Ten Years From Now—Do You Have a Plan?
It’s a new decade and time to project and plan for the next one. Ten years from today, what will your market look like? What kind of customers will you have and where will they be located? What will they buy? How will they buy? And how will you adapt your supply chain operations to serve them?
Ten years is a long time from now. Should you be planning or even considering these questions? Given standard business practice and an unpredictable economy, I’d say the answer is yes.
Technological innovations will certainly drive much of your long-term strategic thinking. Other important developments in the next decade will also drastically impact how we will conduct business. What are these developments and how will they impact planning as you advance along the demand-driven enterprise continuum?
During the past 10 years, we’ve seen how the emergence of consumer economies in the developing world drove a rapid evolution in trade as well as the logistics and supply chain structures and applications that supported and enabled that growth. Internationally, that growth will continue.
Trends and measurements indicate that a similar evolution in the United States is just over the horizon. Consumer and industrial buying habits, driven by U.S. demographic changes, will spur dramatic shifts in U.S. consumption patterns. In my view, the impact on enterprise operations will be even more dramatic than those wrought by artificial intelligence, robotics, and other logistics technology. Who buys, how they buy it, and what they buy really drives the supply chain.
Is that a far-fetched notion? Let’s break it down. "Baby boomers have always had an outsize presence compared with other generations," according to the U.S. Census Bureau. "They peaked at 78.8 million in 1999 and have remained the largest living adult generation." Boomers—and what they buy—drove much of our economic activity in the past.
But new consumers will soon outnumber baby boomers by two to one. Add millennials (born 1981-1996) to Gen Xers (born 1961-1981), and a very different consumer and style of consumption will drive the economy of the next decade. And as they age, boomers, millennials, and Gen Xers will change what they buy in important ways.
For example, for the past 10 years, Gen Xer consumers have lived off discretionary spending. "U.S. adults aged between 21 and 38 years old will begin to prioritize ‘necessity spending’ over the next decade," Bill Smead, founder of Smead Capital Management, told CNBC.
"Necessity spending" means young adults will soon move away from buying "Apple devices, craft beer, and Chipotle burritos," Smead said, and instead spend their savings on big-ticket items such as cars, houses, and the things that furnish them—appliances, furniture, and other home goods.
"We have got 89 million people between 21 and 38 years old who are about to start their lives, form households, do incredibly economically impactful things," Smead added.
What’s more, we’ve got the lowest interest rates in U.S. history. "We are practically giving them the money to buy houses and buy cars" and other big ticket items, he said. Smead’s prediction? Strong economic growth will continue in the United States, and we will therefore be less reliant on global trade even as global economic activity grows.
Wait, there’s more. By 2030, one in five, or more than 70 million Americans, are projected to be age 65 and over, according to U.S. Census data. Many of these retirees will transition to lower-cost states. That means more high-end consumption as they set up new households with lots of disposable income from proceeds from the expensive real estate they left behind.
Add newly arrived consumers whose fertility rate percentages far outstrip native-born consumers, and it’s clear these new arrivals will drive higher levels of consumption as well.
By 2030, the U.S. population is projected to be 350 million. Add the new level of buying and the uptick in consumption of "big-ticket" items to the existing consumption habits of boomers, Gen Xers, and newbies, and U.S. economic activity will explode. Boom times are just over the horizon.
Considering these projections, you do need a long-term plan. Ten years from now? 2020 will be 2030 before you know it.