The Future Stores of Today

"What is happening in the Rheinberg Future Store is a masterpiece of integration. We now understand that the integration of these technologies in one store is possible." - Zygmunt Mierdorf, member of the Management Board of the METRO Group

Metro MGI aimed to make the life cycle of a product transparent. They have used RFI technology from back-end supply chain management, through inventory tracking on the shelves and finally purchasing.

I have given below the details of the life cycle of the product.

Product is packed in boxes having RFID tags. When this box leaves the distribution center it is scanned when it passes the door. This shipment data is automatically sent to the store manager. Therefore the store manager will know exact quantity of goods to expect and when to expect.

As soon as the shipment arrives it is again scanned in the store. This data is the compared with previous shipment data to ensure all the goods have arrived. If anything is missing, it can be immediately re-ordered. This also allows greater visibility into issues such inventory shrinkage, counterfeit etc.

The carts in the store are RFID equipped. So, when a customer enters a store and pulls a cart, the RFID tag gets activated and the store manager can then track the number of shoppers and duration of their stay.  The shelves also have built-in RFID which helps track misplaced items and low volume items. For example the shelf triggers a replenishment alert to the back office if a product volume is below a set threshold.

Once the RFID tagged products are checked out, the item is removed from the inventory and supplies is updated stores stock level of the product. 

One of the key technology revamp required for this ‘Future Store’ was complete integration of all RFID systems.

Results of this implementation:

High Customer satisfaction: As per study conducted by Boston Consulting Group, 50 percent of the people gave positive feedback on this technology including people in old age bracket. The customer satisfaction soared from 34 to 52%.

Save Money – Due to tight inventory integration and control the company was able to save money.

Save time – Due to automatic information transfer, the company could reduce time on manual counting.

Improved supply chain end to end efficiency and visibility – The RFID tracking system allows real-time tracking of inventory and shipment.

On a final note: RFID system also provides customer data such as duration of stay and count. This data can be utilized with advanced data analytics methodologies to create even more intelligent stores and more customized user experience.

Question: Since, METRO understands its role as a pioneer for modernization of retail outlets; It is open to sharing its assessments and consumer surveys with other retailers. Will other retailers take this opportunity to design more such future stores?

Smart Design is a Half Success

We all tend to think “excellent design” when we talk about apple, but it is not always the case. Apple had designed some failure products as well. For example, the Apple Puck Mouse in 1998 and the Newton in 1993. Picture 1 illustrated the revolution of Apple’s mouse, and among them, the fourth one is Apple Puck Mouse. Compare with the previous Apple Mouses, the Puck Mouse has a unique round shape which results in the main failure of this product. It is uncomfortable for holding it in hand, and customers also found difficulties in finding the single mouse button. Although the simplicity of this product may have decreased logistic costs, the complete product is a failure and had been killed in January 2000.

Another example is the Newton which was meant to be an intelligent "personal digital assistant" which would decipher handwriting and carry contact details and in essence be the first Apple iPhone – but years before the iPhone. [3] However because of the high cost of the product and the handwriting recognition problem, the Newton was killed soon.  From the picture, we can see how clumsy the Newton looks like compare with the iPhone. The design of Newton was not logistic friendly enough too. It is not as streamline as iPhone, and the projecting part on the top of it will contain extra space during delivery which induces extra costs. 

Nowadays, more and more companies have realized the importance of product design based on the objective of logistics efficiency. An effective product design can enable logistical efficiency, an inefficient design can cripple it. [[1]And the relationship is particularly crucial in a global logistics environment where all inefficiencies are magnified in importance. [1] And here are some good suggestions for improving the performance of product design:

1. be aware of the linage between product design and global logistics efficiency

2. Give logistics a "seat at the table" during the design process 

3. not only focus on squeezing cost of supply chain, but also aware the truth that design is also a main cost driver. [4]

Then what's the tipping point of choosing a more logistic friendly design instead of a more attractive product?

References：

[1]http://faculty.msb.edu/homak/homahelpsite/HOMAHELP/Documents/Designing%20Products%20for%20Efficient%20Global%20Logistics.htm

[2]http://www.theideadesk.com/blog/10-worst-product-designs-good-ideas-gone-bad/

[3]http://www.guardian.co.uk/technology/blog/2012/sep/24/apple-maps-problems-list?newsfeed=true

[4] http://www.manufacturingnews.com/news/dfma1012122.html

3D Printed Meat - Disruption of the Supply Chain Food Network?

A lot has been said about 3D printing. I think the idea behind bioprinting is very fascinating. The concept is to print living cells dot-by-dot to produce a tissue, which can further be used to produce organs. Surely we can see the benefits of being able to print organs on demand. Bioprinting of organs clearly solves critical healthcare issues, and will greatly benefit the society as a whole. The latest idea around bioprinting is to print meat.

A startup called Modern Meadow is experimenting with methods to manufacture leather products from animal cells. It will reduce illegal killing of animals, and could make leather goods an affordable commodity since the intermediaries involved in manufacturing leather goods will be skipped over. The founders of Modern Meadow then began to think about the other uses of using animal tissues and the idea to print meat is being explored.[1]

Modern Meadow received a $350,000 funding from the Thiel Foundation to pursue research on 3D printing meat. Thiel Foundation has funded projects like Facebook, PayPal. This leads us to believe that this venture capitalist foundation sees a lot of potential in 3D printing meat techniques.

The benefits of being able to successfully print meat using 3D bioprinting techniques are - it does not involve killing of animals to make the meat, the quality of meat being delivered is assured, you can see the meat being printed in front of your eyes assuring you of the sanitation levels of the meat. It will serve as a great supplement of animal protein which is an essential component of a healthy diet. It caters to vegetarians who don't eat meat today due to ethical reasons. In terms of supply chain, this will significantly affect the production and distribution meat industry, if printers capable of bioprinting become ubiquitous. High end restaurants may soon purchase a printer capable of printing meat to cater to its elite customers. Restaurants could also potentially increase the price of meat because the quality of the meat is being assured. On the other hand, it could also lower the costs of meat because the only raw materials that are now required are animal cells. The supply chain network will thus have to place an emphasis on raw material manufacturers and suppliers. The supply of animal tissues might be critical for organ printing since they need to be treated at the right temperature, however, for meat, the tissues being used have fewer such restrictions since the tissues can be in the degenerative state.

The goal of Modern Meadows is to print a sliver of meat. It is expensive today, but if this experiment were to be successful, the cost is likely to go down. It could potentially solve hunger and nutrition problems across the world. This experiment is very valuable to the society. Do you think the future of 3D printing could be food? Would there be a day when a pizza can be printed right from scratch?

References: 
[1]: Smarter Planet - Investing in 3D printed meat - http://www.smartplanet.com/blog/smart-takes/investing-in-3d-printed-meat/28476
3D printed Meat - It's whats for dinner - http://news.cnet.com/8301-11386_3-57493377-76/3d-printed-meat-its-whats-for-dinner/

Global Supply Chain Network.. In the Cloud.

In a global supply chain network, there are several internal and external vendors, all of who are influx with the existing system. The challenges faced by every global company is to deliver products to customer in the promised state and time. Manufacturing units are responsible for shipping out the items, however, what happens after is something they have no control over since the transportation unit of the company takes care of delivering the product to the customer. However, it is the responsibility of the company overall to ensure this disconnect is not evident to the customer. The business leaders must be able to answer all questions right from manufacturing of the product to the final delivery. In this post, I will explore the challenges faced by large manufacturing companies in a global supply chain scale and discuss how cloud solutions can overcome traditional challenges.

Challenges:
Any global company interacts with several vendors to source parts for its products and to distribute the finished products via various other vendors in different parts of the world. Even though there are several interacting parties involved, the ultimate ownership of the product lies with the company. In a traditional supply chain network, there is a severe lack of disconnect in information flow network. The company needs to know the inventory status, sales figures at all its locations. De-centralization of power has overcome this problem, where every product outlet is responsible for reporting back to the company. This can cause a time lag between the actual state of the system and the reported state of the system resulting in a delay in troubleshooting. In this fast paced competitive environment, it is important to have a visibility to the business in real-time. This problem is especially prevalent when products are being manufactured overseas and shipped back into a country[1]

The Cloud Solution:
A platform hosted on the cloud can bridge all the gaps in the information flow network by providing a global real-time visibility of the system. Various arms of an organization can now upload all their information in real-time to the cloud platform and provide an accurate view of the system. External vendors can access the cloud platform to obtain the information that is relevant to them. The global company can set security controls, access controls, and allow for easy addition of new vendors onto a single cloud platform. This results in a company functioning in a truly global fashion fostering a community where people in remote locations of the organization can connect via the cloud platform and exchange ideas[2]

Case Study: Pfizer
Pfizer, a global pharmaceuticals company, used GT Nexus's cloud solution to transform its IT system architecture to manage the company's global network in a 'device-independent' manner. The move was seen as necessary as the Pfizer operates in "patented" market that places a high demand on the supply network for drug manufacturing and requires smart solutions to manage a large inventory. On the other hand, Pfizer also operates in the "generic" market that is focussed on inventory optimization and efficiency. The move to the cloud was taken as Pfizer felt the need to adapt to ever changing customer needs. Installing a cloud solution enabled Pfizer to communicate effectively with all its partners and also obtain a global visibility into the business as a whole. The success of the cloud solution can be seen when Pfizer claimed to have from a state of "zero shipment traceability" to handling more than 40,000 shipments through the cloud platform. This might convince more pharmaceutical global companies to think about cloud solutions to improve their logistics as well[3].

Cloud based platforms have seen applicability in various industries such as consumer packaged goods as well to save overseas shipping costs by allowing for better inventory management. It also provided the necessary transparency to understand costs and compliances on one part of the world from another part of the world. The benefits associated with cloud platforms include better management of various systems located globally, improved business processes to manage costs, allow for immediate troubleshooting assistance in case of calamities. Cloud platforms are changing traditional supply chain management strategies, especially for global companies. However, cloud solutions also have several weaknesses associated with it. Infrastructure is not a significant investment and thus may see a spurt of companies providing cloud based solutions. Would you consider starting up a company that provides a cloud based solution? If yes, which market do you think would gain the most from it?  



[1]: Cloud Computing and Supply-Chain - A natural fit for the Cloud - http://www.logisticsmgmt.com/article/cloud_computing_and_supply_chain_a_natural_fit_for_the_future/
[2]: Ways in which Cloud Computing can improve Supply Chain - http://www.chemweek.com/chem_ideas/Guest-Author/Three-Ways-Cloud-Computing-Can-Improve-Supply-Chain-Operations-for-the-Chemical-Industry_40994.html
[3]: Pfizer Supply Chain Cloud - http://www.gtnexus.com/landing-pages/pfizer-cloud-supply-chain

Subscription Models and Supply Chain

Currently there is a fundamental shift in how customers are consuming products and services. We are slowly moving from a buy model to subscription services, where the emphasis in on getting a repeat customer to consume the product on a consistent basis, of what is being called the “subscription economy”. Until very recently, subscriptions models worked well for goods and services that needed a refresh on a daily or a weekly basis. i.e. Utilities, Magazines, newspapers etc. But, times are changing.

There has been an exponential rise in the number of consumers who access their music through subscriptions on applications like Pandora, iTunes or Spotify. There is also an increasing trend where consumers are slowly changing traditional behaviors like owning cars. Instead they are subscribing to car rental companies like Zipcar. Customers are also refraining from buying hardware for memory storage and are utilizing cloud services, which also run on subscription models. We are moving away from owning goods and gravitating towards becoming users of services that deliver experiences–like music, movies, cars, productivity software etc. ¹

Interesting experimentation is going on with the likes of Dollarshave.com, Birchbox.com etc. who are trying to get consumers to avail subscription models for goods that we use daily. Subscription economies not only change how consumers pay for goods, but also how the goods are delivered to the consumers. This means that the supply chains need to be reorganized, from demand forecasting to capacity planning. There will be fundamental shift in how businesses organize themselves. Looking much ahead into the future, if the subscription model for physical goods takes off in a big way; it will be interesting to see how businesses adopt to new realities of subscription economies.

Does the rise of Subscription Model alter Supply Chains significantly?

References:

 1) http://www.forbes.com/sites/ciocentral/2012/02/09/the-end-of-erp/

Supply Chain and Big Data

These days sources like Enterprise resource systems, RFID sensor information, NFCs etc. are generating significant amounts of high quality data for companies. Having access to better data than ever before, it is natural to expect that they would soon begin to use it for analysis, optimization, and make predictions about their supply chains. The usage of analytics is not new to the supply chain industry. Application of analytic techniques has been around for over 50 years (UPS was one of the pioneers to kick start this). However the usage of advanced quantitative and statistical techniques have plateaued for last several years; the application of newer techniques has not really caught up in proportion to the rate/size of the information that is being collected by enterprises.

There are several factors that make it difficult to make use of this data, specially the technical and computation challenges we need to overcome.   However all of this is set to change with the rise of Big Data and Cloud computing. So what exactly is Big Data?  “In information technology, big data is a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools. The challenges include capture, storage, search, sharing, analysis and visualization”¹.  With the evolution of Big Data technologies, supply chain processes can change dramatically based on sensing and pattern recognition capabilities from both structured and unstructured data. 

To make best use of what Big Data can offer to the advancement of Supply Chain Industry, there are some other data quality challenges that need to be addressed. For instance “only 20 percent of a supply-chain data set is internal and 80 percent is contributed by external partners, all of these data transactions are distributed across multiple enterprise systems in different companies with no easy way to determine the single version of the truth”. Also, there is a need to improve overall analytical literacy across the industry as well, so that the industry can position itself to be able to make gains from Big Data.

What other problems do you see for Supply Chain Industry in context of Big Data? Do you think Big Data will make a huge impact to Supply Chain Industry in the next couple of years?

References
1)http://sandhill.com/article/five-challenges-of-managing-big-data-in-supply-chains/
2)http://en.wikipedia.org/wiki/Big_data

3)http://www.supplychainquarterly.com/print/201104analytics/

Need a New Body Part? Hit Print.

There is tremendous amount of on going research to develop living tissue in the biomedical engineering field. With the evolution and promise of 3D printing many biologists have now been evolving innovative ways to recreate living tissues. While three-dimensional printing is revolutionizing the manufacturing world, the world of bio-engineering is paving the future by using this technology for the purposes of developing organs and tissues. Bioprinters have the capability to artificially place cells to create living tissue. The flexibility of bio printers permits it to place cells exactly as it is required. The vertical and horizontal movements of the head of the printer develop the living tissue layer by layer.

Bioprinting has numerous interesting applications, according to the Wall Street Journal there are researchers at Cornell that are currently working on developing heart valves, knee cartilages and bone implants. In North Carolina, bioengineers are working on printing kidney cells and healing tissues for burns and scars. Researchers and engineers hope that some day transplant surgeries will be supported by this bioprinting technology itself. The beauty behind this technology is that every body organ has its own intricate complex structure, if this could be replicated it will solve a lot of existing medical problems.

In 2010, Organovo, a pioneer company in bioprinting printed the first blood vessel. Since then they have implanted nerve grafts into animals such as rats and predict that such technology would be fit to use on humans by 2015. Bioprinting or tissue engineering is still in a very preliminary stage, most researchers claim that it will still be years before this is actually clinically tested.

While bioprinting brings with the promise of the unexpected with medicine the question that arises is that of moral practices. How will the government, research labs and medical institutes enforce and carry out ethical practices? How will they limit and restrain the power from slipping into the wrong hands? How will they ensure that what was meant to cure a broken leg will not be used instead to enhance it?

References:

1) http://online.wsj.com/article/SB10000872396390443816804578002101200151098.html?mod=e2tw

2) http://www.explainingthefuture.com/bioprinting.html

3) http://www.organovo.com/

Challenge for Future Supply Chains: Reducing food Wastage

Have you ever eaten a sandwich at any restaurant that has the top/bottom crust of a loaf of bread in it? Chances are minimal. Now, millions of sandwiches are made at thousand of supermarkets and stores everyday which use millions of loaves of bread. Did you ever think of what happens to all the crusts? This is what happens:

 Crusts of bread being sent to landfill from behind the stores of a supermarket in North America

In most of the cases supermarkets and stores directly send this “waste” to landfills. When I and you think about food waste we imagine food expired or rejected due to QC reasons, packed into bags and sent to landfills. Something like this:

Expired and rejected food items sent to landfills

But actually, most of the food waste that takes place, happens in the upstream of the supply chain. Consider the above case of shelving of bread loaf crusts. Add to that rejection of thousands of pounds of fruits and vegetables everyday just because they don’t meet the “aesthetic requirement”. Now multiply all this by the number of food retail stores across the country and then you know of the magnitude of waste I’m talking about.

A typical landfill site in the US

In my previous blog post, I wrote about how improper transportation, inadequate storage facilities and inefficient warehouses lead to heavy food losses in India. This post builds on that idea but in a different setting. The primary topic is still food waste in the supply chain but the setting is countries like the US, UK etc. which have big retail outlets for food and the time context is the near future. Essentially: what can we do to make the food supply chain really efficient? And by really efficient I mean having reducing wastage of food.

The US food supplier industry produces as much as four times the nutrient requirements of its people. This is in many ways one of the biggest human achievements and something that we should be proud of. Today, we are far away from hunger than we ever were. But, in our quest for surplus, we’ve achieved a term that we should be ashamed of – colossal wastage. In his book titled ‘Waste’, Tristram Stuart talks about how countries in Europe and North America throw away up to 50% of the food produced – more than enough to feed all the hungry people in the world. He also describes at length the obsession with having more agricultural output and how that has led to massive deforestation among other problems. Although there is no ‘one-size-fits-all’ solution in sight, he argues how having more efficient food supply chains can mean lesser wastage and possibly reduce the extent of human hunger. One of the solutions he mentions is diverting the rejected food from landfills to pork farms for their feed. Of course, the inorganic farming industry would be up in arms against such an idea but it is, in a way, a need of the hour. (For those of you interested but don’t have much time, his TED talk briefly outlines the contents of his book and possible solutions.)

Whereas most of the wastage that happens in Indian food supply chains is pre-fork due to a highly inefficient supply chain, wastage in the US happens between fork and landfill. In this report by NRDC, the author highlights how between 40 – 50% of the food actually ends up in landfill due to different reasons.

Although there have been initiatives like the Walmart food donation program and Waste and Resources Action Program (WRAP) which set targets to reduce waste, these are still infant steps. So the big question I leave you with is:

How can we use technology (if it does need to be used) in future supply chains to reduce or eliminate this colossal wastage of food?

Forcing Policy Changes in India: Strength of supply chain effectiveness of the Walmarts and Carrefours

Opening of ceremony of a newly opened Bharti Wal-Mart store in Hyderabad in 2010

The Indian government recently passed an executive order permitting up to 51% FDI in multi-brand retail and 100% investment in single-brand retail. It was a bold step considering the resistance it had to face from opposition parties and from within its own allies who were concerned about potential death of the local kirana stores. While not getting into the politics behind it, I want to talk about the technical and policy reasons behind the government’s decision. The primary driver behind the legislation has been the currently inefficient supply chain of food (fruits, vegetables, crops etc.) in India.

A typical Kirana store

The government bases its side of the story on three key changes that they think this new policy would bring:

1.       Better prices for farmers

2.       Lesser wastage of food

3.       Lower prices for the consumers

Currently, farmers sell their produce at government owned wholesale vegetable markets. It then goes to local vegetable markets from where it gets picked up by various vegetable sellers and kirana store owners. Because there are so many middlemen involved in the whole process, a very little amount of what the customer pays actually goes to the farmer. Most of it is shared by the politically strong and influential middlemen. This means that the farmer is not only inadequately compensated, he is left at the mercy of the prices decided at the wholesale vegetable markets. Of course, all this is not so simple but gives a rough picture of current state of affairs. Government estimates that entry of Walmarts et al would lead to them negotiating directly with the farmers. This would lead to better prices for the farmers and lower prices for the consumers.

A traditional wholesale food market in Guwahati, India

A fruits seller in New Delhi, India

India has an archaic supply chain for crops. In 2010, government reported an estimated loss of 250,000 – 1 million tons of food grain loss due to inefficient warehouses and storage. The situation is worse for fruits and vegetables. India has one of the most inadequate cold chains which lead to huge losses. A KPMG report puts the losses from farm to fork anywhere between 30 – 40%. Although India is the world’s second largest fruit and vegetable producer (134.5 million tons), cold storage facilities are available only for 10% of the produce. The government was traditionally the only player in the warehousing, distribution and storage market but it is evident now that it has not been doing its job well at all. Also, the investment and management expertise needed to run these areas are absent. It estimates that having modern supply chains would lead to a drastic lesser wastage of food.

This is where the strength of supply chains of the Walmarts and the Carrefours come in. The government predicts that if these giants have to perform well and make positive RoIs in India, they’d have to invest heavily in the supply chains. This is where they’ll make use of their expertise in management and their deep pockets. Of course, it has left the doors open for Public-Private Partnerships.  The government also predicts that apart from modernizing the supply chains, these companies would need to have lower prices for the consumers if they have to survive in the competitive Indian market. With so many difficulties against it, why would the retail giants want to do it? Simple answer:  Indian retail market is estimated US$450 bn (top five in the world), and more significantly, one of the fastest growing in the world.

Not only food but companies like IKEA and Apple have shown significant interest in entering the Indian market. I’ll end up with one question that has kept bothering me for some time now and I’d love to hear your opinion on:

For the end-customer, do you think the prices would be lower as the government predicts or will the creation and handling of the modern supply chain mean that the prices may finally end up increasing?

Co-creation and the supply chain

In this week's reading, the article, "Putting Customers in Charge of Design," spoke to me. In a generation where the consumer will pay to be part of their purchase, companies like Blank Label are making the most of this phenomenon. It makes sense that the consumer trend is headed this path; in a culture where mass-consumerism has shaped the mold of the majority of our purchases, personalization is the new luxury.

Blank label reminds me of the brand "Frank and Oak", "an online clothing store boasting an exclusive, free service known as the Hunt Club, which selects and recommends pieces that are best suited for each of its members."[1] Frank and Oak boasts a vertically integrated strategy in which the designer, retailer, and manufacturer. 

Companies like Blank Label and Frank and Oak have been successful in part because they are tapping into the consumers who prefer having a part in the creation, and they are tapping into consumers who prefer to not have the need for a visit to the shopping mall. 

In the future, I expect to see more companies that share the same concept of co-creation consumerism. This concept supports efficient models with low overhead and high profit margins.

[1]:  http://www.montrealgazette.com/life/fashion-beauty/online+clothing+company+Frank+zeroes+your+personal+style/7275665/story.html#ixzz28qCCiKUi

Is Cost Still King?

Is cost still king? Maybe it’s ruler in a constitutional monarchy with representatives from environment, quality, security, and other factors, but how much power does it still hold?

Last year I sat in our professor’s office rambling excitedly about a potential local food value-chain project in Western Pennsylvania. He cautioned me to think critically about which people were willing to pay for local and organic food, and how much. I kept coming back to this conversation as I read this week’s articles on Manhattan micro-factories, customer led and crowd-sourced design. At first, I thought, why have I wasted all this time studying when I could have been out there soldering and making things like kinetic sculptures.* And next I thought, all of this must be awfully expensive. I know the articles praised these tiny industrialists for being profitable, and supposedly producing reasonably priced products utilizing new prototyping technologies but I am skeptical about the scalability of scale-less manufacturing across most industries. The author of “Putting the Customer in Charge of Design” dropped $72 on a child’s shirt.[1] That may be worth it for “originality” for some people, but not most. I was also surprised that the “Atoms are the New Bits” article claimed that “the economic crisis has triggered an extraordinary shift in the business practices of (mostly) Chinese factories, which have become increasingly flexible, Web-centric, and open to custom work (where the volumes are lower but the margins higher).”[2] Shouldn’t economic crisis mean that people are less willing to pay higher margins for custom work? Show me these people that are designing their own clothing and cars right now. I will show them a Target and my Toyota Corolla.  

So, what does this have to do with local food? Our first week we read foundational articles about supply chain management, that suggested that more than cost matters.[3] Consumers care about quality, environmental impact, and a variety of issues. But with the exception of extremely niche high-end industries like high fashion, most consumers care a lot about cost. My purchasing patterns are probably exemplary of many others, where, regardless of other factors and concerns, cost is king. I care a lot about food and I spend all of my time cooking, eating, and studying. But as a professional student I’m in and out of odd jobs. When I’m making money, I buy organic and local. When I’m not, it’s conventional produce. And my conventional veggies are incredibly (artificially) cheap because agribusiness has not only adulterated our food supply but because it has taken advantage of economies of scale. In “In Defense of Food,” Michael Pollan urges those of us who can afford to eat high-quality food to do so, not only for our own health benefits but because supposedly we can eventually encourage the market to shift from unhealthy practices to better ones. There’s plenty of evidence of this (Walmart organic division) but it only goes so far. Most people in this country can’t afford to buy local, organic, or high quality food because they just can’t offer the same economy of scale. A Freakonomics article from 2011 breaks down the inefficiencies in buying local.[4] Certain regions of the United States have a competitive advantage for production. Those buying local in California can get their hands on good food year round. Those of us in New England are looking at a different story. Furthermore, going local in food and disrupting these economies of scale might cause exactly the type of problems locavorism is supposed to address. I can’t say this better than the economists:

“A local food system would raise the cost of food by constraining the efficient allocation of resources. The monetary costs of increased input demands from forsaken gains from trade and scale economies will directly bear on consumer welfare by increasing the costs of food. And, as we try to tackle obesity, locavorism is likely to raise the cost of precisely the wrong foods. Grains can be grown cheaply across much of the country, but the costs of growing produce outside specific, limited regions increase quickly. Thus, nutrient-dense calories like fruits and vegetables become more expensive, while high fructose corn syrup becomes relatively cheaper.”

Maybe the difference between going micro with food systems versus some of the other industries discussed in the articles is that those industries identified areas where they had enough of a competitive advantage to make sure higher margins weren’t that much higher. They also specialized in once in awhile purchases. It may be easier to justify a premium on something you buy once, like a custom shirt or car, then premiums on something you buy on a daily or weekly basis like food. But overall economies of scale still matter, because the incentive of being a large player in a market when it’s not a monopoly pushes costs lower and makes more things available to more people. The “Atoms” article talks about democratizing the market for producers, but it won’t necessarily democratize the market for consumers. I doubt the author Cory Doctorow’s prediction that “The days of companies with names like ‘General Electric’ and ‘General Mills’ and ‘General Motors’ are over. The money on the table is like krill: a billion little entrepreneurial opportunities that can be discovered and exploited by smart, creative people” will be true anytime soon.

---

[1] Putting Customers in Charge of Design (NY Times, May 14, 2010)

[2] In The Next Industrial Revolution, Atoms Are The New Bits (Wired

Magazine, January 25, 2010)

[3] Outcome-Driven Supply Chains (Melnyk, Davis, Spekman, and Sandor, MIT

Sloan Management Review, Winter 2010, pgs. 33-38)

Your Next Supply Chain (Interview with Fine and Simchi-Levi, MIT Sloan

Management Review, January 2010)

[4] The Inefficiency of Local Food http://www.freakonomics.com/2011/11/14/the-inefficiency-of-local-food/

*In my micro-factory we would semi-mass produce kinetic sculptures that are activated when your doorbell rings. The ball runs along the wall length sculpture and through different chains, loops, hoops, and bells, eventually a pulley system pours a glass of wine for an arriving guest, making delightful noises all along. I’m going to make millions. 

Tragedy of (Not Having) the Commons

by Whitney Coble

I find the subject of crowdsourcing fascinating.  For this week's blog, I am going to explore a couple of the ideas outlined in Wired Magazine's "In the Next Industrial Revolution, Atoms are the New Bits."  Specifically, I am going to focus on the concept behind Creative Commons licensing and the way in which some of the principles in the article are being played out in Pittsburgh.

Creative Commons licensing

In the article, customers make their own components of the Rally Fighter, which they can sell to peers, using a Creative Commons license.  These licenses provide a standardized way for a creator to share creative work with the public on conditions of his/her choice.  Instead of the traditional "all rights reserved," the creator can choose "some rights reserved."  For example, someone could choose to allow only noncommercial uses of their work. CC licenses are not an alternative to copyright, instead they are a supplement.  Creative Commons is a nonprofit organization that designed these licenses to increase access to creative material and knowledge while still protecting the rights of the creator.  The first set of copyright licenses were released for free to the public in December 2002. (http:creative commons.org/about/)

The next phase of transformative change

Local Motors facilitated design through community.  The following quote particularly stood out to me: "Transformative change happens when industries democratize, when they're ripped from the sole domain of companies, governments, and other institutions and handed over to regular folks."  There are some indications that this kind of environment is being created in pockets of Pittsburgh.  

For example, in June 2012, the Post-Gazette published an article about a workshop that is being established in Pittsburgh, called the TechShop.  The TechShop is a do-it-yourself manufacturing workshop based in Menlo Park, California.  Its location in Pittsburgh will be funded by a $3.5 million investment from the Department of Defense, which will use the workshop at night for ultra secretive technology development.  "Members range from people who simply use the facilities to make gifts for family members to entrepreneurs who create and test products.  All of them share one thing in common: They want to build without dropping tens of thousands of dollars for equipment."

I love the idea of removing traditional barriers - like access to manufacturing equipment or stodgy copyright laws - and empowering normal people to become innovators.  

In what other businesses/industries in Pittsburgh could this mindset be utilized?  For more inspiration, check out this video about Threadless, a community-driven innovation model: http://www.youtube.com/watch?v=zGcCANuL6ks.

Smart Dust & RFID privacy

http://www.nanotech-now.com/images/golem-dust-penny-large.jpg

The Science Daily article Nano-Based RFID Tags Could Replace Bar Codes [1] announces with breathless excitement that we may be on the verge of nano-scale RFIDs. The implications extend far beyond tracking inventory in warehouses, even if the devices perform only passively at the hoped for range of 300m.

These devices would be by design tiny and ubiquitous, likely embedded in products such that they are not only undetectable when the product is in use, but also integrated into the product in such a way that their removal would be impossible without damaging or destroying the object in question.

There are already some grave concerns [2] regarding tradeoffs in efficiency versus privacy and safety in RFID-enabled passports: do you really want anyone who cares to install the proper equipment to be able to identify you as carrying a U.S. passport the moment you walk though their door? There are certainly places today where such identification could be actively dangerous to the passport holder. Passports, at least, are specific enough items that it might not be unreasonable to expect that those carrying them should take measures to protect them from casual snooping, just as one might take care where one carries a wallet or credit card. Use your favorite search engine to see how many hits you get for “passport RFID blocker” – there are already multiple products on the market designed to address this concern.

Imagine instead that nearly everything on or about your person is labeled with an RFID which identifies manufacturer and item number – not at all unreasonable if you are the manufacturer working to track your inventory, but potentially problematic if you are the end consumer. From an arbitrary distance, say, that 300m or less figure quoted in the Science Daily article someone can generate a profile of you without even needing to focus upon you as a specific individual. You might pass through a portal or doorway and be identified as having $3000 worth of clothing and electronics on your person. You might subsequently be selected for a targeted sales pitch or to be followed with intent for unspecified mayhem.

One might sprinkle nano RFIDs on or about one’s premises for simple inventory – sprinkle first then catalog later: the rough collection of these RFID IDs correlates to the printer, and those to the postage meter. If a few fall off, so be it, there are still a few hundred with unique identifiers; more than enough to specify a particular item. This would be wonderful for tracking material through a manufacturing process or simply for keeping track of what is where. It might also be useful for a third party wishing to track you without your knowledge. If the little nano RFIDs are a bit more capable, they enter the realm of smart dust [3] – able to record and transmit data. [4] Again, incredibly useful if you want to monitor conditions in your shipping container or warehouse, but potentially problematic from a privacy standpoint.

Concerns regarding privacy issues and potential for abuse aside, this technology is coming: the world of ubiquitous sensors is not so much “if” but “when and how.” There is just too much upside for manufacturers or any entity that desires to track and inventory . . . anything.

Question: how will we mitigate the new set of risks that will be created as this technology evolves? Disabling all the RFIDs on your gear/clothing will eventually make you as noticeable as disabling none of them . . .

Further reading

Pister: Smart Dust in 2010. He has the timing off (obviously) but many of his projections are being developed actively.

Privacy concerns grow with the use of RFID tags Martínez-Cabrera, A. SF Gate (September 6 2010). Short consumer article outlining some broad concerns regarding RFID use.

References

[1] Nano-Based RFID Tags Could Replace Bar Codes. ScienceDaily. (Mar. 19, 2010) http://www.sciencedaily.com/releases/2010/03/100318113300.htm accessed 9 October 2012.

[2] A Threat Analysis of RFID Passports. Waldo, J. et al Queue. (October 1 2009) http://queue.acm.org/detail.cfm?id=1626175 accessed 9 October 2012

[3] 'Smart dust' aims to monitor everything. Sutter, J.D. CNN (May 03, 2010) http://articles.cnn.com/2010-05-03/tech/smart.dust.sensors_1_smart-dust-sensors-kris-pister?_s=PM:TECH accessed 9 October 2012.

[4] SMART DUST: Autonomous sensing and communication in a cubic millimeter. Website: http://robotics.eecs.berkeley.edu/~pister/SmartDust/