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PROFESSOR: OK, great.

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So I think it's about
time to get started.

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00:00:29,890 --> 00:00:32,940
So good afternoon.

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00:00:32,940 --> 00:00:35,103
So let me see.

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00:00:35,103 --> 00:00:37,477
So what do you think about
[? Genco? ?] [? Or Genco, ?] I

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guess.

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00:00:37,977 --> 00:00:40,490
[? Genco ?] [? Genco? ?]
You never know.

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It was a good talk.

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I enjoyed it.

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Did you enjoy it?

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00:00:43,940 --> 00:00:45,300
Yeah, it was interesting.

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00:00:45,300 --> 00:00:49,130
So let's talk about the-- just
to kind of refresh your memory.

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00:00:49,130 --> 00:00:50,590
And then we move
into the two more

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things I want to cover today.

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We want to cover the
willful case study-- kind of

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to close this notion
of reverse logistics

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00:01:00,310 --> 00:01:03,600
and closed-loop supply
chains a little bit.

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00:01:03,600 --> 00:01:09,580
But before we start, we read
quickly a study of ReCellular

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00:01:09,580 --> 00:01:12,720
that was really try to connect
with some of the things that we

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00:01:12,720 --> 00:01:17,730
heard from [? Genco-- ?]
[? Genco? ?] Genco.

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00:01:17,730 --> 00:01:22,960
And I wanted to know-- I read
the responses, the homework,

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00:01:22,960 --> 00:01:24,460
and you were split.

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00:01:24,460 --> 00:01:28,410
So some of you did think
that ReCellular had a future,

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and others thought that
they were beginning

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to disappear as a company.

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00:01:32,800 --> 00:01:36,170
So who wants to be the
voice of ReCellular-- well,

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00:01:36,170 --> 00:01:39,980
before we start, well, since
this is your first time I see

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00:01:39,980 --> 00:01:42,230
you here-- you were traveling.

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00:01:42,230 --> 00:01:44,310
So do you remember what
is the basic business

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00:01:44,310 --> 00:01:45,390
model of ReCellular?

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00:01:45,390 --> 00:01:47,990
AUDIENCE:Yeah, I do. [INAUDIBLE]
I was one of the guys for it,

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00:01:47,990 --> 00:01:48,820
actually.

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00:01:48,820 --> 00:01:50,153
PROFESSOR: Well, it's all great.

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00:01:50,153 --> 00:01:53,500
So why don't you give us a quick
recap of what ReCellular does?

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00:01:53,500 --> 00:01:54,995
Just in 10 minutes or less.

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00:01:54,995 --> 00:01:55,913
AUDIENCE: They are-- [INAUDIBLE]

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00:01:55,913 --> 00:01:56,620
PROFESSOR: A couple minutes, OK?

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00:01:56,620 --> 00:01:58,911
AUDIENCE: --cellphones and
repurposing them and selling

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00:01:58,911 --> 00:02:00,960
them to other markets--
markets that, you know,

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00:02:00,960 --> 00:02:04,600
may think those cell--
give us certain value

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00:02:04,600 --> 00:02:07,090
for those secondhand cellphones.

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00:02:07,090 --> 00:02:09,910
And they get them
from various sources,

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00:02:09,910 --> 00:02:15,260
including the donation bin
type sources as well as

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some higher quality sources.

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00:02:17,052 --> 00:02:17,760
PROFESSOR: Great.

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00:02:17,760 --> 00:02:21,450
So who else was in favor, or
thought that the ReCellular

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model had some future?

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Four?

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So who wants to--
[? Marianna? ?]

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Do you want to try to do it?

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AUDIENCE: Sure.

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PROFESSOR: Give your pitch.

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AUDIENCE: Well, my
[INAUDIBLE] I think

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they have a future
because people

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who always consume cellphones.

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They might evolve
into something else,

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like we have seen it [INAUDIBLE]
composites or something.

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But that same instrument
to talk and surf the web,

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and what we're doing now
with phones will evolve,

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and they can tap
into that industry.

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It might not be cellphones,
but it will something else.

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And they can tap into
that and reach-- as long

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as they keep up with it.

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Which I think by them
going to the e-commerce

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gives them a good
sign that management

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is doing a good job of
keeping up with technology

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and making it,
keeping it global.

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So I think that's why
I see a good future.

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PROFESSOR: What do you
think is the biggest

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bottleneck of ReCellular?

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AUDIENCE: The fast evolution
of equipment, of the technology

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is a thing.

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The other one is as they
say the standards are not

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the same in all countries.

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However, the fact that
they have different markets

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in each country also
works in their advantage.

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00:03:25,796 --> 00:03:28,380
For example, in
Latin America, you

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00:03:28,380 --> 00:03:30,142
get equipment that
is refurbished,

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and it, you don't, doesn't care.

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You have the technology in hand.

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00:03:33,439 --> 00:03:36,265
And I'm sure it's the same
in developing countries.

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And I see that as working
to their advantage,

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as well, for that.

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PROFESSOR: OK, great.

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00:03:40,805 --> 00:03:44,845
So someone that doesn't think
ReCellular has a chance?

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00:03:44,845 --> 00:03:47,220
AUDIENCE:I guess they've got
their current business model

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00:03:47,220 --> 00:03:50,197
getting donated cellphones
just wasn't viable because, you

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00:03:50,197 --> 00:03:51,780
know, there was a
time when, you know,

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00:03:51,780 --> 00:03:53,770
people usually got their
cellphone for free.

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00:03:53,770 --> 00:03:56,355
And then after two years ago,
they got another one for free,

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00:03:56,355 --> 00:03:56,830
and they said, OK.

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00:03:56,830 --> 00:03:57,770
I don't need this anymore.

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00:03:57,770 --> 00:03:58,930
And they throw it
in the donation bin.

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But now people pay lot of
money for their cellphone.

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00:04:01,190 --> 00:04:03,096
And they want some
of that value back,

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00:04:03,096 --> 00:04:04,720
or they still see
the value at the end,

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00:04:04,720 --> 00:04:06,610
so they have to shift their
model where maybe they're

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00:04:06,610 --> 00:04:08,550
actually paying you
at this kind of rate

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00:04:08,550 --> 00:04:09,840
for someone's old cellphone.

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00:04:09,840 --> 00:04:11,832
Which you see now,
like [INAUDIBLE].

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00:04:11,832 --> 00:04:13,188
PROFESSOR: Yes.

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00:04:13,188 --> 00:04:17,390
We cannot hear anything
at all from here.

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00:04:17,390 --> 00:04:18,910
You can hear me,
but nobody else.

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00:04:21,510 --> 00:04:27,550
So Michael can you
help us with the mics?

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00:04:27,550 --> 00:04:29,884
I'll try to repeat in a sec,
but keep going then please.

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00:04:29,884 --> 00:04:31,425
AUDIENCE: At
[? least ?] I think they

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00:04:31,425 --> 00:04:33,526
have to shift towards
basically purchasing

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00:04:33,526 --> 00:04:35,400
these phones from people,
not relying so much

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00:04:35,400 --> 00:04:39,050
off of third-party collectors
if they want remain viable.

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00:04:39,050 --> 00:04:43,800
PROFESSOR: So your main concern
is that the shifting business

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00:04:43,800 --> 00:04:45,785
model of cellphones
or electronics

119
00:04:45,785 --> 00:04:47,757
is you're paying for
them, that you don't

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00:04:47,757 --> 00:04:48,840
want to donate it anymore.

121
00:04:48,840 --> 00:04:50,756
And that's kind of the
main way how ReCellular

122
00:04:50,756 --> 00:04:53,740
is trying to make money
is by getting them donated

123
00:04:53,740 --> 00:04:57,010
and trying to make money
out of that donation.

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00:04:57,010 --> 00:04:59,830
So basically you're
arguing that there may not

125
00:04:59,830 --> 00:05:02,847
be enough residual
value to buy a phone,

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00:05:02,847 --> 00:05:04,930
because they could pay a
little bit for it, right?

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00:05:04,930 --> 00:05:05,790
And then they will--

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00:05:05,790 --> 00:05:06,480
[INTERPOSING VOICES]

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00:05:06,480 --> 00:05:08,230
AUDIENCE: Can't rely
so much as getting it

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00:05:08,230 --> 00:05:09,900
to the third-party collectors.

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00:05:09,900 --> 00:05:12,320
PROFESSOR: But you
think they pay for it ,

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00:05:12,320 --> 00:05:14,670
will that make them viable?

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00:05:14,670 --> 00:05:15,410
AUDIENCE: Yes.

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PROFESSOR: OK.

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00:05:15,993 --> 00:05:18,446
Somebody that's doesn't agree.

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00:05:18,446 --> 00:05:21,770
AUDIENCE: So [INAUDIBLE]
the point of-- I don't think

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00:05:21,770 --> 00:05:23,057
it'll, it'll--

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00:05:23,057 --> 00:05:25,140
PROFESSOR: I'm checking
to see if they could hear.

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00:05:25,140 --> 00:05:26,040
AUDIENCE: Can they?

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00:05:26,040 --> 00:05:27,456
PROFESSOR: Can you
hear right now,

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00:05:27,456 --> 00:05:31,628
or the same as [? before? ?]
Can you hear better?

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00:05:31,628 --> 00:05:33,044
AUDIENCE: Yes,
[? it is better. ?]

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00:05:33,044 --> 00:05:33,627
PROFESSOR: OK.

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00:05:33,627 --> 00:05:39,650
AUDIENCE: OK, so I think the
business model was more viable

145
00:05:39,650 --> 00:05:44,000
the beginning where the
cellular industry was starting,

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00:05:44,000 --> 00:05:48,570
and part of lifetime like
was [? say ?] much longer.

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00:05:48,570 --> 00:05:51,730
But now you have new
models coming all the time,

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00:05:51,730 --> 00:05:54,200
and that significantly
decreases the price they

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00:05:54,200 --> 00:05:56,930
you can get for a
secondhand phone.

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00:05:56,930 --> 00:06:01,156
So for example, previously
maybe you had, I don't know,

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00:06:01,156 --> 00:06:03,510
50 models of cellphones
come out in a year,

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00:06:03,510 --> 00:06:04,710
and now you might have 200.

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00:06:04,710 --> 00:06:05,300
I don't know.

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00:06:05,300 --> 00:06:09,600
I'm making the numbers up, but
you do have much more offers

155
00:06:09,600 --> 00:06:10,580
right now.

156
00:06:10,580 --> 00:06:15,880
So the price you can get is
pretty, I think it'll decline.

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00:06:15,880 --> 00:06:18,590
And as a result, you'll
have less revenue,

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00:06:18,590 --> 00:06:22,793
so I don't think
that it's so viable.

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00:06:22,793 --> 00:06:24,525
PROFESSOR: OK

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00:06:24,525 --> 00:06:28,430
AUDIENCE: I think to add onto
the point, right now, I mean,

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00:06:28,430 --> 00:06:31,215
we're talking about
enough, almost like one

162
00:06:31,215 --> 00:06:34,020
to one ratio of cellphones
and people on Earth.

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00:06:34,020 --> 00:06:36,190
So we're talking about
large manufacturing volumes,

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00:06:36,190 --> 00:06:39,800
which means that the cost,
the price has also decreased.

165
00:06:39,800 --> 00:06:42,020
So that would decrease
the attractiveness

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00:06:42,020 --> 00:06:43,390
of secondhand phones.

167
00:06:43,390 --> 00:06:44,944
And also, I mean,
that differential

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00:06:44,944 --> 00:06:47,110
that ReCellular is trying
to play on-- how much they

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00:06:47,110 --> 00:06:48,901
buy the phones as
compared to how much they

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00:06:48,901 --> 00:06:50,009
can sell the phones.

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00:06:50,009 --> 00:06:51,550
PROFESSOR: So it is
shrinking margins

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00:06:51,550 --> 00:06:53,150
that you think are
going to be a problem.

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00:06:53,150 --> 00:06:55,320
So you want to go back and
say why ReCellular can still

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00:06:55,320 --> 00:06:55,820
make money.

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00:06:55,820 --> 00:06:57,161
AUDIENCE: Yes.

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00:06:57,161 --> 00:07:00,023
And I mean like a good
point that was raised,

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00:07:00,023 --> 00:07:02,910
I think one first
thing about prices--

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00:07:02,910 --> 00:07:05,385
I don't think that
the price going down

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00:07:05,385 --> 00:07:07,860
is bad from the
customer's perspective.

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00:07:07,860 --> 00:07:11,890
And what I used is
technology lifecycle model.

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00:07:11,890 --> 00:07:13,942
So there is a lot of innovation.

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00:07:13,942 --> 00:07:16,170
And there are early adopters
in the early majority,

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00:07:16,170 --> 00:07:18,215
but there are also
laggards and people

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00:07:18,215 --> 00:07:21,050
who are not adopting
the [INAUDIBLE]

185
00:07:21,050 --> 00:07:24,350
and who are just really happy
to have really low-priced phone

186
00:07:24,350 --> 00:07:26,920
because they value
more the price rather

187
00:07:26,920 --> 00:07:28,240
than the technology.

188
00:07:28,240 --> 00:07:32,090
And so there's at least one
third or more of the market

189
00:07:32,090 --> 00:07:34,910
that is actually asking
for the secondary phones

190
00:07:34,910 --> 00:07:37,180
because they don't value
as much the technology.

191
00:07:37,180 --> 00:07:40,135
And they have just more
choice because a lot

192
00:07:40,135 --> 00:07:41,920
of different phones
actually that

193
00:07:41,920 --> 00:07:45,620
are being put on the market.

194
00:07:45,620 --> 00:07:48,800
[INAUDIBLE] so those people
have actually larger choice

195
00:07:48,800 --> 00:07:50,902
for like a lower price.

196
00:07:50,902 --> 00:07:54,070
And from a customer perspective
and from a demand standpoint,

197
00:07:54,070 --> 00:07:57,010
I think this is a good thing.

198
00:07:57,010 --> 00:07:59,345
And so the business
model might have

199
00:07:59,345 --> 00:08:02,100
to change a little bit because
they will have more margins

200
00:08:02,100 --> 00:08:03,620
or so, but they have demand.

201
00:08:03,620 --> 00:08:07,400
So they do the right
adjustments [INAUDIBLE]

202
00:08:07,400 --> 00:08:09,730
and they have
quality [INAUDIBLE]

203
00:08:09,730 --> 00:08:14,650
that quality of phone offered.

204
00:08:14,650 --> 00:08:16,800
I think that is really
a way to make their way

205
00:08:16,800 --> 00:08:18,930
through the secondary market.

206
00:08:18,930 --> 00:08:20,440
PROFESSOR: So the
argument here is

207
00:08:20,440 --> 00:08:22,610
that even though the margin
could shrink over time,

208
00:08:22,610 --> 00:08:24,910
there's always an adoption
of any technology.

209
00:08:24,910 --> 00:08:26,547
There's always laggards.

210
00:08:26,547 --> 00:08:28,130
So there's always a
market, basically.

211
00:08:28,130 --> 00:08:28,630
Yeah?

212
00:08:28,630 --> 00:08:30,670
The question is,
well, you probably

213
00:08:30,670 --> 00:08:34,520
have to be more efficient
or-- so part of the argument

214
00:08:34,520 --> 00:08:36,115
is they are the first.

215
00:08:36,115 --> 00:08:38,490
If you are among the first,
you could probably get scale,

216
00:08:38,490 --> 00:08:39,823
and you can be more competitive.

217
00:08:39,823 --> 00:08:40,672
I don't know.

218
00:08:40,672 --> 00:08:42,350
AUDIENCE: Part of my
reason for thinking

219
00:08:42,350 --> 00:08:43,980
they're not going
to last is that they

220
00:08:43,980 --> 00:08:46,370
do one and only one thing.

221
00:08:46,370 --> 00:08:49,460
And we find all the time that
companies who do one thing

222
00:08:49,460 --> 00:08:51,140
don't survive when
the next disruptive

223
00:08:51,140 --> 00:08:52,384
technology comes along.

224
00:08:52,384 --> 00:08:53,800
I guess what I'm
saying I disagree

225
00:08:53,800 --> 00:08:56,091
with the fundamental assumption
that people will always

226
00:08:56,091 --> 00:08:57,030
have cellphones.

227
00:08:57,030 --> 00:08:58,690
That's what we
said about horses.

228
00:08:58,690 --> 00:09:00,330
That's what we said
about newspapers.

229
00:09:00,330 --> 00:09:02,214
Things go away

230
00:09:02,214 --> 00:09:03,880
AUDIENCE: I said that
they would evolve.

231
00:09:03,880 --> 00:09:04,546
PROFESSOR: Yeah.

232
00:09:04,546 --> 00:09:06,710
So maybe There is
the electronics

233
00:09:06,710 --> 00:09:09,350
so they need to add
something else, yeah?

234
00:09:09,350 --> 00:09:14,652
AUDIENCE: And also [INAUDIBLE]
emerging countries.

235
00:09:14,652 --> 00:09:19,480
The cellphones [INAUDIBLE]
large market to penetrate.

236
00:09:19,480 --> 00:09:21,260
And we can see that
with mobile payment.

237
00:09:21,260 --> 00:09:23,670
People are just buying
phones when there's really

238
00:09:23,670 --> 00:09:27,468
accessing ways to pay for
those phones because it's also

239
00:09:27,468 --> 00:09:28,836
[INAUDIBLE].

240
00:09:28,836 --> 00:09:32,827
So even if we at some
point in the future

241
00:09:32,827 --> 00:09:38,040
don't have phones anymore,
they can still in the meantime

242
00:09:38,040 --> 00:09:39,175
sell to other people.

243
00:09:39,175 --> 00:09:42,000
And what I think is
that they can adapt.

244
00:09:42,000 --> 00:09:44,497
And if they, if we don't
have phones at some point,

245
00:09:44,497 --> 00:09:45,955
and we have something
else, then we

246
00:09:45,955 --> 00:09:50,155
can sell [INAUDIBLE] something
else to people afterwards.

247
00:09:50,155 --> 00:09:51,967
So this [? big timeline ?]
still goes on.

248
00:09:51,967 --> 00:09:52,550
PROFESSOR: OK.

249
00:09:52,550 --> 00:09:56,200
So let's say I just check with
our friends from Zaragoza.

250
00:09:56,200 --> 00:09:59,225
Do you hear any of
that discussion?

251
00:09:59,225 --> 00:09:59,850
AUDIENCE: Yeah.

252
00:09:59,850 --> 00:10:03,097
We heard part of it, so--

253
00:10:03,097 --> 00:10:03,680
PROFESSOR: OK?

254
00:10:03,680 --> 00:10:04,390
AUDIENCE: It's OK.

255
00:10:04,390 --> 00:10:04,870
PROFESSOR: OK, good.

256
00:10:04,870 --> 00:10:05,953
Just want to double check.

257
00:10:05,953 --> 00:10:08,400
All right so here's
the challenge, right?

258
00:10:08,400 --> 00:10:13,850
So we, I am hopeful that
ReCellular can survive,

259
00:10:13,850 --> 00:10:16,240
or one way or the other.

260
00:10:16,240 --> 00:10:19,680
But the question is what
happens when ReCellular does not

261
00:10:19,680 --> 00:10:20,320
survive?

262
00:10:20,320 --> 00:10:23,090
There's not a
business to be made.

263
00:10:23,090 --> 00:10:25,540
So, what will happen
with those phones?

264
00:10:25,540 --> 00:10:27,040
AUDIENCE:
[? Genco will ?] get them.

265
00:10:27,040 --> 00:10:27,720
PROFESSOR:
[? Genco will ?] get them.

266
00:10:27,720 --> 00:10:28,940
Yeah.

267
00:10:28,940 --> 00:10:31,610
So the we heard
that the difference

268
00:10:31,610 --> 00:10:35,360
is ReCellular is a specialized,
very niche, reverse logistics

269
00:10:35,360 --> 00:10:36,610
provider.

270
00:10:36,610 --> 00:10:39,160
Genco is completely diversified.

271
00:10:39,160 --> 00:10:40,820
So they take anything
that their are

272
00:10:40,820 --> 00:10:43,760
customers want-- in this case,
the customers is the retailers.

273
00:10:43,760 --> 00:10:46,190
The customers is the
[? rest. ?] So I think that is,

274
00:10:46,190 --> 00:10:50,300
what many of you pointed out,
one of the big differences is

275
00:10:50,300 --> 00:10:54,550
Genco's with its [? moral ?] is
more towards partnership with

276
00:10:54,550 --> 00:10:55,820
the retailers.

277
00:10:55,820 --> 00:10:57,070
Really, that's their customer.

278
00:11:00,040 --> 00:11:01,540
ReCellular, on the
other hand, wants

279
00:11:01,540 --> 00:11:02,550
to go to the end customer.

280
00:11:02,550 --> 00:11:04,800
They want to get us more
engaged one way or the other.

281
00:11:04,800 --> 00:11:08,400
Of course, most of their
purchases come from dealers.

282
00:11:08,400 --> 00:11:11,370
So they have another option.

283
00:11:11,370 --> 00:11:13,330
And they try to go to
end consumers to try

284
00:11:13,330 --> 00:11:14,660
to penetrate the market more.

285
00:11:14,660 --> 00:11:18,320
But it's a challenging
environment.

286
00:11:18,320 --> 00:11:21,670
Which gets us to Whirlpool.

287
00:11:21,670 --> 00:11:23,100
Whirlpool, Whirlpool, Whirlpool.

288
00:11:23,100 --> 00:11:25,470
So what do we do with Whirlpool?

289
00:11:25,470 --> 00:11:29,160
So the way I would like to
start-- any other comments?

290
00:11:29,160 --> 00:11:31,420
I cannot, not sure if they're
going to survive or not.

291
00:11:31,420 --> 00:11:32,110
But--

292
00:11:32,110 --> 00:11:35,064
AUDIENCE: Every time a fly to
Brazil, I can pay for my ticket

293
00:11:35,064 --> 00:11:37,022
by reselling the cellphone
that's in my pocket.

294
00:11:37,022 --> 00:11:38,955
There's definitely a
future for ReCellular.

295
00:11:38,955 --> 00:11:42,010
PROFESSOR: There's-- hopefully
there's enough market.

296
00:11:42,010 --> 00:11:45,446
And I believe there's enough,
but there's lots of pressures.

297
00:11:45,446 --> 00:11:46,820
To be honest, I
[? see ?] becomes

298
00:11:46,820 --> 00:11:48,431
the margins lower and lower.

299
00:11:48,431 --> 00:11:49,236
Who knows.

300
00:11:49,236 --> 00:11:50,235
AUDIENCE: I was curious.

301
00:11:50,235 --> 00:11:52,740
I didn't see exactly
when that was published.

302
00:11:52,740 --> 00:11:53,630
Oh.

303
00:11:53,630 --> 00:11:56,605
This case was five
years ago, or so?

304
00:11:56,605 --> 00:11:57,730
So it's a little bit older.

305
00:11:57,730 --> 00:11:59,660
So ReCellular is still around.

306
00:11:59,660 --> 00:12:04,080
I don't know how good are they
right now-- thriving or not.

307
00:12:04,080 --> 00:12:04,660
OK, good.

308
00:12:04,660 --> 00:12:07,990
So let's go to Whirlpool.

309
00:12:07,990 --> 00:12:10,570
Unless there's any other
closing comments or questions

310
00:12:10,570 --> 00:12:12,940
about ReCellular or Genco?

311
00:12:12,940 --> 00:12:14,880
Zaragoza, any
comments or questions?

312
00:12:14,880 --> 00:12:15,700
Final thoughts?

313
00:12:18,809 --> 00:12:19,308
No?

314
00:12:19,308 --> 00:12:19,760
AUDIENCE: No.

315
00:12:19,760 --> 00:12:20,240
PROFESSOR: OK.

316
00:12:20,240 --> 00:12:20,765
Remember wave--

317
00:12:20,765 --> 00:12:21,473
AUDIENCE: Thanks.

318
00:12:21,473 --> 00:12:22,520
PROFESSOR: --the hands.

319
00:12:22,520 --> 00:12:24,110
Otherwise, I cannot see you.

320
00:12:24,110 --> 00:12:25,060
All right.

321
00:12:25,060 --> 00:12:27,210
So let's go to Whirlpool.

322
00:12:27,210 --> 00:12:29,060
And to do Whirlpool,
we're going to spend

323
00:12:29,060 --> 00:12:31,020
a little bit more time on it.

324
00:12:31,020 --> 00:12:36,550
And what we will start with
is who wants to tell me

325
00:12:36,550 --> 00:12:40,140
what should Whirlpool do?

326
00:12:42,547 --> 00:12:44,380
So what, which are the
choices of Whirlpool?

327
00:12:44,380 --> 00:12:45,255
Let's start with you.

328
00:12:45,255 --> 00:12:48,620
AUDIENCE: So the choices are
to go with the IFO model--

329
00:12:48,620 --> 00:12:50,297
PROFESSOR: Can you
explain what IFO is?

330
00:12:50,297 --> 00:12:50,797
Quickly?

331
00:12:50,797 --> 00:12:54,773
AUDIENCE: So the IFO is an
industry-funded organization

332
00:12:54,773 --> 00:12:58,220
in which-- it's from
what I understand,

333
00:12:58,220 --> 00:13:00,905
it's kind of like a third
party that kind of collects--

334
00:13:00,905 --> 00:13:03,030
you know, it's owned by
all these industry players,

335
00:13:03,030 --> 00:13:06,064
and they collect the
appliances, and then [INAUDIBLE]

336
00:13:06,064 --> 00:13:07,350
with the public.

337
00:13:07,350 --> 00:13:09,520
PROFESSOR: So if we're
pulling at words-- Genco,

338
00:13:09,520 --> 00:13:12,790
but funded by a bunch of
[? same ?] the suplex.

339
00:13:12,790 --> 00:13:14,930
And they all pay Genco,
and Genco does it.

340
00:13:14,930 --> 00:13:15,860
Pretty much.

341
00:13:15,860 --> 00:13:17,720
AUDIENCE: Another
way, a second method

342
00:13:17,720 --> 00:13:21,872
is for Whirlpool to
be an IFO on it's own,

343
00:13:21,872 --> 00:13:24,324
or to run a closed-loop system.

344
00:13:24,324 --> 00:13:27,270
And collect their own
appliances at the end of life.

345
00:13:30,230 --> 00:13:33,340
PROFESSOR: Closed-loop
system-- so in this context,

346
00:13:33,340 --> 00:13:36,050
we probably have not defined
closed-loop properly.

347
00:13:36,050 --> 00:13:39,490
It's just the same company
that sells a product,

348
00:13:39,490 --> 00:13:40,720
wants to get it back.

349
00:13:40,720 --> 00:13:43,790
And try to keep it within
your own system, as opposed

350
00:13:43,790 --> 00:13:48,320
to getting somebody else to deal
with it and take care of it.

351
00:13:48,320 --> 00:13:51,224
And you want to somehow extract
value out of the process

352
00:13:51,224 --> 00:13:53,390
and bring those materials
back into your same supply

353
00:13:53,390 --> 00:13:55,224
chain as best as possible.

354
00:13:55,224 --> 00:13:57,140
And that's why the option
and this closed-loop

355
00:13:57,140 --> 00:14:00,984
is closed loop-- doing it alone.

356
00:14:00,984 --> 00:14:03,150
[? A little bit ?] alone,
at least it cannot, right?

357
00:14:03,150 --> 00:14:06,190
Do it by why will they even--

358
00:14:06,190 --> 00:14:07,670
AUDIENCE: There's
a third option--

359
00:14:07,670 --> 00:14:07,880
PROFESSOR: Which is?

360
00:14:07,880 --> 00:14:09,200
AUDIENCE: -which
is to do nothing.

361
00:14:09,200 --> 00:14:09,640
PROFESSOR: Ah.

362
00:14:09,640 --> 00:14:10,020
Third option.

363
00:14:10,020 --> 00:14:10,520
Of course.

364
00:14:10,520 --> 00:14:12,454
[INTERPOSING VOICES]

365
00:14:12,454 --> 00:14:13,870
PROFESSOR: More
than do nothing Do

366
00:14:13,870 --> 00:14:15,500
nothing is no longer an option.

367
00:14:15,500 --> 00:14:18,327
Do nothing was an option
maybe in 2005 for these guys.

368
00:14:18,327 --> 00:14:19,160
[INTERPOSING VOICES]

369
00:14:19,160 --> 00:14:19,960
PROFESSOR: Yeah, I know.

370
00:14:19,960 --> 00:14:20,740
I know what you meant.

371
00:14:20,740 --> 00:14:21,320
Yeah.

372
00:14:21,320 --> 00:14:27,890
So third option is to
oppose the regulation.

373
00:14:36,540 --> 00:14:37,580
Oppose the regulation.

374
00:14:37,580 --> 00:14:40,037
So let me start doing with
a little show of hands.

375
00:14:40,037 --> 00:14:41,620
How many people think
that they should

376
00:14:41,620 --> 00:14:45,800
go with the
industry-funded option?

377
00:14:45,800 --> 00:14:50,446
Zaragoza one, two,
any one there?

378
00:14:50,446 --> 00:14:51,220
That's two people.

379
00:14:51,220 --> 00:14:51,950
AUDIENCE: Two and a half.

380
00:14:51,950 --> 00:14:53,100
PROFESSOR: Two and a half?

381
00:14:53,100 --> 00:14:53,969
No halves here.

382
00:14:53,969 --> 00:14:56,260
AUDIENCE: I'm doing, I'm
going with three and then one.

383
00:14:56,260 --> 00:14:56,843
PROFESSOR: Oh.

384
00:14:56,843 --> 00:14:58,000
OK.

385
00:14:58,000 --> 00:14:59,620
So if it doesn't work?

386
00:14:59,620 --> 00:15:00,120
OK.

387
00:15:00,120 --> 00:15:02,687
Two.

388
00:15:02,687 --> 00:15:04,395
How many would like
to oppose regulation?

389
00:15:07,210 --> 00:15:10,140
One, two, three?

390
00:15:10,140 --> 00:15:12,480
Look like there's three.

391
00:15:12,480 --> 00:15:19,430
So I take the rest of you would
like to do it on your own,

392
00:15:19,430 --> 00:15:20,210
right?

393
00:15:20,210 --> 00:15:22,625
So let's start with
the-- so you already

394
00:15:22,625 --> 00:15:25,360
spoke-- who else wants
to oppose regulation?

395
00:15:25,360 --> 00:15:27,880
Why would you oppose regulation?

396
00:15:27,880 --> 00:15:30,610
AUDIENCE: Well,
can I also qualify

397
00:15:30,610 --> 00:15:33,074
to say if I had to be one
or two, I would pick two.

398
00:15:33,074 --> 00:15:33,740
PROFESSOR: Yeah.

399
00:15:33,740 --> 00:15:37,350
AUDIENCE: But the idea
was that it's not really

400
00:15:37,350 --> 00:15:39,490
be helpful because a
lot of this process

401
00:15:39,490 --> 00:15:41,050
is self-sufficient
to begin with.

402
00:15:41,050 --> 00:15:45,160
I think they said like 95%
of all of these products

403
00:15:45,160 --> 00:15:48,956
go to the recycling process
and hardly any of it

404
00:15:48,956 --> 00:15:53,480
go to the landfill just because
there's a lot of commodities

405
00:15:53,480 --> 00:15:56,530
that are in these
products like aluminum,

406
00:15:56,530 --> 00:16:00,420
or aluminium-- whatever--
copper, stuff like that.

407
00:16:00,420 --> 00:16:01,950
So all this stuff
gets reclaimed.

408
00:16:01,950 --> 00:16:05,020
So you don't need to
do something that's

409
00:16:05,020 --> 00:16:07,900
going to add a lot of overhead
to people's businesses

410
00:16:07,900 --> 00:16:10,500
to have them do something that's
pretty much already happening

411
00:16:10,500 --> 00:16:11,232
on its own.

412
00:16:11,232 --> 00:16:12,240
PROFESSOR: So it
happens on its own.

413
00:16:12,240 --> 00:16:13,120
What are the rates?

414
00:16:13,120 --> 00:16:14,530
Someone remembers of recycling?

415
00:16:14,530 --> 00:16:17,240
AUDIENCE: It's like 95% to 99%.

416
00:16:17,240 --> 00:16:19,820
That's pretty good, right?

417
00:16:19,820 --> 00:16:22,700
AUDIENCE: Those were
Whirlpool's numbers.

418
00:16:22,700 --> 00:16:25,412
PROFESSOR: They're pretty
good, pretty consistent.

419
00:16:25,412 --> 00:16:26,120
Let's trust them.

420
00:16:26,120 --> 00:16:26,828
Let's trust them.

421
00:16:26,828 --> 00:16:28,050
These are factual numbers.

422
00:16:28,050 --> 00:16:34,327
So 95% of it is kind of being
naturally repurposed, recycled

423
00:16:34,327 --> 00:16:36,410
in some way or another
through our normal network.

424
00:16:36,410 --> 00:16:38,250
We're going back
to, we're discussing

425
00:16:38,250 --> 00:16:42,030
all the different products--
cars and t-shirts.

426
00:16:42,030 --> 00:16:43,230
Cars have a lot of value.

427
00:16:43,230 --> 00:16:44,720
Appliances have a lot of value.

428
00:16:44,720 --> 00:16:46,830
They're designed for a
very, very long time.

429
00:16:46,830 --> 00:16:48,930
So someone wants to
kind of move that chain

430
00:16:48,930 --> 00:16:52,520
of how much value having the
latest model of refrigerator

431
00:16:52,520 --> 00:16:53,290
or not.

432
00:16:53,290 --> 00:16:55,900
And eventually when it goes
to the bottom of that chain,

433
00:16:55,900 --> 00:16:58,440
that person also wants
to maybe make the effort

434
00:16:58,440 --> 00:17:00,850
to try to get some value.

435
00:17:00,850 --> 00:17:03,620
And a dealer gets it and
scraps it and divides it

436
00:17:03,620 --> 00:17:05,994
into all the metals and
eventually gets done.

437
00:17:05,994 --> 00:17:08,410
AUDIENCE: I would argue it's
more of an effort for someone

438
00:17:08,410 --> 00:17:10,542
not to recycle their
old washing machine,

439
00:17:10,542 --> 00:17:12,500
to like pick it up and
take it to the landfill.

440
00:17:12,500 --> 00:17:14,440
It's not like you're
throwing away batteries.

441
00:17:14,440 --> 00:17:16,504
I mean, most people
get rid of their stuff

442
00:17:16,504 --> 00:17:18,420
by putting it outside
in front of their house,

443
00:17:18,420 --> 00:17:19,671
and then someone picks it up.

444
00:17:19,671 --> 00:17:21,579
So if the process already works?

445
00:17:21,579 --> 00:17:24,640
Like those 5% who aren't
recycling it, or whatever,

446
00:17:24,640 --> 00:17:27,140
they're probably not going to
just because Whirlpool came up

447
00:17:27,140 --> 00:17:28,223
with a closed-loop system.

448
00:17:28,223 --> 00:17:29,820
So it's really not
going to add any--

449
00:17:29,820 --> 00:17:31,819
PROFESSOR: So those 5%
have their own landfills.

450
00:17:31,819 --> 00:17:33,120
They will still trash it, yeah?

451
00:17:33,120 --> 00:17:33,995
AUDIENCE: [INAUDIBLE]

452
00:17:33,995 --> 00:17:36,000
PROFESSOR: OK. they'll
leave it there hanging.

453
00:17:36,000 --> 00:17:38,208
Those are the ones that are
not accounted for, right?

454
00:17:38,208 --> 00:17:40,709
Those are the ones that
are still your houses,

455
00:17:40,709 --> 00:17:41,500
landfill somewhere.

456
00:17:41,500 --> 00:17:42,000
OK, good.

457
00:17:42,000 --> 00:17:43,031
So what is-- yeah?

458
00:17:43,031 --> 00:17:44,655
You want to add
something else on the--

459
00:17:44,655 --> 00:17:44,800
AUDIENCE: Yeah.

460
00:17:44,800 --> 00:17:45,960
I just want to
[? comment made ?] I think that

461
00:17:45,960 --> 00:17:48,566
the problem with that even
though it seems to be working,

462
00:17:48,566 --> 00:17:51,744
[? it's like ?] perpetuates a
mentality that I can just put

463
00:17:51,744 --> 00:17:54,923
something out on my,
you know, on my driveway

464
00:17:54,923 --> 00:17:57,368
or on the sidewalk and someone
else will take care of it.

465
00:17:57,368 --> 00:18:02,280
And I think that's a big issue
in the US at least [INAUDIBLE].

466
00:18:02,280 --> 00:18:04,625
PROFESSOR: So this
is the working part

467
00:18:04,625 --> 00:18:06,120
is that it naturally
the market is.

468
00:18:06,120 --> 00:18:11,140
But there's something about the
overall social norms changes

469
00:18:11,140 --> 00:18:13,404
that you would like to maybe to?

470
00:18:13,404 --> 00:18:14,820
So this is part
of a trend, right?

471
00:18:14,820 --> 00:18:15,750
So this is Canada, right?

472
00:18:15,750 --> 00:18:17,310
We're not talking
about the US here.

473
00:18:17,310 --> 00:18:19,494
It's Canada so people
are very conscious.

474
00:18:19,494 --> 00:18:21,160
They're already doing
lots of recycling.

475
00:18:21,160 --> 00:18:23,191
There's lots of other
programs going on.

476
00:18:23,191 --> 00:18:23,690
Eh?

477
00:18:23,690 --> 00:18:26,820
So this is natural progression.

478
00:18:26,820 --> 00:18:30,830
But a couple of
people that maybe--

479
00:18:30,830 --> 00:18:36,140
who thought that the one
regulation is still not enough.

480
00:18:36,140 --> 00:18:37,330
So one reason is social.

481
00:18:37,330 --> 00:18:39,609
Which is the other reason?

482
00:18:39,609 --> 00:18:43,553
AUDIENCE: Well, I [INAUDIBLE]
prices of all the cohesion

483
00:18:43,553 --> 00:18:46,018
are pretty high, but what
happens if at some point

484
00:18:46,018 --> 00:18:49,469
the prices are not high enough
to give incentive to recycle?

485
00:18:49,469 --> 00:18:50,455
There's a second point.

486
00:18:50,455 --> 00:18:59,575
And also [INAUDIBLE] new
regulations [INAUDIBLE] There's

487
00:18:59,575 --> 00:19:00,810
an example about mercury.

488
00:19:00,810 --> 00:19:02,740
They may need to
regulate mercury,

489
00:19:02,740 --> 00:19:06,377
how we get that mercury.

490
00:19:06,377 --> 00:19:09,263
How will we show that all
the scavengers that deal

491
00:19:09,263 --> 00:19:12,870
with maybe some of the
material correctly so

492
00:19:12,870 --> 00:19:14,520
the person [INAUDIBLE]

493
00:19:14,520 --> 00:19:16,020
AUDIENCE: Refridgerant,
for example.

494
00:19:16,020 --> 00:19:16,978
PROFESSOR: Refrigerant.

495
00:19:16,978 --> 00:19:19,030
So there's a couple
of things that we

496
00:19:19,030 --> 00:19:21,660
know that they are recycled.

497
00:19:21,660 --> 00:19:26,110
We know that those materials
are being somehow repurposed--

498
00:19:26,110 --> 00:19:26,980
a big chunk of them.

499
00:19:26,980 --> 00:19:31,760
So the problem is that if
the prices change, boom.

500
00:19:31,760 --> 00:19:33,720
This market will collapse.

501
00:19:33,720 --> 00:19:35,361
Maybe there's
innovation in materials.

502
00:19:35,361 --> 00:19:36,860
And they come up
with a new material

503
00:19:36,860 --> 00:19:38,600
that is an alloy-- plastic.

504
00:19:38,600 --> 00:19:40,550
Who knows-- that is
still as good performing

505
00:19:40,550 --> 00:19:43,010
as the need for the
structure of the refrigerator

506
00:19:43,010 --> 00:19:44,990
that is not as recyclable
or is very expensive.

507
00:19:44,990 --> 00:19:46,780
And then you have
much [? our ?] waste.

508
00:19:46,780 --> 00:19:48,910
So there's a little bit
of an uncertainty factor.

509
00:19:48,910 --> 00:19:52,060
Then clearly what
they're trying to get out

510
00:19:52,060 --> 00:19:54,230
of it what is the
most value and what

511
00:19:54,230 --> 00:19:55,410
they know how to deal with.

512
00:19:55,410 --> 00:19:58,310
And mercury and refrigerants
are a little more tricky.

513
00:19:58,310 --> 00:20:08,620
And it's unclear to know if
if they're doing properly.

514
00:20:08,620 --> 00:20:11,200
So there's a little bit
of a tricky part there.

515
00:20:11,200 --> 00:20:14,604
But there may be other
options of regulation

516
00:20:14,604 --> 00:20:15,520
instead of these ones.

517
00:20:15,520 --> 00:20:17,830
So this is the regulation
that what they are opposing

518
00:20:17,830 --> 00:20:22,220
is the extended producers'
responsibility, the EPR

519
00:20:22,220 --> 00:20:24,127
responsibility.

520
00:20:24,127 --> 00:20:25,710
That is Whirlpool
is to be responsible

521
00:20:25,710 --> 00:20:26,870
over the whole thing.

522
00:20:26,870 --> 00:20:28,940
But there are other
things that could do.

523
00:20:28,940 --> 00:20:32,140
Adjust to tackle mercury and
refrigerant, for example.

524
00:20:32,140 --> 00:20:35,869
What could they do if they
only want to fix that problem?

525
00:20:35,869 --> 00:20:38,160
Why would the government,
what could the government do?

526
00:20:38,160 --> 00:20:40,880
Without doing this whole,
very complicated process?

527
00:20:40,880 --> 00:20:42,905
AUDIENCE: It's what
they're doing to laptops.

528
00:20:42,905 --> 00:20:46,180
They just ban the product, or
ban the hazardous material.

529
00:20:46,180 --> 00:20:48,320
PROFESSOR: So some
pieces you can

530
00:20:48,320 --> 00:20:50,621
ask manufacturers to phase
this out of their products

531
00:20:50,621 --> 00:20:51,370
altogether, right?

532
00:20:51,370 --> 00:20:52,828
So you work with
the manufacturers,

533
00:20:52,828 --> 00:20:55,830
and you so some sort of
agreement, technology path.

534
00:20:55,830 --> 00:20:58,090
And then eventually you
can get rid of that.

535
00:20:58,090 --> 00:20:59,130
That's one option.

536
00:20:59,130 --> 00:21:01,760
Any other options?

537
00:21:01,760 --> 00:21:02,970
Zaragoza, any other options?

538
00:21:07,950 --> 00:21:11,240
They're silent today.

539
00:21:11,240 --> 00:21:12,760
AUDIENCE: We have
the mic off just

540
00:21:12,760 --> 00:21:15,990
to make sure we don't have echo.

541
00:21:15,990 --> 00:21:18,380
PROFESSOR: So any other options?

542
00:21:18,380 --> 00:21:20,820
AUDIENCE: Guys?

543
00:21:20,820 --> 00:21:22,895
PROFESSOR: No options.

544
00:21:22,895 --> 00:21:24,770
The other one is to try
these dealers, maybe,

545
00:21:24,770 --> 00:21:26,936
right-- these current
recyclers and train them to do

546
00:21:26,936 --> 00:21:28,060
better mercury management?

547
00:21:28,060 --> 00:21:30,060
You can do a whole program,
right, where you can

548
00:21:30,060 --> 00:21:31,550
just instead of
involving everyone

549
00:21:31,550 --> 00:21:34,610
you just go to the market
directly and do it.

550
00:21:34,610 --> 00:21:37,770
Those are a few things you
could do instead of regulation.

551
00:21:37,770 --> 00:21:40,940
But let's move to the
other two options.

552
00:21:40,940 --> 00:21:46,490
IFO versus closed loop--
who chose the IFO more?

553
00:21:49,150 --> 00:21:52,780
So, well, no one in Zaragoza,
so maybe I'll give you a chance.

554
00:21:52,780 --> 00:21:56,100
So why will the IFO model be
a good chance for Whirlpool?

555
00:21:56,100 --> 00:22:00,110
AUDIENCE: Well, I voted
for that because that

556
00:22:00,110 --> 00:22:04,947
leaves time and flexibility
for the regulation to change.

557
00:22:04,947 --> 00:22:07,941
I said if you go with an
IFO, gives you more time

558
00:22:07,941 --> 00:22:11,933
to see how things
[? structure ?] really works,

559
00:22:11,933 --> 00:22:17,172
how they can look internally
to see how the closed loop can

560
00:22:17,172 --> 00:22:18,420
be designed [INAUDIBLE].

561
00:22:21,930 --> 00:22:26,150
I thought more as a
temporary solution,

562
00:22:26,150 --> 00:22:30,437
and then because it's way
more expensive, right?

563
00:22:30,437 --> 00:22:32,475
It would take three,
four times according

564
00:22:32,475 --> 00:22:35,300
to my garbage to go through.

565
00:22:35,300 --> 00:22:37,770
So I said do it for
a period of time,

566
00:22:37,770 --> 00:22:40,110
and then once you
change the closed group,

567
00:22:40,110 --> 00:22:43,452
you can pay back an actually
meet how the regulation would

568
00:22:43,452 --> 00:22:44,905
go [INAUDIBLE].

569
00:22:44,905 --> 00:22:46,780
PROFESSOR: So this is
like a good, safe place

570
00:22:46,780 --> 00:22:47,840
to start the process.

571
00:22:47,840 --> 00:22:48,631
AUDIENCE: To start.

572
00:22:48,631 --> 00:22:51,110
And then move ahead
either regulation change

573
00:22:51,110 --> 00:22:52,750
or the closed loop.

574
00:22:52,750 --> 00:22:55,558
Turns out to be more
effective than expected.

575
00:22:55,558 --> 00:22:56,870
PROFESSOR: All right.

576
00:22:56,870 --> 00:22:58,854
So what do you say about that?

577
00:22:58,854 --> 00:23:01,270
AUDIENCE: I haven't been because
I'm still not on Stellar.

578
00:23:01,270 --> 00:23:02,660
PROFESSOR: Oh, you're
still not on Stellar.

579
00:23:02,660 --> 00:23:03,680
AUDIENCE: My first class.

580
00:23:03,680 --> 00:23:04,060
PROFESSOR: OK.

581
00:23:04,060 --> 00:23:04,360
OK.

582
00:23:04,360 --> 00:23:04,860
All right.

583
00:23:04,860 --> 00:23:06,530
So they--

584
00:23:06,530 --> 00:23:09,020
AUDIENCE: I said that you
should go with a closed loop

585
00:23:09,020 --> 00:23:10,985
because, I think,
assuming that you're

586
00:23:10,985 --> 00:23:13,100
going to have to
get there eventually

587
00:23:13,100 --> 00:23:15,724
even though it's
more start-up costs.

588
00:23:15,724 --> 00:23:17,640
Putting the time in and
getting the jump on it

589
00:23:17,640 --> 00:23:20,936
could make them
a leader in this.

590
00:23:20,936 --> 00:23:22,560
If they know they're
going to go there,

591
00:23:22,560 --> 00:23:25,400
and they already have started
to make their machines more

592
00:23:25,400 --> 00:23:27,868
[? grave, ?] then they
can stand to benefit

593
00:23:27,868 --> 00:23:32,688
from optimizing their processes
and manufacturing their system

594
00:23:32,688 --> 00:23:35,339
vice continuing
to pay for people

595
00:23:35,339 --> 00:23:42,592
who aren't as advanced as
they are with their recycling

596
00:23:42,592 --> 00:23:43,092
technology.

597
00:23:46,571 --> 00:23:51,560
AUDIENCE: Adding to that, you
also address customer loyalty.

598
00:23:51,560 --> 00:23:59,064
Not only are you there when
they start using [INAUDIBLE]

599
00:23:59,064 --> 00:24:03,510
actually have a lot of
impact in a future sense.

600
00:24:03,510 --> 00:24:09,438
AUDIENCE: [INAUDIBLE] common
culture is very in-house

601
00:24:09,438 --> 00:24:13,884
[INAUDIBLE] doing their own
thing so I [? thought ?]

602
00:24:13,884 --> 00:24:21,294
the closed loop, maybe
like [INAUDIBLE] [? as ?]

603
00:24:21,294 --> 00:24:24,258
the industry will grow they
will say to the customer how

604
00:24:24,258 --> 00:24:26,234
important it is to
have [INAUDIBLE]

605
00:24:33,087 --> 00:24:33,670
PROFESSOR: OK.

606
00:24:33,670 --> 00:24:36,270
Do you want to defend
your IFO choice?

607
00:24:36,270 --> 00:24:41,210
So basically why I
chose IFO was as to me

608
00:24:41,210 --> 00:24:44,667
so I worked under the assumption
that legislation would pass

609
00:24:44,667 --> 00:24:45,500
[INTERPOSING VOICES]

610
00:24:45,500 --> 00:24:47,400
PROFESSOR: Sure.

611
00:24:47,400 --> 00:24:50,710
AUDIENCE: So [INAUDIBLE]
the legislation passed soon,

612
00:24:50,710 --> 00:24:53,600
and that there are
fines for not complying,

613
00:24:53,600 --> 00:24:58,140
you going to closed loop you
have to develop a logistics

614
00:24:58,140 --> 00:25:02,368
system that's really, that
gets to every part of Canada,

615
00:25:02,368 --> 00:25:03,344
basically.

616
00:25:03,344 --> 00:25:06,760
Which is a huge country.

617
00:25:06,760 --> 00:25:11,170
And you need to make investments
in, for example, vehicles

618
00:25:11,170 --> 00:25:16,070
to pick up the
refrigerators and the ovens,

619
00:25:16,070 --> 00:25:19,020
the washing machines,
and all this.

620
00:25:19,020 --> 00:25:23,780
So I believe that this
was too much of a cost

621
00:25:23,780 --> 00:25:29,392
to effectively reach all of
the customers that it has.

622
00:25:29,392 --> 00:25:34,172
And that under the IFO model
since there was something

623
00:25:34,172 --> 00:25:36,424
consolidated, you
were taking advantage

624
00:25:36,424 --> 00:25:39,322
of the economies of
scale of, well, you

625
00:25:39,322 --> 00:25:41,520
would reach all the
customers in all of Canada,

626
00:25:41,520 --> 00:25:44,280
but for not just
30% of the market,

627
00:25:44,280 --> 00:25:47,654
but for the entire
100% of the market.

628
00:25:47,654 --> 00:25:50,070
And you get the economies
of scale of that.

629
00:25:50,070 --> 00:25:52,380
PROFESSOR: So if I make
[INAUDIBLE] this argument is,

630
00:25:52,380 --> 00:25:56,020
well, I can make investment
money many, many places, right?

631
00:25:56,020 --> 00:25:58,700
I could invest in
better products.

632
00:25:58,700 --> 00:26:00,280
I could invest maybe
in other places.

633
00:26:00,280 --> 00:26:05,760
So why should I put my money
in developing this new network

634
00:26:05,760 --> 00:26:09,880
if I could just pull my
resources with others.

635
00:26:09,880 --> 00:26:13,230
And then try to make,
pay potentially less.

636
00:26:13,230 --> 00:26:15,450
We'll talk about the
cost later, yeah?

637
00:26:15,450 --> 00:26:16,640
And decide what happens.

638
00:26:16,640 --> 00:26:19,250
Do you want to add
something to the argument?

639
00:26:19,250 --> 00:26:21,440
AUDIENCE: Speaking of
the economies of scale,

640
00:26:21,440 --> 00:26:25,780
95% to around 95%
of the machines

641
00:26:25,780 --> 00:26:28,740
are currently not making
their way to the landfill.

642
00:26:28,740 --> 00:26:30,615
I'm not sure that there's
an economy of scale

643
00:26:30,615 --> 00:26:34,100
to justify the up-front costs
for a closed-loop system.

644
00:26:34,100 --> 00:26:37,580
PROFESSOR: So, yeah, so there's
not even enough volume even,

645
00:26:37,580 --> 00:26:38,080
right?

646
00:26:38,080 --> 00:26:40,869
Because people are
naturally recycling.

647
00:26:40,869 --> 00:26:49,495
AUDIENCE: [INAUDIBLE] about
these costs and [INAUDIBLE]

648
00:26:49,495 --> 00:26:51,620
PROFESSOR: So here you
have, you control the costs.

649
00:27:00,850 --> 00:27:05,200
Here you may get scale.

650
00:27:05,200 --> 00:27:05,820
Maybe.

651
00:27:05,820 --> 00:27:06,580
Maybe, right?

652
00:27:06,580 --> 00:27:08,150
The scale is much
more certain here.

653
00:27:08,150 --> 00:27:09,450
Here you control the cost more.

654
00:27:09,450 --> 00:27:10,160
OK, great.

655
00:27:10,160 --> 00:27:11,530
So those are the options.

656
00:27:11,530 --> 00:27:14,350
And it's hard to make a call
here without some number.

657
00:27:14,350 --> 00:27:19,580
So who is brave enough to walk
us through their calculations

658
00:27:19,580 --> 00:27:22,490
on how much this thing
cost for Whirlpool?

659
00:27:22,490 --> 00:27:24,777
Let's try to make a
few estimates to see

660
00:27:24,777 --> 00:27:27,110
and try to make a decision
is this really more expensive

661
00:27:27,110 --> 00:27:27,810
or not.

662
00:27:27,810 --> 00:27:35,300
From an industry IFO
versus the closed loop.

663
00:27:35,300 --> 00:27:39,840
So what I'll do is maybe someone
is willing to risk and tell me

664
00:27:39,840 --> 00:27:46,124
how much is the cost per
ton of doing an IFO model.

665
00:27:46,124 --> 00:27:47,600
Do you remember?

666
00:27:47,600 --> 00:27:50,260
I have your [? papers ?] here
so [? someone ?] I can open it,

667
00:27:50,260 --> 00:27:52,770
or your document, I can
be happy to open it.

668
00:27:52,770 --> 00:27:55,974
So we see how do you
get to that number.

669
00:27:55,974 --> 00:27:57,390
Because those are
numbers you have

670
00:27:57,390 --> 00:28:00,750
to do eventually if you
want to analyze the systems.

671
00:28:00,750 --> 00:28:05,800
So what is the cost per ton
more or less, or per pound?

672
00:28:05,800 --> 00:28:07,990
I'm sure all of you computed
to get these numbers.

673
00:28:07,990 --> 00:28:09,560
Let me get mine here.

674
00:28:09,560 --> 00:28:13,075
See more or less what they were.

675
00:28:16,120 --> 00:28:17,750
Someone remembers?

676
00:28:17,750 --> 00:28:19,730
How much money will
this cost to Whirlpool?

677
00:28:19,730 --> 00:28:20,729
Total money.

678
00:28:20,729 --> 00:28:21,270
You remember?

679
00:28:21,270 --> 00:28:22,103
[INTERPOSING VOICES]

680
00:28:22,103 --> 00:28:23,000
PROFESSOR: How many?

681
00:28:23,000 --> 00:28:23,916
AUDIENCE: $35 million.

682
00:28:23,916 --> 00:28:25,110
PROFESSOR: $35 million.

683
00:28:25,110 --> 00:28:28,050
AUDIENCE: [? Since ?] 2008.

684
00:28:28,050 --> 00:28:29,030
AUDIENCE: IFO?

685
00:28:29,030 --> 00:28:30,487
AUDIENCE: IFO, yeah.

686
00:28:30,487 --> 00:28:31,362
AUDIENCE: [INAUDIBLE]

687
00:28:36,260 --> 00:28:37,830
AUDIENCE: That's
based on the fact

688
00:28:37,830 --> 00:28:40,990
that there's 100 kilotons
of stuff being thrown away.

689
00:28:40,990 --> 00:28:43,700
And 30% of it is Whirlpool.

690
00:28:43,700 --> 00:28:46,815
And then I found some data
somewhere in a case study that

691
00:28:46,815 --> 00:28:48,390
had dollar per
ton, and I applied

692
00:28:48,390 --> 00:28:50,550
the collection, transport
and processing--

693
00:28:50,550 --> 00:28:51,780
numbers that were there.

694
00:28:51,780 --> 00:28:52,405
PROFESSOR: So there
was [? an existing ?]

695
00:28:52,405 --> 00:28:54,470
to how all of this cost
per ton of collection,

696
00:28:54,470 --> 00:28:55,720
dollars, et cetera, et cetera.

697
00:28:55,720 --> 00:28:57,270
And you can apply that.

698
00:28:57,270 --> 00:28:59,960
You add it up that
gives you roughly

699
00:28:59,960 --> 00:29:02,400
like $1,000 or something
of the collection costs?

700
00:29:02,400 --> 00:29:03,025
AUDIENCE: Yeah.

701
00:29:03,025 --> 00:29:04,730
I assumed the most
expensive route

702
00:29:04,730 --> 00:29:07,800
for the trucks, and the
full trucks, as well.

703
00:29:07,800 --> 00:29:10,480
PROFESSOR: And that gave you
like $35 million to do IFO.

704
00:29:10,480 --> 00:29:11,521
AUDIENCE: For 2008, yeah.

705
00:29:11,521 --> 00:29:13,050
PROFESSOR: For 2008 figures.

706
00:29:13,050 --> 00:29:15,299
AUDIENCE: I did something
similar with average numbers

707
00:29:15,299 --> 00:29:17,300
and ended up same
ballpark-- $24 million.

708
00:29:17,300 --> 00:29:19,540
PROFESSOR: $24 million?

709
00:29:19,540 --> 00:29:22,350
$10 million more.

710
00:29:22,350 --> 00:29:25,430
I will argue.

711
00:29:25,430 --> 00:29:28,272
But still-- it's a big number.

712
00:29:28,272 --> 00:29:29,910
It's a big ballpark.

713
00:29:29,910 --> 00:29:32,980
Someone got a different number?

714
00:29:32,980 --> 00:29:35,880
So that looks like a big
number, but how big is it

715
00:29:35,880 --> 00:29:37,260
compared to what it will cost--

716
00:29:37,260 --> 00:29:39,388
AUDIENCE: It's tiny.

717
00:29:39,388 --> 00:29:42,717
They spend $202 million to ship
the stuff out to customers.

718
00:29:42,717 --> 00:29:43,550
How much they spend?

719
00:29:43,550 --> 00:29:45,170
200 and-- how'd
you get the number?

720
00:29:45,170 --> 00:29:47,170
220 million.

721
00:29:47,170 --> 00:29:47,920
Other assumptions.

722
00:29:52,140 --> 00:29:54,540
I assumed $40 per
appliance delivery--

723
00:29:54,540 --> 00:29:57,199
PROFESSOR: How much
was the, $40 per--

724
00:29:57,199 --> 00:29:58,990
AUDIENCE: $40 per
appliance delivery, yeah?

725
00:29:58,990 --> 00:30:02,980
And 5 million appliances, large
appliances shipped in 2008.

726
00:30:02,980 --> 00:30:05,620
Mind you that's I didn't
take the 30% of that number,

727
00:30:05,620 --> 00:30:09,910
so it would be 30% of $202
million, so about $70 million--

728
00:30:09,910 --> 00:30:11,300
PROFESSOR: Around $70 million

729
00:30:11,300 --> 00:30:15,044
AUDIENCE: --for
Whirlpool washers.

730
00:30:15,044 --> 00:30:17,577
PROFESSOR: So that would be
about this number [INAUDIBLE]

731
00:30:17,577 --> 00:30:19,160
AUDIENCE: I'm sure
it was about right.

732
00:30:19,160 --> 00:30:21,152
AUDIENCE: That number
is going on the customer

733
00:30:21,152 --> 00:30:22,916
in terms of the delivery fee.

734
00:30:22,916 --> 00:30:25,330
PROFESSOR: And it says that
it counts for the costs

735
00:30:25,330 --> 00:30:27,847
so the customer does pay for it.

736
00:30:27,847 --> 00:30:28,680
[INTERPOSING VOICES]

737
00:30:28,680 --> 00:30:30,346
PROFESSOR: --right
now for the retailer.

738
00:30:30,346 --> 00:30:31,680
But this is the collection fees.

739
00:30:31,680 --> 00:30:34,180
AUDIENCE: Yeah, but I'm just
saying like right now like they

740
00:30:34,180 --> 00:30:37,502
haven't, their cost for delivery
isn't really a cost to them

741
00:30:37,502 --> 00:30:39,918
because they're probably making
money off of the delivery,

742
00:30:39,918 --> 00:30:40,407
you know.

743
00:30:40,407 --> 00:30:42,657
They're probably charging
more than it actually costs.

744
00:30:42,657 --> 00:30:44,320
So, I mean, just a footnote.

745
00:30:44,320 --> 00:30:44,986
PROFESSOR: Yeah.

746
00:30:44,986 --> 00:30:50,520
So it's-- so to build to make
this choices we have to make

747
00:30:50,520 --> 00:30:51,740
these calculations right.

748
00:30:51,740 --> 00:30:53,350
So the number I got--

749
00:30:53,350 --> 00:30:54,570
[INTERPOSING VOICES]

750
00:30:54,570 --> 00:30:55,950
PROFESSOR: Yeah.

751
00:30:55,950 --> 00:31:02,260
The numbers I have are more
towards the $35 million,

752
00:31:02,260 --> 00:31:07,880
but for 2020 numbers,
no 2008 numbers.

753
00:31:07,880 --> 00:31:09,080
Why 2020?

754
00:31:09,080 --> 00:31:12,700
Remember that in
some way you only

755
00:31:12,700 --> 00:31:14,930
see things that are discarded.

756
00:31:14,930 --> 00:31:18,490
The things that are kind of
naturally progress from one

757
00:31:18,490 --> 00:31:20,360
place to the other,
you don't see those.

758
00:31:20,360 --> 00:31:26,890
The Whirlpool case had a table
somewhere-- exhibit seven--

759
00:31:26,890 --> 00:31:31,660
and this gives you a sense of
the units discarded in 2020.

760
00:31:31,660 --> 00:31:37,130
So those are the total discarded
units of all different kinds

761
00:31:37,130 --> 00:31:37,820
of appliances.

762
00:31:37,820 --> 00:31:39,780
So you can get
their refrigerators,

763
00:31:39,780 --> 00:31:42,310
freezers, dishwashers,
cooking ranges, [INAUDIBLE]

764
00:31:42,310 --> 00:31:44,440
[? and some ?] washers
and so forth, yeah?

765
00:31:44,440 --> 00:31:47,050
Then there's a table,
I think on top,

766
00:31:47,050 --> 00:31:52,585
that has more or less the amount
of steel, aluminum, copper, et

767
00:31:52,585 --> 00:31:54,490
cetera, and the weight
of each appliance.

768
00:31:54,490 --> 00:31:57,530
So you can get the total
number of appliances

769
00:31:57,530 --> 00:32:00,599
times the weight of
those appliances,

770
00:32:00,599 --> 00:32:02,640
and they give you how many
tons you have to let's

771
00:32:02,640 --> 00:32:05,300
say, get back.

772
00:32:05,300 --> 00:32:09,310
Once you compute those
tons you need to get back,

773
00:32:09,310 --> 00:32:11,320
those are now all yours, right?

774
00:32:11,320 --> 00:32:13,490
You'll be responsible
for your market share.

775
00:32:13,490 --> 00:32:15,400
You said 30%, but
actually Whirlpool

776
00:32:15,400 --> 00:32:18,090
does Whirlpool and Kenmore.

777
00:32:18,090 --> 00:32:21,740
So it's close to 48% more
or less of the market.

778
00:32:21,740 --> 00:32:26,490
48% of the market share, and
then you get those numbers.

779
00:32:26,490 --> 00:32:28,070
And that's the total tonnage.

780
00:32:28,070 --> 00:32:30,385
So what you can sell,
you make money out of it.

781
00:32:30,385 --> 00:32:31,760
Because you can sell it, right?

782
00:32:31,760 --> 00:32:33,430
You get it and you
make money out of it.

783
00:32:33,430 --> 00:32:37,500
And then you pay, and
that's the tricky part.

784
00:32:37,500 --> 00:32:41,570
There's a collection
cost on exhibit four.

785
00:32:41,570 --> 00:32:43,530
It's a collection per ton.

786
00:32:43,530 --> 00:32:47,290
That's come from the previous
program, [? the We ?] program.

787
00:32:47,290 --> 00:32:50,110
And it says, roughly-- you
know, in the [? We ?] program

788
00:32:50,110 --> 00:32:51,700
is an IFO program.

789
00:32:51,700 --> 00:32:55,680
It gives you $165
to collect per ton.

790
00:32:55,680 --> 00:32:57,700
And you can then add
all those numbers,

791
00:32:57,700 --> 00:33:00,700
and it gives you $37 million.

792
00:33:00,700 --> 00:33:03,360
I'll put a table,
but those are more,

793
00:33:03,360 --> 00:33:05,550
those are rough
numbers that you get.

794
00:33:05,550 --> 00:33:12,140
And I give you 7 million
for the cost for doing this.

795
00:33:12,140 --> 00:33:20,360
Which translates into a
$47 per unit more or less.

796
00:33:20,360 --> 00:33:34,915
So the cost of IFO is
equal to $47 per unit sold.

797
00:33:39,870 --> 00:33:41,980
$47 per unit.

798
00:33:41,980 --> 00:33:46,315
How does that compare to
their distribution costs?

799
00:33:46,315 --> 00:33:48,900
That's how we know
it's expensive or not.

800
00:33:48,900 --> 00:33:51,440
How do you compute the
distribution cost of Whirlpool?

801
00:33:51,440 --> 00:33:52,460
Someone did that?

802
00:33:52,460 --> 00:33:55,540
So we know more [? than ?]
to compare how they do it.

803
00:33:55,540 --> 00:33:59,567
That's the reverse
part-- $47 per unit.

804
00:33:59,567 --> 00:34:01,275
AUDIENCE: Well, if I
know it's different,

805
00:34:01,275 --> 00:34:06,798
so I did do it with 30%
of market share, not 48%.

806
00:34:06,798 --> 00:34:10,000
But they said that it's
approximate for the industry

807
00:34:10,000 --> 00:34:12,699
standard 10% of their sales.

808
00:34:12,699 --> 00:34:15,320
PROFESSOR: Yeah.

809
00:34:15,320 --> 00:34:17,690
AUDIENCE: And so I
would say that they

810
00:34:17,690 --> 00:34:21,790
were selling [INAUDIBLE]
per 100,000 units

811
00:34:21,790 --> 00:34:24,510
but that's 30% of the market.

812
00:34:24,510 --> 00:34:25,870
And you change it to 48%.

813
00:34:25,870 --> 00:34:27,745
PROFESSOR: Yeah, but
that's the right number.

814
00:34:27,745 --> 00:34:29,479
So the approximate
costs are 10%.

815
00:34:29,479 --> 00:34:30,770
AUDIENCE: Yeah, so it changes--

816
00:34:30,770 --> 00:34:31,969
PROFESSOR: Exactly.

817
00:34:31,969 --> 00:34:34,244
So now there's another
number somewhere in the case

818
00:34:34,244 --> 00:34:36,969
that is $1,000 per unit.

819
00:34:36,969 --> 00:34:38,880
That's the average retail price.

820
00:34:38,880 --> 00:34:41,550
Now you can also assume
a margin, you know,

821
00:34:41,550 --> 00:34:42,150
of a retailer.

822
00:34:42,150 --> 00:34:45,120
30% margin, 25% margin is
not uncommon for these kind

823
00:34:45,120 --> 00:34:46,389
of appliances.

824
00:34:46,389 --> 00:34:51,489
So I give you $700 more or
less per the cost of the goods.

825
00:34:51,489 --> 00:34:54,996
So the forward supply chain of
Whirlpool is more or less $70.

826
00:34:58,320 --> 00:34:59,470
Forward supply chain.

827
00:35:03,680 --> 00:35:09,690
So it gives us like
$70 I guess per unit.

828
00:35:09,690 --> 00:35:13,400
So it's 10% of our
sales price, $1,000.

829
00:35:13,400 --> 00:35:18,030
30% margin, let's suppose if
our retailer they give us $700

830
00:35:18,030 --> 00:35:20,550
is the cost of Whirlpool of
those 10% of distribution

831
00:35:20,550 --> 00:35:21,230
costs.

832
00:35:21,230 --> 00:35:23,960
So it gives $70 per unit.

833
00:35:23,960 --> 00:35:26,770
Now the IFO cost
here-- this cost

834
00:35:26,770 --> 00:35:29,960
includes selling
the scrap metals

835
00:35:29,960 --> 00:35:31,960
and recovering all the
value of those metals.

836
00:35:31,960 --> 00:35:38,022
If you get that out, this
costs you $80 per unit.

837
00:35:38,022 --> 00:35:40,040
If you just look at
the direct costs of,

838
00:35:40,040 --> 00:35:42,734
you know, recovering
all this material.

839
00:35:42,734 --> 00:35:45,186
AUDIENCE: I just have
one other question.

840
00:35:45,186 --> 00:35:48,290
So for the Whirlpool
forward chain,

841
00:35:48,290 --> 00:35:52,720
that's the 10% of the cost,
but that is usually bringing it

842
00:35:52,720 --> 00:35:54,319
to the retailer, right?

843
00:35:54,319 --> 00:35:55,110
PROFESSOR: Exactly.

844
00:35:55,110 --> 00:35:58,990
AUDIENCE: So should
we consider the fee

845
00:35:58,990 --> 00:36:02,550
that is charged to customers
to get to their home?

846
00:36:02,550 --> 00:36:04,460
Because for the
reverse supply chain,

847
00:36:04,460 --> 00:36:07,880
we kind of would have to pick
them from the home, right?

848
00:36:07,880 --> 00:36:10,270
PROFESSOR: So we could talk
about the network design,

849
00:36:10,270 --> 00:36:10,770
as well.

850
00:36:10,770 --> 00:36:11,050
Yeah.

851
00:36:11,050 --> 00:36:13,350
Let's talk about the options
to try to be discussed.

852
00:36:13,350 --> 00:36:15,440
But to get started,
these are the two numbers

853
00:36:15,440 --> 00:36:16,860
we need to compare.

854
00:36:16,860 --> 00:36:21,360
So $70 per unit is the cost
of getting to the dealer,

855
00:36:21,360 --> 00:36:25,160
to the retailer, sorry-- or
the dealer of the appliance.

856
00:36:25,160 --> 00:36:27,250
$70 per unit.

857
00:36:27,250 --> 00:36:30,100
To get it back without getting
a scrap is $80 per unit.

858
00:36:32,650 --> 00:36:38,254
Why is this higher, you
know, compared to this one?

859
00:36:38,254 --> 00:36:40,170
AUDIENCE: Well, it's
centralized distribution.

860
00:36:40,170 --> 00:36:41,961
PROFESSOR: Centralized
distribution, right?

861
00:36:41,961 --> 00:36:44,847
This, my network is not
designed to collect stuff.

862
00:36:44,847 --> 00:36:46,680
So since it's not
designed to collect stuff,

863
00:36:46,680 --> 00:36:49,100
the IFO model, even
if it's the IFO model,

864
00:36:49,100 --> 00:36:51,850
Whirlpool is very
specialized in forward.

865
00:36:51,850 --> 00:36:54,310
These numbers, even the
rough numbers-- this

866
00:36:54,310 --> 00:36:56,280
is the kind of
environment that you

867
00:36:56,280 --> 00:37:00,640
face the first time you go into
any reverse logistics cost.

868
00:37:00,640 --> 00:37:03,200
That-- maybe the
numbers are not that big

869
00:37:03,200 --> 00:37:05,300
when you look at the whole
Whirlpool corporation,

870
00:37:05,300 --> 00:37:08,560
but when you start looking
back and try to nail down

871
00:37:08,560 --> 00:37:11,430
and compute your
distribution costs,

872
00:37:11,430 --> 00:37:13,520
This is more or
less the situation

873
00:37:13,520 --> 00:37:15,670
you will face the
first time around.

874
00:37:15,670 --> 00:37:18,510
Your forward cost per unit $70.

875
00:37:18,510 --> 00:37:21,760
Your reverse could
be higher than that.

876
00:37:21,760 --> 00:37:26,850
Mainly because you are not
using a optimized, well-designed

877
00:37:26,850 --> 00:37:27,920
network.

878
00:37:27,920 --> 00:37:29,840
Which get us to the
different options

879
00:37:29,840 --> 00:37:33,070
that we have to
make this $80 down.

880
00:37:33,070 --> 00:37:36,110
So it goes back to-- now we
can put a little bit more,

881
00:37:36,110 --> 00:37:37,630
let's say, meat to this.

882
00:37:37,630 --> 00:37:42,810
So if the IFO model, assuming
our estimates are OK,

883
00:37:42,810 --> 00:37:47,130
costs us roughly $80
per unit, and this one

884
00:37:47,130 --> 00:37:50,606
costs us roughly $70 per unit.

885
00:37:54,810 --> 00:37:57,420
So if the IFO gets
super efficient,

886
00:37:57,420 --> 00:37:59,690
and it really costs
me much less-- well,

887
00:37:59,690 --> 00:38:02,290
actually it doesn't cost
me really $80 per unit.

888
00:38:02,290 --> 00:38:03,600
It costs me $47.

889
00:38:03,600 --> 00:38:06,410
But I can also do it here
and then sell the scraps.

890
00:38:06,410 --> 00:38:09,820
That's why I'm computing
this one to the other.

891
00:38:09,820 --> 00:38:14,100
So if the IFO pure
distribution costs get down

892
00:38:14,100 --> 00:38:19,840
to much lower than $70, right,
maybe is worth doing with them.

893
00:38:19,840 --> 00:38:23,540
If they can get to the
scale, and once they

894
00:38:23,540 --> 00:38:26,350
recover the
investments, that they

895
00:38:26,350 --> 00:38:29,350
have the plan-- if this number
gets less than $70, maybe

896
00:38:29,350 --> 00:38:31,750
it's worth for me to jump there.

897
00:38:31,750 --> 00:38:35,350
On a cost, pure cost
perspective, on the other hand,

898
00:38:35,350 --> 00:38:37,090
we have some of the
other options here

899
00:38:37,090 --> 00:38:38,110
that will give me value.

900
00:38:38,110 --> 00:38:44,042
So with that, let me just ask
how will a closed loop-- how

901
00:38:44,042 --> 00:38:46,000
do I want to compare the
actual networks to see

902
00:38:46,000 --> 00:38:49,505
how different they are-- the
IFO versus the closed loop

903
00:38:49,505 --> 00:38:50,380
network of Whirlpool?

904
00:38:50,380 --> 00:38:54,030
So who wants to draw
a diagram of how

905
00:38:54,030 --> 00:38:57,630
do you think Whirlpool
closed-loop supply chain could

906
00:38:57,630 --> 00:38:58,850
look like?

907
00:38:58,850 --> 00:39:00,430
Someone volunteers?

908
00:39:00,430 --> 00:39:03,470
I'll volunteer someone.

909
00:39:03,470 --> 00:39:05,260
How is the current
supply chain working?

910
00:39:08,340 --> 00:39:09,250
Go for it.

911
00:39:09,250 --> 00:39:11,166
You can use that one.

912
00:39:11,166 --> 00:39:13,470
And let's go back to
where is the retailer,

913
00:39:13,470 --> 00:39:16,110
where is the dealer,
and so forth.

914
00:39:16,110 --> 00:39:18,905
Give it a shot.

915
00:39:18,905 --> 00:39:21,830
AUDIENCE: So forward
supply chain,

916
00:39:21,830 --> 00:39:28,910
you have one or two factories
where they make the stuff.

917
00:39:28,910 --> 00:39:34,245
They go to a series of
regional distribution centers.

918
00:39:34,245 --> 00:39:38,544
And each of these, in turn goes
to the series of retailers.

919
00:39:38,544 --> 00:39:39,210
PROFESSOR: Sure.

920
00:39:39,210 --> 00:39:42,010
So there's actually how many
factories does Whirlpool have?

921
00:39:42,010 --> 00:39:44,360
[? No one ?] remembers?

922
00:39:44,360 --> 00:39:46,630
[INTERPOSING VOICES]

923
00:39:46,630 --> 00:39:48,428
PROFESSOR: I think
it was 17 in total.

924
00:39:48,428 --> 00:39:49,386
AUDIENCE: Oh, but for--

925
00:39:49,386 --> 00:39:50,136
PROFESSOR: Canada.

926
00:39:50,136 --> 00:39:51,780
For Canada, yeah.

927
00:39:51,780 --> 00:39:54,782
So 17 factories up there.

928
00:39:54,782 --> 00:39:58,204
And those go to how many
DCs do they have in Canada?

929
00:40:01,452 --> 00:40:02,750
Someone remembers?

930
00:40:02,750 --> 00:40:05,300
More or less?

931
00:40:05,300 --> 00:40:05,840
30?

932
00:40:05,840 --> 00:40:06,340
40?

933
00:40:06,340 --> 00:40:07,750
24.

934
00:40:07,750 --> 00:40:13,200
24 DCs 24 DCs, and
how many retailers?

935
00:40:18,460 --> 00:40:19,580
1,000?

936
00:40:19,580 --> 00:40:21,760
How about 2,400?

937
00:40:21,760 --> 00:40:25,450
2,400 retailers.

938
00:40:25,450 --> 00:40:27,250
So that's the network.

939
00:40:27,250 --> 00:40:32,190
17 factories, 24 real
distribution centers,

940
00:40:32,190 --> 00:40:36,580
2,400 retailers.

941
00:40:36,580 --> 00:40:37,727
Thank you.

942
00:40:37,727 --> 00:40:38,810
Thank you for being brave.

943
00:40:40,691 --> 00:40:41,190
Great.

944
00:40:41,190 --> 00:40:46,740
So, how would the
IFO model look like?

945
00:40:46,740 --> 00:40:50,620
If I join an IFO,
what will happen?

946
00:40:50,620 --> 00:40:54,570
So let me just do a
little change to this

947
00:40:54,570 --> 00:40:55,730
so we can add more models.

948
00:40:55,730 --> 00:40:56,950
So we have a factory here.

949
00:41:00,970 --> 00:41:04,065
And this will go to our original
distribution center, right?

950
00:41:13,290 --> 00:41:21,890
And then this goes to a
bunch of different retailers.

951
00:41:30,310 --> 00:41:33,820
The same diagram so that we
can just grow on this side.

952
00:41:33,820 --> 00:41:38,630
So what happens if we
decide to join an IFO model?

953
00:41:38,630 --> 00:41:42,190
If someone comes
with an IFO model,

954
00:41:42,190 --> 00:41:45,540
what will happen at this
point with the goods?

955
00:41:45,540 --> 00:41:48,251
Will I collect them
at the customer site?

956
00:41:54,640 --> 00:41:56,862
So you think the
industry, the IFO,

957
00:41:56,862 --> 00:41:58,653
what is a standard
producer responsibility?

958
00:42:01,830 --> 00:42:04,000
So what does it mean?

959
00:42:04,000 --> 00:42:06,150
That I have to be
collecting it or I

960
00:42:06,150 --> 00:42:09,230
have to keep options to dispose?

961
00:42:09,230 --> 00:42:11,580
What does the legislation
say more or less, or at least

962
00:42:11,580 --> 00:42:12,930
the way it is described here?

963
00:42:12,930 --> 00:42:14,471
AUDIENCE 1: Probably
just that you're

964
00:42:14,471 --> 00:42:16,790
responsible for the ultimate
disposal of the product.

965
00:42:16,790 --> 00:42:19,250
PROFESSOR: It doesn't say that
you have to go to your house

966
00:42:19,250 --> 00:42:20,890
and pick it up, right?

967
00:42:20,890 --> 00:42:23,237
It probably is not exactly
the way it will work.

968
00:42:23,237 --> 00:42:25,070
The way it will work
is that you will set up

969
00:42:25,070 --> 00:42:30,550
some sort of mechanism
to get those goods back.

970
00:42:30,550 --> 00:42:33,130
And the ones that get back, you
are responsible for properly

971
00:42:33,130 --> 00:42:33,900
disposing them.

972
00:42:33,900 --> 00:42:37,100
And you have to create all the
right information, materials,

973
00:42:37,100 --> 00:42:39,770
and incentives for the
consumers to know where and how

974
00:42:39,770 --> 00:42:41,800
to dispose of these materials.

975
00:42:41,800 --> 00:42:43,577
It's like batteries.

976
00:42:43,577 --> 00:42:46,160
AUDIENCE: However, with the size
of stuff we're talking about,

977
00:42:46,160 --> 00:42:49,590
refrigerators, and whatnot, I
think the only practical way

978
00:42:49,590 --> 00:42:51,152
to do it is to go
get them for them.

979
00:42:51,152 --> 00:42:52,550
Maybe they have to call
and make an appointment

980
00:42:52,550 --> 00:42:53,630
several weeks out.

981
00:42:53,630 --> 00:42:54,421
PROFESSOR: Exactly.

982
00:42:54,421 --> 00:42:57,700
So it will not be
Whirlpool in an IFO model.

983
00:42:57,700 --> 00:42:59,380
More or less, the
way you will do it

984
00:42:59,380 --> 00:43:07,720
is that you will probably
get the retailers

985
00:43:07,720 --> 00:43:10,480
or another network
of dealers, probably.

986
00:43:10,480 --> 00:43:11,760
That's the way you will do it.

987
00:43:11,760 --> 00:43:13,190
That's the way it
works probably today.

988
00:43:13,190 --> 00:43:14,690
You have a bunch
of dealers here.

989
00:43:18,120 --> 00:43:31,835
[WRITING ON CHALK BOARD]

990
00:43:31,835 --> 00:43:33,210
PROFESSOR: And
then these dealers

991
00:43:33,210 --> 00:43:44,350
are the ones that go to
some sort of processor,

992
00:43:44,350 --> 00:43:52,680
some entity here that
deals with steel,

993
00:43:52,680 --> 00:44:00,804
sorry that deals with
decomposing the [INAUDIBLE]

994
00:44:00,804 --> 00:44:01,845
to get the raw materials.

995
00:44:07,924 --> 00:44:08,840
Out of the processors.

996
00:44:08,840 --> 00:44:10,300
That's more or
less how the supply

997
00:44:10,300 --> 00:44:18,550
chain will look like if you
do some sort of IFO model.

998
00:44:18,550 --> 00:44:21,460
Someone pointed out one of the
things that you are missing out

999
00:44:21,460 --> 00:44:24,220
is that you are losing that
connection with the consumer.

1000
00:44:24,220 --> 00:44:26,290
That's why I wanted
to draw the diagram.

1001
00:44:26,290 --> 00:44:28,320
So if you go to
an IFO model, you

1002
00:44:28,320 --> 00:44:32,360
will effectively remove your
connection with the dealers.

1003
00:44:32,360 --> 00:44:34,380
Maybe you wanted to do
that on that network.

1004
00:44:34,380 --> 00:44:36,420
Your consumer will
not have that.

1005
00:44:36,420 --> 00:44:37,950
Let's talk about
practical reasons.

1006
00:44:37,950 --> 00:44:40,480
Somebody mentioned this
will cost some money

1007
00:44:40,480 --> 00:44:43,590
to be able to collect
those goods from the house

1008
00:44:43,590 --> 00:44:46,040
of the consumer to the dealer.

1009
00:44:46,040 --> 00:44:49,220
How will you recover this money?

1010
00:44:49,220 --> 00:44:50,958
What happens today?

1011
00:44:50,958 --> 00:44:52,701
AUDIENCE: You charge
an up-front dealer,

1012
00:44:52,701 --> 00:44:53,450
and they buy the product.

1013
00:44:53,450 --> 00:44:55,290
PROFESSOR: That's
exactly the way it works.

1014
00:44:55,290 --> 00:44:58,870
All of us are paying for
this, we just do not know.

1015
00:44:58,870 --> 00:45:01,580
So when there is a
[? realization ?] like this

1016
00:45:01,580 --> 00:45:05,140
in Europe, or even
batteries in North America,

1017
00:45:05,140 --> 00:45:08,940
we are paid-- or
bottles-- or any kind

1018
00:45:08,940 --> 00:45:13,600
of mandated collection, we
are being charged for it.

1019
00:45:13,600 --> 00:45:16,650
We are-- it's not itemized.

1020
00:45:16,650 --> 00:45:17,707
And then what happens?

1021
00:45:17,707 --> 00:45:19,040
What happens with those dealers?

1022
00:45:19,040 --> 00:45:22,320
Once you get them
collected, the dealer says,

1023
00:45:22,320 --> 00:45:24,560
I have a Whirlpool here,
and I take a picture

1024
00:45:24,560 --> 00:45:26,760
of the Whirlpool, I scan it.

1025
00:45:26,760 --> 00:45:28,730
I send it to Whirlpool,
and Whirlpool gives me

1026
00:45:28,730 --> 00:45:34,170
the money they collected
so I can get back my cost.

1027
00:45:34,170 --> 00:45:36,884
That's how you pay
in these situations.

1028
00:45:36,884 --> 00:45:39,300
So you don't go and charge the
consumer for picking it up,

1029
00:45:39,300 --> 00:45:40,799
but they say, well
when you're done,

1030
00:45:40,799 --> 00:45:42,930
call one of these authorized
dealers' 1-800 number.

1031
00:45:42,930 --> 00:45:44,462
We'll pick up for
your appointment,

1032
00:45:44,462 --> 00:45:46,170
and then the dealer
goes and picks it up,

1033
00:45:46,170 --> 00:45:48,340
and then the whole
process continues.

1034
00:45:48,340 --> 00:45:51,270
That is probably
the most common way

1035
00:45:51,270 --> 00:45:53,430
that this actually is
implemented in practice.

1036
00:45:53,430 --> 00:45:57,430
So who bears the cost
ultimately is the consumer.

1037
00:45:57,430 --> 00:45:59,030
Which creates an
interesting dilemma.

1038
00:45:59,030 --> 00:46:00,690
If I'm charging
by consumer, can I

1039
00:46:00,690 --> 00:46:02,730
compete on the price
I charge my consumer?

1040
00:46:02,730 --> 00:46:05,300
I can charge less.

1041
00:46:05,300 --> 00:46:07,870
This goes back to loyalty and
other [INAUDIBLE] the customer.

1042
00:46:07,870 --> 00:46:09,620
What do you think about
the implementation

1043
00:46:09,620 --> 00:46:11,140
of these programs?

1044
00:46:11,140 --> 00:46:13,920
That is how maybe it
starts making sense

1045
00:46:13,920 --> 00:46:14,950
to try to get into it.

1046
00:46:14,950 --> 00:46:17,950
Because if I can
charge less for this,

1047
00:46:17,950 --> 00:46:20,240
I can actually sell my
product for less money,

1048
00:46:20,240 --> 00:46:22,310
for a prospective consumer.

1049
00:46:22,310 --> 00:46:23,020
Maybe.

1050
00:46:23,020 --> 00:46:24,010
I can try to do that.

1051
00:46:27,410 --> 00:46:29,960
How will the network
look like if I

1052
00:46:29,960 --> 00:46:33,090
use my-- the close look
now becomes apparent.

1053
00:46:33,090 --> 00:46:36,210
What I will ask my
consumers is, whenever

1054
00:46:36,210 --> 00:46:39,490
you purchased the computer,
we will take it back.

1055
00:46:39,490 --> 00:46:42,520
So I'm moving right now, so I
have all these things that I

1056
00:46:42,520 --> 00:46:45,860
buy for my new place.

1057
00:46:45,860 --> 00:46:51,190
And I go to Ikea a lot this
last weekend, I went a lot.

1058
00:46:51,190 --> 00:46:53,870
More times than I wanted to go.

1059
00:46:53,870 --> 00:46:57,550
And there's this big
heart with open hands.

1060
00:46:57,550 --> 00:46:58,750
Have you seen it?

1061
00:46:58,750 --> 00:47:00,260
We'll take it back.

1062
00:47:00,260 --> 00:47:02,950
So no matter when you
buy, we will take it back.

1063
00:47:02,950 --> 00:47:05,020
So you could tell your
customer the same.

1064
00:47:05,020 --> 00:47:10,790
If you bought your refrigerator
from Sears or from Kmart

1065
00:47:10,790 --> 00:47:13,810
or from Walmart, and it's
a Whirlpool refrigerator,

1066
00:47:13,810 --> 00:47:14,590
don't worry.

1067
00:47:14,590 --> 00:47:17,070
You can bring it back
when you're done with it.

1068
00:47:17,070 --> 00:47:19,020
And we will take it for you.

1069
00:47:19,020 --> 00:47:21,380
And in that opportunity,
I can also use that money

1070
00:47:21,380 --> 00:47:22,800
to give you a new refrigerator.

1071
00:47:22,800 --> 00:47:26,340
So that's the concept of also
engaging the consumer, where

1072
00:47:26,340 --> 00:47:33,810
you go to the same retailer
where you purchased the goods

1073
00:47:33,810 --> 00:47:40,910
and return that refrigerator,
washer and dryer, et cetera,

1074
00:47:40,910 --> 00:47:42,130
et cetera, et cetera.

1075
00:47:42,130 --> 00:47:45,980
The question is, how do you
get it back from the retailers

1076
00:47:45,980 --> 00:47:48,310
to the rest of your network?

1077
00:47:48,310 --> 00:47:52,150
So one option is, which is
what GENCO does, pretty much,

1078
00:47:52,150 --> 00:47:54,620
is that you still
keep that connection.

1079
00:47:54,620 --> 00:47:57,040
But you can still have
a separate network.

1080
00:47:57,040 --> 00:47:59,470
You have another network
that goes back here,

1081
00:47:59,470 --> 00:48:02,730
where it goes back to
some sort of collector

1082
00:48:02,730 --> 00:48:06,420
where you aggregate
some of these flows.

1083
00:48:06,420 --> 00:48:10,865
And then you can get it back
to a processing facility that

1084
00:48:10,865 --> 00:48:13,140
can take care of it.

1085
00:48:13,140 --> 00:48:16,010
This gives you the
intimacy with the consumer

1086
00:48:16,010 --> 00:48:18,270
without having to deal
with the whole network.

1087
00:48:18,270 --> 00:48:20,510
But in that case you will
not get a cost advantage.

1088
00:48:20,510 --> 00:48:23,379
You will have probably higher
costs than the IFO model has,

1089
00:48:23,379 --> 00:48:24,920
because you don't
have enough volume.

1090
00:48:24,920 --> 00:48:27,980
Where you get the most
value is if you somehow

1091
00:48:27,980 --> 00:48:33,460
use the same flow, so
the same trucks that

1092
00:48:33,460 --> 00:48:35,560
collect and deliver your
goods to the retailer.

1093
00:48:35,560 --> 00:48:36,976
Those are the same
trucks you use.

1094
00:48:36,976 --> 00:48:38,997
You don't have to create
a new set of trucks.

1095
00:48:38,997 --> 00:48:39,830
[INTERPOSING VOICES]

1096
00:48:39,830 --> 00:48:41,540
PROFESSOR: They're
coming empty anyway,

1097
00:48:41,540 --> 00:48:44,210
so why not bring them back?

1098
00:48:44,210 --> 00:48:46,320
Also their return
volume is not as high,

1099
00:48:46,320 --> 00:48:48,880
so it's not 100% of the sales.

1100
00:48:48,880 --> 00:48:54,940
So what is the main bottleneck,
then, for this to work?

1101
00:48:54,940 --> 00:48:57,570
If you want to use your
retailer and use your own trucks

1102
00:48:57,570 --> 00:48:58,744
that come empty.

1103
00:48:58,744 --> 00:49:00,660
Some problems we will
find with this approach.

1104
00:49:00,660 --> 00:49:04,410
AUDIENCE: [INAUDIBLE] so
why would I want to do it?

1105
00:49:04,410 --> 00:49:06,880
PROFESSOR: So that's
a big problem.

1106
00:49:06,880 --> 00:49:08,782
You are getting all this crap.

1107
00:49:08,782 --> 00:49:10,490
I have to have it
around in my warehouse,

1108
00:49:10,490 --> 00:49:12,060
or in my floor space.

1109
00:49:12,060 --> 00:49:15,280
I have to use a sales
associate to try

1110
00:49:15,280 --> 00:49:18,440
to spend time with the
customer and make sure it

1111
00:49:18,440 --> 00:49:19,840
is something I should take?

1112
00:49:19,840 --> 00:49:20,710
Any Whirlpool?

1113
00:49:20,710 --> 00:49:21,930
So that's the first barrier.

1114
00:49:21,930 --> 00:49:24,380
What's the other barrier?

1115
00:49:24,380 --> 00:49:27,370
That way you can fix, maybe you
can give them some incentives.

1116
00:49:27,370 --> 00:49:28,450
AUDIENCE: Oracle did
mention a systems barrier.

1117
00:49:28,450 --> 00:49:30,360
They're not able to trace
[INAUDIBLE] serial number

1118
00:49:30,360 --> 00:49:32,443
levels, so we can figure
out when these things are

1119
00:49:32,443 --> 00:49:33,450
going to be coming back.

1120
00:49:33,450 --> 00:49:34,783
PROFESSOR: That's another thing.

1121
00:49:34,783 --> 00:49:37,200
Which is the other one?

1122
00:49:37,200 --> 00:49:43,830
Who has ever kept a box of
the Whirlpool refrigerator?

1123
00:49:43,830 --> 00:49:46,650
How do you move those things
in a truck efficiently?

1124
00:49:46,650 --> 00:49:50,510
Luckily, things are
very nicely packed.

1125
00:49:50,510 --> 00:49:52,350
Not only because they're
beautiful for you,

1126
00:49:52,350 --> 00:49:54,760
but also easier to handle.

1127
00:49:54,760 --> 00:49:56,392
Your palate can now
go to the bottom,

1128
00:49:56,392 --> 00:49:57,600
and put on top of the palate.

1129
00:49:57,600 --> 00:49:59,558
Things are not sticking
out all over the place.

1130
00:49:59,558 --> 00:50:01,190
The doors are not
opened and closed.

1131
00:50:01,190 --> 00:50:04,880
So just the packaging of this
thing is meant to be moved.

1132
00:50:04,880 --> 00:50:06,990
Now once you return it,
it's just an easier scale.

1133
00:50:06,990 --> 00:50:09,300
So that creates
equipment [? tear. ?]

1134
00:50:09,300 --> 00:50:11,024
Eventually you have
to have more labor

1135
00:50:11,024 --> 00:50:12,940
to put it on top of the--
all those things are

1136
00:50:12,940 --> 00:50:14,580
the things that made it
a little more expensive.

1137
00:50:14,580 --> 00:50:16,250
But you can come up
with some solutions.

1138
00:50:16,250 --> 00:50:18,150
Some standard
wrapping or something.

1139
00:50:18,150 --> 00:50:20,030
But those are the
operational constraints

1140
00:50:20,030 --> 00:50:21,280
that you are probably getting.

1141
00:50:21,280 --> 00:50:23,790
Once you get to
face that problem,

1142
00:50:23,790 --> 00:50:26,120
and you get to your RDC,
you have the same problem

1143
00:50:26,120 --> 00:50:27,942
that the retailer has.

1144
00:50:27,942 --> 00:50:30,400
And that's you don't want to
have all this crap in your DCE

1145
00:50:30,400 --> 00:50:30,920
either.

1146
00:50:30,920 --> 00:50:32,753
So you have to have
another area of your DCE

1147
00:50:32,753 --> 00:50:34,664
so it doesn't
interrupt the flow.

1148
00:50:34,664 --> 00:50:36,330
So those are the
operational constraints

1149
00:50:36,330 --> 00:50:38,850
you have to face to set
up your own network.

1150
00:50:38,850 --> 00:50:41,260
And in some ways
or another, that's

1151
00:50:41,260 --> 00:50:43,280
what makes the IFO interesting.

1152
00:50:43,280 --> 00:50:45,030
So even though the
cost could be high,

1153
00:50:45,030 --> 00:50:47,480
all those little
barriers require

1154
00:50:47,480 --> 00:50:51,180
some really strong collaboration
with all your partners.

1155
00:50:51,180 --> 00:50:54,180
Your retailers need
to be on board.

1156
00:50:54,180 --> 00:50:56,030
You have to give them
some incentives either

1157
00:50:56,030 --> 00:50:59,360
on branding or market share,
some sort of incentive for them

1158
00:50:59,360 --> 00:51:00,660
to work with you.

1159
00:51:00,660 --> 00:51:03,080
Otherwise why would
they work with you?

1160
00:51:03,080 --> 00:51:05,190
And after that, you
still have to work

1161
00:51:05,190 --> 00:51:08,330
with all those physical
barriers of actually moving

1162
00:51:08,330 --> 00:51:11,890
used products back into where
they need to be disposed.

1163
00:51:11,890 --> 00:51:14,086
And those warehouses and
DCEs are not available.

1164
00:51:14,086 --> 00:51:15,710
You need more
investments, even if they

1165
00:51:15,710 --> 00:51:17,510
were huge capital investments.

1166
00:51:17,510 --> 00:51:19,990
They are big barriers on
operational investments.

1167
00:51:19,990 --> 00:51:24,110
And that's why companies like
GENCO are very profitable.

1168
00:51:24,110 --> 00:51:26,875
Because they still can
deal with that complexity,

1169
00:51:26,875 --> 00:51:29,420
and you don't have
to think about it.

1170
00:51:29,420 --> 00:51:33,290
In this case, Whirlpool
has a big advantage.

1171
00:51:33,290 --> 00:51:35,700
Market share-- 48% market share.

1172
00:51:35,700 --> 00:51:39,350
So you have the scale that you
need to work these details.

1173
00:51:39,350 --> 00:51:44,280
And if you can somehow
include the value of the brand

1174
00:51:44,280 --> 00:51:48,800
into this whole equation, that's
where this becomes attractive.

1175
00:51:48,800 --> 00:51:51,100
Operationally, it's a nightmare.

1176
00:51:51,100 --> 00:51:53,850
It's very upsetting to GENCO.

1177
00:51:53,850 --> 00:51:56,490
Once you get a certain scale,
like maybe Whirlpool has,

1178
00:51:56,490 --> 00:52:00,320
that's where you
can get into making

1179
00:52:00,320 --> 00:52:04,560
worthy investments plus you
get connection to the customer.

1180
00:52:04,560 --> 00:52:07,240
Which I think is ultimately,
just as a side note,

1181
00:52:07,240 --> 00:52:08,950
what Whirlpool decided to do.

1182
00:52:08,950 --> 00:52:10,820
Whirlpool, in this
particular case,

1183
00:52:10,820 --> 00:52:13,010
they actually decided to
go towards a closed loop.

1184
00:52:13,010 --> 00:52:16,060
But it was much more
expensive than they thought.

1185
00:52:16,060 --> 00:52:20,140
So it did not go that
well for our manager.

1186
00:52:20,140 --> 00:52:22,168
At least the first trial.

1187
00:52:22,168 --> 00:52:27,074
AUDIENCE: [INAUDIBLE] They're
probably the first ones.

1188
00:52:27,074 --> 00:52:29,260
Maybe they can become
the IFO and everyone

1189
00:52:29,260 --> 00:52:29,790
else. can pay them to do it.

1190
00:52:29,790 --> 00:52:31,760
PROFESSOR: And that's exactly
what was the thinking.

1191
00:52:31,760 --> 00:52:33,750
The thinking was, well maybe
we could become the IFO.

1192
00:52:33,750 --> 00:52:35,333
At the end of the
day, the legislation

1193
00:52:35,333 --> 00:52:38,460
says, we pick one organization
to pick up everything.

1194
00:52:38,460 --> 00:52:41,160
So if things are not working
out, you could become the IFO.

1195
00:52:41,160 --> 00:52:42,840
So Whirlpool, in
this particular case,

1196
00:52:42,840 --> 00:52:46,320
they did decide to
try to close the loop.

1197
00:52:46,320 --> 00:52:49,700
And they actually talked, well
not in Canada, but in general,

1198
00:52:49,700 --> 00:52:51,940
they talked widely
about these things.

1199
00:52:51,940 --> 00:52:54,620
About how they are
taking things back

1200
00:52:54,620 --> 00:52:56,480
and as part of their
valuable position.

1201
00:52:56,480 --> 00:52:58,896
And they believe this is going
to give them some long term

1202
00:52:58,896 --> 00:53:00,180
value.

1203
00:53:00,180 --> 00:53:03,640
All right, so that was kind
of the underlying ripples.

1204
00:53:03,640 --> 00:53:07,260
So this is the way-- the
best data you can get

1205
00:53:07,260 --> 00:53:08,860
was in this case study.

1206
00:53:08,860 --> 00:53:11,147
You can get rough numbers
of how much it cost.

1207
00:53:11,147 --> 00:53:12,730
You have to look at
other initiatives,

1208
00:53:12,730 --> 00:53:13,660
the WEEE initiative.

1209
00:53:13,660 --> 00:53:15,120
In different places
of the world,

1210
00:53:15,120 --> 00:53:18,050
they publish this kind of
numbers, price of steel,

1211
00:53:18,050 --> 00:53:20,770
price of copper,
estimated number of units,

1212
00:53:20,770 --> 00:53:22,790
and roughly going those.

1213
00:53:22,790 --> 00:53:28,260
The mapping of the costs
here was a little bit harder.

1214
00:53:28,260 --> 00:53:29,970
You need to have the
inside information.

1215
00:53:29,970 --> 00:53:31,860
That's why you use 10%.

1216
00:53:31,860 --> 00:53:34,900
But this is how you probably
can think through understanding

1217
00:53:34,900 --> 00:53:36,260
what is the right trade off.

1218
00:53:36,260 --> 00:53:38,010
That's always a good benchmark.

1219
00:53:38,010 --> 00:53:39,790
Try to compute
how much it costs.

1220
00:53:39,790 --> 00:53:41,080
Forward versus reverse.

1221
00:53:41,080 --> 00:53:44,090
And that will give you a sense
of what-- don't be surprised

1222
00:53:44,090 --> 00:53:47,220
if it is twice as much,
30% as much, 40% more

1223
00:53:47,220 --> 00:53:49,500
than your forward, because
it's not optimized.

1224
00:53:49,500 --> 00:53:50,860
And later it will become better.

1225
00:53:50,860 --> 00:53:53,330
Volume is here the
key to do that.

1226
00:53:53,330 --> 00:53:57,050
And on homogeneous products
like the case of Whirlpool,

1227
00:53:57,050 --> 00:54:01,380
their boxes-- [INAUDIBLE]
boxes-- makes it more viable.

1228
00:54:01,380 --> 00:54:03,510
For a retailer, that's why
their GENCO starts with.

1229
00:54:03,510 --> 00:54:06,260
You have shirts and
toys and cell phones.

1230
00:54:06,260 --> 00:54:10,570
Everything in one bundle,
then maybe collecting

1231
00:54:10,570 --> 00:54:12,380
to your former supply
chain is not as easy

1232
00:54:12,380 --> 00:54:16,270
because the box is hard
to fit in your truck.

1233
00:54:16,270 --> 00:54:17,880
Boxes like these
ones are easier.

1234
00:54:17,880 --> 00:54:21,896
All right, Any other thoughts or
comments on the Whirlpool case?

1235
00:54:25,560 --> 00:54:28,010
Tony or Alex, is there
anything I should add?

1236
00:54:28,010 --> 00:54:28,730
Great lecture?

1237
00:54:28,730 --> 00:54:29,550
OK, great.

1238
00:54:29,550 --> 00:54:30,330
Let's keep going.

1239
00:54:30,330 --> 00:54:32,720
So now I want to talk
about the final projects.

1240
00:54:32,720 --> 00:54:35,560
So I want each of you
to come here in front

1241
00:54:35,560 --> 00:54:38,590
and quickly tell the
rest of the group what

1242
00:54:38,590 --> 00:54:40,480
are you doing, which
companies you picked,

1243
00:54:40,480 --> 00:54:42,230
and that's what I ask
for your [INAUDIBLE]

1244
00:54:44,680 --> 00:54:47,310
Did everyone find a
nice clean green area

1245
00:54:47,310 --> 00:54:49,920
in the [? work site ?]
of your companies?

1246
00:54:49,920 --> 00:54:52,410
With Alexis we joke, every
time we look at companies,

1247
00:54:52,410 --> 00:54:56,050
they all say it is
eating our values, right?

1248
00:54:56,050 --> 00:54:56,830
It's in our DNA.

1249
00:54:56,830 --> 00:54:57,746
That's the word I use.

1250
00:54:57,746 --> 00:54:58,660
It's in our DNA.

1251
00:54:58,660 --> 00:55:01,090
So every single company
and website [INAUDIBLE]

1252
00:55:01,090 --> 00:55:02,560
the world should
be a better place.

1253
00:55:02,560 --> 00:55:06,317
So the other company
is Indie Tech Zara.

1254
00:55:06,317 --> 00:55:08,150
OK, so I can tell you
have lots of questions

1255
00:55:08,150 --> 00:55:11,520
next class about how to compute
carbon footprint of energy

1256
00:55:11,520 --> 00:55:13,549
and stores, and electricity.

1257
00:55:13,549 --> 00:55:15,840
I think that's going to be
something to understand well

1258
00:55:15,840 --> 00:55:17,714
because I'm sure all
your companies have that

1259
00:55:17,714 --> 00:55:19,330
highlighted somehow.

1260
00:55:19,330 --> 00:55:23,770
So are they smoke and mirrors,
or they're doing the real deal,

1261
00:55:23,770 --> 00:55:24,270
I guess?

1262
00:55:24,270 --> 00:55:26,920
We have to have to see after--
no pressure, Tony, but--

1263
00:55:26,920 --> 00:55:29,180
AUDIENCE: I might have
more questions after

1264
00:55:29,180 --> 00:55:29,822
[LAUGHTER]

1265
00:55:29,822 --> 00:55:31,030
PROFESSOR: After the lecture.

1266
00:55:31,030 --> 00:55:32,790
Great, so you know
that's Zaragoza,

1267
00:55:32,790 --> 00:55:36,250
our center is actually in the
same logistics park as Zara,

1268
00:55:36,250 --> 00:55:38,670
largest distribution
center in Spain.

1269
00:55:38,670 --> 00:55:42,440
So that's one reason why our
partner center is in Zaragoza

1270
00:55:42,440 --> 00:55:45,930
partly, co-located
with the plaza that

1271
00:55:45,930 --> 00:55:50,340
is the logistics
activity zone of Zaragoza

1272
00:55:50,340 --> 00:55:53,030
where the largest distribution
center of Zara is.

1273
00:55:53,030 --> 00:55:54,580
To manage all the
global operations.

1274
00:55:54,580 --> 00:55:56,810
They also fly things
around from there.

1275
00:55:56,810 --> 00:55:58,270
OK great, thank you.

1276
00:55:58,270 --> 00:56:00,690
So let's pick the next one.

1277
00:56:00,690 --> 00:56:05,470
Any questions or comments
before I move to the next group?

1278
00:56:05,470 --> 00:56:06,350
No?

1279
00:56:06,350 --> 00:56:07,530
All right.

1280
00:56:07,530 --> 00:56:08,860
Let me see.

1281
00:56:08,860 --> 00:56:17,520
So the next one is
Hewlett Packard and Delll,

1282
00:56:17,520 --> 00:56:18,730
So thank you.

1283
00:56:18,730 --> 00:56:21,450
I would like to just
highlight these two projects.

1284
00:56:21,450 --> 00:56:25,830
So we look at, first
two pairs of companies

1285
00:56:25,830 --> 00:56:28,260
have very different
business models.

1286
00:56:28,260 --> 00:56:32,950
Zara has one, fast fashion,
lots of designs per year.

1287
00:56:32,950 --> 00:56:35,124
Dell goes direct to consumer.

1288
00:56:35,124 --> 00:56:37,040
And I think that really
has deep implications.

1289
00:56:37,040 --> 00:56:38,950
And I think both of you
highlighted that's important.

1290
00:56:38,950 --> 00:56:40,450
I also want to
point out, at least,

1291
00:56:40,450 --> 00:56:42,150
the state of both
industries in terms

1292
00:56:42,150 --> 00:56:44,440
of environmental practices.

1293
00:56:44,440 --> 00:56:48,480
Electronics industry has moved
together for a longer time.

1294
00:56:48,480 --> 00:56:50,760
There's the WEEE
directive in Europe.

1295
00:56:50,760 --> 00:56:52,500
They put electronics
under scrutiny,

1296
00:56:52,500 --> 00:56:54,152
so they're both under
higher pressure.

1297
00:56:54,152 --> 00:56:56,360
That's why maybe you see
more of the same initiatives

1298
00:56:56,360 --> 00:56:59,926
like take materials
out of certain kind.

1299
00:56:59,926 --> 00:57:03,030
It's outlawed in some countries.

1300
00:57:03,030 --> 00:57:05,610
So you have to do it
because you have to do it.

1301
00:57:05,610 --> 00:57:09,360
So there's a little
bit of that on one end.

1302
00:57:09,360 --> 00:57:15,677
They also tend to collaborate in
other sectors, both the apparel

1303
00:57:15,677 --> 00:57:17,260
industry and the
electronics industry.

1304
00:57:17,260 --> 00:57:20,926
They collaborate on social
issues on a parallel for labor.

1305
00:57:20,926 --> 00:57:22,800
So that brings them
together in other forums.

1306
00:57:22,800 --> 00:57:28,310
In electronics, they also get
together for technology designs

1307
00:57:28,310 --> 00:57:29,960
to keep processors high speed.

1308
00:57:29,960 --> 00:57:32,320
So as you go into
both of your cases,

1309
00:57:32,320 --> 00:57:34,970
take a look at maybe there's
some underlying themes that

1310
00:57:34,970 --> 00:57:37,740
are common to the industry
that have brought,

1311
00:57:37,740 --> 00:57:39,180
because of the industry really.

1312
00:57:39,180 --> 00:57:41,736
And the US consumer has no
idea about these things,

1313
00:57:41,736 --> 00:57:44,110
so for you it looks like every
company is doing the same.

1314
00:57:44,110 --> 00:57:46,180
But this probably comes
from some other force.

1315
00:57:46,180 --> 00:57:49,960
So in both cases, I know,
especially electronics.

1316
00:57:49,960 --> 00:57:53,350
[INAUDIBLE] apparel are
more on that band width.

1317
00:57:53,350 --> 00:57:54,920
So let's keep that in mind.

1318
00:57:54,920 --> 00:57:56,745
All right good, let
me see who is next.

1319
00:58:05,810 --> 00:58:06,310
BMW.

1320
00:58:11,710 --> 00:58:14,280
So I think that this
is interesting to know

1321
00:58:14,280 --> 00:58:19,300
that the company that started
the brand with the consumer--

1322
00:58:19,300 --> 00:58:22,640
hybrid notion-- is not
the top rated company.

1323
00:58:22,640 --> 00:58:26,410
You will imagine that where the
largest emissions are in a car

1324
00:58:26,410 --> 00:58:27,880
is in the usage.

1325
00:58:27,880 --> 00:58:31,930
So if you innovated there,
why are you number one

1326
00:58:31,930 --> 00:58:34,076
for the next 25 years?

1327
00:58:34,076 --> 00:58:35,200
But it looks like it's not.

1328
00:58:35,200 --> 00:58:37,920
So I think that it's
interesting to know that.

1329
00:58:37,920 --> 00:58:41,980
I also did not mention
much about the life cycle

1330
00:58:41,980 --> 00:58:44,180
aspect of it in both
of these companies.

1331
00:58:44,180 --> 00:58:49,470
It's very different
and in textiles-- Tony,

1332
00:58:49,470 --> 00:58:52,070
I don't remember in
textiles or Alexis--

1333
00:58:52,070 --> 00:58:54,240
the life cycle
emissions are not in use

1334
00:58:54,240 --> 00:58:57,140
except if you
consider water energy

1335
00:58:57,140 --> 00:59:00,180
use for washing your clothes.

1336
00:59:00,180 --> 00:59:03,740
That probably dwarfs the
other emissions then.

1337
00:59:03,740 --> 00:59:04,700
Do you remember, Tony?

1338
00:59:04,700 --> 00:59:07,340
The life cycle
emissions of apparel,

1339
00:59:07,340 --> 00:59:09,494
in general, or in the tex--

1340
00:59:09,494 --> 00:59:12,470
AUDIENCE: Yeah, it's the
wash, if it's the wash.

1341
00:59:12,470 --> 00:59:16,029
PROFESSOR: So don't wash
your clothes if it's the--

1342
00:59:16,029 --> 00:59:17,070
AUDIENCE:High efficiency.

1343
00:59:17,070 --> 00:59:20,400
PROFESSOR: High efficiency--
no, don't wash them.

1344
00:59:20,400 --> 00:59:22,310
Or use a solar washer.

1345
00:59:22,310 --> 00:59:23,910
AUDIENCE: [INAUDIBLE]

1346
00:59:23,910 --> 00:59:26,716
PROFESSOR: So this again
goes back to the life cycle

1347
00:59:26,716 --> 00:59:28,340
and which pieces you
control versus you

1348
00:59:28,340 --> 00:59:29,756
don't control of
their life cycle.

1349
00:59:29,756 --> 00:59:31,560
But great.

1350
00:59:31,560 --> 00:59:32,220
Thank you.

1351
00:59:32,220 --> 00:59:33,620
Let's look at the other group.

1352
00:59:44,420 --> 00:59:46,680
Phillip Morris International.

1353
00:59:50,670 --> 00:59:51,330
OK thank you.

1354
00:59:51,330 --> 00:59:58,110
I just want to add the comment
on do you work internally

1355
00:59:58,110 --> 01:00:02,370
in your operations
or you do offsets?

1356
01:00:02,370 --> 01:00:04,410
Plant trees, or--
we'll talk a little bit

1357
01:00:04,410 --> 01:00:05,870
about that over time.

1358
01:00:05,870 --> 01:00:08,230
But I'm glad that
one of the companies

1359
01:00:08,230 --> 01:00:11,200
here highlighted offsets as
one of the strategies they

1360
01:00:11,200 --> 01:00:14,370
wanted to pursue.

1361
01:00:14,370 --> 01:00:17,210
Let me see.

1362
01:00:17,210 --> 01:00:19,390
The other one is-- so I skipped.

1363
01:00:24,120 --> 01:00:26,800
So for our next class, the case
studies [INAUDIBLE] is ready?

1364
01:00:26,800 --> 01:00:28,344
The [INAUDIBLE] case study?

1365
01:00:28,344 --> 01:00:30,510
GUEST SPEAKER: It's been
posted, it's pretty simple,

1366
01:00:30,510 --> 01:00:32,170
so hopefully asking
good questions

1367
01:00:32,170 --> 01:00:35,629
about what you're actually
the mechanics of doing

1368
01:00:35,629 --> 01:00:38,430
calculations, et cetera,
You can email me directly

1369
01:00:38,430 --> 01:00:39,305
with those questions.

1370
01:00:39,305 --> 01:00:43,135
But have that filled out and
turned in by Wednesday morning

1371
01:00:43,135 --> 01:00:45,770
because we'll-- I'm going to
collect some of the data from

1372
01:00:45,770 --> 01:00:48,507
that [INAUDIBLE]
discuss it during class.

1373
01:00:48,507 --> 01:00:50,840
PROFESSOR: And you have to
use the numbers for that one.

1374
01:00:50,840 --> 01:00:52,280
There's no way to escape it.

1375
01:00:52,280 --> 01:00:55,130
There's a bunch of sales
questions you have to work on.

1376
01:00:55,130 --> 01:00:57,530
GUEST SPEAKER: It requires
only basic multiplication

1377
01:00:57,530 --> 01:00:59,030
[INAUDIBLE]

1378
01:00:59,030 --> 01:01:01,180
PROFESSOR: Thank you again.