Excellent analysis of a huge problem facing many automotive parts suppliers. If Rassini acts quickly to mitigate the impacts of a potential nationalist tariff in the US, they can gain a competitive advantage against other foreign suppliers in the US market. However, Rassini must be very flexible in their approach due to the extreme volatility of the political climate and the large variance in the implementation timelines of various political regulations. A tariff can be repealed just as quickly or slowly as it was enacted. Rassini should therefore only consider solutions that require high capital investments as a last resort. I can think of two potential ideas for relatively low cost solutions to address the impending tariff:
1) Rassini should evaluate US-based raw material suppliers. If Rassini moves some of its raw material supply chain to the US, it can potentially avoid or reduce the US tariff by making the argument that the produced components have a large impact on the US workforce and a tariff would harm the US raw material supplier company. Rassini should target commoditized raw materials because they would have a better chance of finding US-based suppliers that can compete on price compared to a foreign supplier.
2) Many automotive parts suppliers provide assembled products to their car-making customers. If Rassini has products in their foreign production facilities that require significant manual assembly, they can perhaps move the assembly portion of the process to a US facility while leaving the component production in its original plant. Therefore, the assembled product would technically be considered a US part because it was completed as a finished good in the US. This would likely increase the cost of the assembled product due to relatively high labor costs in the US, but the increase in labor costs may be smaller than the cost increase required to transfer the component production machinery to the US.
Great article showing how a politically motivated decision can have far-reaching impacts on a supply chain. To maintain a competitive edge, Nissan needs to have a plan of action in place to act quickly as soon as the Brexit trade agreements are finalized. I tend to agree with my classmates that a trade agreement with no tariffs or no restriction on component origin is unlikely, so they should urgently consider how to adjust the supply chain to address the potential tariffs.
Colton’s point is very important to consider – will the U.K. plant still be worth operating after the tariffs are imposed? If Nissan decides it is more profitable (or perhaps, less costly) to move production to the Switzerland headquarters to avoid tariffs between the U.K. and EU, the U.K. labor force will suffer significantly. Nissan should use this point as a bargaining tool when trying to convince the British government to consider its interests while negotiating a trade agreement with the EU. The British government is incentivized to avoid mass layoffs at all costs, so they could be incentivized to lobby in the favor of keeping Nissan’s U.K. plants in operation.
While it is unlikely that Nissan could transfer 35% of its components to a U.K.-based supplier (to meet the 50% restriction), Nissan could consider a few options to “bend the rule”. Nissan could consider working with its suppliers to specify that the component raw materials be purchased in the U.K. to meet the requirement that the component must originate in the U.K. Nissan could also consider acquiring some of its component suppliers. Would a component produced by a Nissan-owned supplier be subject to the same domestic origin requirements?
Great article highlighting a company’s approach to both slowing their usage of a limited raw material (water) and reducing the impact this raw material shortage will have on their business operation. The water scarcity crisis is very concerning, especially considering that irrigation needs will only continue to increase as global warming takes effect.
I am impressed that PepsiCo is taking so much initiative in getting ahead of the water scarcity crisis. We so often see large companies waiting for government intervention to implement efforts to reduce negative environmental impacts (such as the government mandates to reduce carbon emissions). I’d imagine that PepsiCo has identified this as a real, urgent threat to their food production, which is motivating them to take action now. Increasing the efficiency of water usage in high-risk areas can help PepsiCo determine the best practices and standardize this approach to spread it to other areas.
While I think this is a good start, PepsiCo would benefit greatly by increasing its water efficiency efforts across the globe. Water is a limited resource across the entire globe, even if only a few areas have been hit with a scarcity crisis. To address the question raised in the article, PepsiCo should definitely educate consumers on water conservation to help inspire a shift in consumer behavior. PepsiCo should also partner with the government to construct water efficiency regulations that all large companies must follow. By leading the effort to reduce water consumption of companies across the globe, PepsiCo can help slow the depletion of this limited resource and help ensure that enough water is around for PepsiCo to use in the future.
Great idea to add traceability into the raw ingredient source. I definitely agree with some of my classmates’ comments that the added traceability can improve how Prodal handles potential ingredient recalls and that the ingredient transparency can be used as a competitive advantage for customers. With the recent “farm-to-table” trend growing in popularity, I believe some customers would be drawn by the advertising that Prodal knows exactly where their ingredients come from and how they were produced. An added benefit of the ingredient tracking is that Prodal can now monitor and track customer behavior and how often these raw ingredients are being used to actually make the pizzas. This information can help Prodal improve the accuracy of their ordering and identify the impacts that factors like holidays or promotions can have on raw ingredient usage. As we learned in the Barilla case, promotions can be a nightmare for the supply chain, and the impact would be even greater on food that perishes more quickly than pasta (like cheese or dough). Tracking the raw ingredient usage can help Prodal effectively reduce ingredient waste due to spoilage and decrease the chance of Prodal running out of ingredients during a promotion.
One potential drawback to the digitization and automation of the supply chain is that customers may turn away from Prodal if they learn about the automation of their pizza-making process. Some customers still value the authenticity and heritage of handmade pizza, which doesn’t translate well when a machine is spreading the sauce. Customer perception must be identified and managed while introducing automation to handmade food.
The “Speedfactory” appears to be a very advanced manufacturing solution and will bring Adidas a significant competitive advantage in the ability to quickly create customized shoes. However, as you pointed out above, the benefits that the Speedfactory brings to supply chain and inventory management can’t be sufficiently realized until the Speedfactory is implemented in the majority of Adidas’ manufacturing facilities spanning several different markets. Due to the high capital costs associated with transforming manufacturing facilities into Speedfactories (mentioned by Bridget above), the rollout of the Speedfactory across several markets will likely be relatively slow.
As mentioned by the Harvard Business Review (https://hbr.org/webinar/2017/10/digitizing-the-supply-chain), companies must move very quickly to digitize their supply chain in order to capture the competitive advantage. I worry that the slow capital-intensive rollout of the Speedfactory will hinder Adidas from capturing the supply chain benefits in order to keep up with its competition. Especially considering that New Balance, an athletic shoe competitor, has already implemented digitization in their supply chain (http://www.manh.com/sites/default/files/sys/en-gb/document/manh-new-balance-runs-ahead-competition-case-study-en-gb.pdf).
In the short term, Adidas should consider digitizing their supply chain with a less sophisticated method than the Speedfactory design to keep up with competition. Simply adding a barcode scanner to production lines and a traceable barcode on each product can provide enough information to greatly enhance supply chain management. (I was involved in a similar project at a previous employer.) This low-cost approach to digitizing the supply chain could help Adidas transform its inventory and supply chain management while the mass rollout of the Speedfactory is still in process. This way, Adidas could build its supply chain management processes and software systems around a “smart” production system and be ready to roll when the Speedfactory is implemented worldwide.
This is a very interesting post that really highlights how climate change can destroy the raw material supply for a company. I think Smithfield made a great decision in purchasing their own grain elevators and feed mills to help protect themselves against the predicted fall in crop yields due to climate change. By purchasing a much larger portion of their crops directly from farmers, they have a much greater opportunity to influence the farmers in their efficiency and sustainability efforts. It is implied that independent feed mill and grain elevator companies would cater their efforts to many more customers than hog-producing companies like Smithfield. Therefore, Smithfield could not have relied on the separate feed mill and grain elevator companies to promote hog production while impacting farmer behavior. Now, they have direct access to farmers with this purchasing power.
Smithfield can use this new purchasing power to convince the farmers to tailor their sustainability efforts towards increasing hog production. For example, Smithfield can work with the farmers to produce strains of crops that provide denser nutrients and help hogs grow faster. This would increase the rate by which Smithfield can turn grain into pork.
Another benefit of Smithfield purchasing their own supply chain is that they are now diversifying their business. If they run into a year of decreased pork demand or low hog yield, they can still rely on the feed mills and grain elevators to turn a profit. This added business of grain production also will help Smithfield if they are required to reduce their pork production to satisfy future government mandates of methane reduction. I recommend that they invest heavily in these feed mills and grain elevators to learn the intricacies and perhaps even train their sales force to sell developed grain to de-risk their reliance on pork.