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 ?

Posted in Capacity, competitiveness, Cost, delivery, logistics, manufacturer, supplier, Supply Chain Issues | Tagged , , , , | Leave a comment

Did Large Grocers use their size to get better delivery volumes during the Pandemic ?

Posted on March 26, 2024 by aviyer2010

An article in the Wall Street Journal (March 21, 2024) titled ‘FTC Finds Large Grocers Used Size to Stock Shelves During the Pandemic” describes claims that large grocery retailers demanded stricter delivery requirements and levied fines on suppliers who did not comply. The result, claim independent smaller retailers, is that they faced higher wholesale prices or received smaller allocations. The FTC also claims that larger retailers raised prices faster than supplier cost increases, thus increasing profits. Since prices at large retailers are usually lower on average than smaller retailers, did such a shift of availability hurt customers as a whole or help them in aggregate ? Should larger retailers be prevented from using their scale to improve customer access to products ? As long as there is sufficient retail competition, is it necessary to focus on the details of operations across retailers of different sizes ?

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Dynamic Pricing in restaurants and Impact

Posted on March 11, 2024 by aviyer2010

An article in the Wall Street Journal on March 10, 2024, titled ” Surge Pricing is coming to More Menus near you”, describes dynamic pricing at restaurants to reflect demand increases, estimated to increase revenues between 4 and 6%. The owner of Cali BBQ claims a 5% revenue increase in delivery orders. Surveys suggest that 61% of adults support dynamic pricing, but some restaurants frame it as a price discount during nonpeak periods. Can dynamic pricing be justified as increased cost or a way to shift demand during surge periods? Is the 5% revenue increase worth the potential customer perception of pricing unfairness? Can dynamic pricing enable average prices to decrease, thus increasing overall demand?

Posted in Capacity, competitiveness, consumer, Cost, Operations Management, Prices, Service Operations, Uncategorized | Tagged , , | Leave a comment

The Logistics Impact of disruptions in the Suez and Panama canals

Posted on March 11, 2024 by aviyer2010

An article in the Wall Street Journal, March 10 2024, titled “Two Canals, Two Big Problems – One Global Shipping Mess” describes the logistics impact of low water levels in the Panama Canal and the Houthi rebel attacks on ships going through the Suez Canal. Drought in Panama has described daily ship traffic through the Panama Canal from 36 ships down to a projected 18 in February, with prices beyond a $0.5  million fee per ship crossing. Houthi attacks in the Gulf of Aden have caused ships to sail around the Cape of Good Hope, adding 10 days to trip times and doubling rates from those in 2023. Should shippers carry more inventory? Should shipping by air now be optimal for items such as apparel? When should consumer prices be increased to reflect these costs?

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Are apparel brands responsible for minimum wage levels in Bangladesh?

Posted on November 6, 2023 by aviyer2010

An article in the Wall Street Journal (November 6, 2023) titled “The Workers who make your clothes want higher pay. Who should pay up?” describes the demand by workers in Bangladesh for higher wages, $205 per month, as against the current $75 per month (which is higher than the minimum wage in the country). Their Bangladeshi employers claim that brands who source from them demand competitive prices, and threaten to move sourcing if prices increase. Wages in Cambodia are $293 per month, and the proposed wage increase offered by employers is $95 per month. How should the supply chain ensure reasonable minimum wages are offered in sourcing countries i.e., is it sufficient to be above the minimum wage, or should these wages follow a global level independent of the local minimum wage? How can customers who purchase these brands play a role in this discussion ? Should certification by nonprofits ensure fair wages are paid, along with related services such as education, shelter etc., or is that the role of the elected government in the country ?

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White house suggestions to reduce supply chain congestion

Posted on February 24, 2022 by aviyer2010

An article in the Wall Street Journal (February 24, 2022), titled “White House Lays Out Broad Changes to Address Supply-Chain Shortfalls” , describes several initiatives short, medium and long term,to deal with global container flows. In the short run, eliminating the existing rule that prevents overtime payments for drivers, to increase truck availability. In the medium term, adjusting global containers to accommodate US domestic container sizes. In the long term, increase the number of US ports who can handle the larger ships. How should the cost to implement these changes be allocated back to
beneficiaries, a shared tax or other? Will reducing the cost to import slow reshoring of manufacturing ?

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Organic Cotton certification fraud

Posted on February 24, 2022 by aviyer2010

An article in the New York Times ( February 13, 2022) titled “That Organic Cotton T-Shirt May Not Be as Organic as You Think”, describes the certification challenges for organic cotton in India. Despite commanding $ 25 to $ 46 for Michael Kors hoodi e and Urban Outfitters sweatpants, the yield for organic cotton is 28% lower, and the cotton prices not adequately higher, thus making farmers  worse off . With international certifying agencies using local auditors often paid by suppliers, fraud is rampant. Who should be held responsible, the international auditing agencies or manufacturers? Is cancelling use of certified organic claims, as Eileen Fisher did, the solution? How should cotton farmers be protected from the lower yield related cost?

Posted in Collaboration, competitiveness, consumer, labeling, product | Tagged , , , , , , | 1 Comment

Managing small firm supply chain pressures

Posted on February 22, 2022 by aviyer2010

A Wall Street Journal article (February 22, 2022) titled “Worried About Inflation and Supply Constraints? Try Being a Small Business”, describes the longer supply lead times, how higher prices and higher demand, yet lower bank credit access. The article claims that larger firms such as Honeywell and UPS, are able to raise prices, but smaller firms worry about long term demand impact. With pressures to increase wage rates to get labor, should a focus on profitability justify giving up on some demand growth? Will investments in technology to increase productivity be more justified in this context ? Is now the time to rethink product mix and processes to improve performance?

Posted in Capacity, competitiveness, delivery, disruption, manufacturer, Operations Management, Prices, Supply Chain Issues, technology | Tagged , , , , , | Leave a comment