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?

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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 ?

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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 ?

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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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