Thanks for an interesting read, KL! Your paper does a great job explaining the complexities of managing all of the inputs to what, at first glance, appears to be a relatively simple product.
Your article mentions some of the benefits to these digital investments, including risk mitigation and potential for savings, and number of comments above speak to some of the factors a firm should consider when deciding whether to build or outsource. I’d add size as a potential consideration. A firm must make meaningful investments to build its own technologies and support some of the costs that F1991 speaks to above. A large firm may be better positioned to absorb these costs; small firms may not be able to afford do so given their scale.
The budget issue you mention in your second question may also influence whether a firm builds or outsources. As brandlesswriter has referenced above, building a system comes with a meaningful cost in the short-term. Outsourcing over time may better align the timing of the costs of a system with the potential benefits. Firms with tight operating budgets may therefore prefer to outsource to avoid this cash flow challenge.
StarP, thanks for a great article! It has been interesting to hear about how a large producer like General Mills is working to improve sustainability and act in a more environmentally-friendly way.
Alec makes a great point above around the potential role of consumers and regulators, and I agree. I believe the role of consumers in this shift is very important. One could argue that a large player like General Mills is better able to shift its supply chain towards sustainability because of its size and leverage it has. While firms like General Mills can act as leaders in these discussions, it’s up to consumers to support and encourage this shift through their purchase decisions. This hopefully creates both pressure and momentum for other players to follow suit.
From a shareholder perspective, Jen D’s article pointed out that investments in reducing emissions can lead to improved financial performance for a business. If that also applies in this industry, it could be a helpful fact to satisfy shareholders. It would also be a concept that General Mills would want to emphasize to suppliers, who may view new sustainability requirements from General Mills as concessions in the context of a negotiation.
Thanks for a great read, Rob! It’s certainly interesting to learn about the this in terms of the competitive dynamics at play, as well as the potential cost pressures on suppliers from the Bombardier / Airbus partnership.
It’s also interesting to think of the potential impact of this on Delta and their strategy if the tariff remains. You mentioned that, despite their complaint, Boeing does not have a plane of the same size. As a result, I wonder whether Delta has access to an alternative 100-seat plane that is economical. If not, this tariff could have ripple effects on how Delta operates, as it would have to operate presumably larger and more expensive planes. This could impact its strategy, such as which markets it serves or which routes it could take.
While this certainly has a significant impact on the supply chains of Airbus / Bombardier, I would be curious to hear your thoughts around the potential impact of this sourcing challenge for Delta on its operations.
Thanks for a great paper, Tom!
Regarding your second question, my feeling is that an event like Brexit will lead companies to shift to a more localized supply chain. Your article does a great job of pointing out many of the real costs associated with Brexit – each one effectively makes it more challenging for Ford to operate in the UK. Beyond the real costs, there is also the challenge of managing the further uncertainty that is created. Companies’ supply chain investments are often long-term decisions and, as a result, the instability may make companies more reluctant to invest in global supply chains given the heightened risk.
With that said, a caveat: a recent article found that, while public sentiments around globalization and trade declined dramatically from 2005 to 2015, actual levels of globalization did not. As a result, it’s possible that the actual impact of events such as Brexit on these investment decisions will be more muted.
 Pankaj Ghemawat, “Globalization in the Age of Trump,” Harvard Business Review 95 (July-August 2017): 115.
Jen, thanks for a very interesting read. Your point about GHG emissions on eCommerce orders relative to store purchases raises an interesting tension between two of the megatrends we’re discussing: digitalization and sustainability.
Another interesting potential tension surrounds the company’s choices around how to incentivize customers to act sustainably. Your throughput time example is a great illustration of how Walmart creates both environmental and financial savings. It’s nice to see that a company’s emissions could be correlated to its costs, an idea which you spoke to and which Imran has also cited evidence for. With that said, I’m sure whether a company’s initiatives to save on customer emissions (such as your example of pickup in higher-traffic areas rather than supercenters) would be as linked to improved financial performance. It will be interesting to see how companies work to manage this potential tradeoff.
To your question about whether Walmart shoppers care to ‘go green’ or whether they are willing to pay a premium for low emissions, I also wonder whether, when making a purchase, customers think of their own emissions in the same way as they would those of a firm. In other words, are consumers as willing to pay more in order to reduce their own emissions?
Thanks for a great read, Elliott. Your question of whether Starbucks can fall victim to its own success is particularly relevant given a recent example for the business.
In your article, you mentioned the overarching benefits of the Mobile Order & Pay system at Starbucks. Although the system has created efficiencies for stores by allowing customers to start their transactions elsewhere, its growth and adoption have inadvertently created congestion where customers pick up their orders, leading to some customers leaving stores without completing a purchase. Here, the company’s success has led to challenges for the business: as Starbucks innovated to shift and improve its processes in stores, a new bottleneck was created requiring further attention.
This example emphasizes the importance of thinking carefully about some of the challenges you mention, ones which companies like Starbucks must continually manage as they grow and shift.
 Kevin R. Johnson, President, Chief Operating Officer & Director, Starbucks Corp., remarks made during Q1 2017 Starbucks Corp. Earnings Call, Call, January 26, 2017. From transcript provided by Starbucks Corp, https://s22.q4cdn.com/869488222/files/doc_financials/quarterly/2017/transcripts/SBUX_Q1-2017-Earnings-Call-Transcript.pdf.