H&M has committed to operate a more environmentally sustainable fast fashion business, but as climate change looms over the complex supply chain of apparel production, are these efforts enough?
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The immediate and potential long-term effects of Brexit certainly cause companies like ABF to reevaluate their business model. Instituting important supply chain shifts are likely required, but I’m doubtful that one so drastic as eliminating retailers and distributing directly from ABF to consumers may be successful. At a moment when business margins are tight and the costs of doing business in the UK are increasing, should ABF vertically integrate a resource and capital intensive part of the supply chain? The benefits to this change are clear, as you outlined in your post, including eliminating profits paid to retailers. But I believe that the costs and risks of this change likely outweigh the benefits.
To take over the role of the retailer, ABF would have to invest huge amounts of capital resources in retail facilities. Even if the company considered an e-commerce model, the cost of developing an internet service for food products would be a significant investment. Additionally, ABF would bear the cost and legal responsibility for many, many workers required to staff the retail roles and responsibilities. As the cost of labor is rising in the UK post-Brexit, I view this personnel obligation as especially risky. Finally, ABF would assume the risk and obligation of all inventory transferred to the retailers, possibly lengthening its financial product chain and cash conversion cycle. For me, the wide-spread financial risks of assuming such a significant part of the supply chain in the wake of Brexit are cause for concern.
On a broad level, I think the impact of isolation movements on large companies like GM is enormously significant, even if the company has seemingly positioned itself to produce more vertically inside one country. This effect is due to GM’s tremendous dependence on suppliers; its supply base, the location of that supply base, and the corresponding impact to the supply chain are crucial elements to GM’s success. GM requires tens of thousands of diverse manufactured parts, raw materials, and suppliers to produce a single vehicle. Despite GM’s immense purchasing power and resources, it’s challenging to develop high quality, high performing, competitively priced suppliers. It may be impossible to optimize location, capability, and price. For example, GM may only have a few suppliers globally capable to produce a highly technical electric component required in millions of vehicles each year, all of which may be located in China.
Although GM has closed several of its international production facilities, its manufacturing locations in the US depend heavily on a very diverse and geographically spread-out supply chain. GM has even pushed many US-based suppliers to operate in Mexico to minimize the cost impact to the product supply chain. Could those very product chains now be in jeopardy, as trade tensions rise between the US and Mexico? US trade policies may be trending towards manufacturing isolationism, but I’m very doubtful that the complex automotive supply chain can be localized in a cost-effective way. If this trend continues however, how could GM remain both profitable and competitive?
Prior to starting at HBS, I participated in 3 courses through HBX, a subset of HarvardX and Harvard Business School’s online classroom platform. I was pleasantly surprised, even shocked at times by the effectiveness of the platform – I felt engaged with the online materials, I could interact in real-time with other classmates around the world that were online, and I appreciated the flexibility to complete courses around my existing schedule constraints. I also participated in a live HBX case-method discussion before starting at HBS. The high level of functionality and technological advancement in both these experiences were extremely impressive. I’m surprised, therefore to read about such low course completion rates and mediocre feedback regarding this platform. While I personally agree that a blended curriculum of both online and offline academics may optimize learning and be more relevant for students in the increasingly digital age, I’m more optimistic about the possibilities for HarvardX.
What was clear from using this interface, however is that producing HBX is a massive undertaking with significant cost. The live class was comparable to a broadcast television show, with a large set, many people managing video, sound and each student’s live camera feed (for cold calls), and an impressive combination of live camera and web-based student engagement activities. To regularly produce these classes and pay for teaching salaries likely presents significant costs to Harvard. As you mention, technology now becomes obsolete at an increasingly rapid pace; Harvard must regularly improve and innovate this online platform to remain relevant in this space. But is the cost of this production sustainable? Can Harvard continue to increase tuition costs and fund these courses, or will students reach a financial breaking point?
It’s clear from the information shared in your post that sustainable fishing should be at the forefront of Red Lobster’s business strategy. But as it grows its activities in farming fish and crustaceans as a sustainable practice, I wonder, how will consumers respond? It seems that as the social push towards organic, natural and whole foods gains momentum, the idea of farmed fish becomes less desired and even shunned by customers. Who wants farmed salmon when you can buy Alaskan wild, fresh-caught salmon? And farmed tilapia is rapidly becoming synonymous with a product many consumers eschew. As consumers become more conscious of the sources of their foods, can Red Lobster’s sustainable fish farms be sustained?
I also wonder how long Red Lobster can maintain its low-cost seafood business model, as it experiences other impacts of climate change. Not only will the availability of fish decrease, but the rest of its supply chain will also likely experience related effects – costs of transportation will increase as the cost of fuel rises, wheat and other agricultural products may become scarce and expensive as temperatures rise and water disappears, and regulations on importing goods may become more stringent. Unless Red Lobster can institute significant improvements to its supply chain and operations to offset these rising costs, it will eventually have to pass along price increases to customers. If Red Lobster can no longer be the low-cost seafood restaurant that consumers expect, what’s its position in the market? How does Red Lobster, the ethical, environmentally conscious and fair-priced seafood restaurant sound? ¯\_(ツ)_/¯
I’m surprised that more surfers don’t use eco-friendly surfboards, as it seems they would be uniquely attuned to the direct threats against their passion and in some cases, profession. Do Firewire boards offer a different level of performance that would prohibit amateur or professional surfers from using them, particularly from the reduced use of resin in its boards? If not, why do you think more surfers haven’t adopted using these boards? Are there other prohibitive factors that Firewire should address, such as high price points, limited retail availability and distribution, or a long production lead-time? Are there ways the company could improve their production process and supply and distribution chains to customers in order to increase its market share?
I agree with the idea that Firewire should target sponsoring more surfers to get higher levels of visibility. As is the case with many extreme sports, I think that in surfing, professionals have the ability to dramatically influence the demand for specific goods and brands through sponsorship and endorsements. This, coupled with the production of special edition or custom boards for certain occasions could generate a lot of positive buzz for the company. I also think that Firewire should tap into the rapidly growing adventure tourism and overall tourism markets – it could target partnering directly with travel and tour organizations like TripAdvisor and PlacePass to get connected with the many companies that offer, or could offer surfing activities, tours and trips. It’s still unlikely, however that Firewire could displace existing board manufacturers through these efforts. I’m therefore left wondering, should the company instead attempt to change other manufacturers’ behavior and create a new, more environmentally-friendly industry standard for producing surfboards? Or does Firewire care more about its unique competitive advantage in the marketplace than creating a sustainable environmental change in the industry?
The possibility of digitizing a portion of the ice cream supply chain to better understand and communicate customer preferences, forecasting demand and order fulfillment is an interesting one. You mention that the level of investment required for this project may not be feasible, and I agree that the magnitude of the investment could be significant. But if Nestle decides to use “smart shelves,” who should pay for it? If the proposed technology is located inside the retailers, and benefits both the inventory levels and costs of the retailer and the distribution flow and costs of the manufacturer, who should bear the cost of this investment? Nestle, or the retailers? When various costs can be improved across a supply chain, which group(s) in the chain is(are) responsible to generate the improvement ideas and bear the costs?
I’m also left wondering, is this the most relevant supply chain improvement that Nestle should focus on? The sample cold chain diagram above states that 20% of cold chain goods are wasted at the time of shipping; this quantity is huge and presumably, a significant cost to companies. If this statistic is true for Nestle, the smart shelves don’t seem to address this problem at all! Will smart shelves propelling Nestle into the future of better forecasting and order fulfillment matter if 20% of its ice cream melts / is wasted during transport? Why is such a high percentage of goods wasted during transport, and what could Nestle do to improve this costly element of its supply chain?
Within the resource constraints Nestle presumably has to support supply chain improvements, are smart shelves the best investment?