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

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 ?

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

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 ?

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WalMart tests blockchain technology to track food and enable targeted recalls

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 ?

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

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

Hatchimals – the 2016 toy in demand

An article in the Wall Street Journal (December 13, 2016) titled “Hatch me if you can:Hunt for Hatchimals Goes Global” describes the 2016 hit toy wonder, the Hatchimal, a toy that hatches from an egg and is a walking toy bird.  With WalMart and Target stores facing long lines for the $59.99 toy, the manufacturer, Spin Master Corp, is now flying in the toys by air from China to meet demand.  The article cites the toy as a global hit in 11 countries thus causing parents to search across the globe for retail locations, even as reseller prices rise.  The rising demand has created a new supply chain entity, the toy hunter, who searches the globe to find the toy and charges a finders fee.   What can be done to anticipate and satisfy such demand surges during Christmas ? Can domestic automated manufacturing help satisfy this demand ?

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The supply chain impact of India’s cash crunch

An article in the New York Times (December 13, 2016) titled “India Hobbles a Cash Crisis, and Electronic Payments Boom”, describes the shortage of the new currency bills in India following its demonetization of 500 and 1000 rupee notes (which took 86% of the old currency out of circulation).  As a consequence, customers are seeking retailers who will accept electronic payments, with on company that provides such service, PayTM, claiming a 350% increase in its daily cashless transactions and an increase in merchants joining by a factor of 14 per day.  As a result, PayTM has hired more than 3,500 employees, 50% more than its hiring the last two years. Another source from Atos Worldline claims that credit and debit card transactions have increased by a factor of 3.    Will the pressure from cash availability ensure a faster switch to cashless transactions and thus increased efficiency in the long term for the Indian economy ? Will the ability to track all transactions require small shops to charge sales tax, increase their costs and thus their prices and decrease their competitiveness ? Or will cashless transactions make small retailers less exposed to risk because they do not have cash, and thus enable them to reduce their costs, absorb the taxes and remain competitive ?

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Amazon’s cashierless grocery store plans

An article in Business Insider (December 6,2016) titled “Amazon’s new grocery store highlights a huge hole in Donald Trump’s promise on jobs” describes plans by Amazon to open thousands of stores where customers can check into the store with their phones, shop and leave, with their Amazon account getting billed. The new cashierless stores have the potential to eliminate close to 857,000 jobs in grocery stores, and if replicated across other retailers, eliminate 3.5 million cashier jobs in the US.  Will the automation of cashiers and the benefit to customers generate new industries to absorb these cashiers ?  Will other customer services, such as cooking or chopping, which might add value to grocery items, become the new norm for grocery stores to add value ?

Posted in competitiveness, consumer, Cost, disruption, logistics, Operations Management, retailers, Service Operations, technology | Tagged , , | 1 Comment