This is an interesting view on the tension of isolationist policies aiming to protect american businesses (such as Walmart) simultaneously damaging their competitive advantage. I question whether bringing manufacturing jobs to the US would be of much benefit even to the communities for two reasons: 1) As you pointed out, product prices are more than likely to rise and potentially become out of reach, and 2) given Walmart’s widely reported history of underpaying its employees and improperly training them (https://www.theatlantic.com/business/archive/2016/01/walmart-raise-2016/425058/), the quality of the jobs potentially available may not even be desirable for the vast majority of Americans.
Keeping labor costs low has clearly been a competitive advantage for Walmart (some might say unethically so). However, isolationist policies wouldn’t only affect Walmart; they would also affect competitors such as Target and other discount super retailers. Given that Walmart would remain the largest, and given that they have engineered ways to keep labor costs low even in the US, I think they stand to remain the incumbent leader in delivering “everyday low prices” even if at the expense of poor labor relations and low customer satisfaction (http://time.com/3715877/walmart-satisfaction-index/).
Really interesting post that highlights the importance of sharing information with upstream elements of the supply chain in order to minimize disruption.
I actually disagree that integrating technology into the product itself is necessary or even desirable. There’s a lot of buzz in the media about “the internet of things”, but I think we’re a long way away from real value additions derived from integrating technology into otherwise mundane products. I think certain wearables have managed to gain traction (primarily fitness trackers and some backpacks with integrated battery back up for mobile phones). Nevertheless, absent a significant value proposition for integrating digital platforms into wellies and snow boots, it would be difficult for LL Bean to convince consumers that such products demand a premium.
I am most impressed by the quote that Nike’s “new process uses 75% less energy, 50% less tooling cost and has a 60% reduction in labor.” This clearly has fantastic repercussions from an environmental stand-point and delivers an incredible cost advantage to Nike in relation to other sportswear companies. I think UA will have difficulty beating Nike on supply chain innovation, and should perhaps focus on their other competencies with regard to athletic design that is more performance driven – especially in the compression performance apparel area.
I second what Philip said regarding the role that technology has played in the sportswear industry. Nike, but also other players like Lululemon, are constantly innovating on their products to improve performance. So it seems only logical that they would also be some of the first to innovate on their supply chains.
Great piece, Tiffany! I think REI is extremely well positioned in the outdoor retail segment precisely due to its sustainability focus. When we talk about sustainability, we tend to narrow it down to environment, but what is really striking about REI is their focus on people (their employees, their customers, and society at large). This is a key differentiator, which I think gives them a competitive advantage (rather than disadvantage) as they continue to focus on sustainability.
Additionally, while REI does not have governance over their suppliers, I heard their former CEO speak at HBS about how they have worked with suppliers, particularly on their packaging practices. They are aiming to reduce plastic use and minimize waste. This may seem a small action, but for a company that sells over $2.5 Billion (https://www.rei.com/content/dam/documents/pdf/Financial%20Statements/REI%20Financial%20Statements%202016.pdf), even small/incremental improvements can be quite significant.
That being said, manufacturing and retail as a whole have a very long way to go in terms of achieving sustainable production and supply chain. Unfortunately, it’s my opinion that the primary driver of that is consumer behavior, constantly demanding low prices and turning a blind eye to production standards.
Really well-written essay. I applaud H&M’s efforts to combat climate change through Green House Gas reductions in their supply chain. However, given prior work I’ve done in carbon capture and sequestration (albeit for other applications), I think H&M is going to face tremendous challenges to invest in this technology, which is very capital intensive and not yet economical. Especially given that H&M’s carbon footprint is very dispersed (through electricity in manufacturing facilities and transportation), it’s difficult to imagine how a carbon capture project can be effectively implemented.
Additionally, I would further agree with Jane Doe above. H&M’s business model is designed on the premise that consumers replace their wardrobe in increasingly shorter cycles. And as we learned from the Gap case, H&M and Zara are actually influencing other retailers who would typically have taken a more traditional approach. In this way, H&M contributes to over-consumption of resources, to larger amounts of waste, and to a culture that encourages the same behavior in consumers of brands that are not offsetting their carbon footprint.