Winning the Lottery. Oil and Ghana’s transformation

This week in the UK, news of a £90 million Lottery win launched a media frenzy and a barrage of questions about what the winners would do with the cash – keep the day job or, go shopping? In 2007, Tullow Oil found a significant oil reserve under the sea off Ghana’s Gold Coast. The IMF estimates that the Jubilee Field will generate $30 billion of revenues by 2030. In a country where 30% of the population are living on less than $1.25 per day. The Lottery advised the UK winners to take an immediate holiday to consider options. Kofi Annan, a native of Ghana and former UN President, urged Ghana’s Government to ask Norway for advice on what to do about oil. He did not suggest Nigeria.

There's more to oil than oil

Ghana was the first African country granted Independence and, by the Jubilee of 2007 had held 4 (soon to be 5) democratic elections against a backdrop of peace and stability; control of corruption; solid macro economic management; poverty reduction and an effective social contract. The capacity of any government to collect taxes and provide social services sums this stability up: in 1990 Ghana collected 12% of GDP and this had grown to 24% by 2005. Primary school enrollment over the same period grew from 54% to 65%. Will Ghana’s oil have a transformative or, a destructive impact?  The jury is out.

 

Thoughts on ethics and the Supply Chain

Writing on the abolition of the British slave trade in 1807, G.M. Trevelyan, the historian, called it “one of the turning circumstances in the history of the world”. As we look to Logistics to make a more transformative impact on global business practice, we could turn to the campaign waged by William Wilberforce and the Abolitionists for inspiration in the quest for an ethical supply chain. Here, T L explores ideas around an inclusive, sustainable and ethical value chain moving goods from source to the consumer; linking it back to ideas set in train by a four hour speech given in the House of Commons in the momentous year of 1789.

A long and winding road

Globalisation has forced companies to develop better, cheaper and faster routes to market – continuosuly. This has generated huge pressures on companies to shorten lead times; place smaller orders with few longer term commitments and, become footloose in search of  lowest cost operators. We have seen the growth of Corporate power – many of the majors bigger than the countries they source from and, the move to outsource non core operations creates layers of suppliers that  add capacity to Tier 1 but reduce any chance of transparency and challenge ethical consistency.

 

Nature’s pig and inclusive value chains…

Cotton is natures pig. Everything can be used. First off, the fibres. These soft white threads - over 80% of the world’s natural fibres – cover the seeds and are strong enough to deal with our sweat and, be washed and ironed hundreds of times. Even today, when synthetic fibres account for 60% of the market, cotton hangs on to the rest. Then, the seeds themselves. Rich in protein, they become a major part of oil used in foods. Then, what is left over finds itself in soaps or, as feed for cattle. Finally, what is left of the plant itself is used for animals to bed down on or, as kindling for a fire. Cotton planted in April is harvested in October and spun the following Spring. By the time this white gold is processed into fabrics, a full year has passed. Let’s look closer at the logistics dimension and how inclusive value chains can make a difference.

More inclusive blue sky thinking needed ...

Look at the shirt or blouse that you wear and consider the story behind the label and its price. Can you imagine the farmer that seeded the crop and the inputs that were needed to protect this fragile crop? Do we know the impact that pesticides are having on the environment or, what the intense need for water throughout the process – some 2,600 litres are needed per shirt – is doing to water supplies? Are we clear that many farms are forced to use child labour to survive and, that loan sharks are behind much of the cash that finance the crop? There is a catalogue of social consequences that need to be understood and, a lack of transparency throughout the process – often caused by the agents at every step – that makes dealing with the economic, social and environmental challenges so difficult.

 

Port cities and the sustainability challenge

Tonight, Christine Loh – founder and CEO of Hong Kong based Policy Research Group Civic Exchange - gave the annual Peter Thompson lecture at the University of Hull Logistics Institute. The theme was Port cities and, the sustainability challenge. 

Takes your breath away!

Using a Global League Table of the top ten container ports since 1998, Christine Loh highlighted the rise of Shanghai from 3 million to over 28 million teus (containers) by 2008. Other ports came from nowhere to join the elite. Then, showing photographs of the port proximity to living space, Public Health figures were introduced to beg the question – is this growth sustainable?

 

Mind the gap! T L is needed. Now!

Distribution rarely makes an appearance on the main stage of the Globalisation debate. Specialist literature on logistics or supply chain management is confined to the margins and yet, few countries are in a so-called developed state and, the vast majority need a revolution in infrastructure and connectivity to have any chance of transforming their economies to reap the rewards of globalisation or, improve their local realities.

Paul Collier has tracked a number of African countries where natural resources have not generated the desired social dividends and many other commentators highlight countries torn apart by civil war or, natural disasters to be plagued by the dead hand of corruption. And yet, in some Report or, Strategic Plan somewhere visions of a viable market-led economy tied together by logistics languish. Let’s look at the journey that all such countries have to travel. 

All countries torn apart by war and many wrecked by natural disasters turn to military logistics to put them back together. Temporary bridges and makeshift roads are laid to pull together isolated communities and, lay out the network that can allow a second phase Humanitarian logistics effort to work. Now, the work of reaching the needy with food and the sick with medicines can begin. And yet, the next set of images that we see in this narrative is based on a business case from the developed world. It is as if we move from military and humanitarian logistics to a market led solution in one giant leap.  From mayhem to shopping mall is not the logistics next step. Mind the gap.

Without T L there's a clear gap

 

CII Logistics Summit, October 2009, Chennai

In a speech on the Skills Gap and Manpower training at the CII Logistics Summit 2009, Rob Bell spoke of the elephant in the room. He was referring to the tendency to ignore those who live and work in the informal or shadow market when all of the great plans for India are being discussed. All talk of India shining and the demographic dividend must address those at the bottom of the pyramid and, the skills deficit.

Over 350 delegates heard him speak of the skills gap in India. “By 2022, India will need over 500 million skilled workers but, current skills training capacity is no more than an estimated 3 million trainees per year. This is a major skills gap in the Young Republic and a revolution in thinking and practice is needed to close the gap.”

Let's not forget the inclusive value chain

Using examples from all sectors of Indian industry, he highlighted the massive infrastructure and sector based investments that are planned over the next 15 years. From Ports to Warehousing, the Logistics industry is being transformed. However, without the skills to deliver – these plans will stall.

 

The perishable supply chain

Have you ever wondered about how Italian ice cream was invented – before electricity? Or, the significance of eggs at Easter? Ice cream reaches back in time to the Egyptians; the Mughals and 5th century Greeks with their snow mixed with honey and fruit. And hens always laid their eggs from April to June when their body clock said so. For most of recorded history, eggs were a springtime crop and, that’s where it starts.

Where am I going with this? The perishable supply chain combines technology to conquer borders and distance but we need to understand the dislocation involved in local communities and the environment itself. For example, as the Indian middle class grows so too does the demand for quality fruits and vegetables. Recently, in Delhi, I met with a company that is developing an impressive network of orchards up in the foothills of the Himalayas. This will take time so, there are plans to source apples and other quality fruits from … Chile.  

 

Transforming deities …

So there we are in a village in Tamil Nadu when someone asks the question what is logistics? How can it transform our lives? As ever, we search for a bit of local context to make the point …

 

Hinduism has 330 million or so divas (gods); those knowable aspects of the formless phenomenon, Brahma. Some personify natural phenomena, evil forces or even a  disease; some are humans deified and others, the local deities of a town or a village. The gods are many headed , many limbed and often fantastical but despite this superficial polytheism there is an underlying belief in a single deity that drives the rest.

The Gods appear as pairs … [hang in there, we will get to Logistics in a moment] … and the male aspect needs the female, his shakti (consort) to be complete. And each god and goddess has a vahana, a creature considered the vehicle on which they ride.

 

Improving Supply Chain Energy efficiency. What happens to the Majority World?

McKinsey have published an important insight into increasing the energy efficiency of supply chains. Starting from the fact that 15 million barrels of oil per day – that’s 20% of total production – is used to move things around globally, the study highlights six levers that can make significant impacts on energy efficiency. See: McKinsey (August 2009).

The levers work within three oil price scenarios and focus supply chain set up (from increasing value densities; reducing transport distances and switching modes) to the transport assets themselves (improve design and technology; maximise usage and improve infrastructure).

The levers are well documented. However, several issues remain untouched and the report would be improved by considering:

1. The Majority World. Let’s suppose that Brasil, Russia, India, China and other emerging economies end up with the same level of consumerism as the current developed world. We will need something like three planets to provide the raw materials. Think of the supply chains and the energy that they will use.

This Blog has covered this  point extensively. It needs to be said again in this context. As more companies outsource, companies no longer compete on their own. As Martin Christopher emphasises – supply chains do. Increasingly, this means that front line brands depend – often without knowing the full extent – on several tiers of supplier. Many tier one suppliers outsource production to increase their capacity but, in doing so, open up risks and exposure to the informal market. What does this do to the supply chain and, efforts to maximise energy utilisation and improve efficiencies? 

Specifically, the oil lobby is well organised, well funded and the apparatus of growth (rather than sustainable growth) is largely dependent on it. The renewables sector holds none of these cards – yet. What chance is there to maximise the impact of renewable energy options into an often informal economy that does not have the resources to “buy in” to the technology or, even fails to comply with legal status requirements that would allow them to access funds and subsidies to make this happen? 

This is not to demonise the informal world but to champion inclusive value chains (see the work of Professor Malcolm Harper mentioned on another recent post) and, their significant capacity for innovation and being part of the employment solution worldwide. And an inclusive value chain has to be a green one too!  

2. Skills. It is acknowledged that the major driver of energy usage is behaviour at a Corporate and an individual level. Again, as we factor in the Majority World to this energy and the supply chain equation, we add significant complexity in relation to behaviour. What happens to the skills that can improve asset utilisation and optimise energy performance?  Why not explore training on two levels:

• Enabling skills: This could be focussed on the language, communication and core learning skills. This will start with assessment and equip people to absorb the know how that will be required at the task level.  
• Functional skills:  Task specific and focussed on asset utilisation. If Governments are serious about renewables where will the skills come from to implement Policy? Are they to be local or, another opportunity for expensive ex pats to clean up?

Note: Consider this in a T configuration – “T” Learning. The idea was inspired by Mangan & Christopher elsewhere.  

3. Training technologies. The image of training is locked in a classroom. How can any emerging and developing economy hope to mkae things happen within a reasonable timeframe when the ability to implement the training required is hampered by the inability to scale up the delivery in sufficient numbers? Before we start to consider curriculum design – there is plenty of material out there – let’s look more closely at the technology to fast track actual front line delivery. Is enough being done to move beyond the classroom and into, say, mobile telephony as a means to deliver training or, in some cases, support decisions in the field. For example, look at the maintenance function across all sectors such as ports, power or, agriculture. What about developing a cutting edge set of tools to be used to diagnose problems; suggest solutions and then, move to a visual “how to” make a solution happen. And all of this needs to happen with people who have little or no schooling. Voice activated commands and visual material can help matters improve dramatically. Other ways to make this happen include improving the quality and scope of simulator training to be used in the field. Take the example of trucks.

Trucks are key to success in all developing and emerging economies. And yet, there is a widespread shortage of drivers and a chronic lack of insight into how to train them in any other way than on-the-job. Take India -many roads are potholed and often “bio degradable” – a pleasant way of saying that they disappear in the monsoon – and, welfare conditions are dire. Corruption is rife at border conrol areas; the Aids rate is the highest amongst the population and, general health factors are not catered for. Against this backdrop how are we going to improve truck performance and safety on the roads? Try simulators. Potential drivers can be assessed beyond their ability to hold their booze using objective criteria; all sorts of driving conditions can be worked on and, fuel and wear and tear can be reduced to zero.

This is the way to go for all sorts of materials handling assets all along the supply chain and beyond. For example, what about welding? What about any number of competency and continuous assessment schemes that can be greatly improved using objective criteria often lost on-the-job and even in the classroom. 

This emphasis on skill is crucial. Behaviour change is the only way to transform the way things are designed, are used and their productivity is improved upon.  

Years back my Father was working in Sweden when they changed the side of the road on which they drive. This innocent then seven year old asked how they did it. Cars on Monday; Trucks on Tuesday … It started a discussion on change I have never forgotten. And this is the dilemma we face with greening the supply chain. Far too little is being factored in to make an impact in the Majority World. This could be disastrous. 

The McKinsey report is useful. However, far too many reports focussing the green supply chain and ”how to” improve energy efficiency shy away from tackling this massive issue – the green supply chain and the Majority World.

Thoughts?

 

From street markets to digital bazaars

Back in soviet times when the economy was fixated on heavy industrial goods consumer items reached their market by word of mouth and demand aggregated to prioritise supply below the radar of the State. Cuba with its vast underground of unlicensed products and services either pilfered from the State or, brought in from outside works in the same way. And like so many other informal markets all over the developing and emerging world, word-of-mouth or, to use a buzz word from the textbooks, viral marketing drives demand and pulls the product to market.

revolico.com has transformed this en la calle (street based) market into a digital bazaar for a broad range of goods from housing to cars to classified ads. revolico, meaning disarray, has become one of the top 3 web sites in Cuba with over 1.5 million page views per month and over 100,000 ads placed in the last two months.