Are the simple European Union conflict materials laws too weak ?

Posted on March 30, 2014 by aviyer2010

An article in The Guardian (March 26, 2014) titled “Conflict minerals: new EU rules simpler alternative to US regulation” describes draft legislation that is voluntary, requires the manufacturer to determine areas that are conflict afflicted and just requires use of a responsible importer who provides assurance of source. Unlike the US Dodd-Frank law that specifies that tin, tantalum, tungsten and gold should not be from conflict areas, and requires tracking across the supply chain, the European rules are expected to be easier to comply with. Will the European rules decrease costs for nonUS manufacturers or will sales to US companies force European suppliers to adhere to the US version of the conflict material law? Given that the European laws will not apply to products using conflict materials when imported in the Europe, will this change the structure of European supply chains ?

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Will buyers paying a penny a pound more for tomatoes help farm workers ?

Posted on March 30, 2014 by aviyer2010

An article in ozy.com (January 16,2014) titled “A Penny a Pound and so much more”, describes the push by the Coalition of Immokalee Workers to get buyers like Taco Bell, Subway, McDonalds, WalMart and Whole Foods to pay a penny a pound more for their tomatoes. The goal is to get these funds back to farm labor, with the impact being to double their wages. With retailers accepting this price increase, and the Florida Tomato Growers Exchange now permitting these funds to go to farm labor, the question is whether this approach can be expanded to other products. Can textile manufacturers be pressured to ensure fair labor cost payments to employees across the world ? Should the consumer bear the higher product cost or should this come from distributor margins ? Should one expect base labor costs paid to farm labor to decrease to compensate for these flows ?

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Why are lime prices rising in the US ?

Posted on March 30, 2014 by aviyer2010

An article in the New York Times (March 30, 2014) titled “Is the Lime an Endangered Species” describes many reasons for the rise in lime prices in the US from $25 per 40 pound carton in February to over $100 in late March. Mexico supplies over 95% of US limes, but bad weather in Mexico cut exports to the US by 67%. A bacteria has infected key limes and dropped its yield by 33%. The resulted drop in supply and rise in prices has attracted drug dealers to hijack trucks carrying limes, thus requiring extra security and thus added costs. Are these factors expected to result in a rise in lime prices permanently or should this be expected to be a temporary effect ? Should the small volume grown by California (1% of US consumption) be expected to increase given these high prices ? Or will consumption, which increased from 0.5 lbs annually per capita in the late 70s to over 2.5 lbs currently, drop to solve the supply problem ?

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State laws regarding beer distribution and impact on small breweries

Posted on March 30, 2014 by aviyer2010

An article in the New York Times (March 30, 2014) titled “Free Craft Beer!” describes the franchise rule in many US states that requires beer manufacturers to choose one distributor in a state to distribute their product. The absence of distributor level competition means that the more than 2,700 beer manufacturers have to use the 1,000 distributors, with a few distributors controlling large territories. The cost for small breweries to drop a distributor if suggested to be significant even if the distributor does not distribute inventory and leaves it sitting in a warehouse. Given that the historical origin of the law was to protect distributors when there were 50 brewers and 5,000 distributors, should the rules be changed under the current conditions ? Should small breweries be dropped from the rule or should the rule be scrapped altogether ? Will changes result in higher or lower costs for distribution ? Should small breweries be allowed to distribute themselves and, if so, what should the minimum volume be set at to ensure fairness ?

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Ullmart’s three tier ecommerce distribution in Russia

Posted on March 30, 2014 by aviyer2010

An article in Bloombergbusinessweek (March 10,2014) titled “In Russia, call it You-Commerce”, describes the company Ullmart, that sells 55,000 fast moving items through a three tier distribution system. The company buys from manufacturers to three warehouses that supply 30 urban warehouses and 250 outposts, where customers can pick up for free, or get home delivery at a charge. Items are available seven minutes after the order is placed and can be paid for in cash, a preferred mode by many ecommerce customers in Russia. Will Ullmart strategy succeed against other ecommerce companies with greater variety but with higher supply chain inventories ? Does this strategy succeed because it speeds up delivery compared to the slow Russian postal service ? Will Ullmart benefit as Russian consumers’ ability to order directly from ecommerce sites outside the country are curtailed or is it in a different market niche ?

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Penalties for Canadian railways that do not ship enough grain

Posted on March 30, 2014 by aviyer2010

An article in the Wall Street Journal (March 7,2014) titled “Canada sets Minimum Grain Shipment Targets for Railways”, describes penalties of up to $90,000 if shipments by railways fall below 5,500 railcars a week. This target is significantly greater than the current shipments of 2,500 railcars a week, that farmers claim leaves their grains stuck at the farm. Shipments of crude are said to displace the grain shipments. But railways claim that the constraints will be counterproductive. Should constraints be the way to force capacity to be directed to grain traffic or should prices be permitted to adjust flows ? Given the reported bumper grain crop, how should transportation be planned without impacting other flows? Should US plants awaiting these grains be required to bear the higher transport costs?

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The business of personalizing IKEA products

Posted on March 30, 2014 by aviyer2010

An article in Bloombergbusinessweek (February 24,2014) titled “Cry of the Style. Mavens” describes smaller companies that enable customers to personalize their IKEA products. Companies like Bemz provide slipcovers for chairs, couches and beds, and Superfront, that modifies kitchens and wardrobes, help customers take IKEA standard products and modify them to create unique looks, often at higher prices than the original product. The article claims that as IKEA moves to its planned $68 billion sales by 2020, its low priced standard products will create market opportunities for customizing companies. Should IKEA continue to ignore these opportunities and focus on standardization and growth, leaving such markets to smaller suppliers? Will the over 2,000 new products offered each year by IKEA increase the complexity for suppliers to catch up, thus increasing their costs significantly ? Is there an opportunity for IKEA to share its designs with this ecosystem of suppliers thus further increasing its own sales ?

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Apple’s efforts on conflict free tantalum procurement

Posted on February 14, 2014 by aviyer2010

An article published by the Financial Times titled “Apple to name and shame suppliers of conflict minerals” (February 13, 2014) describes Apple’s “supplier responsibility” report. Given the Dodd-Frank bill’s requirement to track use of conflict materials, Apple plans to use the electronics industry companies that use around 50% of the tantalum mined, to drive supplier compliance. Rather than source from a couple of certified suppliers, the company claims that it wants to increase compliance in the smelter supply base by listing compliance certified suppliers. Given that the electronics industry is a much smaller user of gold, tungsten etc, do you expect the approach used for tantalum can be expanded to other minerals ? Will Apple’s reports generate spillover benefits for other competitors or will it increase Apple’s negotiating power by having more possible suppliers ? Will the need to track supply sources increase costs to the point that smaller smelters will be uncompetitive ?

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Will delaying online cab service pickups by 15 minutes increase competition in France

Posted on February 12, 2014 by aviyer2010

An article in the Wall Street Journal titled “Uber, Taxis engage in French Street Fight” (30 December 2013) describes a proposal to impose a 15 minute delay between the online order and pickup by online by limo service companies like Uber in France. This delay doubles the usual time for pickup for such companies and is intended to help taxicabs with medallions plying in France. The taxicab companies complain that they have more restrictions and that online taxi companies need to face some restrictions in turn. Will a 15 minute imposed delay provide the kind of competition that will help customers ? Are there alternative restrictions, such as caps on surge pricing that may benefit customers and moderate capacity levels across online and street hailed cabs ?

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Is web ordering shifting the market share to national chains ?

Posted on February 9, 2014 by aviyer2010

An article in the Wall Street Journal titled “Big Pizza Chains use web ordering to slice out a bigger market share” (February 6,2014), describes an increase in the market share for large pizza chains to 52% from 47% in 2009, with a corresponding drop for independent stores from 31.5% to 29%. The article suggests that young consumers are drawn to the flexibility of internet ordering and others like the flexibility to take the time to make up their mind by examining alternative menu options on the web. But some independent pizza chains are responding with unique offerings of gourmet or wood fired oven pizzas to stay competitive. Given the rapidly dropping costs for web enabled ordering, will you expect this competitive advantage for large chains to disappear ? Will a differentiated product offering that caters to local tastes result in more variety for customers to choose from and thus a better outcome ?

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