Great article! Thanks for an interesting read, Brooke! I am not familiar with coffee industry and gained a lot about its supply chain issue under the pressure of climate change from you. I did some research on it and learnt three additional considerations that Nespresso could consider:
1. Technology can play a key role in coffee industry. Per Washington Post, modifying coffee seeds might be an effective alternative method to help coffee plants withstand climate change and to keep coffee plantations from relocating. (https://www.washingtonpost.com/opinions/theres-more-to-do-to-save-coffee/2017/10/25/102b39aa-b808-11e7-9b93-b97043e57a22_story.html?utm_term=.03e0e128d005) The downside in my opinion is the heavy initial outlay of investment, cost of R&D and a long-term trials and wait for the return on investment.
2. Your article mentioned the concept of “growing under trees”. It is completely new to me. I read about this concept and this is what I found: traditional coffee-growing methods is not as immediately economical as conventional methods, but growing coffee under trees increases bio-diversity and soil quality and removes the need for pesticides, resulting in a healthier environment. By hybridizing coffee seeds and using traditional farming methods, farmers can farm more sustainably. (https://www.greenbiz.com/article/tilling-transformative-approach-crop-and-climate-risks) It makes sense that Nespresso traces the supply chain to the planting method.
3. Integrating supply chain could be a real challenge. Recall the IKEA case, Option 1 was to own the forest, but it requires huge cost upfront and ongoing maintenance, in addition to fighting uncertainties of regulatory environment. Further, it is hard to convince other players along the supply chain the value of the new technology or harvesting methods. I doubt Nespresso has the ability to make such an investment in a near term. As such, more immediate actions should be taken such as cost cutting or lobbying for government support.
What an interesting read, Tom! I learned a lot more about Ford’s situation facing Brexit and I appreciate you connect the concepts we learnt in class to your writing (bottleneck, buffer, and supply chain ecosystem). I agree with your concern in the end. I would like to try to answer your first question and propose another key consideration for Ford.
1. How closely will future trade relationships reflect the existing relationship? From what I read, Ford has some estimates of loss and near-term remedy. According to Bloomberg, Ford estimates 600 million pounds annual loss just from Brexit, and it claims it lost $86 million in the past 3Q alone. (https://www.bloomberg.com/news/articles/2017-10-26/brexit-batters-ford-europe-as-tumult-sidelines-u-k-car-buyers). The automaker does have a measure of the loss, but the problem is how to reduce the level of harm and turnaround from the negative impact in global trade. Ford currently is currently pushing for a two-year transition period with UK where current trading conditions will stay in place. If it does work out, the policy will give the automaker more time.
2. My additional consider is that Ford’s supply chain does not just stop in the factory floor. It actually extends to the car financing division- an even larger market in terms of dollar value. Four in ten Ford cars sold in the UK rely on financing supplied by Ford’s financing arm. This arm- Ford Credit Europe, acts essentially like a bank offering loans to car buyers, and relies on its ability to operate throughout Europe on the UK’s membership of the EU and the so-called “passport” to operate throughout the bloc. (http://www.bbc.com/news/business-41935554). Brexit challenges Ford to rethink the supply chain from upstream in manufacturing to delivering to end user. Indeed, if car buyers lose the ability to finance and purchase the Ford cars, the key factor to success and customer promise will mean nothing.
Thanks for an interesting read! I want to expand on two important aspects along the theme of this article that the company should consider:
1. EH’s long-term plan of operating in China could outweigh the risks pointed out. I would like to compare EH to Tesla. I admire Tesla not only for their vision, technology and resilience in the commercial Electric Vehicle (EV) market, but also its courage to be the first to seek opportunities to operate in China- that is not an assembly factory, but an actual complete start-to-finish company in Shanghai, China (https://www.nytimes.com/2017/10/22/business/tesla-plant-in-china-may-be-a-first.html). What usually comes to mind when discussing global trade with China concerns the cheap labor. In Tesla’s case, Musk is thinking long term: because China is the largest consumer of EV in the world. By setting up a company in China in its free-trade zone, Tesla enables itself to reach deep into the China market and avoid the tariffs that prevent Chinese buyers from purchasing. EH could have taken more risks and thought out of the box of a short-term benefit.
2. However, EH China might not work though because it is in energy sector. All major energy business (from upstream to downstream) are strictly state owned in China. That means a foreign entity won’t have access to the cheap raw material just because it has a factory (shell) in China. Think about the Fuyao Glass case we talked about in class. Even if the Chinese company builds a factory in the US to take advantage of the (trending) cheap labor cost, the materials are still shipped directly from China! We need to keep in mind that a win-win global trade takes more than just the cost of manufacturing in the short term, the sentiments from the citizens/politicians from both countries, but also the deep root of the business model and the sector and geopolitical situation. China for example, is no longer in a position to take whatever capital from outside. It gets the power to say “No” (think failed attempts of Uber, Google, Amazon, and Facebook in China). Energy and Cyber security are among the top two industries that can’t sustain in China with just the foreign infusion of capital.
What an interesting read! I especially appreciate this article because it also helps me to think further about the cases we learned in the supply chain module.
I agree with Alec’s concerns in the end but would like to add on his second point: I believe Walmart also needs to consider the pushback and financial burden to get the suppliers on board for the blockchain system to work. Recall the Barilla SpA case, where the manufacturer hopes to push for a JITD program but faced tremendous resistance in implementing from upstream players in the supply chain (namely the distributors). It is hard to demonstrate the value of the blockchain to the suppliers in Walmart’s case- why should they want to be more easily traced and hence accused or punished if something goes wrong? Who is going to absorb their cost of digitalization in order to make the system work?
I also think geopolitical risk could be another concern for the blockchain. China government has been doing a lot of damage control on the food-safety scandals within the nation, and it was one of the reasons the government was willing to push for the blockchain initiative in China and for Alibaba in Australia (South China Morning Post http://www.scmp.com/tech/enterprises/article/2107847/coalition-drive-global-food-safety-efforts-blockchain-platform), but when it is China’s turn to provide traceability of questionable food items exported overseas, the willingness to cooperate could differ. It makes sense that Walmart pushes for this initiative since 50% of its items sold are food related, but things could complicate when you try to strike a deal with the China government.
Great essay! I definitely agree with the challenges Amazon is facing in terms of digitalization in the last-mile delivery, but I am more concerned of the sustainability of the delivery from the variables caused by human aspects. Two more things that are worth considering: 1. Amazon recently announced Amazon Key, which is a smart lock that allows delivery people to leave items inside of your home, might cause more problems than benefits 2. How should Amazon treat the increased delivery force from legal perspective- are they employees, or temp hires?
On Issue 1. Despite the benefit of finally having your packages delivered to your home, instead of leaving them in the common area, customers are concerned about the cost of installing the Key Locks (cost up $150- $250 per Amazon), the time of replacing the old lock, and security- after all, how much do you trust a complete stranger to get inside of your home? The news this week broke that in Colorado, an Amazon delivery driver caught on camera urinating on homeowners’ doorstep. On issue 2. Uber went through the debate and litigation about how they should treat their drivers as the salary and benefits offered to drivers will differ significantly whether they are employees. With the backdrop of mass digitalization and the upcoming investment in scaling up and customizing the delivery service, one has to wonder who are these increased number of delivery people and the people behind the drone services to Amazon, and how should they get paid? After all, digitalization is still run by human and need human’s involvement in the last mile delivery.