New technology to use the entire cocoa fruit – who will it benefit ?

Posted on August 27, 2024 by aviyer2010

An article in the BBC news site (August 27, 2024) titled “Have Swiss scientists made a chocolate breakthrough?” describes new technology developed at the Federal Institute of Technology at Zurich that claims to use the rest of the coca fruit i.e., the flesh and the husk, (rather than just the beans) to replace sugar in the chocolate and thus add to the value of the fruit. Given lower yields of coca beans, and rising cocoa bean prices, yet lower net benefits to farmers of the cocoa plant, will this new technology increase benefits back to the farmer ? Since the additional value will now require a market for the flesh and the husk, how should the logistics be organized to realize this value i.e., should these plants be in the coca bean source countries, or should the material be exported to use locations ? Since sugar is subsidized, and use of the flesh will increase chocolate costs, will customers be willing to pay more to use the whole cocoa fruit ?

Posted in Africa, Cost, delivery, Prices, productivity, supplier, Supply Chain Issues, Sustainability, technology | Tagged , , , , | Leave a comment

AI Use trends across businesses – who is using it, and how are they improving productivity ?

Posted on August 20, 2024 by aviyer2010

Analysis of a survey of over 1.2 million firms (NBER # 32319) in a paper titled “Tracking Firm use of AI in Real Time” suggests that the fraction of firms reporting use of AI grew from 3.2% to a projected 6.6% between September 2023 and 2024. Adjusted for number of employees, young and mature firms showed greater use of AI, a U shared adoption as a function of firm age. The most significant use cases were in marketing and in chat agents, followed by data analysis, and while these tools substituted for some employee tasks, they were not expected to decrease employment. In competitive industries, will Gen AI tools just improve service to the consumer, with no significant firm level profit impact ? How should firms adjust their organizations to enable adoption by their employees ? What can the firms in the middle do to also engage with exploration of Gen AI tools ?

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Should early cash access, with voluntary tips as the cost, be treated as a loan?

Posted on August 13, 2024 by aviyer2010

An article published by the Associated Press (July 28, 2024) titled “US agency says apps that let workers access paychecks before payday are providing loans”, states that the Consumer Finance Protection Bureau wants the Truth in Lending act to apply to early access to money, and that voluntary tips become a compelled payment due to claims of charity towards the less fortunate. But since the payday is set by the employer, and delayed payment of earned wages is float provided to the employer, is early access a loan or payment due? Should employers be forced to provide this service to avoid overdraft fees by banks? Or should banks be required to coordinate with employers to provide such access to earned wages? 

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Cocoa risks – high prices, the EU deforestation initiative, cocoa substitutes

Posted on August 13, 2024 by aviyer2010

An article in foodnavigator.com titled “Six startups rethinking cocoa for alt choc innovation” describes the combined impact of cocoa bean prices exceeding 10,000 euro per metric ton and the new European Deforestation Regulation starting December 2024 as driving substitutes for cocoa. Celleste Bio uses a couple of cocoa beans and a reactor to produce two tonnes of cocoa. Choviva uses oats and other plant based input to produce a substitute with a 90% lower carbon impact. Will the switch to new technologies permanently reduce demand for cocoa beans? Should Ghana and Ivory Coast proactively attract such companies as a hedge against demand drops for cocoa beans? Will carbon impact become a salient feature in chocolate bars?  

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Boeing division, to independent supplier, back to Boeing, the story of Spirit Aerosystems

Posted on August 13, 2024 by aviyer2010

An article in the Wall Street Journal (July 2, 2024) titled “Boeing Calls Time on the Great American Outsourcing” describes the reintegration of supplier Sport Aerosystems back into Boeing as a failed attempt at outsourcing. When Spirit split from Boeing, it managed to reduce labor costs, and grow 19% of its sales to Boeing’s competitor Airbus. But production quality issues, COVID and other shocks saddled Spirit with significant costs. The article claims that Boeing suffered from a loss of the innovation resulting from “learning by doing”, and that low margin suppliers aggregated worldwide to become fewer and burdened with higher geopolitical risk.  Will US manufacturers reintegrate with key suppliers, thus reversing the growth of foreign value added as a fraction of US imports, which had grown from 13 to 20% between 1995 and 2000? How should high capital, low margin supply sources be justified within a company? What can governments do to ensure supply resilience and guard their key manufacturers from geopolitical risks?

Posted in Capacity, Coordination, Cost, logistics, Made in USA, manufacturer, Operations Management, productivity, supplier | Tagged , , , , | Leave a comment

Treating patient’s at home: good idea or potential liability?

Posted on August 13, 2024 by aviyer2010

An article in the Wall Street Journal (August 13, 2024) titled “Hospital’s New Push: Treat Patients in Their Homes”, describes the over 23,000 Medicare treated at home through April this year. The rules require the patients to be less than 30 minutes away from the hospital, and their care is monitored remotely and through site visits. Hospitals get paid the same rate for home care as for in hospital stay. Currently, such care is offered for stable patients who are ambulatory but require hospital level monitoring. While patients are kept comfortable, their home length of stay is shown to take an additional day, with associated costs, while keeping quality of care constant. Should such programs be expanded to enable hospitals to expand without adding physical space ? Should choices regarding the care location be a patient choice ? Do we expect to see independent home care hospital equipment that will be setup and administered by third parties subcontracted by hospitals to manage logistics ?

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Global freight charges surge in response to supply chain demand and supply disruptions

Posted on June 24, 2024 by aviyer2010

An article in the Wall Street Journal (June 24, 2024) titled “Ocean Shipping Prices are Pushing Towards Pandemic-Era Highs” describes the doubling of freight from Asia to the East coast of the US. It suggests that the Houthi rebel ship attacks have caused ships to spend 10 more days to travel around the Cape of Good Hope rather than use the Suez Canal, coupled with a surge in orders placed with Chinese manufacturers ahead of tariff increases, a reduction in traffic through the Panama Canal due to drought conditions, and worries of dock worker strikes in the East and Gulf Coast ports. At the same time air shipments are on the rise, thus increasing costs and cutting shipper margins. Is the front loading of orders a temporary price impact that one can expect to be resolved as soon as the replenishment orders get shipped ? Will continued global shipping worries increase the benefit for domestic sourcing and justify the higher domestic manufacturing costs ? What steps can one expect to restore the safety of global shipping through the Suez Canal ?

Posted in Air, Capacity, China, congestion, logistics, Made in USA, ordering, Prices, ship, supplier, Supply Chain Issues | Tagged , , , | Leave a comment

Climate change and its impact on olives, coffee and grapes

Posted on June 10, 2024 by aviyer2010

An article in the Wall Street Journal (June 10, 2024) titled “Climate Change is Coming for the Finer Things in Life” describes heavy rains causing mildew that has destroyed grapes in Italy, hot weather and drought impacting olive groves and heavy rains and heat waves impacting both coffee beans and withering coffee flowers thus impacting yields in India. The result is worries about crop quality, lower yields and higher and more volatile prices. But crops are also moving north from southern regions with grapes grown in Sweden, olives in Austria etc. Installing irrigation systems, thinning grape vines, planning drought resistant crops and moving north all increase costs and may impact quality, thus increasing prices. Should we expect new crop locations, with consequences for existing southern production countries and a shift to a greater level of automation in these new farms ? Will climate controlled greenhouses or vertical farms have to replace current growing methods ? Or will consumption drop as a result of the higher prices to make olive oil, coffee and wine less accessible ?

Posted in Capacity, Cost, disruption, Global Contexts, logistics, productivity, Supply Chain Issues, Sustainability, technology | Tagged , , , , , , , , , , , | Leave a comment

Will customers pay more for ethical sourcing of chocolate bars ?

Posted on June 6, 2024 by aviyer2010

An article in the Wall Street Journal on June 3, 2024 titled “A U.K. Grocery Store Committed to Paying Farmers More for Cocoa” (https://www.wsj.com/articles/a-u-k-grocery-committed-to-paying-farmers-more-for-cocoa-chocolate-bar-sales-skyrocketed-9977794b) describes a price increase for chocolate bars at Waitrose from 2 pounds to 2.20 pounds, with a focus on participation in “Tony’s Open Chain” that resulted in a 34% increase in sales. Tony Chocolonely’s open supply chain works with farmers to pay a living income premium, ensure the cocoa beans are de-forestation free and free to use of child labor. But will consumers care enough about ensuring ethical supply chains to be ready to pay a premium price for chocolate bars ? How can supply chains ensure that the benefits of these higher prices go to the poorest participants in the supply chain i.e., the farmers ? Will such changes shift the sourcing to larger industrial farms from small farmers ?

Posted in Africa, competitiveness, Coordination, Cost, Global Contexts, labeling, logistics, Prices, Sustainability | Leave a comment

Did Boeing favor “Speed over Quality” ?

Posted on March 28, 2024 by aviyer2010

An article in the New York Times (March 28, 2024) titled “”‘Shortcuts Everywhere’: How Boeing Favored Speed over Quality” describes examples of monthly production rates of the 737 Max increased from 42 in 2017 to 52 in 2018, suppliers pushed to speed up, and quality and safety compromised. But competitive pressures from Airbus required a response, and Boeing had a safety committee and increased quality inspectors by 20%. Will replacement of senior management suffice, or will the fraction of the supply chain that is outsourced need to be reconsidered to improve airplane reliability ? How should systems be adjusted to prioritize quality, eliminate self-verification by mechanics, and made it nonnegotiable ? Is the root cause less experienced workers on the line, and should more be spent on technology to reduce the impact of this inexperience ?

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