Supply Chain Adding flexibility to Warby Parker’s supply chain and increasing innovation by utilizing 3D Printing
Source 3 Source 3
Source 14
1
Table of Contents 3
8
12
16
Executive Summary
3D Printing Introduction
Handling Disruptions
Appendix 2
4
9
13
17
Background
New Supply Chain Model
Predicting Demand Using Advanced Analytics
Appendix 3
5
10
14
18
Current Supply Chain Model
Companies with 3D Printed Glasses
Milestone Goals
References
6,7
11
15
Current Supply Chain Issues
Profit and Loss Statement
Appendix 1
Executive Summary Companies have more flexibility to cope with spikes in demand when they have multiple partnerships and supply chain streams. Warby Parker majorly depends on factories in Italy and China, which is problematic during natural disasters or outbreaks, such as overseas shipping container shortages caused by the COVID-19 Pandemic. Creating a new supply chain that focuses on onshoring and short-term production will help Warby Parker stand out from competitors. 3D printing (3DP) is highly innovative and still in the beginning stages for the fashion and accessory world. It has the potential for less waste and greater customization, both factors extremely important to younger generations. 3DP opens up a new realm of possibilities because this technology has a very low barrier to entry considering there is very little labor involved and the machinery used can produce endless amounts of products, not just glasses, without the need for molds. This 3DP project is an investment for the future because Warby Parker will build relationships with extremely knowledgeable 3DP manufacturing companies and have the first-mover advantage in the US. The project will represent 1% of annual revenue for Warby Parker because this process is in the beginning stages, but more revenue will be allocated to 3DP in the future.
3
Source 3
Background Warby Parker was founded in 2010 with the mission of making glasses more affordable with glasses starting at $95 through their Direct to Consumer approach. In comparison, the national average for frames and single lenses is $366 without vision coverage.6 Their competitor, Luxottica, controls most of the industry with the brands they own, such as Ray-Bans and Oakley, and the brands they manufacture under license, such as Versace and Prada.1 Warby Parker’s more luxury approach with these 3DP glasses may attract Luxottica's high-end consumers. Warby Parker made their stock market debut on September 29th, 2021, as a direct offering. The company was valued at $6 billion, which exceeded the original value of $3 billion in August 2020.2
Source 3
Source 3
Warby Parker also gained popularity because of their Home Try-On program that let customers choose 5 pairs of glasses to try on for 5 days. 4
Current Supply Chain After the glasses concept is designed in-house at NYC Headquarters: -
-
Italian factories produce sheets of acetate. China uses CNC machines to cut out glasses frames. Materials sourced from Vietnam and China are undisclosed in their SEC report and website, but they are likely supplying hinges, cases, or kits. New York and Las Vegas Optical Factory produce and insert lenses. In addition, US suppliers enable the Warby Parker Home Try-On program, contacts, sunglasses, gift cards, accessories, and returns. Glasses are shipped to US and Canada customers from Optical Factory.4,5
Canada Italy United States China
Japan Vietnam
5
Issues with Current Supply Chain Warby Parker only ships in the US and Canada, yet their supply chain depends on global suppliers, which leads to greater lead times and less control. COVID-19 has created major setbacks in receiving orders and has created an under-supplied seller’s market. Therefore, greater flexibility will be achieved when shipping is only dependent on trucks inside the US.
●
In September of 2021, there was a record-breaking 73 ships off the coast of California waiting to unload their shipments at one time. This port is where most of the imports are received from China and other Asian countries.7 ○ As of September, container dwell time is 6 days, on-dock rail dwell time is 11.7 days, and outside of the terminal (street dwell), time is 8.5 days.7 ○ Congestion in this port during the first quarter caused millions of dollars worth of cancellations in the second quarter for companies because ships weren’t able to make it back to Asia. ○ Asia-Europe ships risk being pulled into the Asia-Pacific network because the shipping rates are at an all-time high due to such heavy demands. This is problematic for Warby Parker because they need the acetate from Italy to ship to China.
●
●
●
Container shipping rates from China to the US have reached a new record of $20,000 per 40-foot box.8 These extreme shipping rates are predicted to last until Chinese New Year in 2022, but it is still uncertain. Due to COVID-19 and recent Delta variant, Asian countries have cut off access for sailors to switch out crews, causing understaffing and a “crew crisis.” ○ Ships transport 90% of global goods so the crew crisis is causing delays in every industry.9
Source 8
6
Continued Issues with Current Supply Chain ●
●
●
Over half of their acetate comes from one family owned factory in Italy, which also supplies to other glasses companies, leaving Warby Parker extremely vulnerable to shortages.5 There are shortages in the US for truck drivers, and this would affect the new and old supply chain. ○ Truck drivers have a high turnover rate of 90% because of the typically low wages, unideal working conditions, and the history of unfair treatment.10 Navarre, headquartered in MN, is Warby Parker’s logistics distribution and logistics provider. Close monitoring of how their drivers are treated can ensure better transportation. The normal start to finish from design, production, and distribution is 1-3 months, but the shortage of ships means it’s taking over 1 month just to ship from China to the US, not including how long it takes from Italy to China. ○ Changing tariffs adds variability- Sep 2019: 15% tariff & Feb 2020: 7.5% tariff on goods from China to the US5
Cellulose acetate4
7
3D Printing Warby Parker will use the Additive Manufacturing technique of Selective Laser Sintering (SLS). SLS sinters layers of powder together on a heated bed until the object is completed. 11 After completion, the excess powder is removed and bead-blasted for a clean object. This technique is popular among other 3D printing glasses companies, such as Monoqool. Monoqool’s found that their customers enjoy the “unfinished” or less smooth surfaces of their glasses, but research is needed to see this appeal, so some post processing may need to occur.13 SLS uses engineering-grade nylon, which ensures the durability of these everyday wear glasses. PA 650 is the nylon type that will be used as it’s both economical and durable.11 It originally comes in white but will be dyed Warby Parker blue during post finishing. Using a base-surge strategy will help Warby Parker stay competitive amidst uncertainty.
CAD file by Sacha Zacaropoulos was used for determining the potential quote of future 3DP designs for Warby Parker.14 This design is unique because the design on the side allows for flexibility without requiring hinges. This case study is meant to introduce Warby Parker to this industry, so they have that first-mover advantage when the technology capabilities are dramatically amplified in the next few years. 3DP does have some quality control issues, but SLS doesn’t require support structures and has little warping.12 Quality control issues will be mitigated by decreased labor costs and small batch production.
8
1.
New Supply Chain 2.
1
Design CAD Files: New York
2
Produce Powders: Texas
3
3D Print: North Carolina
4
Glasses Assembly and Shipping: New York
Benefit: All the companies are on Eastern Standard Time with the exception of Texas, which is only 1 hour behind.
3.
4.
Warby Parker already designs their glasses in-house in their New York City headquarters, which helps reduce costs. They will work with the large team of engineers and technicians at ZVerse, a partner of Protolabs Inc., to create their CAD files. Alm is located in Temple, Texas. They develop Additive Manufacturing materials for their clients. Most PA 12 (nylon 12) is produced overseas by German and Swedish companies. Alm is unique because they customize powders for their customers as well as offer a variety of pre-created powders. PA 650 is produced in their Texas facility. 15 Protolabs Inc. uses Alm’s 650 powders in their printer facilities, and all US orders are produced in their US facilities; the largest 3DP facility is in Cary, NC. This facility can handle the capacity needed by Warby Parker with their 60,000 monthly average of 3D printed parts, 77,000 sq ft, and over 100 industrial 3D printers.11 One SLS machine can print 50-200 glasses in a 24 hour period.16,17 This company will take the CAD glasses files and print them using their SLS machines. Warby Parker will use their optical lab in Sloatsburg, New York to edge and insert glass. Their vertical integration increases their flexibility. From their labs, they ship the frames all across the US and Canada.
9
Specsy Specsy works directly with opticians to scan customers’ faces using a mobile app and makes recommendations and adjusts measurements based on their face shape. After the order is placed, it takes 7-10 days for the order to go into production in their manufacturing facility in Toronto, Canada. Customers have to go to an optometrist that services Specsy, and can’t try on glasses before printing.18
Fitz Warby Parker can learn a lot from Fitz’s model and apply it to their adult-sized glasses. Fitz is headquartered in California but owns its own 3DP facility in Ohio. They offer 3DP glasses for kids, without hinges using Nylon 12 and in-house SLS printers.12 They also have a virtual try-on program, but Warby Parker can differentiate because they will offer these first pairs of glasses products in their home try-on box and in stores. In the future, Warby will offer 3DP fully customizable glasses as well as a standard size
Glasses USA
Companies with 3DP Glasses Warby Parker has a competitive advantage because they will sell directly to the consumer instead of through 3rd party optometrists allowing them to price glasses at a lower rate with higher margins.
Monoqool Monoqool is another 3D printed eyeglass company located in Denmark.16 They use another Danish company to produce their 3DP frames. Their frames are 3D printed using nylon, but the glasses also have steel and metal arms. They found that their customers love the innovation of 3D printed glasses and the less “finished” look of the glasses added personality compared to regular acetate glasses. Their glasses are priced at $420.
Glasses USA is a major competitor to Warby Parker due to its direct-to-consumer model and variety of expensive and inexpensive glasses. They collaborated with 3D printing artist Janne Kyttanen in 2018 to create free downloadable CAD files, so customers can print their own glasses. After the glasses were printed, customers could order their lenses from Glasses USA’s website making this process very easy for their creative customers. This collab was extremely creative, but there are not many customers with access to 3D printers, especially SLS machines. Glasses USA claims that these glasses need no post-processing, but they are unlikely to be as smooth as traditionally made glasses. In addition, Glasses USA had a competition where they encouraged creators to post their own 3D glasses to Instagram using the #GlassesUSA3Dfor the chance to win a $300 gift card and promote this innovative collab.19
10
Profit and Loss Statement Explanation in Appendix
11
Handling Disruptions If there are sudden spikes that Protolabs can’t handle then 3D printing manufacturer, Shapeways, will be used as the first backup. Shapeways’ headquarters and factory are based in New York making transportation to the New York Optical Lab very cost-effective.20 They use PA 2200, another nylon powder, which is made in the German facility of EOS, so these glasses wouldn’t be considered fully made in the USA. They also provide post-processing dyeing, so the colors of glasses can match. The margins between these glasses and Protolabs’ vary slightly. Using the CAD file on slide 8, the price per glasses is approximately $43, without accounting for bulk discounts. Protolabs is approximately $40 including bulk discounts, but this order uses USA sourced powders, which are preferable in case of global supply chain shortages and falls. In the future, there will be different styles of glasses and in different colors. Warby Parker’s designers will buy access to AutoCAD and Netcom, a firm that teaches 3D printing CAD skills,24 so they can create their own designs and continue to build Warby Parker’s portfolio.
Source 20
12
Predicting Demand Using Advanced Analytics ●
●
●
Assess possible demand through Warby Parker’s app, which allows customers to virtually try on glasses ○ See how many people are trying on the glasses in real-time ○ Can assess the most popular colors and glasses shapes to make the most profitable choice when designing new pair of 3DP and future glasses Warby Parker could also add on the app a section where customers can filter through glasses based on their face shape or a quick survey about the customer’s lifestyles, style, and face shape to recommend products and put the 3DP glasses near the top of the suggestions. Facebook and Instagram will be used to advertise the products, so analyzing the engagement through the click through rate, shares, and likes will also help forecast demand.
Source 3
13
Milestone Goals Prioritize your immediate (6-12 months): Education and increased SKUs ● Add more styles and colors ● Educating designers on CAD and creating more designs ○ Price for CAD and beginning training are already listed in P&L statement for Q1/Q2, but more funding will be needed to attend webinars, trend research, and other online CAD courses
Near-term (1-3 years): Expand material catalog and make more customizable ● Test out different materials, like PA 11, made from renewable resources, for a more sustainable approach and increased flexibility in case of powder shortages ○ Use more recyclable powders, more research on circular economy ● Adopt software to make glasses fit face and adjust digital files for each customer. ○ Pros: higher satisfaction if glasses match face features, customers can feel more connected to the brand if the glasses are highly customizable ○ Cons: customers would not be able to return glasses if they made just for their specific face
Long-term (3-5 years) milestones: Open 3D printing facility ● Pros: Higher vertical integration, in control of sourcing powder, could be used as outsourcing for other companies and industries that need an SLS printer ● Cons: High cost of equipment ($400,000)16, hire 3D printer technician, need space available for printer, also need a post processing station
14
Appendix 1: (P&L) Statement Gross sales revenue is derived from a quote from Protolabs, where an open-source CAD file of glasses14, was uploaded. The prices decreased as the number of glasses increased, but to achieve maximum flexibility and allow for continued improvement of 3D printing into the supply chain, 250 units are best. When the glasses are printed, they would arrive to the Optical Lab in New York in less than 7 days. After product development, the first shipment would be 1,000 glasses, and these would be distributed to the 165 Warby Parker stores, and the rest would be available for the 5 free trial pairs. The next shipment would be 1,000, so the Optical Lab is stocked for new orders. The best thing about 3D printing and Protolabs is that you can change the quantity easily based on demand. 250 pairs ordered almost every week would allow for customer feedback and continuous relationship building in the 3D printing industry. Quantities can be increased or decreased easily since there is no minimum at Protolabs; therefore, creating less waste and less warehouse storage issues. The quote is shown below, and the price will be reduced to $10,000 including shipping for 250 units after designers from Zverse help optimize the SLS print bed space, so more glasses can be printed in the same batch. The total revenue in 2020 for Warby Parker was $262,929,000 in 2020, with glasses making up 95% of sales and contacts making up 1%5. These 3D printed glasses will represent 1% of sales for all of 2022 because this new technology and supply chain are in a trial phase, much like the addition of contacts to Warby Parker’s assortment. The 1% of sales helped determine the sales allowances since Warby Parker accounted for returns and allowances of 1.9 million in 20205. The fiscal year ends on December 31st, so there is an opportunity to markdown 1,000 glasses at 20%, during any promotional sales, such as Valentine’s Day. By perfecting one pair of glasses and trying out a new technology, Warby Parker will be viewed as an innovative and risk-taking company all while building relationships in the 3D printing space, so future projects can be carried out- it’s all part of the big plan.
Protolabs’s quote for 250 parts, plus blue dye, not including shipping or taxes.
15
Appendix 2: (P&L) Statement According to their SEC Report: Warby Parker has 2,000,000 active customers with a sales retention of 50% within two years of purchase and 100% within four years based on customers during 2015-20195. Customers buy an average of 1.5 units per year and complete 1.4 orders per year on average.21 Since some customers typically purchase more than one pair of glasses per year, with $218 being the average revenue per customer,5 $250 per pair of 3D printed glasses isn’t too unreasonable from what the average customer buys in a year. It also allows for additional profit to go towards future programming. -
-
Future programming such as 3D CAD training in the price for two designers to be trained in AutoCAD for 3DP by NetCom Learning, so more 3DP projects can happen in the future. The price of consultations from ZVerse is essential to ensure premium printing. Product development costs are high because the price per one pair of glasses is much higher, and there need to be at least 10 pairs of glasses in PD.
Source 5
16
Appendix 3: Customer Engagement These glasses will be promoted using Facebook, Instagram, and email ads. Emails are social media are the best ways to reach millennials compared to other generations.23 Posts can be analyzed in terms of engagement to predict demand. Facebook and Instagram expenses are based on the cost-per-thousand impressions. Facebook costs $7.19 per 1,000 impressions and Instagram costs $6.70 per 1,000 impressions.22 There does not need to be extreme marketing because the customer retention rate of Warby Parker is already so high. The second highest group of consumers are those that make over $150K a year, so pricing these 3D printed glasses starting at $250 (without added prescription costs) is not unreasonable for this income group.21
Source 21
17
References 1.
2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.
Bogosian, J., Flores, D., Galhotra, S., Lee, M., Lieu, A., & Caro, F. (2017, August 11). Warby parker vs luxottica: Supply chain disintermediation in the eyewear industry. UCLA Anderson Global Supply Chain Blog. https://blogs.anderson.ucla.edu/global-supply-chain/2017/08/warby-parker-vs-luxottica-supply-chain-disintermediation-in-the-eyewear-industry.html Thomas, L. (2021, September 29). Warby Parker opens at $54.05 per share in public debut on NYSE, soaring more than 30% above reference price. CNBC. https://www.cnbc.com/2021/09/29/warby-parker-direct-listing-wrby-starts-trading-on-the-nyse.html Warby Parker. (n.d.). Impact Report 2020. https://www.warbyparker.com/assets/img/impact-report/Impact-Report-2020.pdf How our glasses are made. (n.d.). Warby Parker. https://www.warbyparker.com/how-our-glasses-are-made Warby Parker SEC Report. (2021). UNITED STATES SECURITIES AND EXCHANGE COMMISSION. https://www.sec.gov/Archives/edgar/data/1504776/000162828021017546/warbyparkerincs-1.htm Vsp vision—National average cost without vision coverage. (n.d.). https://www.universityhealthplans.com/custom/VSP_NtlAvgCost.html Miller, G. (2021, September 16). Record shattered: 73 container ships stuck waiting off California. FreightWaves. https://www.freightwaves.com/news/record-shattered-61-container-ships-stuck-waiting-off-california Khasawneh , R., & Xu, M. (2021, August 6). China-U.S. container shipping rates sail past $20,000 to record. Reuters. https://www.reuters.com/business/china-us-container-shipping-rates-sail-past-20000-record-2021-08-05/ Saul, J., Xu, M., & Sun, Y. (2021, July 26). Global supply chains buckle as virus variant and disasters strike. Reuters. https://www.reuters.com/business/global-supply-chains-buckle-virus-variant-disasters-strike-2021-07-23/ Macmillan, C. (2021, October 14). The truck driver shortage in 2021—The dirty truth no one talks about. Smart Trucking. https://www.smart-trucking.com/truck-driver-shortage/ Selective Laser Sintering (SLS). (n.d.). Protolabs. https://www.protolabs.com/services/3d-printing/selective-laser-sintering/ Hendrixson, S. (2019, December 2). These 3d printed glasses are designed to “solve” kids’ eyewear. Additive Manufacturing. https://www.additivemanufacturing.media/articles/these-3d-printed-glasses-are-designed-to-solve-kids-eyewear Sher, D. (2019, March 17). MONOQOOL takes a look at the 3D printed eyewear market. 3D Printing Media Network. https://www.3dprintingmedia.network/monoqool-3d-printed-eyewear-market/ Zacaropoulos, S. (2018, February 21). VIRTUALTRYON.COM - 3D PRINTING GLASSES - STEVE V2—VTO. Cults. https://cults3d.com/en/3d-model/fashion/virtualtryon-fr-lunettes-impression-3d-steve-v2 Butten, A. (2021, October 6). Phone call with Sales Representative at Alm [Phone call]. Sustainable 3D Printing. (n.d.). Tailor Made Glasses & Bespoke Glasses. Retrieved October 17, 2021, from https://monoqool.com/sustainable-3dprinted-glasses-2/ Hussain, A. (2021, September 20). Phone call with Sales Representative at 3D Chimera [Phone call]. How it Works. (n.d.). Specsy. Retrieved October 17, 2021, from https://home.specsy.com/how-it-works-2 O’Neal, B. (2018, January 30). 3d print your own glasses at home thanks to glassesusa.com and janne kyttanen partnership. 3DPrint.Com. https://3dprint.com/201807/glassesusa-janne-kyttanen/ Shapeways: About us. (n.d.). Shapeways. Retrieved October 17, 2021, from https://www.shapeways.com/about Zucker, A. (2018, May 14). Warby Parker’s pricing strategy has buyers seeing double. The Brief Blog. https://www.rakutenintelligence.com/blog/2018/does-brick-and-mortar-add-substance-to-warby-parker-sales-the-data-says-no How much do instagram ads cost in 2021? In-depth guide from k6. (2020, August 18). K6 Agency. https://www.k6agency.com/instagram-ads-cost/ PRNewswire. (2020, February 3). 5wpr survey reveals facebook is the most used social media platform among american millennials. MarTech Series. https://martechseries.com/social/social-media-platforms/5wpr-survey-reveals-facebook-used-social-media-platform-among-american-millennials/ Class Schedule. (n.d.). NetCom Learning. https://www.netcomlearning.com/training/schedules.phtml
Template by
18