SAV's Profile

From a supply chain perspective, I agree with Jason above that there are efficiencies to be gained from preemptively establishing manufacturing sites in the United States, coupled with the growth of the Mexican population in the United States and the gaining popularity of Mexican beers in the United States. I’m more worried about the effect of increased labor costs in Mexico and how that will reverberate through the supply chain. This is similar to how Professor Shih has described the extreme increase in labor costs in certain regions of China. Unlike some of the major U.S. beer players whose margins have decreased because of the craft beer surge, Constellation’s huge sales growth over the past year has been largely unaffected, which signals strong loyalty in its consumer base. Constellation can diversify against isolationist policies and potential increases in Mexican labor costs by acquiring more U.S. based companies and establishing U.S.-based manufacturing. Additionally, with the recent surge in profit margins, they can push their popular Mexican brands further into U.S. markets and markets abroad [1] to drive growth elsewhere. By driving growth in new markets, they can posture themselves financially for potential increased labor costs and/or isolationist policies that affect their supply chain.

The Wall Street Journal, “Logistics Report”, https://www.wsj.com/articles/todays-top-supply-chain-and-logistics-news-from-wsj-1507286173 Accessed November 27. 2017.

To your questions, I think that companies need to think about insourcing and outsourcing based on their level of confidence in the quality they would achieve through outsourcing and the costs and benefits of being reliant on suppliers.

Two examples come to mind, and one is another Elon Musk company. SpaceX insources about 80% of its own manufacturing [1], while Blue Origin, another big mover in the reusable rocket industry, similarly builds much of its rockets in-house. This allows both companies to have more control over their manufacturing processes, and provides greater oversight in quality. Cars, like rockets, must be up to stringent quality standards, as lives are dependent on the safety of each. From a supplier point of view, in the rocket world, United Launch Alliance, made up of Boeing and Lockheed Martin, use Russian-made engines. Not only does this initiate concerns over quality, but it also brings up concerns over the future political/economic climate between the U.S. and Russia. With the supply chain in mind, taking an isolationist mindset, whether you are Tesla, SpaceX, or Blue Orgin, makes sense in many ways to protect from factors a company may not be able to control. From a bottomline point of view, there is a heavy up-front cost and potentially higher labor costs. But in the space industry, where even the smallest error can cause billions in damages, supply chain control is critical.

[1] Wired.Com, “The Rocket Factory: SpaceX Builds Them From Top to Bottom”,” https://www.wired.com/2012/05/the-rocket-factory-spacex-builds-them-from-top-to-bottom/ Accessed November 27th, 2017.

Great write-up and interesting questions that you pose. First, I think one of the key factors here that you brought up is how the city governments can attract talent to work in the public sector, which is generally known for its bureaucratic, slow-moving, and low-paying nature. In my military experience, the Air Force has traditionally had difficulty retaining talent in certain professions that require extensive training and skills because the pay is much more lucrative in the private world (think pilots, engineers, lawyers) [1]. Not to mention, public work may seem a bit outdated in the eyes of millenials who may be looking for companies driving faster, more advanced change.

In the case of under-resourced, or even over-resourced cities (not sure they actually exist in America) cities, it’s hard to imagine these cities using tax-payer money to invest in long-term projects when elections are generally based on very short term results.

Ultimately, cities can certainly benefit in investing in technology for the greater utility of all its citizens. However, cities may have to do so through cutting costs internally, as raising taxes is always a political headache.

[1] U.S. Air Force. “AF Manpower, personnel, services leaders talks recruiting, retention.” http://www.af.mil/News/Article-Display/Article/977870/af-manpower-personnel-services-leaders-talks-recruiting-retention/ Accessed November 27, 2017.

I am reminded here of our Beer Game and Barilla Spa cases, which has led me to a few questions.

First, while utilizing blockchain in this context seems abundantly appropriate, how huge are the costs to implement? I would assume that a huge company like Walmart would have the funds to invest in this technology, but smaller companies may not have the capital to implement such a change.

Second, will there and can there be trust issues along the supply chain? As we discussed in our recent TOM class, even with the proliferation of technology today, companies upstream and downstream still hesitate to be transparent even at the cost of lost value and efficiency throughout the supply chain. However, based on Walmart’s case, it appears that retailers and suppliers have been open to discussions on blockchain [1] Though, if you’re a Walmart supplier, you probably have very little bargaining power, and would conform to Walmart’s ideas to keep your business with the giant.

[1] Forbes, “Walmart and 9 Food Giants Team Up on IBM Blockchain Plans” http://fortune.com/2017/08/22/walmart-blockchain-ibm-food-nestle-unilever-tyson-dole/ Accessed November 27, 2017.

I really enjoyed this article and had no idea that rubber came from trees…which leads me to my question while reading this article: Is rubber currently being recycled, and if so, at what rate and does it have the same quality?

I couldn’t help but draw connections to the recent IKEA case. For tire manufacturers, based on your research, it is apparent that there could be a shortage of raw materials in the future, similar to the problem that IKEA is facing with tree harvesting. I’m curious if there are laws and regulations in place to protect the para-rubber tree and the guayule to prevent over-harvesting.

The first question you bring up is quite interesting, and I think it applies to many companies that are heavily affected by climate change. How much should a company invest in sustainability initiatives, when these initiatives often require a heavy up-front investment? In this case, it seems that Cooper should strongly looking into these initiatives since they heavily use raw materials for their products, much like IKEA.

I found the note about how we will see a decrease in the amount of land suitable for coffee growing to be quite interesting. This immediately brought up the question is that if suitable land in some geographies is decreasing, then we should expect that suitable land in other geographies should increase as temperatures in different areas change in step with climate change.

I did a quick search on this idea and as we expect to see a decrease in suitable land in Nicaragua, Honduras, and Venezuela, we should alternatively see an expansion in Mexico, Guatemala, Colombia, and Costa Rica [1].

From a supply chain point of view, it would be interesting to know if the latter countries listed above are preparing their supply chains to increase future supply and exports due to an increase in suitable land. Perhaps some countries are looking to invest in coffee-growing land in these countries to anticipate future demand.

On a side note: Pollinators, such as bees, are important to coffee growing, and the effect of climate change will impact the extent at which pollinators can help improve yields. Research and modeling so far shows that there will be a reduction in the number of bee species, but at the same time, some areas will see an increase in diversity of bee species, which should offset each other [2].

Both footnotes are attributed to this article:

[1][2] National Public Radio, “Coffee, Bees and Climate Change Are Linked In Ways You May Not Have Expected.” https://www.npr.org/sections/thetwo-way/2017/09/11/550169720/coffee-bees-and-climate-change-are-linked-in-ways-you-may-not-have-expected Accessed November 27, 2017.