Thanks @CranberryCo for a really interesting and well-written post!
I’d like to respond to a different part of your argument than the other commenters, namely the Trump administration’s reliance on short-term domestic manufacturing investments to create a win for the White House in the media. Since the election, the administration has used specific and limited investments in domestic manufacturing to project an overall image of “worker friendliness” that is actually undercut by policy in other arenas (e.g. the choice to award lucrative government contracts to companies with lower cost bases due to offshoring). One great example of this was the news cycle created by Trump’s decision to “save” a Carrier plant in Indiana that was facing layoffs due to offshoring by brokering a deal with the company. However, one year after the deal, layoffs are still occurring and many of Trump’s words have been proven hypocritical (https://www.washingtonpost.com/news/posteverything/wp/2017/11/29/a-year-ago-trump-promised-carrier-workers-help-were-still-waiting/?utm_term=.094ec76d26d7). Carrier’s decision to continue with the layoffs comes down to the fact that the company does not feel its business is sustainable with its current operating environment in Indiana.
This example makes me wonder how sustainable and impactful Ford’s investments in domestic manufacturing will really be — or whether they are simply meant to create positive press coverage for Trump in the same way the Carrier deal did a year ago. If companies indeed believe that these investments are unsustainable and merely for show, they should refuse to participate in the sham. This would deny the media their story and deny Trump the power and sway that are so dangerous to these companies in the first place.
Thanks for an interesting post!
Reading this, I believe that 3D printing offers an exciting technological alternative. However, I wonder about the potential for 3D printing to scale up in a cost effective way when McMaster-Carr provides so many value-added services. There are a few areas that I think will decide who wins in the debate between old and new technology:
1) Footprint: One rationale for 3D printing is that it saves space that would otherwise be taken up by inventory. Given the small size of fasteners, I wonder how this inventory space compares to the space required for the number of 3D printers that would be needed to support large and continuously operating manufacturing plants.
2) Speed: Your post stated that 3D printers currently take 15 minutes at a minimum to produce one small part. When McMaster-Carr offers same-day delivery, I wonder which of the two options really provides more of a “just-in-time” solution. It seems that unless speeds improve, manufacturing companies would be better off sourcing the exact types of fasteners they need each day from McMaster-Carr rather than timing their entire operation to the cycle time of the 3D printer.
Both of these points also make me question whether the right segment for McMaster-Carr to focus on is highly customized fasteners as suggested by the post. If 3D printing remains costly and slow, it may be better for in-house production of highly customized but rarely ordered parts that are inefficient to keep in inventory. Meanwhile, McMaster-Carr could continue its daily delivery of mass parts that require low labor content and can be produced quickly.
Thanks for a great post!
I found the efforts to use digitization to drive mass customization particularly interesting in the context of the beauty industry considering both how diverse individual customer needs are (every person in the world has a unique face) and how many segments of the population have been traditionally “excluded” from the beauty industry.
One interesting parallel is in hair care, where the majority of CPG companies have historically focused on products that appeal to major mass market segments (e.g. fine hair) due to the scale required for the traditional CPG-to-retail supply chain. In the new age of digitization and direct-to-consumer, a number of startups are innovating on how to design shampoo and conditioner unique to each person’s hair type and hair goals (e.g. https://www.functionofbeauty.com/). To me, it seems like companies like this are focusing their value proposition on consumers whose hair differs from the mass segments served by the traditional supply chain, in order to grow the market rather than steal share.
I believe products like the custom color skin foundation would have a similar proposition in the market and grow the beauty industry in a diversified way. I agree with @Ketty Lie that initiatives like this carry a major risk of adding so many SKUs that manufacturing becomes inefficient. However, as the beauty industry faces global skepticism in the aftermath of campaigns like Dove’s Campaign for Real Beauty and the rise of “natural beauty” trends, I wonder if opening up the market to new consumers is the only way to ensure growth.
Thanks for the interesting post and comments, everyone!
While I agree with the discussion above that Samsung has been smart to make investments in the U.S. in order to diversify their risk, I worry that their actions are mostly concentrated on late stages in the supply chain. As @CranberryCo pointed out, there are likely cost-related reasons Samsung did not choose to manufacture their products in the U.S. prior to Trump’s election — one reason is likely the relative absence of appropriate and cost-effective suppliers to Samsung’s final stage manufacturing plants. Going forward, I would be curious to see how Samsung reacts to political instability by globalizing the entire supply chain — e.g. investing capital and intelligence in its materials and components suppliers around the world to keep its input costs at a sustainable level.
Thanks for a great post, @scolby! I agree with @aportland that we rarely think about these issues from the consumer perspective so this was an extremely relevant post.
Primark’s supply chain issues remind me closely of IKEA’s, specifically in terms of the dual impact of the supply side and the demand side. During the IKEA case, we discussed how the company could dramatically increase consumers’ willingness and ability to recycle by investing in convenient infrastructure. I believe Primark’s focus on soft goods (vs. IKEA’s furniture-heavy business) enables it to establish this infrastructure more easily and cheaply. You mention in your post that Primark has increased waste collection at its retail locations, but I wonder if it could have more of an impact by enabling recycling at a broader variety of locations. This could be an area where partnering with other fashion retailers, particularly fast fashion retailers with similar product lifetimes, would create a meaningful scale benefit: if Zara, H&M, and Primark partnered to create a clothing recycling infrastructure, they could collectively offer many more drop-off points and increased convenience to the consumer. This would in turn increase the availability of recycled materials on the supply side and allow Primark to reduce its reliance on costly raw materials that often have to be transported from distant locations, thereby decreasing the company’s negative impact in secondary ways.
Thanks for the great post, @AT!
I agree with you that the severity of the threat demands a stronger response from Lindt. While it is admirable that the company is attempting to pour more capital and education into its supply markets, these solutions do not address the fundamental root cause of rising temperatures. While education on the risks of deforestation may slow climate change, the impact the rest of the human population has on global climate change will likely be far faster than any slow-down Lindt can bring about.
I therefore agree with @scolby that Lindt simultaneously needs to decrease its dependence on cacao. However, rather than diversifying into non-chocolate candy, I think the company could do this by changing the recipe of their chocolate to include less pure cacao. Ferrero SpA in Italy provides one compelling example: when the company first entered the market for chocolate confectionary, it decided to include a large percentage of hazelnuts in its recipes due to the high prices of cacao. The situation has now reversed, and the company is finding hazelnuts more difficult to source than chocolate. I would imagine the company is considering shifting raw materials prices as it develops new recipes and revises old ones, and I believe Lindt could do the same.