Sahael – this was a great post & one that reminded me of very frustrating times waiting for drinks at Starbucks counters! I especially like your question around quality because I think this might be at risk with this model. I think that digitization does offer a unique opportunity for Starbucks but they are currently falling in the same trap many of our case protagonists have: thinking their existing operating model is going to work for a new type of product or process. In my opinion, mobile orders and in-store orders are creating different products because customers might need different things for their different circumstances. This can be seen more clearly in the restaurant industry as restaurant struggle to optimize their process and products for different channels – to go vs. dine in vs. takeout . In Starbucks for example, an in store order can take a bit longer as individuals are presumably in less of a rush than ordering online and will be picked up immediately when it is called making the component requirements (e.g., blending, temperature, separation of ingredients) function differently. Conversely, an online order might need to be made differently to still taste like its high-quality in-person counterpart when picked up at a later time. This combined with the wait time you described might require a different set of processes for online orders including orders with ingredients that separate less, drinks with a lower cycle time, or maybe even limiting online orders to a few key drinks and then specializing baristas for each of these drinks. Although provocative to consider today & inevitably subject to some consumer pushback, these changes may be necessary to meet the required tact time of online drink orders and maintain the customer quality and experience Starbucks strive for.
Thanks for this post – I never knew that Sriracha depended on a single pepper supplier! I find climate change compounds an existing concern: the single pepper supplier. Regardless of any macroeconomic trends, this is a dangerous position to be in for Huy Fung Foods as that relationship could sour or fall apart for a variety of reasons. In fact, this overreliance on a single supplier along with never increasing wholesale prices (not even to match inflation) made me wonder a bit more about the founder himself. After reading the Quartz article you cited, Tran seems to “run the company with his eyes closed” – he doesn’t even know where Sriracha or sold or that it is a major ingredient in sushi . For him Sriracha seems to be a passion project that has turned into a multi-million dollar company. Therefore, while I personally agree 100% with your suggestions, I’m not sure that Tran would be willing to engage in the more complex supply chain alternatives you mention. Instead, I think he would respond to the emotional pull of wanting to deliver upon his customer promise and help more people enjoy their food. I would recommend he find another local chilli farm he trusts, ideally two to three, and work on building another relationship with them to continue to supply. Although risky and not aligned with our TOM principles, I believe this is more aligned with the CEO / Founder’s values and how he wants to run his business. Longer term, I would do more research into how to use peppers more than a day after they are picked without compromising quality so that he can find another trusted supplier in another geography to limit risk exposure. Finally, I would recommend that he hires someone more profit oriented so he can grow the business to its full potential & then they can be more willing to diversify the supply chain.
What a great read, Kamau. Loved learning (even) more about Target! Frankly I was extremely surprised to learn that the TPP agreement threatened Target to the point of putting bankruptcy on the table. I had not previously considered that behemoths like Target were so affected by the TPP. Throughout your piece, I kept thinking about small & medium businesses (less than 500 employees) which comprise 99% of US companies . Target, a company of 350,000 employees as you noted, had the political leverage and media access to attempt to influence the President. Their short & long-term actions involved media interviews, meetings with the President, and political lobbying in DC. Small business don’t have the resources or access to do so. This brought to mind the importance of considering unintended consequences as mentioned in many comments above as well as considering how to secure your supply chain against international shifts. I see your point on domestic manufacturing investment, but struggle to see how the economics will ever be equivalent. I do agree with aportland that in theory this is a macro trend Target’s competitors will also face and by all passing costs to consumers, isolationist policies can eventually be reassessed.
Damir, I learned a lot from this post. I was particularly excited to learn about Section 1502 of the Dodd-Frank Wall Street Reform- I didn’t know that the SEC looked at public company’s use of CMs. I had previously assumed that change in business’s supply chains on these ethical issues were tied to customer demands, similar to how consumer preference for conflict-free engagement rings disrupted the market. Upon further research, I noticed that the regulation just requires disclosure vs. actually banning the use of conflict minerals . This made me more impressed by FLIR’s commitment to UN standards as well as vertical integration of supply chain as it wasn’t officially required. I agree wth you that they need to involve third parties who can provide a more unbiased review and help the FLIR clean up its supply chain. Overall, this reminded me a lot of our Ikea case where a company can commit to higher standards due to its values even if financial metrics are impacted in the short-term. I look forward to tracking this company and hope that it becomes a standard for other players in the industry!
This was a really interesting post – thank you. I had never thought through how climate change might affect something as simple as mail delivery. While I appreciated USPS’s commitment to sustainability through their vehicles and suppliers, I was concerned about how they would continue to meet their customer promise in the face of climate change. I agree it is essential they consider reducing their emissions to minimize contribution to climate change, but they also need to have contingency plans or innovations in place to ensure they are able to deliver mail and packages in a timely manner as disasters occur more frequently. I really liked your mid-term suggestions on “weather-proofing” facilities or vehicles, but if I were USPS, I would be consider more innovative options. I’m reminded of this article I recently read where Rakuten delivered fried chicken to areas hit by disasters . Although a bit light-hearted and quite a while post-disaster, I think the use of this kind of technology could be extremely helpful for USPS in the face of climate change and more generally in modernizing their operating model. However, I appreciate your final point on the difficulty of securing funding for innovative projects; I’d definitely want to look further into if they have the capital to make this kind of investment.
Really enjoyed this read, Japees. I especially appreciated you outlining the four key benefits of the pilot program, and I agree with most. I’m still thinking through the 23% reduction in inventory level – what type of inventory did this refer to? If drugs / medicines then I agree that better tracking expiry is a clear value add, but I’m unsure of the benefit for more frequently used “commodity” products like medical consumables (e.g., syringes, gowns, gauze). Given these products have no perishability, wouldn’t it be helpful to have more on hand in case of pandemics or emergencies? To me some of these are an essential buffer in case of disaster situations that are difficult to predict. I could see the benefit if hospital were able to downgrade their storage space and convert the additional space to beds or downsize, but I’m not sure they’re taking action on the reduction or if its reducing actual usage and therefore costs. This post raised the question for me – is lower inventory always better? How does this differ by industry, perishability / size of inventory, and ability to actually convert lower inventory to additional margin? Overall, though, I think the other benefits you noted are profound and RFIDs are a no brainer in healthcare. In the future, perhaps they can even be applied more broadly to staff or machines to improve processes as they did in the Mayo Clinic . Tracking nurses or physicians would have even more resistance than traditional supply chain though, so we should definitely start with this!