@MZ-Hammer, In my experience, any dependence on politics or trade decisions by government for your business case is unlikely to be lasting so that’s not where I would recommend they focus their efforts. I’m also not sure that your proposal for Georgia’s poultry companies to move their supply chain operations to China will solve the trade policies or actually the problem. I think moving poultry production operations to China would just mean that there are now other chicken parts not saleable in China because they grow enough chicken there to consume the other chicken parts (breast, thighs, etc) – China has a very mature poultry industry itself, and is home to one of the top 5 largest poultry companies in the World.
As you rightly note, the issue for the typical Georgia poultry company is: how can it extract value from all the excess poultry feet that it produces but is unable to sell in the US, and now China due to the restrictive trade policies… In my previous line of work, I looked into the alternative uses of unutilized / waste products from slaughterhouses, and learned about the very lucrative, high margin (60-80% EBITDA margin) waste rendering industry. A rendering plant uses offals, bones, hooves, hides, etc and other parts not consumed in certain markets including chicken feet in many markets, to produce meat and bonemeal, which is in turn used in the production of industrial animal feed on farms and pet food. Perhaps Georgia poultry companies can sell this excess to offtakers in the waste rendering industry. One issue I can see with this approach though is that they are unlikely to command as high a price than the human consumption needs in China, but, they certainly have the capacity to pay more than you may think.
My concern with this approach is that the culture in many of these VC tech firms is one of innovation deeply imbedded to align with the people, the formal organisational structure and its critical tasks in delivering cutting edge technology. I think the learning curve inhouse with Twill is too high for an old timer like Damco, and furthermore, let’s be honest… what business does Damco have developing it’s own “tech start-up”?. For example, I would argue that Flexport would probably figure out the ability to handle less than full container load a lot faster than Twill as it is in their DNA to do so. Damco could first of all consider outsourcing to Flexport and other tech startups, to really test out viability and push the boundaries at a low cost. The outsourcing model should work such that customers of Damco would be effectively be using the Flexport platform without knowing it, and Flexport would receive a fee for each consignment. Eventually, once proven successful, it may make sense to acquire one of these firms.
Messi, this is a wonderfully written article. I think what some of the comments are missing is that domestic supply chains are not only beneficial to the Nigerian government but also to Unilever. @Phil Mackeson, in investing in domestic supply chains Unilever is not “helping develop”, as you noted (as though they’re giving hand outs by making an investment) and it there are far more benefits to Unilever than “perception of local consumers” because Nigeria is a long-term growth market. I strongly argue that building out a local supply chain is in the best economic interest of Unilever too. Firstly, it reduces its inflationary and currency exposure as it will eliminate the P&L mismatch between local currency revenues and foreign currency costs. Secondly, it mitigates regulatory risks that it would be subject to as international trade policies may change between administrations. Thirdly, as Unilever becomes a more involved investor in the country, it will increase its negotiating leverage with the government over the any challenges it may have with infrastructure that everyone is commenting on above, and fourthly, Unilever is likely to benefit from tax rebates by making this incentive. The combined effect would lead to less variance in margins and long-term stability for the business, which will ultimately drive shareholder value!
I would however agree with @Justine that these protectionist measures do have an impact on the local consumer in the interim as they may lack the products they need. Additionally, a ripple effect across the economy is unavoidable as the many actors involved in the import business such as traders may be altogether out of business, therefore increasing unemployment rates.
Lucas, this article makes for a very interesting read. The proverbial ability for us to solve one problem whilst creating another. I like your suggestion of an activity based costing (ABC) methodology to account for carbon emissions. Perhaps businesses like Tesla should begin to adopt ABC to accumulate carbon emissions along the supply chain from all materials purchased in addition to those processed as this would allow for better comparability across different sourcing and operating models. I believe however, that you enter muddy waters when you extend Tesla’s realm of accountability/responsibility beyond their span of control in their supply chain.
DT, thanks for the article. I think that consumers need to be able to see the unique selling point before adopting these new technologies. The question I ask myself is what is in it for the consumer to adopt autonomous vehicles? Will they reduce their transportation cost? Ride-sharing services had very clear cost benefits to the consumer, but it is not clear what those of driverless technology will be. Additionally, should the aspiration to reduce our carbon footprint come at the cost of our safety? It is well known that one of google’s driverless cars caused a collision by changing lanes in the pathway of a bus!
On a separate note, the numbers are staggering: transportation represents 27% of carbon emissions. Whereas your article focuses on ground transportation, I wonder how much of that transportation number is actually aviation.
Finally, to your moral question… This is a broader discussion of the limitations of artificial intelligence. I interpret this as one of AI’s biggest challenges – pre-programming decisions that are usually reactionary/instinctive in human beings.
Bismah, this is a very interesting read. To your question of whether this model is replicable in other cities around the world, I think my concern would be the level of surveillance that the SMART system infrastructure has developed. Whereas I think Seoul has taken great commendable strides using this model, I think it would probably be met with resistance in many Western countries. The infrastructure set-up in many cases seems to have involved a level of surveillance on people that many would deem uncomfortable at best and even worse breach of data protection. For example, analysing the data from night time calls, and using the billing addresses of the callers from the telecoms company to calculate optimal bus routes… I can just see the headlines… “Proposed smart city will require citizens to live their lives on big brother”, “New proposal suggest spying on citizens will improve congestion”… etc. etc.