kspies

kspies

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kspies
On December 1, 2017, kspies commented on Designed in California, Manufactured/Assembled in U.S.A.? :

I agree that the core question for Foxconn and for their customers is whether they can match production levels in China with their new Wisconsin plant — or at least get close enough that the cost of lower efficiency is covered by the $3B incentive package provided by the government (US Taxpayers). However, I assume that Foxconn has done that analysis and has decided that the incentive along with the positive PR and any other externality-effects make the deal worthwhile.

As someone without a strong opinion on isolationism politics, what is more interesting to me is whether this sort of proposal brings long-term benefit to Wisconsin or the US. If Foxconn decides that operating the US plant is less profitable than operating a plant elsewhere, will they simply pull out of the US at the end of the contract with the government? And if so, what will be the effect on Wisconsin? Presumably, if “iPhone city” is developed in Wisconsin, it will be a dominant employer in the region — what are the risks to US workers if those jobs disappear at the end of the contract? Are subsidies like this incentive package likely to continue? Faced with the threat of Foxconn pulling out of Wisconsin and laying off tens of thousands of US workers, will the taxpayers again be asked to subsidize extending their contract by offering more incentives?

Separately I’m intrigued by the analysis that must have taken place forecasting the growth of demand around the world. As you mention, demand is increasing in emerging markets in Asia — at what point will it make more sense to be closer to those customers?

kspies

It is so interesting to see that the vicious cycle at work: protectionist trade policy creating import-tariffs, some fraction of which can be passed on to consumers, and then the company must respond in order to minimize the effect of this tariff on their costs (if they need to eat the portion that consumers won’t accept) or on their revenues (if increased costs affect demands). I am fascinated by the idea that companies are responding to isolationist political trends with increased automation, which drives their costs down and makes the tariff more bearable.

I question whether these political trends will stand the test of time, or whether a two-party system (at least in the top office of the US) will always have enough turnover that any forceful isolationist legislation will be overturned within 2-4 years (and vice versa). With this kind of turnover rate, are companies actually incentivized to invest capital in building manufacturing plants, in a geography in which (as you point out) they have no core competencies?

I agree with your proposed next steps for Nike – continue financing lobbyists, driving supply chain efficiencies. If Nike projected more growth from US sales, would they be more willing to consider ‘reshoring’? Would all of the upstream material partners also need to ‘reshore’ (assuming they’re not vertically integrated when they first reshore back to the US) in order to fully benefit from isolationist policies?

kspies
On November 28, 2017, kspies commented on Apps on Apps: Tesco uses digitalization to tackle food waste :

This is a fascinating area of study. I’m so curious to see what the future of this supply chain will look like – especially with the advent of many on-demand delivery and ‘subscription’ based food services. I’m curious how the internet of things, especially within the realm of smart home and smart cooking/refrigeration devices will eventually feed data back to retailers and grocery stores about what items are running low on supply in the home, what food usage habits exist in each household to help with demand forecasting

RE: Imperfect Produce: Supermarket discounts, especially when selling to price-sensitive consumers, incentivize consumers to create certain habits and beliefs. Discounting produce that isn’t perfectly round leads consumers to believe that produce may be lower quality, and stores may be able to reach the same goal by simply educating their consumers. I’m curious whether Tesco’s Perfectly Imperfect pricing team considered the costs of educating consumers about the benefits of not wasting “imperfect” produce that tastes and cooks the same as “perfect” produce. While I support the goal of selling this produce and reducing waste in the supply chain, I question why stores don’t also use dynamic pricing to sell soon-to-expire produce at discounted prices to homes that will use it immediately. Eventually, I hope that my smart home can communicate to Instacart or Blue Apron the timeframe within which I plan to use certain items, and those services can more efficiently manage soon-to-expire supply.

I also applaud the efforts that Tesco is pursuing to donate left-over supply that may not sell to those in need via the FareShare FoodCloud app.

kspies

After reading this, I share Melissa’s concern that these practices may not be sustainable for the company as they try to grow.
I don’t see how The Body Shop gains a defensible, significant competitive advantage through these measures, and worry that some of their commitments will become too costly to continue. How loyal is this coop to The Body Shop: If the coop gets a similar offer from one of The Body Shop’s competitors, would they be willing to supply to that competitor instead? How scalable is this sort of relationship, in which the downstream manufacturer finances risk mitigation for loyal upstream producers?

My primary concern relates to the insurance offering, and how that financing will scale with worsening climate change. As weather patterns become more erratic and extreme events more frequent, the risk seems to universally increase. Is it possible to offer a profitable (or at least break-even) crop insurance product to such a geographically concentrated set of growers in the future as the weather worsens and delivering high yields becomes more difficult? I wonder whether this insurance offering will drive The Body Shop to further diversify its interests, not only by crop but also by geography.

That being said, I applaud the work that The Body Shop is doing to enable smallholder farmers and coops to develop sustainable practices and investing in these communities to better their future profitability.

kspies
On November 28, 2017, kspies commented on Unilever – Tea Saving Superhero? :

The Rainforest Alliance is an NGO that promotes sustainable farming techniques for smallholder farmers, runs an annual audit, trains rural farmers in these techniques, and certifies farms with their “Rainforest Alliance” seal. Unilever advertises that they source 100% of their tea from Rainforest Alliance (RA) certified farms. As far as I can tell, RA is entirely independent from Unilever/

This reminds me of the discussion we had around Ikea’s lumber certification partner. Unilever faces some of the same long-term risks that Ikea faced (input availability, reputational hazard, impact on relationships with communities), and after reading this essay I’m left asking the same question as we asked Ikea: Does Unilever have the market power to set standards for all? Who will eat the additional costs of using more advanced farming techniques, and pursuing additional R&D?

I’d love to understand how important sustainability is to tea-drinkers around the world. Is there something more that Unilever can do to market their pursuit of sustainable tea farming to give them a competitive advantage or to draw higher WTP from consumers? My primary concern is that the Rainforest Alliance seal is not something that consumers are currently familiar with, and is a complicated set of restrictions applied to everything from number of seasonal workers hired to the type and amount of specific pesticides permitted. This black box seal does not hold meaningful value today for consumers and I worry that it doesn’t signal clearly that Unilever tea, and any other products carrying this seal, is worth paying more for if you are a climate-conscious consumer.

Sustainability at large has a marketing problem in that even climate-conscious consumers cannot easily determine the sustainability of a certain product, even when it contains the universal recycling symbol or another “eco-X” logo. Cynical consumers are wary of potentially fraudulent uses of the sustainability related buzzwords, and black box certifications are complex to understand. How can Unilever effectively communicate this added value to their customers, while pushing the entire industry to adopt new practices?

kspies
On November 28, 2017, kspies commented on Unilever – Tea Saving Superhero? :

The Rainforest Alliance is an NGO that promotes sustainable farming techniques for smallholder farmers, runs an annual audit, trains rural farmers in these techniques, and certifies farms with their “Rainforest Alliance” seal. Unilever advertises that they source 100% of their tea from Rainforest Alliance (RA) certified farms. As far as I can tell, RA is entirely independent from Unilever/

This reminds me of the discussion we had around Ikea’s lumber certification partner. Unilever faces some of the same long-term risks that Ikea faced (input availability, reputational hazard, impact on relationships with communities), and after reading this essay I’m left asking the same question as we asked Ikea: Does Unilever have the market power to set standards for all? Who will eat the additional costs of using more advanced farming techniques, and pursuing additional R&D?

I’d love to understand how important sustainability is to tea-drinkers around the world. Is there something more that Unilever can do to market their pursuit of sustainable tea farming to give them a competitive advantage or to draw higher WTP from consumers? My primary concern is that the Rainforest Alliance seal is not something that consumers are currently familiar with, and is a complicated set of restrictions applied to everything from number of seasonal workers hired to the type and amount of specific pesticides permitted. This black box seal does not hold meaningful value today for consumers and I worry that it doesn’t signal clearly that Unilever tea, and any other products carrying this seal, is worth paying more for if you are a climate-conscious consumer.

Sustainability at large has a marketing problem in that even climate-conscious consumers cannot easily determine the sustainability of a certain product, even when it contains the universal recycling symbol or another “eco-X” logo. Cynical consumers are wary of potentially fraudulent uses of the sustainability related buzzwords, and black box certifications are complex to understand. How can Unilever effectively communicate this added value to their customers, while pushing the entire industry to adopt new practices?

kspies
On November 27, 2017, kspies commented on Just-In-Time…. Pothole Repair?! :

Digital tools can undoubtedly ease some of the logistical headaches cities face on a daily basis. When it comes to communicating with constituents, reporting issues, tracking inventory and assets, the opportunities for efficiency gains are endless. However, innovative systems designed for such particular business requirements, that also satisfy a majority of the constituents’ ought to be designed thoughtfully using some of the design thinking tools we discussed in IDEO.

This requires significant time and energy investment in the design and prototyping phases of development. I question whether governments realistically have the expertise or the capital to follow this sort of a design-heavy process. Furthermore, the double-diamond process of repeatedly diverging (discovering many ideas) and then converging (narrowing down a list of ideas and developing them further) requires capital investment up-front, before one can define fully what the end-solution will do or look-like. I worry that this fundamentally differs from the traditional government funding process which requires (or should require) extreme justification for each tax-payer dollar spent to ensure that money is spent efficiently.

Generally, I question why governments wouldn’t contract this sort of work out to private developers. The government does not gain any synergies by doing this work themselves, they are spending on high risk (as you mention, they’ve spent $100M on failed systems) low reward (potholes and graffiti removal are not as impactful as healthcare or emergency response) investments that simply need to integrate with standard government systems. Its unclear to me why the city feels its important to build these systems in-house.

kspies
On November 27, 2017, kspies commented on Birchbox: Suffering From An Identity Crisis? :

This is fascinating – I had no idea how much curation through data science went into these subscription box products. We’ve discussed the various issues associated with predicting customer demand, but Birchbox has built a business in which they control customer demand for each individual sample product. As you mention, when done well, this offers Birchbox the opportunity to optimize relationships and cost arrangements with manufacturers.

I wonder if such data analytics could instead be applied at a much broader level. Rather than competing directly with Sephora and other beauty retailers, Birtchbox could sell analytics insights to other retailers to help them predict demand based on past purchase history.

The biggest concern I have for subscription box retailers, especially in a market like beauty products, is the customer lifetime. If a customer uses your tool purely for discovery, at what point will they leave after having “discovered enough.” A customer may return to your site to make the first full-size purchase of a product she enjoyed, but will she make all future purchases through your 3rd party site, or will she visit another retailer or the manufacturer themselves? I wonder if Birchbox should offer a supplementary subscription offering bundling full-size versions of products that customers enjoyed, and shipping them on a frequency based on how long each product should last. This would offer another revenue channel for the company, would maintain customers for longer, offers predictable demand, and may offer another means of collecting feedback about which products customers love.

kspies
On November 27, 2017, kspies commented on SV Agri – Consolidating India’s Potato Supply Chain :

The demand for services such as SV Agri is providing is clearly already quite large (with India contributing 8% of global potato production) and the demand is likely to increase as more smallholder Indian farmers experience the effect of climate change. SV Agri’s current product offering helps farmers respond to climate change and mitigate the risks of erratic weather patterns. However, this is a reactive product. I wonder if SV Agri has considered offering services to help farmers reduce their carbon emissions. At scale, I wonder if reduced emissions from Indian potato farms could move the needle for climate change on the whole.

When considering how SV Agri could gain market share, I wonder whether they’ve considered vertically integrating with their customers and consolidating the farms themselves. The vast majority of farms in India are smallholder farms, the average size of an Indian farm is roughly 1 Hectare (2.47 Acres). At this size, many farms are no longer financially viable because of the necessary high fixed costs. I question whether SV Agri could be more successful when it comes to protecting Indian agriculture against climate change and improving potato yields if they owned the farms themselves, employing farmers but controlling decision rights. Understandably this would be a different business model entirely for SV Agri, and they would likely face cultural and regulatory barriers (assuming that these are the barriers causing the smallholder-farm trend in the first place).