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What's Ahead: Business trends to expect in 2022

Vertical integration, where companies take over control of one or more stages in the production or distribution, looks set to become more popular in 2022. (PHOTO: Maersk)
Control and ownership over the value chain and resources will become more important. (PHOTO: Maersk)

By Goh Puay Guan

SINGAPORE — As the rate of vaccinations increased globally, life is slowly getting back to some semblance of normalcy. As we look forward to the future, what happened in the past year can also be a harbinger of business trends in 2022.

Here are some trends we can expect in the coming year.

Vertical integration and reconfiguration of global supply chains

The prevailing business orthodoxy before Covid-19 has been to focus on core or strategic business and outsource services which can be easily obtained from the market at lower costs. But shortages and unpredictability in supply chains upended this logic. It has also become harder to define what is core and non-core business, as companies change business models to meet market demand. Control and ownership over the value chain and resources will become more important, rather than seeking lower costs in the global division of labour.

For example, Intel has invested further into its chip manufacturing business, even setting up Intel Foundry Services to help produce metal castings, even though it has been outsourcing this service to Taiwanese foundry TSMC. Amazon now does more than 70 per cent of its logistics in-house, compared to only 46.6 per cent in 2019. In a bid to strengthen its end-to-end supply chain capabilities beyond shipping, Maersk recently launched plans to acquire LF Logistics.

Vertical integration, where companies take over control of one or more stages in the production or distribution, looks set to become more popular in 2022.

A new blend of online-offline services

Digitalisation will be more entrenched in businesses. For physical businesses, it will entail extending their operations beyond their physical boundaries. For example, the National University of Singapore Health System rolled out an app allowing its patients to do follow-up with doctors via teleconsultation. Meanwhile, in manufacturing and smart buildings, the use of sensors allows companies to collect information real-time, and build digital twins to replicate and simulate the operating environment.

New creative business models will also emerge. For example, Nike recently purchased RTFKT, a company that makes digital sneakers. Expect new business models that allow consumers to not only create and purchase digital sneakers online, but also to custom-make them for wearing in the real world.

Reverse integration can also take place. ByteDance (owner of TikTok) has gone beyond its social media purpose, venturing out with e-commerce offerings and investments in logistics capabilities.

A greater sustainability wave

Ironically, Covid-19 has also increased the environmental awareness of consumers. As natural disasters become more frequent and unpredictable, climate change moves to the forefront of the minds of consumers and companies. There would be a greater consumer preference for environmental-friendly product and services, and increased company focus on reducing the threat of climate change on their business.

Sustainability is a very broad concept that could encompass various aspects of protecting the environment and societal groups that depend on it. As businesses identify opportunities, and governments use regulations and incentives to promote sustainable initiatives, we should expect that the broadly-defined “sustainability sector” will continue to grow. Start-ups and innovations are springing up in agriculture, water, renewable energy, waste reduction, packaging and recycling industries. Large companies are investing in new technologies in these areas or getting into infrastructure and green funding initiatives.

To some extent, what the new year holds for us, and the trajectory of the world economy, will also be determined by the impact of Omicron and potential new variants. While we have started on economic recovery, its path will be determined by how much disruption there is to supply and demand in 2022. Let’s hope what does not kill us can only make us stronger as we continue to adapt and adjust.

Goh Puay Guan is an associate professor in the Analytics & Operations Department at the National University of Singapore (NUS) Business School. He is also the Academic Director of the NUS MSc in Industry 4.0 programme. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.