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A great write-up showing the tensions Walmart faces in balancing its customer promise and changing context. My view on this is that if a protectionist agenda is in fact pursued in a real way from Washington, all American retailers will suffer tremendously. Walmart is not the only company that benefits from cost arbitrage in Asia. In fact, many of the smaller retailers in America will find it nearly impossible to survive if they needed to source product from America. If anything, Walmart is in a good position to deal with these changes given its sophistication and talented procurement team.

As Jordan points out, customers are the real loser here. They will pay higher prices, eroding their standard of income. In terms of helping displaced workers, this is the most critical question our society faces in my opinion, and there is no easy answer. Ideally, training and education will help displaced workers enter new industries, but that is often a fantasy vs reality. One comment pointed to the low US unemployment rate, but we are also at record low workforce participation rates (https://data.bls.gov/timeseries/LNS11300000) as many displaced workers have given up looking for work. It is a real problem that must be addressed.

On December 1, 2017, JR commented on Trade wars for aircraft OEMs: Can Boeing keep cruising? :

Excellent article. Free trade and open markets depend on trust. Boeing’s protectionist posture has eroded that trust and we see the backlash from customers, suppliers, and competitors. It is a prisoner’s dilemma, and once one party breaks the trust it is hard to re-create a virtuous circle and fair competition. Calvin points out that perhaps the only way to win an unfair game is break the rules and match what your competitors are doing. I would like to point out that while we have a prisoner’s dilemma that seems to encourage “cheating,” this prisoner’s dilemma is one with iterative play. These two players, along with the smaller competitors, will compete over and over again in the future. It behooves all parties to establish a fair set of rules and to abide by them. This is should be better for all parties, as it discourages any party from undercutting one another.

So, how do they re-create this trust? A summit of some sort is a good place to start. This can be a forum to discuss and agree to ground rules. As a next step, players need to be able to verify all parties are playing but the established rules. This can be in the form of audits or other 3rd party reports. Ideally, the industry can create an environment with fair rules that allows companies to compete and win based on product innovation and customer service, not trade wars. This is also best for the consumer.

On December 1, 2017, JR commented on Can Singapore port survive the digitization storm ? :

Excellent write-up. Your analysis makes me think of the data asset the ports now collect. Not only can they track container traffic, but with the technological advances you mentioned they are able to more precisely track the type of goods and product mix. This data provides information on supply / demand of particular goods, which is extremely valuable to multiple parties. Hedge funds will crave this data as in order to analyze leading indicators for economic cycles. Producers will want to know how supply and demand is changing in real time to better plan production schedules. This type of data reminds me of an analog in the energy space. The company Genscape (https://www.genscape.com/aboutus) has developed creative methods to monitor the supply / demand of energy. For example, they have heat sensors that deduct flows of oil through pipelines and use satellites to track the movements of oil tankers. This information is sold to market participants and investors who want more information on the forces impacting the price of oil.

Ports will develop a very valuable data asset, and they will have the potential to monetize this data. Customers may fight back for control over the data, but ultimately ports are mission critical for shipping goods and they may have the upper hand in negotiations.

On December 1, 2017, JR commented on REI: A Beacon for Sustainable Business :

Superb article highlighting REI’s effort to be a leader in sustainability. While I do think REI can continue to expand while incorporating its current sustainability principles, it is worth discussing the company’s implicit bias for consumption and overall orientation on sustainability. As a retailer, REI is focused on selling consumers more “stuff,” whether they need it or not. In the worst case scenario, REI uses its environmental policy as a marketing charade to make consumers feel good about themselves as they amass more and more and more things. In the best case scenario, REI is providing goods to consumers who truly need and demand these products, and at least REI is doing this in a way that incorporates sustainable practices.

I was very interested in REI’s “Garage Sale” program. An expansion of this would be a true commitment to sustainability. Why make more things, incurring environmental costs, when society and repair and reuse clothing? Patagonia, as noted above for its sustainable leadership, also has a “Worn Wear” line of reused clothing (http://www.patagonia.com/reuse-recycle.html).

Wonderful article on how an iconic jewelry company is dealing with sustainability and climate change issues. As a recent purchaser of a diamond engagement ring, I was fascinated by the inner workings of the diamond industry. Historically, De Beers dominated the world diamond market, boosting demand by encouraging lavish engagement ring purchases and tightly controlling supply to optimize pricing. In the 1990s, De Beers lost its stronghold given new diamond mine discoveries and increasing competition, particular from ALROSA, Russia’s state-owned diamond company. (https://www.economist.com/blogs/graphicdetail/2017/02/daily-chart-19) While increased competition has benefited consumers, one must ask if it is now more difficult to encourage the diamond supply chain to embrace a sustainability agenda? As miners compete for low cost mines, is there any incentive to add cost to create more sustainable diamond-mining practices? Do consumers actually care or demand this? Are they willing to pay for this?

My own view is that customers don’t and won’t care about the jewelry supply chain for the considerable future. While the “blood diamonds” campaign successfully raised awareness about diamonds mined in war-torn nations, it is unlikely climate change implications will create similar visceral reactions. Indeed, so many marketing dollars are spent in the jewelry industry to create the image and lifestyle of wearing jewelry, there is little mental bandwidth to venture behind the marketing curtain and explore where these stones and metals actually came from. A third party watchdog can change this by raising awareness, but as this article illustrated, most of these watchdog reports lack academic rigor to pack a real punch.

On November 28, 2017, JR commented on US Foods: B2B e-Commerce in Foodservice Distribution :

Like other industries, US Foods and its customers will need to decide who owns the data US Foods is collecting and what type of rights surround that sensitive information. Dong rightly asked how the role of distributors may changed in this era of digitalization. One new service a distributor can provide is business intelligence based on the data it collects to help customers better buy food for local tastes and forecast demand. Customers should ask, however, does US Foods have the right to aggregate their data to use in this analysis? Now competitors are benefiting from the data US Food is providing, US Foods can profit from this data, and yet, the customer supplying the data is not compensated. Time will tell how this plays out, but US Foods should proactively manage this situation with their customers.

Dong also hints at the disruption e-commerce is having on the industry. He explains how customer behavior has changed: customers no longer call sales reps to track orders but rather pull out their smartphone and find live updates on an app. US Foods will similarly have to change its internal organization and processes to thrive in this new world. Dong’s research shows US Foods is already investing in technology platforms, and we are curious to see how their operations will change to deliver on their evolving customer promise.