Will any of the two proposed rail options or the new proposed canal option compete with the Panama Canal ?

Posted on July 4, 2013 by aviyer2010

An article in Bloombergbusinessweek (July 1,2013) described a proposed Chinese-led plan to build a $40 billion canal in Nicaragua, linking the Atlantic and Pacific oceans. But two other rail options have been proposed too. A $10 billion Taiwanese proposal to build an interoceanic rail link in Guatemala, and a $20 billion interoceanic Chinese proposal for an interoceanic rail link in Honduras. All of these options are set to potentially compete with the newly expanded Panana Canal. Given the difficulties in bringing these projects to fruition, and the intense dependence on Chinese and Taiwanese companies in Latin America, what is the likelihood of these projects succeeding ? How should companies shipping through the Panama Canal use these possible options to leverage their rates and project plans ? Given the planned expansion of ship sizes to become larger than the Panama Canal capacity, how should shipbuilders incorporate these rail options into their calculations ?

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How widespread is counterfeit food ?

Posted on June 30, 2013 by aviyer2010

An article in the New York Times (June 26,2013) describes counterfeit foods such as vegetable oil in chocolate bars, peanuts in almond powder, water in olive oil, liquor marketed as tequila, engine oil in olive oil, nonbranded vodka sold as branded product etc. It cites a report from the US Grocery Manufacturers Association estimating the cost of counterfeit to be $10 to $15 billion. The global nature of this fraud includes using foreign languages in signs to get consumers to feel that they got a good deal because of the imported product. Given that the rising counterfeit product reflects lower purchasing power in many communities, how should this be monitored in the supply chain – should the retailers who sell be held responsible or the manufacturers whose brands are compromised ? Should new technology to verify that products are genuine be required to be installed so that retailers and consumers can confirm identity ? How much of a role should regulators have to monitor the spread of counterfeit items ?

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Will suspending trade privileges for Bangladesh improve local enforcement of working conditions ?

Posted on June 30, 2013 by aviyer2010

An article in the New York Times (June 28, 2013) describes the US administration’s plan to suspend trade privileges for Bangladesh because the country has permitted safety violations and not enforced labor rights, particularly for the apparel manufacturing industry. The recent fires and lack of building code enforcement have put pressure on retailers worldwide to take responsibility for their sources. Is suspending trade privileges, thus increasing the cost of goods imported from Bangladesh, increase the pressure on apparel manufacturers to further decrease their costs ? Or will it cause the government to increases local taxes on the industry to increase enforcement, thus creating the same effect on cost pressures ? Is the pressure on Bangladesh from its labor costs relative to other countries ? Would the supply chains be better off with a local non-profit that monitors compliance to expected standards ?

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The impact of short cell phone life cycles in Japan

Posted on June 26, 2013 by aviyer2010

An article in the New York Times (June 26,2013) describes the example of Sony’s Xperia Z smartphone whose life cycle started on February 9 but ended one month later after selling 1 million units. The dominance of cell phone carriers who use constant model changes to attract customers, as well as the use of separate design teams within each cellphone manufacturer for each carrier creates significant cost stresses for Japanese manufacturers. But nonJapanese manufacturers like Samsung and Apple have longer life cycles with more stable feature sets and seem to also be competitive. Is the constant product churn amongst Japanese manufacturers aimed at a different market segment than the stable long cycle non-Japanese manufacturers ? Will short product life cycles incentivize handset manufacturers to divide up features across product versions to entice continual purchases ? Given the rapid product change creates a barrier to entry for other global handset makers, is this a strategic supply chain feature to protect domestic Japanese markets ?

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US egg price rise (by 42%) and global supply chain impact

Posted on June 24, 2013 by aviyer2010

An article in the Wall Street Journal (June 14, 2013) describes a 42% rise in US egg prices and explores possible reasons. One key reason is the avian influenza in Mexico that has created a dramatic demand increase in US egg exports to Mexico, to 12.8 million dozen in the first four months of 2013, from 0.5 million dozen in 2012. While this surge has created expanded production and the new prices have started dropping from $1.25 per dozen down to $0.87 cents, the story does show the global linkage between local outbreaks and global impacts. How should egg consumers pan for such price volatility and will the demand return if consumers start changing their food habits ? Should there be some export management to prevent the consequent price volatility or are the markets better at managing such shifts themselves, using price signals ? Given the increased consumer fear about food sources, how should food supply chains be managed by food retailers to assist consumers ?

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Will Tesla’s new 90 second battery swap increase electric car demand ?

Posted on June 21, 2013 by aviyer2010

A report in PCmag.com (June 21, 2013 http://www.pcmag.com/article2/0,2817,2420802,00.asp) describes a demonstration of a 90 second battery swap by Tesla, thus offering consumers the choice of waiting and getting free battery charging or paying close to the price of tank of gas and getting 90 seconds swap. The associated video records normal gas tank fill up times of 4 minutes. Is speeding up battery charging key to expanding demand for electric vehicles ? Will the opening of dedicated (incompatible) charging stations by Tesla and other electric vehicle manufacturers slow the overall expansion of the electric vehicle industry ? Given the environmental benefits of electric cars, should the Federal government coordinate standard setting for charging these vehicles to prevent the unnecessary establishment of duplicate retail charging stations by manufacturers, or is the competition an effective mechanism to develop solutions that customers prefer ?

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Can low shale gas prices attract new steel capacity to the US ?

Posted on June 19, 2013 by aviyer2010

An article in the Financial Times (June 19,2013) describes a new plant in Ohio built by Vallourec to produce steel tubes for the oil and gas industry. The company describes the low US gas prices, as well as the surging demand for steel tubes by shale gas producing companies, as reasons for their expansion. Low gas prices also enables production of Direct Reduced Iron or DRI, a product that can be added to scrap to make steel, and exported. But other US steel makers are also expanding their manufacturing of steel pipe, which represents 5% of the overall steel market, and end up driving up overall capacity for the product thus dampening prices. Given that demand for the steel pipe by the shale gas industry is driving up steel capacity, is the low shale gas price the driver of this capacity or the demand from the shale gas extraction industry itself the driver ? Will the added capacity and the ability to produce cheap DRI lead to a resurgence in steel capacity in the US ? How much of the current re-shoring of manufacturing back to the US attributable to the low price of shale gas ?

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How are US paintbrush makers globally competitive ?

Posted on June 19, 2013 by aviyer2010

An article in the New York Times (June 18,2013) describes the competitiveness of over 139 broom, brush and mop manufacturers in the US undeterred by competition from CHina. One company, Kirschner, survives by making no changes in its manufacturing and thus providing stability in its product line. Customers like the Greco Brush company supply Kirschner brushes to house painters, who demand product quality and no loose fibers, and thus trust the Kirschner brush. But other brush manufacturers like Braun Brush focus on innovation, creating new variants for each industry and dropping products for which competition emerges. Will the future of US manufacturing require small companies to be like Kirschner or Braun ? Is there room for both such survival strategies – one focused on stable use of depreciated capital equipment to make consistent product lines while the other used continued capital investment and risk ? How important is the downstream demand for brushes in understand the success of these companies ?

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Should Tesla be permitted to sell cars direct to consumer ?

Posted on June 18, 2013 by aviyer2010

An article in the Wall Street Journal (June 18, 2013) describes the electric car company Tesla’s attempt to sell direct to consumer from its own stores. The company can do so in states such as New York, New jersey, Massachusetts, California and Florida but has been blocked by North Carolina from even owning stores. Tesla claims that since it does not have any franchised dealers, they would face no harm due to its sell direct pricing. But existing dealers, aiming to protect their market access, worry about existing auto manufacturers creating new companies to leverage ecommerce for cars. The origin of the dealer laws is to prevent manufacturers from competing with dealers – a channel conflict problem. Should Tesla, which claims it will be a far more vigorous advocate for electric cars than existing dealers, be permitted to sell direct in the absence of any existing dealers ? If Tesla is permitted to sell direct, and existing auto makers are not offered that option, would the resulting supply chains result in an unfair competitive advantage for Tesla ? Should exceptions be made for emerging technologies with niche markets, such as Tesla, with small sales volumes ?

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Competition between railroads and pipeline operators to transport oil

Posted on June 15, 2013 by aviyer2010

An article in Bloombergbusinessweek (June 17,2013) describes competition between a oil pipeline owner, Kinder Morgan, and railroads to transport oil from West Texas to Los Angeles. While pipeline operates demands long term contracts to cover their capital costs, railroads can add a few miles of rail track and connect oil production locations to refineries. With railroads transporting a record level of oil despite costs for pipelines between 33 and 50% of rail transport, contract flexibility and faster ramp up times tip the scales in favor of rail. Given the long term economics of pipelines, how will the potential clash between new pipeline capacity and rail evolve, given the greater options for shippers ? Will the plan by pipeline companies to invest in rail preserve profitability by avoiding ruinous competition ? Given the flexibility to change routes, will society be better off with rail as the mode of choice to transport oil ?

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