Does the hospital penalty for “excessive” re-admits improve service quality ?

Posted on May 6, 2013 by aviyer2010

An article in the Wall Street Journal (May 5, 2013) discusses the impact of the Affordable Care Act’s penalties for hospitals with excessive re-admits within 30 days, set at 1% in 2013 and going up to 3% in 2015. But the article claims that a) studies show that only 25% of the re-admits are preventable, b) the penalties will incent hospitals not to admit critical patients, c) hospitals servicing low-income patients have a 30% higher likelihood of re-admits within 30 days. Given these issues, is a focus on this metric of performance detrimental to patient health ? Should the focus be on providing “best practice” solutions that can decrease re-admits rather than penalties ? How should strategies to improve health care results while decreasing costs be justified or analyzed for their odds of being successful before they are implemented ?

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The competitive response to Apple’s decision to change its device connectivity

Posted on May 6, 2013 by aviyer2010

An article in the New York Times (May 6,2013) describes the accessory supplier’s response to Apple’s decision to change the connection for its devices. The new connection decision by Apple makes all existing accessories obsolete, with no advance notification provided to suppliers. But Apple’s devices can also connect via bluetooth, and accessory suppliers are switching to that mode of connectivity. But this makes switching to other manufacturers, such as Samsung, easier as the connectivity via bluetooth is standard across different platforms. It also enables accessory makers to avoid paying royalties to Apple for the connectivity hardware licensing. Did Apple’s decision to switch connectors thus end up hurting its competitiveness by lowering the barriers for customers to switch devices ? Will the availability of easier methods to use speakers and other existing accessories end up helping Apple’s growth ? Will suppliers end up being better off, as will customers, as accessory prices drop due to standardization across devices ?

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Shifting manufacturing from China to other parts of Asia as costs rise

Posted on May 6, 2013 by aviyer2010

An article in the Wall Street Journal (May 1,2013) describes decisions by Coach to reduce its manufacturing in China to 50% in 2015 (from 80% in 2011), by Crocs to reduce its footwear manufacturing to 65% this year from 80% in 2011 and by Uniqlo to source 60% in China soon. Rising wages in China and better prices in other locations such as Vietnam and India are claimed to be the reason. Are such sourcing choices, that diversify supply bases across Asia, while increasing coordination costs, justified ? With recent mishaps in Bangladesh, will the risk associated with sourcing in emerging locations with poor standards require more oversight, thus increasing costs overall ? What new roles will retailers have to assume to ensure an ethical supply chain ?

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Importing garbage to produce energy in Oslo

Posted on May 6, 2013 by aviyer2010

An article in the New York Times (May 1,2013) describes the city of Oslo’s success in using garbage, with recyclable content removed, to generate heat and electricity. With half the city and all schools supplied by garbage generated energy, supply sources have required importing garbage from England, Ireland and Sweden. British landfill taxes also justify garbage exports to Norway. Does importing garbage to generate energy to save fossil fuel use in Oslo justify this supply chain ? Would a focus on reducing energy use be more justified than importing garbage ? Given Norway’s exports of oil and gas, and its coal reserves, does this energy generation approach make long term economic sense ?

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Differing manufacturer responses to the Bangladesh factory collapse

Posted on May 6, 2013 by aviyer2010

An article in the New York Times. (May 1,2013) describes the differing public stances by manufacturers. Bennetton, the Children’s Place and Cato Corporation distanced their link to the plant they used as a source, claiming their garments were not on the premises during the building collapse. But Primark and Loblaw admitted their suppliers were at the location and promised to help the workers impacted. They also urged others using the same source to help in covering relief costs. Given the risks associated with finding low cost sources, are these differing stances justified ? How should ethical supply sources, that do not sacrifice worker safety, be developed efficiently ? Should manufacturers be permitted to collaborate to develop such sources or should this be orchestrated by governments or non-profits ?

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Slower growth, higher margins as Amazon.com plays middleman

Posted on April 28, 2013 by aviyer2010

An article in the Wall Street Journal (April 26,2013) describes Amazon.com’s growth as lowing, from 34% last year to 22% for the same quarter this year, while margins increased by 33% to 26.6%. The author claims the slowdown is the result of the growth difficulties given the company’s current size. But the increased margins reflect the company’s role in enabling sales from third party sellers, for which only the portion of the margin collected by Amazon is recorded as sales. But these transactions generate a greater margin than Amazon’s own shipments. Will Amazon’s future role be more like ebay – enabling commerce rather than initiating the sales by carrying its own inventory ? Will the barrier to entry for competitors (to Amazon) be lower if Amazon’s merchant role decreases ? How important will future Amazon devices like the Kindle, possible setup boxes for delivering content etc be in it future growth ?

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Steel manufacturer’s competitive response to falling steel prices

Posted on April 27, 2013 by aviyer2010

An article in the Wall Street Journal (April 27, 2013) describes the decline in steel prices and the response by steel manufacturers. ThyssenKrupp is claimed to offer to pay freight costs to maintain market share. Further price discounts of 5 to 8 % are reported, including waiver of fees for higher grade products. Other steps include buyouts of capacity and its elimination to better match supply to demand. But customers of such steel claim that they face contract prices for steel, signed last year, and thus will not benefit. Given the glut of steel capacity, will the rush to maintain share further worsen steel industry woes? Once buyers shift transport costs to suppliers, can third party logistics providers enable efficiency in shipments ? Will this shift in responsibility for transport have to be accompanied by vendor managed inventory contracts to enable overall cost reduction ?

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P&G’s claim of “win-win” by delaying supplier payments but enabling borrowing at lower rates

Posted on April 27, 2013 by aviyer2010

An article in the Wall Street Journal (April 16.2013) describes a plan by Proctor & Gamble to delay supplier payments beyond 60 days as against the current 45 days, to free up over $2 billion in cash. Suppliers would be permitted to borrow from a bank after 15 days at interest rates that are based on P&G’s borrowing rates. The company claims that the freeing up of this cash for P&G and the consequent access to low borrowing rates, will be win-win for suppliers and the company. But suppliers like Federal Mogul claim that such payment delays by large companies, now becoming more common, hurt supplier margins and may require them to give up on doing business with some of these buyers. Is this shift in payment terms to suppliers a “win-Win” proposition ? Will such agreements benefit suppliers with higher borrowing costs than P&G ? Will product costs have to increase, thus increase Cost-of-Goods sold, to cover the added working capital costs by suppliers ?

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Should patent length vary by industry to spur innovation ?

Posted on April 27, 2013 by aviyer2010

An article in the Wall Street Journal (April 24,2013) describes a proposal to vary patent protection length by industry, rather than the US standard of 17 years. It reports the chairman of Amazon, Jeff Bezos, as suggesting 3 years as the length for the software industry, to incentivize companies to invest their money on innovation rather than patent defense. But shorter patent lengths would also reduce incentives to innovate. How should the optimal patent length be chosen for an industry ? Would differing patent lengths across industries be feasible ? How would global competitiveness of US firms be impacted by changes in the US patent length ?

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The competitive retail supply chain impact of online US sales tax collection requirements

Posted on April 27, 2013 by aviyer2010

An article in the Wall Street Journal (April 22,2013) describes the proposed impact of a Senate bill requiring online retailers to collect sales taxes based on buyer location. The goal is to level the playing field for brick and mortar retailers who are forced to collect local taxes, while online retailers currently do not, with the burden shifting to customers to report and pay it with their income tax filings. But others claim that it hurts smaller online retailers who have to figure out the 9,600 possible tax rules across the country, and increases the burden for online retailers over brick and mortar retailers who only charge the tax based on the retailer’s location. Does the online tax collection requirement discriminate the small online retailer over the age ones ? Does the online tax collection requirement impose a greater burden on online retailers as against brick and mortar retailers ? Should online tax collection requirements be waived for smaller sized retailers, and if so, is that subsidy justifiable ?

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