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Nike appears to have a well thought strategy against isolationism by automation and reshoring for the short term. If I were in Nike’s shoe, however, I would be cautious of the merit that automation can actually bring. For instance, would the massive capital investment and depreciation costs of automated factory be more economical compared to the cheap factory and labor in low cost countries ? Is there enough skilled labors to operate the machines and what if the automated factory needs maintenance and renovation every few years ? How would such kind of (unpredictable) operation still benefit Nike and other companies of the supply chain inside Nike’s eco-system ? My point of view is, the beautiful strategy may not be as attractive when actually implemented. That said, a deliberate estimation of the total return on investment and total cost of ownership may be worth a review before going forward. I also believe the same can be said whether advances in developing countries would reinvigorate the case for offshoring in the future.

On November 24, 2017, S.K. commented on Digitization of Walmart :

I agree to the general direction of digitalization for Wallmart, but I would suggest to keep the offline channel from two reasons. First, standardized product such as electronics, household goods, and clothes can be digitalized whereas non-standardized product such as food would continue to stay in the brick and mortar stores for consumers to choose by it’s appearance and freshness. For example, some consumers are still going to Wholefoods instead of purchasing through Amazon Fresh due to it’s foods delivered doesn’t match the consumers standards. Secondly, there are certain sets of consumers that goes to brick and mortar stores in order to enjoy the space and experience. An easy example is how Barnes and Nobles doubled down on their business model and Amazon actually started to follow their success by starting a brick and mortar store themselves.

On November 24, 2017, S.K. commented on Nissan at the Brexit Poker Table :

I believe you raised valid points for Nissan to worry and it’s way forward. If I were Ghosn, I would restructure the Nissan UK supply chain by utilizing Sunderland factory for UK (and non-EU) markets while shifting production for EU markets to another factory inside EU, perhaps the Renault factory in France. Three reasons to support this decision. Firstly, the UK government should be serious to support Nissan running the factory for UK domestic market, considering the fact that Nissan, Toyota, and Honda produces half the consumer demand of UK. Secondly, we learnt from Toyota USA case about the challenges to educate workers mindset takes significant time. Believing this was true to Nissan Sunderland factory, it will not easy to replicate a state of art factory with Kaizen culture in another country entirely. Thirdly, other UK companies such as EasyJet relocated their company HQ to Austria, however, the relocation cost them significant financial implications (https://www.theguardian.com/business/2017/jul/14/easyjet-austria-eu-flights-brexit). That said, balancing factory in different location could turn out to be a competitive edge for Nissan.

I would also look into the larger picture of climate change. Another factor that has started to dominate the mining industry is the shift of market demand. During the past decade, China has become the largest market for consuming iron ore and coking coal. Before the China era, Japanese steel industries had long term price agreements with mining companies to stabilize the supply chain. With China in lead now, the dynamics has changed from long term to short term spot markets, increasing volatility of the supply chain and causing unstable earnings for mining companies (https://www.bloomberg.com/news/articles/2017-07-03/iron-ore-market-is-facing-extreme-volatility-for-couple-of-years). Furthermore, Chinese industry are now moving towards cleaner energy from thermal powered energy due to public attention towards gas emission and significant air pollution. All these dynamics sheds a shadow to the future of mining industry. Now is a great opportunity for Rio Tinto to review the energy mix of the company and invest towards resources that is valued in the eco-friendly world.

On November 24, 2017, S.K. commented on Caterpillar: Building the Supply Chain of the Future :

This is an interesting subject. I would like to add that Caterpillar’s digital technology has advantage against it’s key competitor, Komatsu. The system between the two companies differ largely by their coverage. While Komatsu only controls their own construction equipment, Caterpillar traces other manufacturer’s construction equipment together. From the end-users view (e.g. construction companies, mining operators), the latter is much more valuable because it enables a holistic project management. If Caterpillar can improve it’s digitalization based on end-user’s needs in addition to their own supply chain management, we may see the company evolve their already dominant position in the market.

Does Volvo have the edge? It’s a great question. I think they do. Their brand heritage and service network in the European market should be considered as a great advantage against US emerging automakers like Tesla and BYD. Knowing Tesla and BYD’s growth has been fairly limited to US market so far, Volvo’s opportunity is in their home court. Volvo, however, may be left behind at home. In November 2016, BMW, Daimler, Ford (Europe), Audi, and a few other companies signed a MOU to deploy a high-powered DC charging network for Electric Vehicles covering long-distance travel routes in Europe. The network is expected to reduce charging time significantly and to build 400 ultra-fast charging sites (https://www.press.bmwgroup.com/global/article/detail/T0266311EN/bmw-group-daimler-ag-ford-motor-company-and-volkswagen-group-with-audi-porsche-plan-a-joint-venture-for-ultra-fast-high-power-charging-along-major-highways-in-europe?language=en). If I were Volvo, I would be worried about being left behind in the alliance. Considering the early stage of the market, it would make sense to start working with the allies to develop infrastructure and to grow EV market in Europe. Hopefully, Volvo shall capture early adopters in the market and build a competitive supply chain.