Welcome to the new age of scarcity

The age of abundance is over. As supply chains bend and break, and energy prices soar, your business needs to re-engineer its systems to thrive amid scarcity.

Scarcity’s back, baby. And it might be here to stay. Globalisation has delivered much of the world an abundant supply of goods. If we can afford something, we can normally get hold of it. The digital revolution also promised an end to scarcity, as digital goods are endless replicable. 

But, just as NFTs are an attempt to bring scarcity and exclusivity back to digital, the events of 2020 and 2021 have put physical scarcity back on the agenda, too. In the latest Fjord Trends report, produced by a sibling company to NEXT in Accenture, they call it the end of abundance thinking. 

And it will be a shock to many of us. And even more so to our customers.

The supply shock

When I started pitching pieces about supply chains to my colleagues at NEXT a year or so back, it would be fair to say that they were met with a degree of indifference, if not scepticism. Supply chains are boring, right? It’s a back office, logistics job. 

Well, there’s the problem — supply chains are boring when they’re working well. When they’re not working, they suddenly get very interesting indeed. And the past two years have been truly interesting times

As the Fjord Trends report 2022 puts it:

The supply chain crisis started with lockdown’s impact on the manufacturing industry, continued with the Ever Given container ship blocking the Suez Canal, and was made worse by a shortage of trucks and drivers, which stalled traffic flow through the world’s busiest ports. A wide array of materials, parts and goods fell into short supply, ranging from coffee to semiconductor chips.

And all of a sudden, we’re discovering what it feels like to be on the wrong end of the bullwhip effect. Or why high gas prices means no beer.

Why the new scarcity matters

The supply shock has punctured our cosy bubble of complacency about supply chains. Those of us in the developed world are merely encountering the absence of goods we want now, for the first time in years. Many of us haven’t experienced it since the hot toy we wanted at Christmas was out of shock before our pare…uh… Father Christmas got hold of it.

In other parts of the world, they’re still waiting for the vaccine supply chains to provide them with their first dose, while some of us are on our third or even fourth.

This is just a foretaste of what could be in our near future. The climate crisis looms large, obscured by the pandemic, but coming nonetheless. That’s likely to deliver bigger supply shocks than the pandemic, and it’s time to start adapting. Even some of the basic necessities of life could be under threat, as a book on water insecurity warned us was a likely outcome of the coming crisis.  

As the climate shifts, ecosystems change, and populations move, how many other supply chains will break? And what will that mean for our lives and our businesses?

What you should do

The likelihood is that the problems we’ve seen in the last two years are unlikely to significantly disperse within the next two years. And that means resetting our expectations as consumers. It could be planning your week’s meal after you see what the supermarket has. Or it could be planning a car purchase a year or two out because cars might be on backorder, due to chip shortages.

It’s also beholden on us as business people to prepare our customers for that. The relationship between marketing, logistics and product development will need to be tighter, so we don’t end up generating demand at a level we are unable to comfortably fulfil. While scarcity had a certain brand cachet, it doesn’t work for all goods. 

But this isn’t all bad news. There’s an opportunity around business transformation here that many would do well to consider.

Sustainability ❤️ Scarcity

For example, the Fjord Trends report suggests one approach:

One method might be to create new value for customers through services that extend a product’s life. Incremental improvements, by contrast, only tempt people to throw away functional items and buy new.

As digital hardware reaches maturity, the ability to provide services that extend the value of those products into the longer term is a business opportunity — and a chance to build a closer relationship with your customers. Apple’s much-discussed shift into services as the replacement cycle on its hardware slows down is a good example of this. 

The circular economy

Another, of course, is closed supply chains and the circular economy. The more you’re taking back and recycling your own old materials, the less dependent you are on external supply chains. Apple, always the supply chain innovator under Tim Cook, has also been making big strides here

But others are doing the same. 

The fashion industry — notorious for being one of the biggest contributors to climate change — is starting to get its act in gear, after decades of paying lip service to the idea. It’s moving beyond recycling plastic bottles into clothes to re-engineering its entire value chain. 

Elodie Rousselot, editor of the book Circular Design for Fashiontold Dezeen:

“Circularity is about designing for systems change, for a future where instead of being a source of global challenges like climate change or biodiversity loss the industry can become a solution to those issues.”

We really have the opportunity here to rethink waste, design and how we create products.

Experience compensates for scarcity

But all of those changes loop back to the customer experience — and that means that the marketing side of your business needs to adapt, too. Customers deeply accustomed to abundance thinking are going to need assistance navigating the change. They will need new narratives around sustainability and value. 

Once again, Fjord Trends highlights this:

We expect an urgent need for the coming together of marketing, customer service and supply chain to protect and support brand reputation.

So, you need to start the conversation with your customers now about the changes that are coming. And then you have to do your best to support them through it. All the while, you need to be starting to rethink your systems for the new age of scarcity. 

It seems to be a common refrain as we look towards our post-pandemic future: the new normal won’t be the same as the old normal. And the new normal may not be stable for a long time to come. That’s a lot of business re-engineering to do. 

And the answer is…

It’s time to act. This is a crisis that few saw coming, which means that most businesses are still on the starting blocks. Those who get going quickest will have an edge in a difficult market. 

  1. Make sure you understand your existing supply chains — and where you are vulnerable.
  2. Where possible, start re-engineering your supply chains so that you can reduce their complexity, or, if that’s not possible, so you can reduce single points of failure. That might even mean increasing complexity. 
  3. Start planning long-term changes to your systems that allow your products and services to remain sustainable — in both senses of the words — in an uncertain future.

Scarcity is back. Sustainability is the new digital, with all the challenges that it implies. And supply chains just got sexy — or scary, if you’re unprepared. A new age of scarcity means a new relationship with your customers, and the time to start that is today.