Traditional vs transparent Pharmacy Benefit Management companies

Posted on November 5, 2013 by aviyer2010

An article in Fortune magazine titled “Painful Prescription” (October 28,2013) describes a traditional pharmacy benefit manager (PBM), Express Scripts and a transparent PBM, Envision Pharmaceutical Services. Transparent PBMs charge a fixed fee for processing prescriptions while traditional PBMs make money on the spread between their purchase and selling prices, often profiting from sales of generics, whose prices are not standardized. Clients such as Meridian Health Systems, which discovered the margins charged by Express Scripts because it was both a provider and a user of the company, claim that their costs increased when they switched to Express Scripts. Should companies shift to transparent PBMs, who charge a fixed fee, as a means to reduce overall costs ? Will the purchasing volumes of the large PBMs, along with automation of order filling, suggest that traditional PBMs will end up being the distributors of choice in the long run ? Will the Affordable Care Act’s requirement, that participating PBMs have to declare their manufacturer rebates and margins, reduce margins in this industry ?

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Burning wood with coal to comply with EPA emissions rules

Posted on November 5, 2013 by aviyer2010

An article in the New York Times titled “Power plants try burning wood with coal to cut carbon emissions” (November 4, 2013), describes the use of sawdust and wood chunks along with coal to reduce carbon emissions in US power plants. While wood continues to create emissions, forests that are grown to compensate for the wood harvested remove carbon dioxide which nets out the emissions. Thus, burning wood with coal enables power plants to reduce their emissions. But the inconsistent as well as low availability of wood diminishes the economics of such options. These options are less effective for older plants, which may benefit from being replaced by gas fired alternatives, but may be more suitable to younger plants. Should power plants be permitted to net out the emissions of burning wood with reductions in carbon dioxide from new forest growth ? Should mixed burning be encouraged or discouraged, given the need to reduce emissions altogether ? How should plant operating costs be balanced against environmental impact ?

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France’s inconsistent rules regarding retail store operating hours

Posted on November 5, 2013 by aviyer2010

An article in the Financial Times titled “France retailers battle restrictive opening hours (November 4,2013) describes rules that permit garden centers, furniture and food stores to be open until 1 pm on Sundays but does not permit do-it-yourself and department stores similar options without special approval. Sephora, a cosmetics retailer, has to shut their Champs Elysees store by 9 pm, while the Monoprix, a food and fashion store, can be open until midnight on weekdays. Sephora claims to sell 20% of its volume between 9 pm and midnight, but some union leaders claim that the option to purchase perfumes late at night is not a social necessity. Should rules across products be required to be consistent to enable more effective competition ? Should the focus of these decisions be consumer preferences or the welfare of union employees or overall economic benefit ? Will such inconsistent operating hours benefit or hurt the consumer ?

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The EU regulation harmonization and the story of lawnmower decibel limits

Posted on October 16, 2013 by aviyer2010

An article in the Financial Times titled “Why Europe needs cross-border lawnmower regulations” (October 16, 2013) describes a law setting the maximum noise level generated by lawn mowers. The limits were in response to German laws demanding lower decibel levels that kept out the imports of British lawnmowers that had higher decibel levels. The proposed rules set a level playing field that helped British lawnmower manufacturers access German markets. The upshot of this story is that within the European Union, opening up markets really requires more regulation to streamline individual country level rules across the region. These common standards will them enable more efficient supply chains and thus more competition across the region. But will the setting of these common standards reduce the diversity of products being manufactured and thus decrease the global competitiveness of firms in the region ? Will the choice of the common standard require moving to the tightest standard or the loosest standard – thus requiring a choice of winners and losers at a central level ? Will the common standards make it easier for global competitors to enter the market, thus decreasing the competitiveness of European manufacturers ?

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The US govenment shutdown, US imports delays, and local production impact

Posted on October 15, 2013 by aviyer2010

An article in the New York Times titled “Shutdown’s quiet toll, from idled research to closed wallets” (October 11, 2013) describes how lack of EPA (Environmental Protection Agency) inspectors at ports has delayed goods at US ports. Chemicals held at ports because of lack of EPA inspectors are delaying pesticide production. Lack of EPA personnel to approve emissions stickers on imported cars is holding up autos at ports. But lack of monitoring of mercury and other emissions also means that there is no audit of manufacturers’ compliance with EPA mandates. How will these delays impact consumers and their costs ? Will domestic producers change their operations to in increase emissions and decrease production costs, or will they continue to comply with mandates despite lack of Federal monitoring ? Will more production be shifted to NAFTA countries as a result of the shutdown ?

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The Nike vs New Balance disagreement regarding import tariffs for Shoes made in Vietnam

Posted on October 15, 2013 by aviyer2010

An article in the Wall Street Journal titled “Nike, new balance highlight thorny issues in trade talks” (October 7, 2013), describes the disagreement between Nike and New balance regarding the 10% US tariff on shoes made in Vietnam. The tariff impacts Nike’s imports but are supported by New Balance, with plants in Maine. Vietnam, a member of the Trans Pacific Partnership, wants the tariff eliminated, as does Nike, which has a lot of manufacturing in Vietnam. But New Balance claims these tariffs make their Maine plant competitive. How should the competing claims by these shoe manufacturers be balanced ? Should the supply chain costs and their impact on customer prices dominate any benefits to local job creation ?

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Walmart ‘s Made in the USA goal and impact

Posted on October 15, 2013 by aviyer2010

An article in the Wall Street Journal titled “Pitching to Walmart – Made in the USA” (October 7,2013) describes plans by Walmart to increase their US sourcing by $5 billion each year. But the company wants to hold customer prices, with US suppliers having to redesign products, respond quicker and thus adapt, despite paying wages that are four times China wages. Examples from toys, cell phone case manufacturers suggest that over 1200 US jobs have been created. Will WalMart’s efforts result in competitive US production, or will it require product performance to be sacrificed to maintain retail prices? Would the company be better off charging a premium for US made product, or will that strategy be unsustainable? Will the faster supply lead times benefit all products, or only those products with volatile demands, like fashion products?

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Understanding and fixing the 244% inflation for onion prices in India

Posted on October 15, 2013 by aviyer2010

An article in the Financial Express titled “Dousing the vegetable fire” (October 11, 2013) describes the 244% price rise between between August 2012 and 2013. The authors highlight that 50% of the onion production in India is in two states – Maharashtra and Karnataka, and these states control 70% of the flows between states. Over 60% of the onion crop is in one season and thus most of the demand is satisfied from inventory of onions. Onion demand is fairly inelastic given its role in the Indian meal. Thus, small fluctuations in onion usage results in sharp price increases – supply driven prices. Can government intervention to create buffer stocks and enabling of dehydrated chopped onion technology be the solution? Will changing the Indian APMC (Agriculture Produce Market Committee) regulations (that require produce to be sold in government regulated markets) to enable more competition along the supply chain be the solution ? Or will easing of imports by dropping the current 30% import duties provide the necessary relief valve to solve the problem ?

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Should Lumber Liquidators be responsible for its Chinese supplier’s wood sources

Posted on September 28, 2013 by aviyer2010

An article in the Wall Street Journal titled “Lumber Liquidators’ Offices Raided) (Sept 28, 2013 http://online.wsj.com/article/SB10001424052702303342104579101042712448428.html) describes a Federal government raid on Lumber Liquidators’ offices to find evidence of use of Mongolian oak and Korean pine logged illegally in Russia. The trees are in the habitat of the Siberian tiger and their logging reduces the acorns and pine nuts that feed the deer and boars that are the tiger’s food source. The claim is that Chinese floor manufacturers are using this wood, thus providing an illegal source of supply that violates the Lacey Act – a US law that makes it illegal to import plants that violate foreign laws. Should Lumber Liquidators’ be held responsible for the wood supply chain beyond assurances provided by its suppliers ? Should US authorities hold US retailers liable if foreign laws are violated, even if both Russia and China take no action against these suppliers ? How should we expect US retailers and manufacturers to ensure that the entire global supply chain’s actions are legal ?

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The improving competitiveness of US toilet manufacturing

Posted on September 25, 2013 by aviyer2010

An article in the Wall Street Journal titled “America’s Toilet Turnaround”(September 25, 2013) (http://online.wsj.com/article/SB10001424052702303983904579093463623447196.html) describes plans to add capacity to the Mansfield Plumbing Products plant in Perrysvlle, Ohio and Toto Ltd’s plans to increase its capacity in the Morrow, Georgia plant to make toilets in the US. Despite involving manual labor, the US locations enable faster delivery, quick adjustments to customer preferences and a “Made in the USA” label. But use of automation to apply glaze also enables increased productivity. Do the trends in toilet manufacturing suggest a shift to closer locations in the US and Mexico, and will automation be a necessary ingredient for that competitiveness ? The article claims a wage freeze agreement with the union that holds wages at $17/hour – how long will such agreements impact the competitiveness of US manufacturing ? The article also claims that companies are leveraging use of software to reduce office processes, inventory management and order receipt – will such back office process automation also be a necessary ingredient of US manufacturing competitiveness ?

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