SM's Profile

I was interested to read about the three business model options that you laid out for Foxconn: 1) continue to manufacture components in China, 2) begin shipping LCD screens back to China to be assembled with other components and then shipped to customers worldwide, or 3) bring other manufacturing jobs to the Wisconsin factory. Given that labor costs are materially cheaper in China than in the US, my intuition is that Foxconn should keep the processes that are most labor-intensive in China. In particular, I imagine that final assembly would require much more direct labor than manufacturing processes that are easier to automate with machinery. If this assumption holds, I would prefer the second option because it would help minimize labor costs. As we observed in our discussion about the Fuyao Glass case [1], when a large volume of small items (such as LCD screens) are shipped together, the cost can be distributed such that shipping costs are only a few cents per item.

That said, one counterpoint to consider is that shipping costs will be more expensive for finished packaged goods (which would need to be shipped back from China to the US) than for components such as LCD screens. Ultimately, one would need to analyze whether round trip shipping costs exceed the labor rate differential between the US and China.

[1] Shih, Willy. “Fuyao Glass: Americas Sourcing Decision.” Harvard Business School Case 618-007, August 2017. (Revised November 2017.)

While I agree that Brexit may impact the human resources aspect of Amazon’s supply chain, Amazon may be able to mitigate this risk by continuing to increase the level of automation and digitalization employed in its warehouses and distribution network.

Amazon has already begun to explore ways in which it can use self-driving technology to automate its logistics strategy (for example, by using self-driving forklifts, trucks and other vehicles in its warehouses and distribution networks) [1]. Additionally, Amazon piloted a successful “Prime Air drone delivery” in the UK in 2016 [2].

By continuing to invest in and experiment with such automation technologies, Amazon may be able to reduce the human resources required to support its distribution network.

[1] Jonathan Camhi and Stephanie Pandolph, “Amazon looks to further logistics automation”, Business Insider, April 26, 2017, http://www.businessinsider.com/amazon-looks-to-further-logistics-automation-2017-4?r=UK&IR=T, accessed November 2017.
[2] Alex Hern, “Amazon claims first successful Prime Air drone delivery”, The Guardian, December 14, 2016, https://www.theguardian.com/technology/2016/dec/14/amazon-claims-first-successful-prime-air-drone-delivery, accessed November 2017.

It is interesting to read that Adidas is beginning to shift its business model to address customer preferences for custom products with fast turnaround times.

One question I had as I read this article was whether the new technologies that Adidas is developing to grow and optimize its production processes could also serve as an entry point for new competition? It is certainly impressive that the new business model may be ~10% cheaper than the traditional model; however, if Adidas demonstrates that it is possible to manufacture small batches of custom product in a cost-effective way, what is to stop innovative new footwear companies from entering the market?

It seems as though this risk is particularly relevant if we believe that consumers care now more than ever about custom product (versus, say, brand name). If that is the case, what is to stop them from turning to a new, potentially lower-cost but equally bespoke offering?

Thanks for the interesting read. I was intrigued by your closing question: do conventional automakers like Volvo have any competitive advantages compared to current electric vehicles leaders Tesla and BYD?

A few come to mind:
1. Manufacturing capacity and experience – Volvo already has an established production footprint and manufacturing processes (machines, factories, labor, etc.), much of which will be transferable to the electric vehicles business. As a point of comparison, Volvo sold >530,000 vehicles in 2016 vs. Tesla’s ~24,500 [1,2].
2. Distribution network – As S.K. noted in the comment above, Volvo’s existing distribution and service network in the European market gives the company an edge in distributing product internationally vs. current U.S. electric vehicle leaders.
3. Reputation – in business since the 1920s, Volvo has had decades to build its brand and customer base. When given the choice between purchasing a Tesla vs. Volvo electric vehicle, consumers may remain loyal to a brand and product that they know and trust.

[1] Volvo Car USA, “Volvo Cars’ 2016 sales hit new record”, https://www.media.volvocars.com/us/en-us/media/pressreleases/202294/volvo-cars-2016-sales-hit-new-record, accessed November 2017
[2] Jill Disis, “Tesla selling twice as many cars as it was in 2015”, CNN, http://money.cnn.com/2016/10/02/technology/tesla-third-quarter-2016-car-sales/index.html, accessed November 2017

You raise an interesting question about whether Blue Apron should change its business model from a subscription business to individual order meal kit deliveries. Certainly, a benefit of the subscription model is Blue Apron’s increased visibility into upcoming demand – i.e., with a subscription model, meal kits are delivered on a predetermined schedule, making it easier for Blue Apron to project demand and source materials to minimize wasted perishable inventory.

While individual order meal kit deliveries can provide customers with more ordering flexibility, I worry that a transition from a subscription model to individual order meal kit deliveries could disrupt Blue Apron’s planning methods and therefore its ability to fulfill complete orders. Given that Blue Apron’s customer promise is to deliver “chef-curated recipes using farm-fresh ingredients, sent straight to your door” in “exactly the right proportions” [1], missing ingredients could present a problem for the company’s packaging and distribution system and, therefore, its ability to meet customer expectations.

[1] Blue Apron, https://www.blueapron.com, accessed November 2017.

Thanks for this interesting article. While I am familiar with some of the plant-based meat alternatives competing in this space, I was unaware of the effort to manufacture lab-grown meats.

I agree with your thesis that transparency around production methods and community support for the product will be critical for success in this market. As cjd mentioned in her comment, I wonder what the best way to distribute this product will be? I imagine that consumers may be skeptical of lab-grown meats, so controlling the narrative around the product as well as the “first taste” experience will be key.

Impossible Foods (https://www.impossiblefoods.com/) has approached this issue by partnering with select chefs and restaurants to distribute its ‘Impossible Burger’ rather than selling through grocery stores or online. In doing so, the company hopes to manage consumers’ first taste experience by controlling the product’s preparation and presentation. I wonder if Memphis Meats would benefit from a similar distribution strategy, especially in its early days of commercialization?