The impact of a US-Europe free trade agreement on auto supply chains

Posted on March 8, 2013 by aviyer2010

An article in the New York Times (March 7, 2013) describes the possible impact of a US-Europe free trade agreement on automobile production. Executives at BMW and Mercedes claim that they would manufacture cars in the US and ship them back to Europe to reduce their costs, by eliminating the current 10% tariff on imprts into Europe. Others, like Fiat, expect to ship Alfa Romeo cars to the US. But the main impact will be the standardization of crash testing and other standards which will permit part commonality across the designs for the two regions. Given the greater flexibility of US employment and other rules, will the auto supply chains increase production, and thus employment in the US at the expense of Europe ? Will design locations move to Europe leaving production in the US or will these vary by company ? Will the results for autos be very different from the impact for other industries, such as pharmaceuticals ?

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Will local supply solve the horsemeat contamination problem?

Posted on March 6, 2013 by aviyer2010

An article in the Financial Times (March 3,2013) describes a decision by Tesco, a UK retailer, to increase use of local sources, starting with chicken and working towards others. Similarly,Carrefour, a French retailer, claimed it would shift to French sources. The claim is that the simpler, local supply chains will reduce contamination risks. Will shifting to local sources reduce risk because of greater oversight or is it reliance on local laws ? Given that 40% of UK meat is imported, will local sources increase prices ? Is the contamination problem the symptom or poor supplier management or global sourcing ?

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“Kumbh Mela” logistics challenges in Allahabad, India

Posted on March 6, 2013 by aviyer2010

An article in the Financial Times (March 3,2013) describes the challenges faced by authorities in Allahabad, India, during the Kumbh Mela, a pilgrimage spot for 80 to 100 million Hindus who arrive over two months, from January to mid March 2013. With 100,000 workers building 165 kms of roads, 18 bridges, fresh water connections, toilets, 200,000 electrical connections, and a tent city for 2 million pilgrims, the logistics are formidable. Is the commitment to pilgrims and their comfort a key motivator to getting the task done ? Does the successful execution of the logistics in the poorest state in India suggest the capability for solving major logistics problems across the country ? Are the logistics lessons to organize logistics for such voluntary collections of pilgrims the same as disaster logistics or are they different ?

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Is exporting shale gas in the US national interest ?

Posted on March 6, 2013 by aviyer2010

In an opinion piece in the Wall Street Journal (February 25,2013) , Andrew Livieres, CEO of Dow Chemical, suggests that permitting exports of shale gas, currently in abundant supply in the US, is not in the national interest. He argues that preventing supplies would keep energy prices low in the US and encourage chemical companies to move production back home, thus generating more US jobs than those created by exports. But are such constraints to block exports of commodities for which there is a greater profit potential abroad strategic or arbitrary choices ? Is a focus on the creation of US jobs, albeit at the cost of profits to natural gas exporters, a fair tradeoff or a subsidy for chemical companies? Will prices rise anyway as natural gas companies find smarter ways to increase their margins and thus worsen the situation for all ?

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Federal labeling standards for GMO foods ?

Posted on March 6, 2013 by aviyer2010

An article in the New York Times (January 31,2013) describes a move by food manufacturers and retailers like Wal-Mart to urge the FDA to propose labeling standards for food. Their reason, proposed state level labeling initiatives by 20 states. In addition, brands like Ben and Jerry which are moving to eliminate all GMO (genetically modified) ingredients, but are owned by Unilever, want to convince their customers of their organic reputation. Will standard Federal labeling and its possible sourcing cost impact be lower than the cost of producing items to comply with independent state level laws ? Will the current mix of costs for GMO and organic ingredients for items such a cereal be forced to increase as labeling laws are enforced? Will the existence of nonGMO foods enable the risk of an exports collapse, due to European enforcement of GMO ingredient laws, to be alleviated by national labeling standards ?

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The impact of a US-Europe free trade agreement on supply chains

Posted on March 6, 2013 by aviyer2010

An article in the New York Times (February 13,2013) describes President Obama’s plan for a free trade agreement with Europe thus impacting the 3% duty on the $646 billion in trade. But more than duties, it is the harmonization of rules such as emissions standards, regulations for toys and cars etc. that is expected to benefit firms as they develop one model across both regions. Another benefit is improved competitiveness against China. Will the increased location flexibility across Europe and US result in plant consolidation and thus more transport of goods ? Will the standardization of products decrease or increase variety ? Will product regulations increase to match European standards ?

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Is “Punk” the fashion trend ?

Posted on March 6, 2013 by aviyer2010

An article in the Financial Times (March 3,2013) describes the influence of the announcement of the “Punk” theme for the Metropolitan Museum’s Costume Institute’s exhibition. Jimmy Choo’s handcuff bag with key, Cesare Casadei’s blade heeled shoe, Versace’s “Vunk” featuring heavy metal nails and chains are cited as examples. Will this theme coordination become the coordination across fashion designers that will form future fashion trends? Will such coordination diminish the fashion industry’s appeal if large volume retailers mimic these trends too early? Or will it lower the volume of marked down product and thus improve industry profitability ?

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Apple’s supply chain transparency — what do we learn ?

Posted on February 18, 2013 by aviyer2010

A recent release of Apple’s supplier list, mapped on Google maps (http://www.chinafile.com/who-supplies-apple-it-s-not-just-china-interactive-map) provides specific locations of 74 component suppliers, of which 331 are in mainland China. A related supplier responsibility report (http://www.apple.com/supplierresponsibility/reports.html) lists audits of suppliers and corrective action, along with reports of educational initiatives directed at supplier employees. Apple claims to have an independent board of academics (list unavailable at the site) that will ensure that the audits are complete. But are such actions sufficient to get Apple’s customers to trust its oversight of the supply chain ? Will Apple’s attempts to educate supplier employees increase turnover at its supplier facilities, thus increasing its own costs, or will it increase goodwill for the company’s efforts ?

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Developing Greenland’s mining industry and resource impacts

Posted on February 17, 2013 by aviyer2010

An article in Bloombergsbusinessweek (February 18,2013) describes Greenland, a country protected by Denmark and with a population of 57,000, as containing 1 billion ton iron ore and the 10.5 million ton rare earth deposits that are being eyed for development. Funding is being sought from Chinese investors, and the local labor is expected to be 10 % of the labor required, with all imported labor being paid the minimum wages of Greenland. But the rare earth deposits also contain uranium, so the ban on mining radioactive materials prevents its extraction. Worries about the Chinese controlling this rare earth source are driven by China’s 95 % current share of rare earth metals extraction, with the material being required by the alternate energy and electric vehicle industry. Should Greenland’s attempts to reduce its dependence on Denmark by using resources from China be considered a sovereign decision or a myopic decision that could hurt other countries ? Should rare earth metals extraction in Greenland, a projected $6.6 billion source, be nurtured as an alternative to China’s 95% share, and if so, how should it be structured to truly be a credible alternative source that is not controlled by the dominant provider ?

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Disaster driven product supply chains

Posted on February 17, 2013 by aviyer2010

An article in Bloombergbusinessweek (February 18,2013) describes the cost of global disasters as $200 billion in 2012, while the earlier decade has an annual cost of $187 billion, caused by earthquakes, tornadoes, tsunamis etc. Given predictions that climate change will further increase these costs, the demand is for sandbags that can be inflated in minutes with water, portable solar panels, tents, pack of chili that just requires addition of water to heat etc. But how should these supply chains be set up to provide prompt availability while minimizing up front payments ? How should supply chains be managed to prevent price hikes during shortage of items following an emergency ? How should the government funding of these options be coordinated with private sector planning to generate supply chain efficiency for disaster products ?

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