The impact of a US bill requiring 75% of US food aid to be shipped on American vessels

Posted on April 29, 2014 by aviyer2010

An article in the New York Times (April 24, 2014) titled “Provision could limit US Food Aid” describes a Coast Guard spending bill that requires “75% of US food aid to be shipped on US owned vessels”. The impact is to increase costs and cause delays in delivery, thus decreasing the amount and effectiveness of US food aid to distant countries like South Sudan. It also runs counter to a move to purchase food closer to the source of the emergency by providing cash rather than food in kind. Do proponents of the requirement, who claim it will preserve US jobs by requiring use of US ships, have an argument that is credible ? Will this requirement decrease the amount of US food shipped and thus run counter to the goal of preserving US jobs ? Should constraints on transportation be eliminated so that USAID can choose the most cost effective solution ?

Posted in Cost, emb2019, Global Contexts, imm2018, Supply Chain Issues | Tagged , , , , , , , , , , , | 13 Comments

Will Stihl’s strategy of sales through small dealers sustainable ?

Posted on April 26, 2014 by aviyer2010

An article in Bloombergbusinessweek (April 28, 2014) titled “Big-box Cutter” describes Stihl’s strategy to sell chain saws through small dealers, avoiding big box sales or internet sales. By selling through small dealers for whom they account for a significant portion of the inventory, service provided by the 8,500 dealers generates the $1.3 billion in sales. Will dealers located close to large stores who sell Stihl products exclusively provide a sustainable retail supply chain ? Will Stihl’s focus on product quality and performance, even at higher price and service levels, get customers to make a separate trip to purchase products ? Does the use of dealers to do repairs during the warranty period, which provides them additional revenue streams, provide the combined financial incentive for the independent dealers ?

Posted in Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , , | Leave a comment

Will Amazon’s delivery trucks permit competitive same day delivery?

Posted on April 24, 2014 by aviyer2010

An article in the Wall Street Journal (April 24,2014) titled “Amazon, in a Threat to UPS, tries its own deliveries”, describes a plan by Amazon in San Francisco, Los Angeles and New York, to operate its own Amazon logo delivery trucks for customer home delivery. It claims that control over the last mile by Amazon will prevent the delivery issues of the kind faced by UPS last Christmas, and provide competitive same day delivery. It also claims that shipping costs have been rising for Amazon. Will Amazon’s control over the last mile permit it to reduce costs over UPS and FedEx ? Will the need for dense delivery volumes to optimize costs require deliveries to be delayed until such routes are formed ? Will control over deliveries permit easier implementation of Amazon’s plans for anticipated shipments (described in an earlier blog) ?

Posted in Ecommerce, Operations Management, Supply Chain Issues | Tagged , , , , , , , , , | 1 Comment

The “click and collect” grocery model in the UK

Posted on April 22, 2014 by aviyer2010

An article in the Financial Times (April 21, 2014) titled “WalMart’s English Experiment”, describes “click and collect”, an approach where WalMart owned Asda’s customers in the UK order their grocery online, it is delivered to temperature controlled lockers close to their homes and is picked up by customers assisted by Asda employees. The goal is to have retailers do the picking and delivery to lockers, providing delivery close to customers, not requiring coordination with customers to be in their homes for delivery, but saving last mile costs. Will this balanced sharing of work with customers save costs while providing convenience ? Will impulse buys be decreased if the customer does not walk around the store to shop ? Will the need to have multiple lockers across locations make this approach inferior to pickup from local shops (gas stations, convenience stores and newstands), a model favored by Amazon ?

Posted in Ecommerce, Global Contexts, Service Operations, Supply Chain Issues | Tagged , , , , , , , , , | 2 Comments

Indian firm Tata building the Land Rover in a joint venture in China

Posted on April 21, 2014 by aviyer2010

An article in the Financial Times (April 20, 2014) titled “JLR China chief says Changshu factory will rival UK for quality”, describes a new plant in China, owned by China automaker Chery and the Indian Tata group that owns Jaguar Land Rover (JLR), that will build Land River cars for the Chinese market. The goal is to compete with German automakers in China. But the new twist is that the automation level of the Chinese plant is expected to match that in European plants, with quality levels rivaling the company’s plants in the UK. Is the demand for quality in China expected to increase automation levels even in low labor cost China ? If the mix of labor and capital is the same in China as in the Western plants, will low transport costs for finished products, or subsidized energy or incentives for plant employment justify Chinese production ? Given that quality cultures in manufacturing require individual initiative to improve over time, will the Chinese plants deliver long term continuous improvement (kaizen) that is expected in Japanese plants ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , , | Leave a comment

Testing alternate modes to get California Salmon to the ocean and back

Posted on April 19, 2014 by aviyer2010

An article in the New York Times (April 19, 2014) titled “Swim to Sea ? These Salmon Are Catching a Lift”, describes two alternate paths to move salmon from drought stricken areas to the ocean. With priority being for California agriculture, water levels in the rivers have dropped to such low levels that the California salmon cannot reach the ocean. Two models of transporting salmon are being tried, one (blogged earlier) uses direct truck transport to move salmon to the ocean. A second mode trucks the salmon to a river, and a then on to a boat, that continuously flows river water over the salmon to get them to imprint on the native water and facilitate their recall for the return trip to spawn. Researchers hope to monitor the two paths to see which one gets the salmon to the ocean and back successfully. Is the tradeoff of efficient direct transport against slower and perhaps higher probability of a successful round trip that ensures future generations of salmon reasonable? Should the root cause, low level of water due to the provision of water to California agriculture, be reconsidered to include these second order cost effects ? How should the potential demands for water and their impact be balanced across the different industries e.g., agriculture vs fishery in this case ?

Posted in Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , , , , , , | 25 Comments

Tracking Emergency Room patients across hospitals to decrease costs and improve care

Posted on April 19, 2014 by aviyer2010

An article in Bloombergbusinessweek (April 7,2014) titled “Hospitals share data to prevent ER abusers”, describes an effort in Washington state to pool data regarding ER patient treatments to prevent wasteful spending. With 20% of patients accounting for over 4 ER visits per year, sharing data enabled ER patients with nonthreatening conditions to be treated elsewhere at lower costs, lowering visits to the ER by Medicaid patients 10%, and $33 million reduction in costs. Followup of ER patients with help for pain management is expected to improve care. Should such data sharing across competitors become the norm, or is this sharing only because nonthreatening conditions were dropped from ER reimbursement by the government? Will costs decrease and patient care improve with patient data sharing or do we need third party monitoring to ensure such outcomes ?

Posted in Collaboration, Operations Management, Service Operations | Tagged , , , , , , | Leave a comment

Trucking Salmon to the ocean to ensure future fishing

Posted on April 19, 2014 by aviyer2010

An article in Bloombergbusinessweek (april 7,2014) titled “In California,salmon hitch a ride to the sea”, describes the low water levels in California rivers this year prevent the young Chinook salmon from finding their way along the rivers to the ocean. The state is spending about $150,000 to truck 30 million salmon to the ocean, thus ensuring that enough of them will return as adults to spawn and provide fish for fisherman in the future. Given the role of trucks to aid species amidst drought, will the forecasted water shortages in the future increase the use of such options? Should human intervention to ensure stability of species be considered a counter to other human impacts on the environment or will it cause unintended impacts ? Should a tax on consumer products be expected to pay these costs and should these costs be spread across all consumers?

Posted in Collaboration, Operations Management, Sustainability | Tagged , , , , , , , | Leave a comment

Hazardous crude oil cargo on trains – no information sharing with towns on routes

Posted on April 16, 2014 by aviyer2010

An article in the New York Times (April 15,2014) titled “Despite Rise in Spills, Hazardous Cargo Rides Rails in Secret”, describes laws that permit railroads to keep their hazardous cargo secret from towns where spills occur. With increasing amounts of Bakken crude being transported by rail, and the tendency of this crude to be volatile, towns close to railroads face risks but were unaware of the magnitude of the risks. The railroads claim that their secrecy if for security reasons. The Federal government has a list of 27 risk factors (include the number of rail crossings and sports stadium proximity) to be considered for each route, with a less risky route to be considered by railroads. A Federally funded Rail Corridor Risk Management System is offered to railroads to use in making these decisions. Should railroads be required to share data regarding shipments of hazardous cargo so that towns are prepared for emergencies ? Should the possible higher cost associated with shipments by less risky routes be borne by the railroad or should more risky routes be associated with insurance requirements to cover possible spills if they occur ? What role can the railroad industry play to mitigate these risks ?

Posted in Collaboration, Operations Management, Supply Chain Issues | Tagged , , , , , , | Leave a comment

Understanding the logic for Tesla’s proposed $5 billion battery plant

Posted on April 2, 2014 by aviyer2010

An article in the Wall Street Journal (April 2, 2014) titled “Does Tesla Need a $5 Billion Battery Factory” describes Tesla’s planned mass market electric cars (the GEN III) priced at $35,000 and the current $25,500 cost of the 85 Kwh battery pack for the Tesla Model S. The pressure to reduce battery costs by 30%, the plan to commit to purchases of primary metals such as cobalt are described as possible reasons for the plant. But the reasons for vertical integration by an auto OEM upstream continues to be a puzzle. Will Tesla plan to supply batteries to itself as well as competitors to manage costs ? Will the pressure to open the plant by 2017, and the corresponding downward pressure on battery prices, force current battery suppliers to partner with Tesla in this new plant ? Will the announced 30% cost reduction goal spur innovation by current battery makers who will be supplying other OEMs, thus increasing sales of electric vehicles ?

Posted in Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , , , , , | 2 Comments