Really enjoyed reading and thinking about this post, Caue. 3D printing at once seems like an easy, intuitive fix to high-friction borders and at the same time an utterly unscalable solution. At first glance, I’d be more likely to agree with the former, but reading some of the previous comments and some of the literature on the matter make me more bearish on the ability of 3D printing to comprise a significant portion of GE’s manufacturing. Potentially if GE were able to use 3D printing selectively for a few parts produced out of country, then 3D printing could overcome protectionist barriers in this fashion, but my sense from your post is that airplanes and spacecraft are comprised of hundreds of thousands of parts produced across quite a diffuse geographical network. In that light, I wonder about the implementation difficulty, not to mention the cost, of spreading 3D printing capabilities across GE’s global manufacturing network… if you need the plane delivered in Brazil, then printing the part in Brazil is all well and good, but if you need to deliver the plane to France, the part in Brazil isn’t very useful. If instead GE is using its recent acquisitions to own more of the manufacturing process, that would prevent the company from capturing the benefits of outsourcing this incredibly complex manufacturing operation, price shopping different suppliers, optimally managing transportation costs of raw materials and WIP inventory based on final delivery destination (enabling geographical and supplier flexibility based on the order), etc. Becoming more dependent on a few 3D printing enabled suppliers or taking on more manufacturing responsibility would be quite risky for the company and contrary to its current strategy. Moreover, reading this HBR article  made me more skeptical that 3D printing will be cost effective and revolutionary for manufacturing in the near or medium term. For parts that are not highly customized, it’s hard to imagine 3D printing effectively competing on cost with conventional machinery: there are not only upfront capex costs but also significant pre- and post-printing costs, training costs (in the factory) to teach workers how to use the less conventional equipment, and labor costs (to develop these 3D printing schematics). 3D printing is fascinating and revolutionary, but its use case may be limited to highly custom parts, which may limit its ability to solve GE’s cross-border friction problems.
Great, highly topical post, JS. I’d agree with the consensus above that it’s highly unlikely Trump explodes NAFTA in ways that will disadvantage oil and gas companies given the political and financial pressure to avoid that situation (though I like Drew’s LNG silver lining suggestion). Given that it’s just not possible to say for certain what the administration will end up doing, I’m intrigued by your suggestion that Energy Transfer Partners should look into distributing alternative energy given their expertise in this discipline. The strategic rationale is clear – reduce dependence on natural gas and diversify to try to de-risk the business – but the expertise point is less clear. Based on ETP’s company website, they seem to have more than 71 billion millions of pipelines for “natural gas, crude oil, natural gas liquids and refined products” , and from what I understand, wind energy, solar energy, nuclear power, and hydro electricity don’t run through pipelines, so that asset base and expertise wouldn’t be of any use. Potentially those pipelines could be used for biofuels, though the market does seem to be moving more toward other renewables like wind and solar . While ETP might not consider getting into the wind or solar power generation business, they would need to be able to transport and likely store the energy, which requires expertise in batteries and electricity transport. I’m not sure ETP has any edge there, though the company might consider acquiring it or entering into a joint venture. Potentially, the compelling narrative ETP could tell about acquiring a wind or solar energy transport company is that ETP has expertise in the government and corporate relationships required to successfully sell the energy as well as the financing required for these highly capital intensive transport construction projects and therefore the combination would be synergistic.
Nicholas, I really enjoyed this post. Great description of an innovative business model taking advantage of new, digital opportunities. Your last question raises a good point about what Fikri should do moving forward, given that he doesn’t own this section of his supply chain, the digital delivery, and therefore it’s not an ownable differentiator for him. I do think Fikri would likely benefit from a G0-FOOD competitor or competitors entering this market, as competition might drive prices/commissions down for food suppliers like him and would keep pressure on GO-FOOD and all competitors in the market to keep the delivery operation as efficient as possible, lowering costs for suppliers, customers, or ideally both. Your suggestion that Fikri will end up building his own delivery service is very interesting – GO-FOOD reminds me of Li & Fung aggregating and servicing demand for small companies, but maybe that doesn’t make as much sense once you get to scale and therefore he should build his own force. If he does build his own delivery force, maybe he could try to use customer data to optimize how many drivers he hires per hour, by day, and time of the year. Potentially, if GO-FOOD’s cut is too expensive, maybe he should think about building another free lance force by partnering with other local businesses on a small scale to pool their demand for a lower commission (which would attract more food-suppliers, given the lower fees, and could attract riders, even at the lower commission, if there is currently more supply than demand for free-lance riders). It would be difficult and expensive to compete head to head with GO-FOOD’s matching algorithm and application software most likely, but on a small scale, potentially a simple interface without an advanced algorithm could provide some demand aggregation benefits for a few local businesses at a lower cost than a dedicated sales force. In addition to incorporating up-stream digitalization as it happens (as you point out), I wonder if Fikri could incorporate these digital optimization concepts further into his business model, potentially by using historical customer order data to plan out his labor allocation and maybe proactively manage his raw material inventory. If he isn’t already, he could also use the digital platform to try to get additional visibility into customer behavior, e.g., by allowing advance ordering. Maybe, if he’s really successful and feeling adventurous, he could also pilot a mini-drone program. That might be a marketing campaign in itself!
Drew, fun and interesting post. I absolutely agree that better food tracking is a huge win for the industry and the public when it comes to food safety: companies can more quickly and cost effectively contain potential contaminants and the public can be more confident the food they’re eating isn’t contaminating. I am a bit skeptical that better tracking will incentivize superior consumer behavior in terms of less wastage, though I certainly agree that better data tracking leading to improved forecasting, sourcing, production scheduling, and delivery could help reduce internal wastage within Cargill’s supply chain. My assumption would that a minority of customers are willing to change their purchasing and consumption behavior based on environmental concerns, but true, any reduction is positive and maybe this push is part of a greater trend toward higher awareness and less wasteful behavior. I do think for the segment of the population that does care about environmental impact, the traceability to individual farms and farmers  is an attractive feature and rare differentiator in what seems like a pretty well commoditized market. My bigger question is why blockchain is the required tracking technology here. From what I understand about blockchain, which is admittedly not a ton, the unique benefits of the technology are that it is public, transparent, incorruptible, verifiable, and decentralized. For Cargill, sure, it’s helpful that this data is public, but they could easily make their own non-blockchain tracking data public. I don’t think they have a real interest in the information having decentralized ownership, being externally verifiable (most customers likely trust Cargill isn’t making this data up), unhackable (are we worried turkey tracking data will be hacked by Anonymous or a rival firm?) I don’t quite see why a good cloud-based spreadsheet or RFID tag doesn’t provide the tracking benefits that blockchain can – Fedex and UPS seem to have been successfully tracking packages for their customers’ impatient eyes for years without blockchain. I suppose over engineering isn’t a problem here unless the use of blockchain itself actually increases the amount of energy used (apparently, a single bitcoin transaction consumes ~5000x the energy required for a single credit card transaction!! ). Hopefully Cargill is using the much less energy-intensive “proof-of-stake” blockchain system versus conventional blockchain…
Bill, great read! JD.com’s investments in warehouse robotics and in drone delivery seem like exciting, forward-thinking strategies (and they seem to be quite serious about making drones a practicable logistics method ), but I do wonder if JD.com is getting too far outside its e-commerce core. You might say that JD.com is just doing what Amazon has done very successfully, i.e., succeeding as a logistics company as well as a marketplace in a synergistic fashion, but I’m not convinced that e-commerce companies can also be successful, innovative tech companies. I wonder if a partnership or acquisition model to develop these capabilities might be more effective than internal R&D. To that point, you mention that Alibabi is not investing in its own supply chain in the same way – meaning, Alibaba do not own the supply chain itself – and that makes me wonder what the merits are of becoming a logistics (and tech) company versus a matching marketplace (the origin of these companies). It does appear, however, that Alibabi is getting closer to owning its own supply chain and taking more direct control of its logistics to reduce costs and improve the customer experience , so I could well be wrong to doubt JD.com and the company is actually ahead of Alibaba here…
Very interesting to look at Blue Diamond through an operational lens (versus a marketing one), and your ending question brings up a number of intriguing issues. One, I agree that farmers may have an incentive to use ‘conserved’ water to plant more crops, particularly during non-drought years, and therefore increase the risk of major losses during drought years, but I suppose the goal of the Industry Notes is to educate farmers as to why to conserve water (it’s in their best interest in terms of financial risk) as well as how. But you are absolutely right to be concerned – maybe Blue Diamond will have to incorporate incentives for farmer water reserves to encourage the right behavior? Regardless, using less water to grow the same volume of almonds seems like a step forward for conservation efforts. To that end, do you think Blue Diamond should try to partner with a company like Indigo and develop strains of almonds that require less water to begin with? I realize that sort of R&D might be outside Blue Diamond’s typical core, but might be a worthwhile investment for long term sustainability of the company and the environment. Lastly, I wonder if ultimately global warming uncertainty will force Blue Diamond to join forces with almond growers in other regions California to diversify the year to year drought risk and avoid losing market share (e.g., with Australia, as you mentioned).