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On November 19, 2017, Ryu commented on REI: A Beacon for Sustainable Business :

Thought-provoking piece about the steps REI has taken to address climate change in its operations and how the company thinks about sustainability and its relationship to the organization’s mission.

Although REI’s investments in energy-efficient buildings, environmental reports and a gear recycling program may represent substantial progress relative to other retailers, I would be curious to know how REI has improved the sustainability of its core manufacturing business. I suspect that very few REI SKUs are produced in factories owned or operated by REI, and if they are indeed outsourcing their production, I would hope that a business so closely associated with sustainability has significantly reduced the carbon footprint of its sourcing and manufacturing processes.

I also believe that there may be a marketing opportunity for REI to invest not only in responsible enjoyment of the outdoors but in sustainable cities as well. The activity of outdoor exploration that drives REI’s business is fundamentally related to how humankind engages with nature, which is not confined to the untouched forests and mountaintops that most people associate with REI. By investing in sustainable urban development through philanthropy or new product lines geared toward environmentally-conscious city dwellers, REI can associate itself with a more holistic view of sustainability.

On November 19, 2017, Ryu commented on Is insurance against natural catastrophes sustainable? :

Intriguing piece about Munich Re’s attempts to provide insurance for natural disasters in response to climate change. I was unfamiliar with the concept of reinsurance and the associated organizations, but it makes sense that the enormous risks of natural catastrophes would simply be too great for even large conventional insurers to absorb by themselves.

The article mentions improving prediction methods as one way for Munich Re to continue to provide reinsurance as the frequency and magnitude of claims increase. However, another perhaps more impactful investment for Munich Re to consider would be funding the development of energy-efficient technologies and more generally fighting climate change itself. Just as medical insurers subsidize gym memberships and annual physicals to improve the health of their customers and reduce their claims exposure, so could Munich Re invest in cleantech to slow the pace of climate change and hedge against disaster claims. It is difficult for small organizations to substantially reduce global carbon emissions, but there is tremendous potential for one of the largest reinsurance companies in the world to affect positive change in this area.

I imagine one of the difficulties with pursuing this strategy is that is it nearly impossible to quantify the risk mitigation that could be achieved through such efforts. Perhaps as a starting point, Munich Re could look into supporting organizations that are attempting to develop metrics and tools to enable this kind of quantitative analysis.

Fascinating piece about the pressures on aviation maintenance companies (MROs) to adapt to increasingly sophisticated airplane technologies and moves by airlines manufacturers (OEMs) to take on maintenance tasks themselves.

I am a bit skeptical about the potential of preventative maintenance and additive manufacturing to improve prospects for MROs. If MROs are so unfamiliar with advances in aviation technology as to require training by OEMs to service various aircrafts, it seems unlikely that airlines would pay for preventative maintenance recommended by MROs over OEMs. If airlines were not paying for a recommendation but rather the simple execution of preventative maintenance, I could see an opportunity to outsource such work but equally an opportunity for OEMs to absorb this work as the article suggests.

3D-printing or otherwise producing replacement parts through additive manufacturing seems like a risky proposition for MROs. Is this type of work really aligned with MRO core competencies and would the risks be commensurate with the potential rewards? 3D printing may indeed require less expertise than other manufacturing methods, but in my limited experience, a substantial amount of skilled labor is still required for post-processing of such components. This strategy would also be a capitally-intensive gamble for MROs that are already struggling to address fierce competition.

On November 19, 2017, Ryu commented on UNIQLO: Digitalization and Supply-Chain Transformation :

Very interesting piece about the digitalization of Uniqlo’s supply chain in response to the data-driven nature of fast fashion and the company’s growing reliance on international sales. The article reminded me of our case study on Gap in which we debated how much of a role Big Data should play in determining a fashion company’s product mix. Although Uniqlo is not experiencing the same kind of identity crisis as Gap, I believe there is still the possibility of a more data-driven and less coherent approach to erode Uniqlo’s brand and create misalignments with its core customers.

I am also a bit skeptical of the effectiveness of digitalization measures such as RFID chips and enhanced connectivity from manufacturing all the way through retail point-of-sale. I do not know anything about the current prevalence of RFID in the fashion industry but would imagine that such technology will soon become the industry standard and will not give Uniqlo a competitive advantage for very long. I also wonder how cost-effective RFID will be for a relative low-margin retailer like Uniqlo. As RFID supplants traditional bar codes, workers will have to be retrained and scanning technology in every facility will have to be replaced. I can see clear benefits for a higher-margin, more luxury-oriented retailer, but I wonder about how the cost-benefit will play out for Uniqlo.

Improved connectivity throughout the supply chain also seems like it would be limited by the capabilities of independent distributors. I imagine that the information transfer along the supply chain would be broken whenever Uniqlo was required to use a distributor that did not use the same technology as its retailers and manufacturers. It is unlikely that Uniqlo will operate its own distributors in numerous locations throughout the world, and if Uniqlo follows the advice of the author and outsources logistics more frequently, it will be even more difficult to digitally synchronize the entire supply chain.

On November 19, 2017, Ryu commented on Apple combats with Protectionism in India :

Very insightful piece about the factors contributing to Apple’s lack of success in India, from the high price point and numerous local competitors to the protectionist agenda of the Indian government. Although I found it difficult to evaluate the overall impact of FDI allowances without in-depth knowledge of such restrictions or a specific definition of “FDI”, I can appreciate how such regulations are being used to prevent local industry from being crowded out by large multi-nationals.

While I see many potential benefits of Apple manufacturing and/or sourcing in India, there are additional risks not mentioned in the article that likely figure prominently in Apple’s decision-making process. For example, without substantial oversight, producing in India could create more opportunities for Apple’s manufacturing processes and other intellectual property to be stolen and sold to competitors. In addition to creating quality control issues, the dearth of skilled Indian labor mentioned in the article could also produce an oligopoly of local manufacturers with substantial leverage over Apple in future negotiations. Customizing its digital platforms and policies to the local market could also be expensive and even undermine Apple’s brand if the tweaks to its system are unsuccessful in catering to consumer preferences in India.

Very informative piece about the effects of protectionism on Boeing and its outsized role in determining policy and trade relations going forward. I was not aware of the Export-Import bank’s role in promoting protectionism or the extreme degree to which Boeing contributes to and is intertwined with the US economy.

It does appear that the Bombardier conflict backfired against Boeing, but did it backfire against the US government’s protectionist agenda? Ultimately, Bombardier moving manufacturing to Alabama created highly-coveted American jobs in what were probably struggling, post-industrial areas of the country. Without knowing the details of Bombardier’s move to Alabama and any relocation incentives they may have received, it is difficult to evaluate the true benefits of this outcome for Americans.

This absence of transparency also impairs the ability of the average American to understand the true ramifications of free trade negotiations. For example, it may well be that Boeing will improve US-Chinese relations by using more Chinese components and manufacturing, but the layperson cannot quantify that improvement or evaluate alternatives without knowing exactly what transpired in negotiations to produce that result.