY CHAINS QUITE SO COMPLEX?

For years guided by MBAs and McKinsey we’ve been persuaded to “think global,” construct complex supply chains, offshore production and cut cost. Our world we believed was driven by price and the need to be lowest cost producer. Which was fine when globalisation was the thing and Asia was to the place to get things made.

Covid has changed a lot of things not least the increasing belief driven by the vaccine contretemps with the EU and post Brexit complications that domestic production is the safest strategy for many industries.

Currently my underpants come from Bangladesh, my jacket and my socks from China, my sweater from Cambodia and my T-shirt from America. Over 50% of what I eat and drink comes from outside the UK – from Holland, France, Peru and Spain.

This is not the ranting of a xenophobe. If we’ve learnt nothing else over the past 14 months its been that the old rules don’t apply. The rebellion started with “America First” and then the bizarre decision to exit the EU. No more frictionless travel. No more working across the EU using the business lingua franca – English – to do business. Two years ago I visited seven different EU countries in as many weeks in co-ordinating a project. That won’t happen again. 

Now perhaps for the first time I’ve begun to wonder about whether I’d want to remain in the EU after the shabby performance of Ursula Van Der Leyen over the EU’s failed procurement of vaccine. I’ve been shocked that the EU, rule maker and follower of rules is now a rulebreaker, with member countries off doing their own thing. The irony of their demanding more Astra Zeneca vaccine even as they withdrew permission for its use was eye-wateringly comic.

In a crisis we retreat to localism. The Covid crisis will change many things but the most significant thing will be the pressure to grow and make our own. Small businesses will be created doing what previously bankrupted businesses did until globalisation became the hot, new thing. 

Except there‘ll be a difference. These new businesses will be better run, with electric speed delivery, concern for climate change and with brilliant customer service. We bought a new car recently . The whole process took less than a week. It used to take forever. Thanks to Amazon and the growth of online our expectations have been transformed. Old fashioned standards are dead. Our world is a better place in which (blame it on the ‘elf and safety woke-culture’ in fact) workplace deaths and injuries have plummeted in the past few years.

Our ability to transform our economy  will be driven by the astonishingly interventionalist strategies of the least conservative government we’ve ever had. Once they realised that people must be paid when, through no fault of their own, they can’t work, then the realisation that inspiring and incentivising new businesses that usefully employ people makes economic sense, can’t be far behind.

But the small is beautiful argument always seemed weird to me especially when small as in pubs, shops and roads often meant rotten and inefficient. Equally the argument for scale falls on stony ground. The NHS we’ve been proudly told is globally the biggest employer after the Indian Rail Service and the Chinese Army. Why is that good?

If we want to stop just being a “nation of shopkeepers” as Napoleon scornfully described us we need to start being producers as well. We’re actually rather good at it. Films, gaming, pharmaceuticals, software, cars and shoes – yes, my shoes are all made in Britain.

  

CRASH OF THE GIANTS

Am I being melodramatic in suggesting that 2020 will go down as one of the moments in recent history when everything changed?

Coronavirus, apart from the obvious epidemiological stuff, has caused a financial collapse but more importantly a collapse in confidence in the interconnectedness of the globalised economy.
In the 1960s I was persuaded by a friend to go to a meeting proselytising the concept of world government. I thought then that they were completely barmy. And they were.

The relentless quest to centralise, merge businesses and delegate strategic decisions to procurement departments who buy only on price is coming to an abrupt halt. A major whisky distiller was allegedly eager to move production out of Scotland to lower cost Hungary. Insanity. Our clothes are mostly made in impoverished parts of Asia. I am sitting in Bangladeshi underpants right now.

It gets worse. Around 50% of our food is imported and most of the best stuff we produce especially meat and fish is exported. We are in thrall to a few supermarket groups - the top seven of whom account for 90% of UK sales. Big is beautiful or is it? Pundits are pretty well unanimous in dismissing our farming and fishing industries as of inconsequential economic importance.

But that isn’t true.

Big hospitals are better, bigger schools are better, bigger accountancy firms are better (the big four have all the FTSE 100 tied up between them), bigger advertising groups create better ads, fewer bigger banks give better service and so on and so on.

But that isn’t true.

Process and purchasing power dominate and people come way behind in the consideration. Irrational as Brexit seemed to those of us well educated in the MBA ways of thinking, it was the way the majority’s  instinct led them. They were not so much anti Europe as against big, bureaucratic EU wanting to have more as part of their empire. Too big, too unwieldy and past its sell-buy-date they told Westminster and voted leave. A few years later in a city called Wuhan something happened that suggested perhaps they had a point.

I wonder if those smaller dedicated businesses like Harveys the brewer, the Cambridge Satchel Company, Cook – the food retailer, Alfred Brown weaver and tailor, Handlesbanken, the local relationship banks, Naked Wines and Charlie Bigham, the ready prepared meal business may not hold a key to a smaller, more controlled economy.

Because the current Covid 19 crisis is not the last nail in the interconnected coffin.

Read Oliver Letwin’s Apocalypse How? which came out on Thursday. In a cross between documentary and dystopian fiction he argues the internet is the infrastructure on which every major system and utility depends. He describes what would happen if something took it out.

We need to think smaller not bigger.

We need to simplify and stop the technocrats taking control.

Small may indeed be beautiful, you’d be excused for thinking. if you’re on one of those marooned mega-cruise liners right now.

LET YOUR PEOPLE GO

Independence is in the air, you can smell the whiff of recession and of rebirth from Padua to Perth. There’s a restless mood of change. Crimea which represents just 5% of the Ukraine has gone home to mother Russia. Scotland is putting its gouty toe into the water of independence and dreaming of “Braveheart” and of Mel Gibson roaring “freedom”.

Just recently I’ve started taking the SNP quite seriously. This is partly because of the lacklustre campaign by the “No” team.  Although to be fair they do have a problem or two. The Tories amongst them know that independence for Scotland means virtually the end of the Socialist party so a large part of their minds would love it to happen. And a whole bunch of ‘schadenfreuders’ in England have a playground attitude of “let them go and see what happens…they’ll be sorry.”
It gets worse…the head of the Chamber of Commerce in Newcastle said compellingly this week that a “yes” vote would be fantastic for them with a migration of business from Scotland south.

But it isn’t any of that that interests me so much as a sense of curiosity as to whether the Scots as a whole, regardless of economic issues, would actually be happier being independent. Too small to survive I hear. Hmm. They’d be bigger than Norway, Finland, New Zealand and Luxembourg who are respectively number 1, 8, 5 and 10 in the “Happiest Nation Index” (the UK, by the way, is 16th).

And who ambitious wants either the been-there-seen-that status quo or the sense of being a small fish in a rather large and unfriendly pond?

Wouldn’t Wales and  Cornwall prefer to be independent – actually come to that wouldn’t London prefer it too – an independent London would be like Singapore only much, much more powerful? The biggest, richest glittery city in the world.

And I see now that Venice is at it, running a poll of ½ million people in the Veneto region of Italy,  voting to secede from the corruption of Rome and the hopeless poverty of the south of the country.

Then there’s Catalonia, Brittany and so it goes on. So it’s better to be independent and it’s better to be small is it? This seems to be the mood. Small is beautiful. Welcome back the apostle of the doctrine…

And that’s why there were 300,000 start-ups in the UK last year and already this year a further 120,000.

As regards size, business units of around 150 seem to be the perfect size. A size where there’s spirit, obsession and energy. This is where creativity seems to peak. Forget about scaling a business; a lot of business thinkers are beginning to wonder if big and bureaucratic isn’t just beastly and unwieldy.

Imagine countries with a population of 5m. and businesses of 150 employees? Maybe this really is the future rather than corporations of thousands or Shanghai’s of 20 million.

This …. and, of course, that bit of freedom.