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Bespoke shoes and apparel are phenomenal concepts for the active wear retail space. When paired with rapid fulfillment for the customer this long term vision at Adidas is fascinating! Adidas, while small in market capitalization compared to Nike, is a worldwide brand with a strong following. Leveraging their existing network and expanding to new markets with this capability will be integral to their success.

I am concerned, however, with the ability for Adidas to scale this model given their current supply chain structure. Program supporters have claimed that these “speed factories” will complement their current network of suppliers in Asia [1], but inevitably this will lead to an erosion of the supply networks they have built in the region. The new factories would then have to not only source additional raw materials to subsidize production from the older factories, but also have the capacity to produce their mass-market lines in the same facilities.

I also see logistical difficulties with this model in transporting the finished goods to the consumer. Distribution and fulfillment networks are not naturally occurring or inexpensive and it will be a challenge for Adidas to grow both its factory operation to scale and its distribution network before players such as Amazon are able replicate it [2].

I am excited to see how quickly Adidas will scale this business and whether or not it cannibalizes its current supply chain to embrace digitalization through 3D printing – if they can scale both the supply chain and fulfillment networks simultaneously they may not have to compete head to head with Nike, Amazon, or others for the fast fashion active wear market.

[1] Various, “Adidas’s high-tech factory brings production back to Germany,” The Economist, January 14, 2017 (print edition).
[2] John Newman, “Amazon Launches 3D Printing Services”, Supply Chain 24/7, July 30, 2014.

I found this piece extremely interesting and think that digitalization at Novartis for the developing world could radically change the healthcare delivery process and positively effect millions of people. I agree that chronic diseases are the next frontier for pharmaceutical companies and offer a great platform for Novartis to make an impact. I disagree, however, that these new technologies will be directly implemented into the current supply chain – rather technology will enable a different supplier network to be built.

The new supplier network will incorporate the data transparency and availability mentioned in the article, but AI and tele-health capabilities will enable both providers and pharmaceutical companies to understand the patient on an entirely different level [1]. The ability to transfer encrypted data securely and utilize the existing smartphone network will allow companies like Novartis to predict demand more precisely than it has in the past [1]. Instead of needing to interact directly with patients or doctors Novartis may be able to directly participate during the diagnosis and prescription process to predict the needs of the patients. Ideally this would help them lower inventory costs for raw materials, batch production based on region-specific demand, and move to a just-in-time production schedule for drugs it knows it will need in developing markets – in much the same way that neglected infectious diseases could’ve been targeted using Pharmacogenomics [2].

Novartis has the capability to redefine the supply network in the pharmaceutical industry through digitalization of demand forecasting and distribution networks while simultaneously bringing treatments to many of the patients who need it most.

[1] Adebayo Alonge, “How AI Can Help Africa Get Universal Healthcare Before America,” Newsweek, October 30, 2017.
[2] Pang, T. Am J Pharmacogenomics (2003) 3: 393.

On November 27, 2017, TM commented on The US Navy’s War Against Climate Change :

I agree that the Navy and the U.S. Department of Defense has, at large, been leading climate change efforts for more than a decade. It goes without saying that an increased dependence on biofuels or other environmentally sustainable practice would undeniably benefit the U.S. Government budget, the environment as a whole, and the global trade economy. As a leader of nations the U.S. and its defense elements can often act as an example or proof of concept to other nations and private industries [1].

The U.S. Navy and its sister branches are in a unique position that allows them to be slightly more shielded from market trends. As this relates to fossil fuels versus biofuels the Navy can, in some case more accurately track the supply, implementation, and effect of different technologies in a shorter cycle than private industry. This will allow them to continue the forward momentum gained in the early 2000s [2]. For instance, the past two decades have forced the U.S. DoD to reassess it reliance on resource-heavy assets. The U.S. Army has a mission to fight and win in a “complex world”. This complex world increasingly includes limited resources and strict supply allocations to drive increases in capability without increasing resource footprints [3]. Inherently this will prioritize efforts that lead to competitive advantages in defense and supply chains are critical elements of being on the leading edge in the defense sector and defending the United States.

The U.S. Navy and associated branches of the military will continue to be sustainability leaders for the U.S. and international community driven by both the bottom line and necessity.

[1] Roger M. Natsuhara, “The US Military Goes Green,” Wall Street Journal, April 8, 2014.
[2] John P. Quinn, “The U.S. Navy’s Sustainability Imperative,” Center for a Better Life, September, 2011.
[3] Raymond Odierno (GEN), “Win in a Complex World,” US Army Training & Doctrine Command, October 31, 2014, pp 37-38.

Well detailed piece and an exciting dynamic in the apparel industry! The case for onshoring is driven by the “fast fashion” trend you mentioned and the need for firms to respond to customer demands or preferences at an unprecedented speed. When companies like Nike first brought manufacturing and supply operations overseas it was in an effort to lower labor costs to increase margins on final products. In a digital environment where automated robotics can replace many labor costs and customers are looking for new and improved goods at a faster pace the new efficiency company’s can integrate is flow of information and data [1].

These elements of the design and supply process today essentially necessitate onshoring [2]. If the North American Market is Nike’s largest and most strategic being closer to market is advantageous. Coupled with the savings from tariffs (at their current or elevated levels) and the decreased speed to market, onshoring allows Nike to more effectively serve its customers while decreasing the risks associated with global transportation of raw materials, technology, or finished products.

[1] Paul Page, “Today’s Top Supply Chain and Logistics News From WSJ”, Wall Street Journal, October 31, 2017.
[2] Tara Donaldson, “Next Step for Sourcing? Go Where No Supply Chain Has Gone Before”, Sourcing Jounral, October 27, 2017.

On November 27, 2017, TM commented on Nissan at the Brexit Poker Table :

Your article is well appointed with issues that transcend not just the auto industry, but manufacturing’s relationship with cross-border conflicts, fluid trade agreements and a shifting global political footprint. I couldn’t help but consider our recent cases, particularly “Sustainability at Ikea” and consider what a vertically integrated supply chain might do to Nissan’s operations.

As it relates to production costs, the integration of raw materials in a more efficient manner would help drive down fluctuations or risks in supply that result from isolationist policies. While increasesd stocks of raw materials have a large effect on costs in an isolationaist setting, vertically integrating the supply chain in Sunderland would remove the tarrifs and barriers to receiving raw materials on time, a cost-offset that would alleviate the effects Bexit might have. This would encapsulate an effective long-term strategy post-Brexit. In the near-term, this would require a tremendous investment by Nissan which is a cost seemingly too high for Goshen to reconcile at this time.

Even if the costs of vertically integrating were amicable to Nissan’s management – global consultancy’s have assessed the implications of inclusive growth strategies and cited the slim margins for asset heavy manufacturing industries [1]. Why has Nissan taken a stance that seeminly doubles down on a strategy that may be obsolete following Brexit negotiations? Goshen and his team need to maximize revenues and production efficiencies already present in their supply chain before they are forced or incentivized to invest in new supply chain practices.

[1]James Manyika, “The US Economy: An Agenda for Inclusive Growth,” McKinsey Global Institute, November 2016.

On November 27, 2017, TM commented on Alaska Airlines and Climate Change: Cleaning-Up the Skies :

I’d like to address the competitive market conditions surrounding the airline industry and how this might drive technological change resulting in a more environmentally conscious market. While I agree that the airline’s contribution to carbon emissions is high, I am not confident in the ability of one firm to change the operating model for the industry and impact the supplier network. Last month the Wall Street Journal reported on third quarter earnings for the top five US Airlines. The report highlighted the industry’s close ties to fluctuations in consumer demand and labor/fuel prices [1]. Transformational change in the industry would require a coalition of regulation and partnering airlines to underpin the current operating model. Fuel efficiency improvements are an effective means to combat carbon emissions, but may not be a long term solution and if that is the case, airline’s will be deterred from making large scale advancements such as alternative fuels or supply chain. If airports, municipalities, and nations could promise or work to provide the infrastructure for larger efforts towards sustainable applications across the industry I would look to Alaska’s commitment to sustainability as a key driver on implementation.

[1] Susan Carey, “Strong Revenue at American, Southwest Airlines Helps Offset Rising Costs,” Wall Street Journal, October 26, 2017.