Agristats and possible chicken supply coordination

Posted on February 25, 2017 by aviyer2010

An article in Bloombergbusinessweek (February 15,2017) titled “Is the Chicken Industry Rigged” describes the increasing profits for chicken manufacturers and a lawsuit about possible coordination. The industry participants subscribe to an information sharing service, Agristats, owned by Eli Lilly, that provides data across the industry regarding individual plant details. The claim in the lawsuit is that such knowledge enables competitors to understand production rampup plans of each other, and thus coordinate actions without meeting. The class action lawsuit claims a resulting increase in prices from what they may have been. How much detail should the trade be permitted to share with each other to improve efficiency while not enabling collusion ? Should rational decisions from such shared data that improve profits be considered unacceptable or are they a portion of the efficiency benefits shared by the industry ? if, as the industry claims, prices went down during this period, is that evidence that such collusion did not take place ? Could prices have not gone down as much as feasible because of implicit coordination ?

Posted in Capacity, Collaboration, competitiveness, consumer, Cost, Liability, Operations Management, ordering, productivity | Tagged , , , , , | 53 Comments

Smartphone ordering and long lines at Starbucks

Posted on January 27, 2017 by aviyer2010

An article in CNN Money (http://money.cnn.com/2017/01/27/investing/starbucks-long-lines-mobile-ordering-earnings/index.html) describes customer adoption of the Starbucks app to order and pay, but the consequent long wait to get their drinks.  The company expects over 30% of the orders at stores to move to mobile orders, but the long wait for delivery has been causing other customers to leave the store without purchase. The repeated reference to congestion in the earnings call on January 26, 2017 suggests the seriousness of the problem. Would offering mobile orders a delivery schedule for their drinks help smooth out queues ? Should customers be offered a delivery estimate before their mobile order to ensure fairness ?  Should there be dedicated capacity for mobile orders to prevent spillover to usual store customers ?

Posted in Capacity, Ecommerce, fairness, Operations Management, ordering, queue, Service Operations, Starbucks, technology, Uncategorized | Tagged | 20 Comments

The costs and benefits of drop shipping to customers

Posted on January 27, 2017 by aviyer2010

An article in the Wall Street Journal (January 26, 2017) titled “Drop Shipping set to go mainstream as more retailers get on board” describes retailers use of shipping directly from suppliers to customers as a way to increase variety offered and reduce costs to compete with eretailers.  Retailers claim that shipping from suppliers relieves them of inventory costs for bulky items and large color assortments. But asking suppliers to ship to customers while retailers remain responsible create associated challenges for handling returns, fulfillment as well as lower retailer visibility.  Associated strategic concerns include evolving suppliers to become retail competitors as they get direct access to customers.  How should retailers manage this tradeoff associated with drop shipping ? Can customer information be entrusted to logistics providers and not suppliers to preserve retailer relationships with customers ? How can retailer visibility to fulfillment be preserved under drop shipping

Posted in Collaboration, consumer, Cost, delivery, Ecommerce, Operations Management, ordering, supplier, Supply Chain Issues | Leave a comment

Amazon’s patent for flying warehouses and delivery drones

Posted on January 24, 2017 by aviyer2010

An article in techcrunch.com (https://techcrunch.com/2016/12/28/amazon-patents-show-flying-warehouses-that-send-delivery-drones-to-your-door/) describes a patent filed by Amazon that describes a floating warehouse that can deliver product to customers via drones. By parking the warehouse close to large gatherings (such as sporting events) the patent claims quickly precise delivery. The patent also considers ensuring product freshness using temperature controlled drones. How much of a premium will customers have to pay to make the economics work for such deliveries ?   How important will it be to accurately forecast of demand at such locations to ensure profitability ? What other uses can you imagine for such a logistics approach ?

Posted in delivery, Ecommerce, logistics, Operations Management, ordering, Supply Chain Issues, technology, Uncategorized | Leave a comment

Sensors in grocery stores and customer benefit

Posted on January 24, 2017 by aviyer2010

An article in the Wall Street Journal (January 20,2017) titled “Kroger tests sensors, analytics in interactive grocery shelves” describes Kroger, the US grocery chain, deploying sensors that detect mobile devices and, through LCD screens on aisles, interact with customers’ shopping lists. The devices also permit additional information being displayed to customers regarding ingredients through the Kroger mobile app. Will such additional sensors in brick and mortar stores increase their competitiveness relative to pure ecommerce grocery options? How might such devices increase the possibility of impulse buys? Will education regarding novel menu options or substitutes that are healthier or customized pricing increase profitability for grocery chains ?

Posted in consumer, Cost, Ecommerce, logistics, loyalty, mgmt5612018, Operations Management, product, technology, Uncategorized | Tagged , , | 159 Comments

What innovation lessons can one learn from LEGO ?

Posted on January 23, 2017 by aviyer2010

The book “Brick by Brick:How LEGO rewrote the rules of innovation and conquered the global toy industry”  by David Robertson describes the rebirth of LEGO and strategic choices made along the way. The book lists ideas such as a) linking innovation to operations (see the reference to 70% of the components of kits being common), b) thinking “inside the box” by setting constraints around innovation to increase “profitable innovation” and c) the rule “set a fixed direction but stay flexible in execution”  as all related to having disciplined innovation. Companies like Apple and Toyota also follow similar approaches. What might be the downside of “design discipline” i.e., what does management need to worry about missing out on as they instill design discipline ?  How might design discipline be leveraged to enable decentralized innovation and more ideas to flourish i.e., can design constraints result in more innovation than a design free-for-all ?

Posted in Collaboration, competitiveness, consumer, Cost, disruption, Innovation, logistics, Operations Management, Uncategorized | Leave a comment

Is the quality vs availability tradeoff for Hatchimals a good idea ?

Posted on January 7, 2017 by aviyer2010

As previously discussed in this blog, Hatchimals have been crowned the hit toy for the 2016 Holiday season. But a recent article in Fortune (December 28, 2016) titled “Meet the Hatchimals that Ruined Christmas (For some kids, anyway) describes toys that were dead on arrival and did not hatch as expected. The issue seems to be batteries with a short life but associated customer service waits at the manufacturer were reported to be too long. If true, was the decision to speed up manufacturing, albeit with quality issues, in order to satisfy demand, a profitable decision for the manufacturer, Spin Master industries ?   What could Spin Master and retailers have done to handle the unexpected demand surge given their lack of capacity in December ? Should Spin Master work with customers to repair toys or just replace every defective Hatchimal ?

Posted in Capacity, Cost, delivery, logistics, manufacturer, Supply Chain Issues, toy | Tagged , , , | Leave a comment

Will floating warehouses and drone delivery enable Amazon to deliver in minutes?

Posted on December 29, 2016 by aviyer2010

An article in CNN.com titled “Amazon patent hints at floating warehouses in the sky”  (December 29, 2016) describes a plan to carry anticipated inventory in a blimp located close to customers, with drone delivery in minutes to a customer.  Example applications described include sports venues and others.  But such deliveries would compete with concessions within sports arenas and thus may not be welcome.  Would an increased variety of inventory from Amazon create an opportunity to earn a margin from sales for sports stadium operators ? What other locations might be suitable for such floating warehouses – would new product introductions with quick delivery on location create a marketing buzz for manufacturers ? How might such a system be economically justified ?

Posted in Capacity, competitiveness, consumer, Cost, delivery, logistics, mgmt5612018, Operations Management, ordering, Supply Chain Issues, technology | Tagged | 46 Comments

WalMart tests blockchain technology to track food and enable targeted recalls

Posted on December 18, 2016 by aviyer2010

An article in Bloomberg Technology (November 18, 2016) titled “Wal-Mart Tackles Food Safety With Trial of Blockchain” describes tests of a packaged produce item in the USA and pork in China using blockchain technology to track the supply chain across growers, distributors and retail location. The company claims that such tracking will enable targeted recalls of potentially contaminated packages rather than disposing off all of the produce in the absence of tracking information. The blockchain, designed to enable independent ledger entries that are difficult to change, is said to enable trustworthiness in the associated supply chain tracking. Will the cost reductions due to the ease of tracking be distributed across the supply chain ? How will smaller growers pay for the costs to provide all the associated detailed data, will they get paid to provide traceable produce ?  will such tracking enable customers to learn more about growing conditions and thus increase the confidence in the agricultural supply chain ?

Posted in consumer, Cost, delivery, labeling, logistics, retailers, technology | Tagged , , , | Leave a comment

Do surging ecommerce orders portend lower ontime Christmas deliveries by UPS and FedEx

Posted on December 17, 2016 by aviyer2010

An article in the Wall Street Journal (December 13, 2016) titled “UPS, FedEx Struggle to Keep Up with Surge in Holiday Orders” describes the increase in ecommerce orders from 18% last year to 25% this year and a reduction in onetime deliveries, usually 98-99% down to 96.3% for UPS and 96.9% for FedEx ground services.  These metrics are better than the 95% ontime for the same period last year.  With close to two weeks to go before Christmas, and ecommerce volumes unpredictable and surging, do the backups now suggest even poorer ontime just before Christmas ? How can stores be incentivized to get their customers to order earlier to manage the delivery queues ? How does retail competition impact the flexibility offered to customers to get free quick last minute delivery ?

Posted in Capacity, competitiveness, consumer, Cost, delivery, Ecommerce, Supply Chain Issues, Uncategorized | Tagged , , , | Leave a comment