Phil's Profile

Really interesting to hear about Starbucks’ supply chain and how they’re digitizing on that front after leading the way in digital retail payments. I’m fascinated by their use of My Starbucks Rewards and Mobile Order data to better forecast customer demands. If they are using the data from those programs to get a better understanding of demand on a customer-by-customer level (vs. store level or transaction level), I can totally understand why that might lead to better forecasting capabilities. In addition, it seems like the rewards program also gives them the ability to quickly test marketing strategies digitally to see what kind of customer reaction a certain marketing program would have, thus allowing for better forecasting [1].

In response to Brext360, I wonder what happens if beans from different farms get mixed together. I’m sure not every single bean can have its own blockchain ledger. And if beans remain grouped together by farm for most of the supply chain, shouldn’t it be easy for Starbucks to understand the quality of each farm’s beans today? Surely by the time the coffee reaches consumers, the beans are mixed from various farms – otherwise, I would imagine the taste / quality of the coffee would have much less consistency than it does today. It’s interesting to think about how blockchain would work for products that don’t have discrete units. And if customers get a list of every farm whose beans made it to their cup of coffee, I wonder if that’s better than Starbucks simply providing a more transparent list of all of its coffee suppliers, the sustainability practices at each one, and the rates they pay each of the farmers.

[1] https://controlmousemedia.com/starbucks-rewards-data-driven-marketing/

Really interesting read, thanks Jenny. While it seems like Vail and other ski resorts could be doing a lot better in terms of their own sustainability, I don’t think we should be holding these ski resorts to a higher standard (of net environmental impact) than any other company in the leisure industry just because they are closer to nature. E.g., water theme parks also probably use massive amounts of water that do not get returned to where they came from. If it turns out water parks use up more water and energy than ski resorts, we need to make sure they are held accountable first. (To quickly answer Jen’s question about where the remaining 20% goes: I think Vail meant 80% of the water they use from their local watershed returns to the same watershed each year… So the remaining 20% escape their local watershed but goes somewhere else in the broader ecosystem)

So I would want to see a comparison of energy consumption per hour of leisure time across ski resorts, theme parks, water parks, and other leisure activities to see if ski resorts are really less sustainable than other forms of experiential leisure. If not, I think they are justified in using snowmaking to combat weather variations. However, if they really are using more energy than other types of resorts, I think that would be a strong argument to hold them more accountable and impose regulations that might lead to electric snowmakers and adoption of solar panels at these resorts (especially since they get ample sunlight and solar panels are unaffected by the cold). I’m sure as climate change continues and snowmaking is more heavily leaned upon, these companies may end up increasingly detrimental to the environment, and if they aren’t already comparatively worse than water parks, they might be eventually.

In the long-run, man-made snow is not going to be a satisfying replacement for real snow. As a snowboarder, I find it easy to tell what’s manmade snow and what is real snow, and I would not go to a resort just to ride on fake snow! So if these ski resorts want to continue operating in the same locations, they might need to invest in better snowmaking technology anyway – higher quality as well as more sustainable.

Wow, 35% of our greenhouse gases! As our population grows and we move towards more sustainable energy sources in other industries, this percentage is likely only going to increase in the near-term. You mentioned population growth – I agree that this is a big problem, and this chart showing our population growth trajectory terrifies me: http://www.worldometers.info/world-population/ . As a resident of California, I know agriculture sucks up a tremendous amount of water in my home state – roughly 80% according to some sources [1]. When the recent drought hit and people were talking about conserving water at homes and restaurants, I found it frustrating how people weren’t focused on the issue of water being wasted by inefficient agriculture techniques (as opposed to, say, drip irrigation techniques [2]).

In response to your questions, my opinion is that General Mills isn’t moving to sustainability because it’s the right thing to do – they’re doing it for competitive reasons. Like we discussed in the Ikea case, General Mills can establish cost effective ways to reach sustainability in the short-term and ask consumers to demand it from all competitors, giving them a cost advantage in the long-term. While consumers can play a role in accelerating the adoption of sustainable business practices (by giving sustainable companies a marketing advantage), I disagree with Alex Robinson above that “they have to play a massive role.” Even if shareholders continue to care only about cash flow and consumers completely ignore sustainability, these companies should still want to reduce greenhouse gas emissions as long as regulators do a good job enacting policies that make it costly for them to ignore sustainability.

[1] https://www.kcet.org/commentary/drought-by-the-numbers-where-does-california-water-go
[2] https://en.wikipedia.org/wiki/Drip_irrigation

Thanks for this well written exposition! It seems like McLaren went all in on the “no-regrets” scenario planning as discussed by the Bain & Co article you cited [1]. It’s ironic that McLaren, a UK-based car company, can be hurt by isolationist policies that are supposed to help domestic manufacturers. From the government’s perspective, even if isolationism hurts McLaren’s cost structure, ideally they would like to see McLaren’s top-line grow by making their cars much cheaper relative to other car manufacturers for people living in the UK. I suppose on the other hand, since it’s a luxury supercar that very few people can afford anyway, another 10% tariff on competition isn’t going to move the needle much. But if these isolationist policies are hurting McLaren sufficiently, Brexit would have been a complete disaster if McLaren decided to leave the UK and manufacture somewhere else (regardless of their branding as a British supercar).

I think the crux of whether McLaren will ultimately benefit or be forced to leave the UK will have to do with how the pound does against the US dollar over the next several years. If the pound continues to decline and exports are propped up by the sudden affordability abroad, then McLaren will do just fine. If for some reason the pound recovers and exports fall, while McLaren still has a more expensive supply chain given the tariffs on imported components, then it’ll start to make less sense for McLaren to be based in the UK. Obviously hard to predict, but it seems like some rates experts expect the pound to have already bottomed out and will be stabilizing at a higher rate in the longer-term [2].

[1] http://www.bain.com/publications/articles/is-your-supply-chain-ready-for-brexit.aspx
[2] https://www.ft.com/content/2a7c2ca8-3850-11e6-a780-b48ed7b6126f

Great read, thank you for the well written analysis of the situation. This is quite distressing indeed for SolarCity, and the US consumers of solar energy panels in general. It seems like the logical solution for SolarCity is, as you mentioned, would be to either source panels from low cost countries that are exempt from the tariff or take over the manufacturing process themselves. Given that SolarCity is planning to team up with Panasonic to produce the next generation of their panels in Buffalo by 2019 (Gigafactory 2, as you mentioned), it seems unlikely that they’ll go through the process of setting up manufacturing in an interim location in Singapore or Australia. Their more likely options may be to either 1) take on the lower margins (potentially negative margins) in the interim, or 2) stop selling until Gigafactory 2 is up and running. I can definitely see SolarCity sunsetting their current model and creating a backlog for their new panels, citing Gigafactory 2 as the main bottleneck (similar to what’s happening with the Model 3). To answer your question about survivability: since Tesla seems to be free flowing with cash at the moment, and since Elon is extremely bullish about the next gen solar roof, I am pretty confident SolarCity can survive through 2019. It may have to suffer a large slowdown at the revenue level through 2018 and most of 2019, but it is fortuitous that the timing coincides with their next gen product launch anyway. I think of it as running out of iPhone 7’s and having a year gap before being able to buy an iPhone X. Since this is such a long-term purchase, I would think of the lost consumers turning into pent-up demand for the new solar roof.

PS, “tiny hands” – ha!

Thanks for this awesome post, Alec. I found your explanation of blockchain and how it can be used in the supply chain to be very helpful. It certainly seems like there’s a technological gap if Walmart can’t already today look up where a package of sliced mangoes came from. Then again, having to keep an excel sheet with millions of rows with each row corresponding to a barcode sounds unrealistic. It seems very intuitive to me that blockchain’s system of decentralized nodes (one at each step of the supply chain) adding to a shared ledger for each item could help Walmart keep track of where their stuff is coming from. One article I saw (https://www.accenture.com/us-en/insight-highlights-cgs-blockchain-cpg-and-retail-industries) also mentions the benefit of reducing counterfeit goods, which in Walmart’s case would be making sure (for example) that certain standards of plastics were used to build microwave safe dishes or that the eggs come from humanely treated chickens. In response to your question about privacy, I think it’s a good one – Walmart wouldn’t want its competitors to be able to see the exact supply chain used by Walmart for each of their SKUs. I wonder if using a closed ledger (where only approved entities are allowed access to the ledger) would be sufficient to solve this problem. Then, Target would have to share a distributor with Walmart and ask the distributor to send them all their data on Walmart. In that case, Walmart perhaps could have contracts specifically barring the distributor from sharing data derived from closed ledgers.

One question that worries me a bit about their endeavor, which you alluded to, is the need to get the whole chain bought in on using the same blockchain system to trace an item from farm to shelf. The costs of doing so much be sufficiently low enough that it’s worthwhile given all the other benefits (tracing, safety, efficiency, etc.).