HBS 2019

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Very interesting article. I agree with you that Toyota should have quite a bit of leverage in negotiations given its large amount of investments in the UK over the years and its contribution to the UK economy and employment.

With regard to your question on how Toyota should consolidate its geographically disparate supplier base, I’m not sure it should start that process just yet (or potentially at all). Firstly, these policies have the potential of being fickle and not long-term, so entering new contracts too soon could put them in a position where they wish they could reverse their actions. Secondly, without more detailed information on what exactly the regulations and tariffs will entail, Toyota should not begin to jeopardize its relationships with existing suppliers. In fact, even after tariffs, it’s possible that its existing contracts could still be cheaper than switching to domestic suppliers. That said, the reality is that it might need to pass on some of these additional costs to its consumers. In this regard, it should acquire data on (a) how price sensitive its customers are and (b) which of its competitors might also be affected by similar tariffs and how Toyota will stack up against them. Lastly, the potential of increased prices to UK consumers could be another negotiation chip with government and regulators.

With regard to employees, it can also discuss this with regulators, as there is the potential for having to lower wages in order to accommodate additional tariffs. Regulators might want to avoid this and grant certain exemptions.

One other lever could be to make the process more efficient in order to compensate for the additional tariffs it might have to pay. For example, it might decide that it can internally create something that it used to import. This might require some factory or process redesign, but could be a profitable investment over time.

Very interesting article! In response to your first question, I think the trends of protectionism will be somewhat unpredictable over the long term, and so the company needs to prepare for the worst possible outcome. In that regard, to your second question, I think it could make sense to make factories abroad if that would make them exempt from certain duties. However, they should only choose to open factories in places where it makes economic sense regardless of whether isolationist policies are put in place. For example, if many of their products are shipped to China anyway, it could make economic sense to open up a factory closer to those consumers. That said, it needs to consider that this introduces political and foreign exchange risk in a new geography, and thus needs to pick those geographies wisely.

To your third question, I would not rely on Rayonier’s ability to fight these policies. Not only might it not be successful, but it could entail a large waste of time and resources. Instead, I would focus on specializing the products, as you proposed. An additional idea would be to expand the customer base across as many nations as possible. Diversifying the customer pool would minimize the risk of any one country’s policies having a large impact on the financials of the business. It could also dedicate some R&D to investigating which nations are most likely to be the target of US policies, and therefore have the greatest potential to retaliate against the US with protectionist policies.

On November 30, 2017, HBS 2019 commented on General Motors: Cars that kill the planet, or cars that kill you? :

I find your article extremely interesting. While there are many ways the future could pan out, GM’s supply chain will definitely need to change to accommodate these trends. You propose that in the future GM will be serving cities, public entities, etc. I’m imagining a world where people only call a car when they need it, and once it drops them off it drives itself back to a centralized government-owned parking lot and/or picks up its next passenger.

While that is definitely one possibility, I challenge the concept because I believe individuals will still have an interest in owning or leasing their own autonomous vehicles (even if it’s more expensive than ride-share). Since the cars will be energy-powered and less harmful for the environment, families will not feel particularly guilty owning them. In fact, different households will have different car-related needs (some will want many seats, some will want few; some will want different specs). Some household will also want to have access to their same car at any time, so that they can store their belongings (say a computer, books, or anything they might want to do while the car drives itself…). Therefore, I believe GM will need to keep serving the individual consumer. Its supply chain will need to adapt in order to incorporate new demands from a very diverse and technologically savvy customer base. Customers will be excited to trade-in their model for new and improved vehicles.

That said, I agree that these cars will need to be much more service-oriented than before. Cars will be differentiated by the interactive offerings they can provide to make the ride experience more fun than the competitor. It will be interesting to see how supply chains might evolve to include partnerships with gaming systems, internet companies, etc.

Very interesting article. The guayule tree seems to be an interesting alternative to cover the shortfall of para-rubber supply. While it might be a great temporary solution, I wonder if some of the same risks that apply to the para-rubber tree could ultimately impact the guayule tree (such as impact from drought, heavy rains, temperature, etc.). I’m also curious how the effects on the environment of growing guayule trees might be better or worse than the effects of growing para-rubber trees. It seems like guayule trees need less water, which would definitely be more beneficial[1].

Perhaps another solution would be to invest in R&D to produce synthetic rubber tires. Some of the existing methods of making synthetic rubber are not very green, but there is talk of new low-carbon methods[2]. While developing a new way to make tires that does not depend on growing plants might be a heavy initial investment, it could pay off quickly if it makes the process much more efficient. Not to mention, it could have even less of an impact on the environment.

[1] Patrick Cain, “How Tire Company Bridgestone Is Solving A Tricky Natural-Resource Issue,” Fast Company, July 24, 2014, https://www.fastcompany.com/3033390/how-tire-company-firestone-is-solving-a-tricky-natural-resource-issue, accessed November 2017.
[2] Adam Fisher, “Cleaner, Greener Synthetic Rubber Tires Start to Roll,” Money Watch, March 24, 2010, https://www.cbsnews.com/news/cleaner-greener-synthetic-rubber-tires-start-to-roll/, accessed November 2017.

On November 30, 2017, HBS 2019 commented on Adidas: Supply Chain as Competitive Advantage :

Thanks for posting such an interesting article.

You pose an interesting question about what will be the key driver of success in the future retail landscape. In the short term, digitization may be quite a differentiating factor. Companies that integrate technology into their supply chain might gain share, as they serve their customers new and innovative designs quicker than their competitors.

In the long term, however, I don’t believe the competitive advantage will persist. For example, it is possible that 3D printing will become the primary method of manufacturing retail products. If this is the case, there might be a short period during which the companies that are best capitalized and can most afford investing in the new technology will have a competitive advantage. However, in steady state, as the 3D printing technology proliferates and becomes cheaper, all competitors will likely adopt it, which will level the playing field once again. At that point, I believe it will be innovative design and customer experience that will primarily determine which companies gain share.

Ultimately, I believe we are at a turning point where supply chain digitization is becoming a requirement to continue to compete in the market, but once the majority of players adopt it, it may no longer be a differentiating factor of success.

On November 30, 2017, HBS 2019 commented on Is Fast Beauty the Next Fast Fashion? :

Really great article. I think you make great points on how speed to market, and therefore supply chain digitization, is becoming critical to the beauty industry.

I appreciate your great ideas on how to apply digitization to trend detection. What if you pushed digitization even further upstream to the manufacturing plants? This could definitely improve lead times and process efficiency, improving your speed to market. Currently, many cosmetics companies use contract manufacturers with low visibility into their logistics[1]. Perhaps cosmetics companies could develop a proprietary technology to improve visibility into their manufacturers’ processes so that they can increase efficiency. One concern would be that if those contract manufacturers produce cosmetics for multiple different companies, that technology might be replicated by competitors as well.

In response to your questions about bringing a new “fast-fashion” brand into the ELC portfolio, I believe the brand would need to maintain an innovation-driven and first-to-market mentality. In my opinion, much of the appeal of new beauty products comes from being “first” and being “different,” and so, while using social media detection technology to spot trends is definitely crucial, it would be important to not become an entirely copy-cat driven brand. To your second question about applying these learnings to other brands in the ELC portfolio, it should be assessed on a brand-by-brand basis, as certain brands might have a more traditional consumer that prefers to stay away from beauty fads, and you would not want to dilute that traditional brand image.

[1] Justine Brown, “Cosmetics Logistics: The Beauty of an Optimized Supply Chain,” Inbound Logistics, February 28, 2014, http://www.inboundlogistics.com/cms/article/cosmetics-logistics-the-beauty-of-an-optimized-supply-chain/, accessed November 2017.