Michal T Leszczynski
Very thoughtful and comprehensive article!
I think that the key to transforming Apple’s supply chain will be transparency and flexibility.
Transparency – because, as other mentioned, going green usually is financially disadvantageous in the short term. Therefore it needs to be clear that Apple is happy with increased costs if it improves sustainability, this trade-off needs to be put explicitly into numbers and rules for supplier selection, and finally the commitment needs to be made for the long term.
But transparency is nothing if Apple cannot penalize the non-compliant companies and reward the compliant ones with giving them more or less business on a shorter notice. This – again – can make processes less streamlined and watertight, thus increasing the overall average cost.
Very interesting article but I would dare to respectfully disagree with the underlying assumption that isolationism in the banking sector is universally a bad thing. I would argue that it can also be a rational policy decision.
All the benefits of trade you list are correct, but what this entails is a much larger complexity of the system which not only makes it more obscure so that fewer agents understand how it works making it more prone to failure (as in the housing market during the 2007-2009 period), but it also propagates any tumbles across the interconnected network. A bank can be seen as a platform linking the lenders (providers of capital) with borrowers, then a degree of isolationism can make sure that the capital provision is not entirely free to move out of the country potentially starving the companies of funds for growth.
See the following for Brookings’s analysis of the role of a large Polish state-owned bank (it is not allowed to make significant forays for foreign markets) in helping avoid recession in Poland in the 2009-2012 period. Its main argument is that it operated in a degree of independence from the turmoil in the rest of the world and was able to provide credit to the Polish economy when the global banks were reining the lending in across the board and shifting capital from the peripheries (such as Poland) to the increasingly capital-strapped mother companies in the developed countries engulfed in recession ( https://www.brookings.edu/blog/future-development/2015/06/12/four-ways-polands-state-bank-helped-it-avoid-recession/ ).
At which point the harms of isolationism outweigh the benefits is a trillion-dollar-question.
Fantastic article and great comments!
I find it very interesting how the megatrend of climate change interacts with the megatrend of increasingly isolationist trade policies. Lower financial costs coupled with shorter shipping time on a major trade routes make the world a more tightly-knit global village. Not only is it more economically advantageous to consolidate production in one place, but also less strategically beneficial to have a plant nearby in order to expedite time to market. Drawing from what we learned in our Marketing class about how fast fashion players operate, the two-week difference in time-to market of new collections can be a game-changer in their design of the supply chain, encouraging placing production in lower-lost countries potentially located further away.
Will this be enough to dampen the effect of isolationism on global trade? Can it be the case that potentially the largest blight for a group of developing Asian countries – climate change – can also be a blessing for them?
From the problem description it seems like the coffee supply industry is indeed ripe for disruption, but I wonder whether blockchain technology is indeed the most efficient one to tackle this.
A different way to do this would be through a centralized ledger (vide PayPal vs BitCoin). To my understanding blockchain is beneficial if: a) it is beneficial not to have one overarching “systemic” player in the supply chain (e.g. central bank for currency), b) there is value in immutability feature, and c) there is value in anonymity.
a) and b) have to do with trust in the supply chain.
For a), it seems that the work of the system is predicated on trusting the “bextmachine”, which inputs the data into the ledger. Given that the machine is produced by one company, it needs to have the trust of all the players in the network. If this is the case and they trust them to produce a “bextmachine” beneficial for all, why this player would not also be trusted to keep the central ledger rather than a distributed one?
For b), the immutability feature might actually be quite cumbersome. Let us imagine that the “bextmachine” makes a series of mistakes and completely tarnishes the reputation of one farmer. Even if they manage to prove their case, there will be a trace in the immutable ledger of what happened. In order to reverse this, one party needs to have a power to say: “no, it was a mistake – the correct data entry is the following […]”. But if this is the case, then what is the value add of the immutable ledger?
c) has more to do with how BitCoin is used nowadays, which is illicit transactions (e.g. “ransomware” – https://www.ft.com/content/051027ee-3b06-11e7-ac89-b01cc67cfeec). This does not apply in this case as the point of the system is quite the opposite – to provide maximum transparency and identifiability of actors in the supply chain.
Since a), b), and c) do not seem to play out in this case, I would think that a centralized ledger could also do the job, but I may well be missing something.
Very interesting article.
It seems to me, however, that it is a prime example of how protectionist policies erode trade and therefore unless such a market presents a truly outstanding potential financial reward, it might be better to shy away from it until the regulatory environment becomes more predictable.
The government is happy to erect barriers in the form of censorship, but it is not happy to bear the burden of maintaining it. Moreover, by giving itself the ability to all but block the company’s operation in the country, it is giving itself unprecedented leverage in any negotiations, potentially wiping out the economic profit of the company. In addition by investing in opening channels of communication with the regulators and educating them about control systems, Netflix may be decreasing barriers to entry for other players in the space further jeopardizing their competitive advantage in the value chain.
I am not an expert on Indonesia, but given the current environment the best strategy might be the simplest one – wait and see.
Great article! I have two thoughts on this.
1) Definitely it is a very salient trend right now – it seems that the high-quality streaming concept is already putting pressure on the mainstream music streaming players, Apple Music and Spotify. My wife is a classical musician. In 2016 she recorded an album with a very specialized music producer Tacet Musikproduction. The producer did not allow to release the album on the streaming services because the quality (lack of high-frequency spectrum you mentioned) did not allow to recognize their true craftsmanship. This, however changed in the early 2017 as Spotify and Apple Music gave the artists and publishers the option to only allow for high-quality streaming.
2) As for the viability of rolling the concept out on a broader scale, I would be worried about another set of players in the supply chain – the Internet Service Providers.
Audio and video streaming services have already put a lot of strain on the ISP’s network and it is unclear whether they will be willing and able to accommodate the higher traffic generated by the high-quality services. Providing CD-quality for the same length of track can mean 8-9x higher data flow based on the specifications you quote, and this transfer is more likely to take up the cellular capacity rather than the landline-WiFi capacity, as we are more likely to listen to music “on the go” away from our WiFi networks. This may prove to be a particularly important obstacle as in the US the FCC is re-considering the “web neutrality” rule which prevents price discrimination by ISPs based on the type or volume of the content that is being pushed through their networks (https://www.economist.com/news/leaders/21731624-doj-right-oppose-att-time-warner-deal-fcc-wrong-scrap-net)