Un-stuck supply chain
Goods freely flowing worldwide
Dream of all shippers
Showing posts with label supply chain. Show all posts
Showing posts with label supply chain. Show all posts
Thursday, March 30, 2023
Monday, June 27, 2022
Monday, February 24, 2020
The Haiku of Finance for 02/24/20
Global disruption
Unforeseen health care crisis
Wrecks all supply chains
Unforeseen health care crisis
Wrecks all supply chains
Monday, February 22, 2016
Monday, August 31, 2015
The Haiku of Finance for 08/31/15
Vendor finance ploy
Force credit terms at low rates
Weakest will pay first
Force credit terms at low rates
Weakest will pay first
Thursday, June 18, 2015
Friday, January 09, 2015
Monday, August 11, 2014
Pain Points in the Semiconductor and Solar Sectors
I mentioned in my report from Intersolar / SEMICON 2014 that the semiconductor and solar sectors have some unmapped pain points. I took it upon myself to identify those pain points in brief CustDev interviews with vendors on the expo floors. I was not there to sell them anything, so I had more credibility than a vendor. That's how I obtained the insights I'll share below.
I'll start with the semiconductor ecosystem. The SEMICON exhibitors were all kinds of trinket makers that large semiconductor manufacturers would find in their supply chains. The most frequently mentioned pain point for them was production cost. Equipment makers don't always know what drives the cost of producing a complex product, which in turn determines price. They don't even know if the problems reside in their designs or their supply chains, even after analysis. Longer lead times add costs and customers don't always forecast their needs very well.
Other pain points in semiconductors seem to be hostage to production costs. Addressing marketing channels is complicated by tight resources (making it difficult to address a changing market segment) and the difficulty of getting product release information into the hands of the appropriate technical audiences with purchasing authority. One frequently mentioned pain point was the gripe that human resources were a recurring irritant. Hiring the right people was always difficult and many of the company leaders I interviewed said "people cause problems." They never said what kind of problems; I suspect those problems are really from lack of knowledge about how to solve marketing and production problems.
I have concluded that the relationship between production costs and marketing costs is a strong source of pain for the upstream parts of the semiconductor sector. The mismatch between market knowledge and the ability to adjust capacity is costing the sector money. This is an underexplored area that is fertile ground for solutions in codifying manufacturing knowledge, material costs, and business process maps. I believe that startups can deliver disruption in this market by deploying enterprise Big Data analytics solutions addressing those knowledge gaps. There is money to be made in solving manufacturing problems.
I'll continue with the solar sector. Three very different pain points emerged under the broad topics of regulation, project knowledge, and financing. Regulation poses unexpected problems for installers unfamiliar with local fire codes or national safety regulations. This is particularly costly for inverters that must manage fault detections and shutdowns.
Project knowledge is a challenge for solar installers. Project developers often ignore monitoring until the end of a sales cycle, and this is not weighted in system design until after funds are spent. Each solar project is unique to a specific architecture and geography. Developers stumble when they ignore the costs of grid access where transmission lines are inadequate. I had a hard time believing some solar component manufacturers have difficulty sourcing basic materials like steel and silicon, so perhaps I spoke to at least one operator who was incompetent.
One very knowledgeable solar person made my day by addressing the cost of a typical installation. Soft costs are a big factor in residential PV. The expected lifetime of durable modules in commercial PV are still too much of an unknown. These random costs make the perfect segue from project knowledge to financing, because uncertainty in estimating project cost means financing must be flexible. The ease of obtaining customer financing would sell more solar PV systems.
I have concluded that the challenges facing the solar sector are more diverse than those facing the semiconductor sector. Entrepreneurs can't solve the regulatory pain point, but utilities may be an untapped source of support in pushing reform. There may be a market for apps that help installers navigate local, state, and national regulatory mazes. DOE has made strides in reducing soft costs and making project planning more transparent. Solving the project knowledge pain point is an open field for startups developing Hadoop-based knowledge sharing architectures. Finally, the financing pain point has a plethora of solutions at the federal and state level but consumers may not know about all of the tax incentives they can use. Yield cos and tax equity are financial solutions for commercial projects but offer little relief for single-unit residential installation. Once again, apps may help the real estate sector arrange financing for home improvements that incorporate solar, wind, and storage installations as home improvements.
I only had time to hit up a few dozen vendors so my impressions are not as robust as what a startup would need for an actionable marketing plan. Oh yeah, the funniest part of my CustDev exploration was when I asked one SEMICON guy to name his biggest pain point. He rolled his eyes and said, "People like YOU!" I knew when to back off but I was not deterred from gathering anecdotes. I make it my mission to understand how to make money from disruption. Someday a startup will catch my eye because it can solve the problems I identified here in bold type. I'll be ready to commit my knowledge as sweat equity.
I'll start with the semiconductor ecosystem. The SEMICON exhibitors were all kinds of trinket makers that large semiconductor manufacturers would find in their supply chains. The most frequently mentioned pain point for them was production cost. Equipment makers don't always know what drives the cost of producing a complex product, which in turn determines price. They don't even know if the problems reside in their designs or their supply chains, even after analysis. Longer lead times add costs and customers don't always forecast their needs very well.
Other pain points in semiconductors seem to be hostage to production costs. Addressing marketing channels is complicated by tight resources (making it difficult to address a changing market segment) and the difficulty of getting product release information into the hands of the appropriate technical audiences with purchasing authority. One frequently mentioned pain point was the gripe that human resources were a recurring irritant. Hiring the right people was always difficult and many of the company leaders I interviewed said "people cause problems." They never said what kind of problems; I suspect those problems are really from lack of knowledge about how to solve marketing and production problems.
I have concluded that the relationship between production costs and marketing costs is a strong source of pain for the upstream parts of the semiconductor sector. The mismatch between market knowledge and the ability to adjust capacity is costing the sector money. This is an underexplored area that is fertile ground for solutions in codifying manufacturing knowledge, material costs, and business process maps. I believe that startups can deliver disruption in this market by deploying enterprise Big Data analytics solutions addressing those knowledge gaps. There is money to be made in solving manufacturing problems.
I'll continue with the solar sector. Three very different pain points emerged under the broad topics of regulation, project knowledge, and financing. Regulation poses unexpected problems for installers unfamiliar with local fire codes or national safety regulations. This is particularly costly for inverters that must manage fault detections and shutdowns.
Project knowledge is a challenge for solar installers. Project developers often ignore monitoring until the end of a sales cycle, and this is not weighted in system design until after funds are spent. Each solar project is unique to a specific architecture and geography. Developers stumble when they ignore the costs of grid access where transmission lines are inadequate. I had a hard time believing some solar component manufacturers have difficulty sourcing basic materials like steel and silicon, so perhaps I spoke to at least one operator who was incompetent.
One very knowledgeable solar person made my day by addressing the cost of a typical installation. Soft costs are a big factor in residential PV. The expected lifetime of durable modules in commercial PV are still too much of an unknown. These random costs make the perfect segue from project knowledge to financing, because uncertainty in estimating project cost means financing must be flexible. The ease of obtaining customer financing would sell more solar PV systems.
I have concluded that the challenges facing the solar sector are more diverse than those facing the semiconductor sector. Entrepreneurs can't solve the regulatory pain point, but utilities may be an untapped source of support in pushing reform. There may be a market for apps that help installers navigate local, state, and national regulatory mazes. DOE has made strides in reducing soft costs and making project planning more transparent. Solving the project knowledge pain point is an open field for startups developing Hadoop-based knowledge sharing architectures. Finally, the financing pain point has a plethora of solutions at the federal and state level but consumers may not know about all of the tax incentives they can use. Yield cos and tax equity are financial solutions for commercial projects but offer little relief for single-unit residential installation. Once again, apps may help the real estate sector arrange financing for home improvements that incorporate solar, wind, and storage installations as home improvements.
I only had time to hit up a few dozen vendors so my impressions are not as robust as what a startup would need for an actionable marketing plan. Oh yeah, the funniest part of my CustDev exploration was when I asked one SEMICON guy to name his biggest pain point. He rolled his eyes and said, "People like YOU!" I knew when to back off but I was not deterred from gathering anecdotes. I make it my mission to understand how to make money from disruption. Someday a startup will catch my eye because it can solve the problems I identified here in bold type. I'll be ready to commit my knowledge as sweat equity.
Tuesday, July 08, 2014
The Haiku of Finance for 07/08/14
Build a supply chain
Squeeze out inefficiency
Forecast monthly need
Squeeze out inefficiency
Forecast monthly need
Saturday, July 27, 2013
Wednesday, July 10, 2013
Friday, January 11, 2013
Big Winners In Greenwashing
Today's "Lost In The Wash" seminar on sustainable products at the Commonwealth Club got me thinking about how sustainability (or lack thereof) impacts a company's bottom line. Consumers can search for sustainable products by using the GoodGuide and businesses can engage the services and networks of BSR to make their supply chains greener. One comment from the panel revealed how funny consumers can be; about 70% of consumers say they want to buy sustainable products but less than 3% actually buy them. Consumers may not know where to get information on green products. Corporations know how to make their stuff greener, but it may not make much difference to their bottom lines.
Companies that make inflated claims about their products' sustainable impact greenwash their brands. Irate consumers full of righteous indignation can rate the most egregious advertisements on the Greenwashing Index. The economy rates these advertisers on their profitability, as reflected in financial statements. Do the greenwash ratings match up with financial performance? Let's see.
GE got a bad greenwash rating in 2009 for its Ecoimagination campaign. GE's stock was tanking in 2009 along with the rest of the market, but it has recovered since then and its five-year ROE has been pretty healthy (despite negative EPS growth). Chevron also got hammered for a couple of its ads but its stock has also rebounded nicely from 2009, along with very healthy EPS and ROE. Outrage from vocal green consumers didn't hurt investors in these alleged big greenwashers.
The advertising ratings are subjective but the financial results are not. The FTC has crafted some handy-dandy guidelines for making environmentally friendly claims in advertisements, so IMHO the folks at the Greenwashing Index should recalibrate their scoring system to match those guidelines. The index's ad submissions are too small in number to be statistically significant so I can't take them seriously as a measure of consumer sentiment. Some media-savvy activist sites can punch above their weight.
TerraChoice (part of Underwriters Laboratories) publishes a much more comprehensive "Sins of Greenwashing" report. The 2010 report unsurprisingly refrains from naming any corporate violators. That's a smart move for a consulting company catering to the Fortune 500. Reading up on all of the new standards and labels provides corporate marketers with plenty of rebranding targets that go way beyond the Good Housekeeping Seal of Approval (and BTW there's a Green Seal too).
The big winners from greenwashing aren't necessarily the consumers who are worried about the processed foods they stuff into their pie-holes, or even the uptight activists who make careers out of making life difficult for job creators. The real winners are the corporations who can re-brand themselves to fit a hip trend and the consulting firms that help them pull it off. The focus on greenwashing has created another marketing niche. Nice work, if you can get it.
Companies that make inflated claims about their products' sustainable impact greenwash their brands. Irate consumers full of righteous indignation can rate the most egregious advertisements on the Greenwashing Index. The economy rates these advertisers on their profitability, as reflected in financial statements. Do the greenwash ratings match up with financial performance? Let's see.
GE got a bad greenwash rating in 2009 for its Ecoimagination campaign. GE's stock was tanking in 2009 along with the rest of the market, but it has recovered since then and its five-year ROE has been pretty healthy (despite negative EPS growth). Chevron also got hammered for a couple of its ads but its stock has also rebounded nicely from 2009, along with very healthy EPS and ROE. Outrage from vocal green consumers didn't hurt investors in these alleged big greenwashers.
The advertising ratings are subjective but the financial results are not. The FTC has crafted some handy-dandy guidelines for making environmentally friendly claims in advertisements, so IMHO the folks at the Greenwashing Index should recalibrate their scoring system to match those guidelines. The index's ad submissions are too small in number to be statistically significant so I can't take them seriously as a measure of consumer sentiment. Some media-savvy activist sites can punch above their weight.
TerraChoice (part of Underwriters Laboratories) publishes a much more comprehensive "Sins of Greenwashing" report. The 2010 report unsurprisingly refrains from naming any corporate violators. That's a smart move for a consulting company catering to the Fortune 500. Reading up on all of the new standards and labels provides corporate marketers with plenty of rebranding targets that go way beyond the Good Housekeeping Seal of Approval (and BTW there's a Green Seal too).
The big winners from greenwashing aren't necessarily the consumers who are worried about the processed foods they stuff into their pie-holes, or even the uptight activists who make careers out of making life difficult for job creators. The real winners are the corporations who can re-brand themselves to fit a hip trend and the consulting firms that help them pull it off. The focus on greenwashing has created another marketing niche. Nice work, if you can get it.
Thursday, November 08, 2012
The Haiku of Finance for 11/08/12
Secure supply chain
Diverse primary sources
Avoid sole-source risk
Diverse primary sources
Avoid sole-source risk
Monday, September 17, 2012
The Haiku of Finance for 09/17/12
Quant easing won't work
Input prices will spike up
Looming shortages
Input prices will spike up
Looming shortages
Monday, August 06, 2012
The Haiku of Finance for 08/06/12
Global supply chain
Oil shock can disrupt transport
Find backup sources
Oil shock can disrupt transport
Find backup sources
Tuesday, April 10, 2012
Tuesday, December 27, 2011
DOE Reached Same Conclusion On Wind Rare Earths As Alfidi Capital
Some of my fine readers may have noticed my recent interview in The Gold Report where I named dysprosium as the rare earth metal most likely to remain strongly in demand. I mentioned it in the context of continued strong demand for wind turbines that also used neodymium in their magnets. Well, lo and behold, the U.S. Department of Energy reached a similar conclusion in its 2011 Critical Materials Strategy. It specifically named dysprosium and neodymium as two of five metals that may pose supply challenges for the clean energy sector. The Gold Report has a good article pointing out implications for the rare earth mining sector.
The DOE report also has some great details on alternative technologies that may ameliorate the rare earth supply crunch when they are fully mature. This is another subject I mentioned in my interview. Listen up, Wall Street! Keep reading this blog if you want to hear about emerging industry issues.
The DOE report also has some great details on alternative technologies that may ameliorate the rare earth supply crunch when they are fully mature. This is another subject I mentioned in my interview. Listen up, Wall Street! Keep reading this blog if you want to hear about emerging industry issues.
Thursday, December 22, 2011
Friday, January 28, 2011
Cocoa Shortage Will Prove Sweet News For Top Makers
Resource investors worry about Peak Oil and Peak Gold. Now they can start worrying about Peak Chocolate. Certified fair-trade cocoa growers are abandoning the business:
Cocoa beans, unlike minerals or hydrocarbon deposits, are a renewable resource but the ideal conditions for their growth are limited. Like the best wine-growing regions, cocoa harvesting is a special source of supply subject to localized disruptions.
Reduced availability of cocoa means smaller producers will face margin pressure before large producers. Companies with global supply chains - like Nestle (NSRGY.PK) and Hershey (HSY) - can rapidly adjust their sourcing. Furthermore, their brand strength gives them pricing power as demand for their well-known candy bars is probably price inelastic. A Hershey chocolate bar is a known entity far more likely to retain its consumer appeal than a boutique fair-trade bar. Hershey doesn't disclose its suppliers but has a supply base in the hundreds, diverse enough to weather disruptions. That gives it flexibility that your favorite overpriced fair-trade certified organic candy maker does not have.
Rising prices for commodities are already compressing margins for producers in every sector. Now chocolate makers will experience the same pressure. Those with the most flexible supply chains will be left standing when the dust settles. High-minded fair-trade protest campaigns won't hurt larger producers if fair-trade growers aren't in business anymore due to political instability. The surge of boutique fair-trade chocolate makers in the last decade has likely run its course.
Full disclosure: No positions in NSRGY.PK or HSY.
Political unrest in the Ivory Coast, where 40 per cent of the world’s cocoa beans are grown, has ‘significantly’ depleted the number of certified fair trade cocoa farmers.
Cocoa beans, unlike minerals or hydrocarbon deposits, are a renewable resource but the ideal conditions for their growth are limited. Like the best wine-growing regions, cocoa harvesting is a special source of supply subject to localized disruptions.
Reduced availability of cocoa means smaller producers will face margin pressure before large producers. Companies with global supply chains - like Nestle (NSRGY.PK) and Hershey (HSY) - can rapidly adjust their sourcing. Furthermore, their brand strength gives them pricing power as demand for their well-known candy bars is probably price inelastic. A Hershey chocolate bar is a known entity far more likely to retain its consumer appeal than a boutique fair-trade bar. Hershey doesn't disclose its suppliers but has a supply base in the hundreds, diverse enough to weather disruptions. That gives it flexibility that your favorite overpriced fair-trade certified organic candy maker does not have.
Rising prices for commodities are already compressing margins for producers in every sector. Now chocolate makers will experience the same pressure. Those with the most flexible supply chains will be left standing when the dust settles. High-minded fair-trade protest campaigns won't hurt larger producers if fair-trade growers aren't in business anymore due to political instability. The surge of boutique fair-trade chocolate makers in the last decade has likely run its course.
Full disclosure: No positions in NSRGY.PK or HSY.
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