AR's Profile

In a world of whip-sawing national governments, rising populism, and protectionism, global supply chains make less sense than they used to. I’m guessing the reason for the inefficiency of shipping product to Belfast and back again has to do with some sort of tax benefit that the UK government gave Guinness to package the product in N. Ireland. People above say they researched for the answer and came up empty, but this smells like a classic race-to-the-bottom tax break to me. If that’s the case, then Guinness should absolutely begin making immediate plans to move their packaging facility to Dublin. Put the N. Irish government and the UK on the defensive and make them reckon with the job loss potential of their isolationism. It’ll make the negotiation easier. If the government calls Guinness’s bluff, go forward anyway. You’ve paid a small price for supply chain certainty in what looks to be a volatile next decade.

The question for me is not whether the US solar industry can compete with low-cost Asian producers, the question is whether the US solar industry can compete with artificially subsidized low-cost Asian producers. And to that question, my answer is “Who cares?” If the Chinese government is willing to subsidize silicon wafer manufacturing, then by all means we should be willing to pay cheaper prices for the solar panels they’re subsidizing. We get cheaper (home-grown) energy, more installation jobs due to falling prices for panels, and this all will require less of a government subsidy for the energy price to be competitive with dirty fossil fuels. I’ll happily trade a few manufacturing jobs that will be automated in the next 10 years anyway, but an entire industry of installers and solar service providers. Now, the risk is whether China plans on driving all foreign silicon competitors out of business and then raising prices, but so long as the US maintains leadership in ancillary products (e.g., inverters) then this risk is overblown.

Global companies have a great deal of responsibility to mitigate global climate change. Extracting value for shareholders by stealing from the future just because it’s legal not only puts companies at risk for future litigation and regulatory clamp-down on their excesses (think the Super Fund Act), but it is also immoral. Companies exist for longer time horizons than their managers and it is the duty of today’s management to safe-guard their company’s strategy by considering what risks their successors will face. Climate change will drastically affect supply chains, resource costs, and government policy, and companies need to take steps today to mitigate the worst of these risks.

Two things interest me here.

First. What was the strategic reasoning behind investing directly in a minority stake of DS Co? It seems like simply purchasing their software product would have been cheaper and led to the same end result. I can see why Nordstrom could capitalize on digital supply chain industry profits by being directly invested in digitalization software, but it’s not clear to me if this was the best use of their owners’ investment. Many traditional retailers are bound to see the benefit of companies like DS Co, so what gave Nordstrom the impression they knew the valuation of future potential in the space better than the market?

Second. As we discussed in the Nordstrom case, Nordstrom’s customer promise revolves around customer service. Supply chain innovation is a necessity to be competitive, but has Nordstrom considered the implications of how digitalization will transform their service proposition?

It seems like all the strategies that Pepsi is employing are in mitigation of inevitable downsides of climate change but keeping their business model status quo all the while. Are there opportunities to start rethinking the business on a more holistic level. For example, someone above mentioned desalination which is still cost prohibitive, but what about other opportunities like non-water based drinks, using chemicals instead of agricultural products to flavor their beverages, or investing in vertical gardens as a way to source. I would encourage companies like Pepsi to see climate change not just as an externality to mitigate, but as an opportunity to rethink their business models for the 21st century.

I’m reminded of our discussion regarding Uber, Lyft, and Fasten. In the delivery space, it seems to me that network effects are another important consideration. The last mile of delivery is the hardest to get right and potentially the most expensive piece of the puzzle. Until drone or autonomous vehicle delivery, WMT is at a severe disadvantage in the last-mile and will find it hard to compete on price with Amazon. I wonder how many delivery services the market for drivers can support (Amazon, traditional shipping companies, Uber, etc.). WMT certainly can’t cede the space to these competitors, but they may want to consider strategic partnerships with a logistics provider that specializes in last-mile.