Agristats and possible chicken supply coordination

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 , , , , | Leave a comment

Smartphone ordering and long lines at Starbucks

An article in CNN Money ( 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 | Leave a comment

The costs and benefits of drop shipping to customers

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

An article in ( 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

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, Operations Management, product, technology, Uncategorized | Leave a comment

What innovation lessons can one learn from LEGO ?

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 ?

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