Very interesting article.
I agree that determining a coherent policy on outsourcing is difficult in today’s political environment. However, as I recently heard in an interview on NPR’s “Marketplace,” tariffs and temporary trade barriers are often overcome by other factors in the market environment, such as prices, wage differences, and transportation costs. Thus, I wonder if companies would be best off simply ignoring President Trump’s rhetoric and instead basing their decisions on the current trade laws.
Companies can also consider the “long arc of history.” Even though isolationist trade movements have flourished in the past, and even become widespread, the relentless march of capitalism across most of the world in the 20th century shows that it does have its distinct advantages. I believe that companies should invest for the long term, assuming that free trade will exist – and then lobby to make that a reality.
Very interesting article.
Tesla’s insourcing strategy is an interesting gamble. However, I feel that it will backfire. Product ideation and marketing – which many other, more traditional car companies are focused on – are still very important for success in this industry. If Tesla has to focus its attention on both manufacturing AND marketing, I feel that it will dilute focus. Given the large amount of improvement that Tesla requires to make its cars cost-efficient for the mass market, diluting its focus in this way may not be the most effective strategy.
SV Agri’s product offering seems based on improving yield by assuming climate change and optimizing the chemical makeup of the potato supplies (e.g., seeds, fertilizer, etc). I question this business model’s sustainability for a few reasons:
1) Few, if any, farmers buy products in advance of an issue. Although climate change is happening rapidly (by global terms), it is still projected to take decades. Why would farmers, particularly poor ones, invest now?
2) By the time climate change has a significant impact, I think it likely that major crop producing companies (e.g., Dow) would also genetically engineer crops for the now-higher temperatures. What advantage would SV Agri have over them?
I am not sure that digitization drove Dieselgate. The incident seems more an issue of corporate malfeasance than one of digitization-induced change.
I do agree, though, that digitization opens new areas of vulnerability for global supply chains. Industries where transactions happen through a marketplace (e.g., commodities), where buyers never meet physical sellers, are most at risk. However, I am unsure of how corporations can avoid this risk. The benefits of digitization seem to still outweigh the potential costs.
Great essay. However, I would argue against the characterization of 2006’s unseasonably warm winter weather as an example of global warming. Rather, I would argue that it instead represents additional volatility that companies will have to contend with.
In other industries, we have seen additional volatility mitigated through means such as insurance, hedging, risk-pooling, and buffering. How can these principles be applied to global warming?
One way that immediately comes to mind is insurance. Companies highly exposed to climate risk could pool money in an insurance vehicle, and use it to offset additional costs of climate change. However, it might be difficult to identify whether or not a situation is caused by climate change.
I find it interesting that JD is able to pre-ship inventory, given their extremely wide product assortment. Perhaps they only pre-ship inventory for their highest volume products? I imagine that given their low average product cost, and the risks of pre-shipping inventory, that they might incur a high cost if products were not ultimately sold in the same geography as they are pre-shipped to.
JD.com does seem to be pushing the limits of digitization in their supply chain. However, I wonder how much of it is enabled (rather than retarded) by China’s lack of regulations and liability. For example, US companies might wait to launch drone delivery because the FAA has not ruled on its legality. In China, companies might start sooner.
However, regulations have a purpose. For example, if a delivery drone crashes, or causes a disaster, who will be held liable?