At least since the outbreak of the pandemic, companies have been talking about resilience. The term originates from psychology and first appeared in the 1950s. It defines the process of how people change their behavior in order to master new challenges. The concept of psychological resilience has since spread to more and more areas. In the energy industry, the term refers to an energy grid’s capacity to avoid power outages. In ecosystems, it's about returning to a baseline after a disruption: like a tree defying storms and hail. In sociology, it is the ability of societies to cope with external disturbances.
And this is precisely what resilience in business is all about: it is the adaptation of business to changing conditions in politics, society and the economy. Companies respond best when they recognize potential crises in advance and prepare for them. Resilience involves ensuring that crises affect a company less severely and that the company recovers quickly. But not all changes are predictable: The pandemic caught the global economy completely unprepared and exposed many vulnerabilities.
Limits of globalization
Before the pandemic, the global economy was perfectly organized and synchronized: Individual working tasks took place where the costs were lowest. A white T-shirt travels through five countries before reaching Germany after about 35,000 kilometers. Logistics costs play no role. Individual components are supplied by a few specialized manufacturers from a few countries. This is because the fixed costs per computer chip, for example, fall as the number of units increases. But the pandemic has paralyzed production. Supply chains are breaking down. At times, 130 ships are stuck waiting outside the world's fourth largest container port in Shenzhen-Yantian. That corresponds to almost two million containers.
Even as we emerge from the pandemic, the global economy is slow to take off. The hunger for semiconductors is enormous. Most of the computer chips come from Taiwan and the USA. But Corona and natural disasters are hampering production: in Taiwan it's a drought, in the USA a cold snap. Peugeot has been installing analog instruments in the 308 model since May 2021 because of the lack of digital speedometers. The automotive industry will sell almost four million fewer cars in 2021 because semiconductors are in short supply. Bosch decided in 2017 to build a chip factory in Dresden. The German chancellor opened it in June, and production is scheduled to start in September. This is an example of resilience: more production sites, shorter freight routes, and less dependence on geopolitics.
The home office is becoming the new normal
The pandemic has revealed something else: Digitalization can make an important contribution to resilience. Data travels around the world in seconds and is not affected by Corona. With every internet connection at home, the place of residence becomes a second workplace – if the infrastructure is right. Employees who have a laptop and obtain software from the cloud were well prepared during the crisis. Video conferencing software helped to maintain some level of social contact. Virtual events were able to replace conventions and trade shows, at least to some extent. Office work changed during the pandemic, and there will be no return to the old normal. Before the pandemic, twelve percent of employees in Germany worked from home at least once a week; in the early summer of 2020, the figure was around 50 percent.
Supply chains become more robust
Even if freight routes are gradually re-establishing themselves after the pandemic, just-in-time production is being put under increasing strain as the vertical range of manufacturing decreases. Digital logistics chains are therefore an important contribution to resilience. Seat builds 2,300 cars a day from 16 million individual parts at its plant near Barcelona. The parts come from within the Group from all over Europe. Major traffic jams on the highway can bring production to a standstill. If logistics experts know in advance what delays are to be expected, they can take countermeasures in good time. Another example: Artificial intelligence forecasts the arrival times of cargo ships more accurately. This is aided not only by data from the ships, but also by weather data and information from ports and canals. This makes it easier to decide whether the route around Africa is worthwhile in terms of time if the Suez Canal is blocked.
Safety is part of resilience
Digitalization speeds up processes, makes workflows more flexible and reduces costs. But it also creates new vulnerabilities. That's why resilience always includes a digital-security concept. In the pandemic, attacks on personal data via phishing increased by eleven percent, attacks with extortion software by six. At times during the pandemic, store shelves have been left empty because production and logistics came to a standstill – at the Hessian grocer Tegut, however, also because of a hacker attack. And this is symptomatic of a wider trend: the more digital the world becomes, the more companies must also invest in security and make their systems resilient.