The impact of sequestration on US supply chains

Posted on March 10, 2013 by aviyer2010

An article in Bloombergbusinessweek (March 11, 2013) describes the impact of the US government sequester on food and transport. Food inspector cutbacks means that meat, poultry and egg processors may have to cut back operations as the inspectors are required for operation. The projected impact is lower production and $10 billion in losses, with worker layoffs projected to have $400 million in wage cuts. Delays in processing imports due to lack of sufficient government customs inspectors or other are estimated to be modest at first, but grow rapidly as queues build up and utilization increases. How should individual supply chains compensate – should companies start boosting inventories to hedge against these delays, and, if so, will these orders increase congestion ? Will the import delays increase spending within the US and thus boost local production ? Will prices rise for items affected by the cuts and thus soften demand and resolve the mismatches in supply and demand ?

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Mexican tomato floor prices increased to please US growers

Posted on March 8, 2013 by aviyer2010

An article in the New York Times (February 4,2013) describes an agreement between the US and Mexico to raise prices for imported Mexican tomatoes by up to twice its earlier levels. The new agreement was demanded by Florida growers to enable them to compete, and also includes coverage of a larger number of Mexican farmers and greater enforcement. But will the higher prices to enable US competition to survive result in better consumer outcomes with fresher tomatoes ? Since the agreement does not cover imports for canning or juices, will it change the mix of uses for imported tomatoes ? What other products might warrant such price agreements to preserve competitiveness ?

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Can “Droptags” reduce damage processing costs ?

Posted on March 8, 2013 by aviyer2010

An article in the SupplyChainDigest(http://www.scdigest.com/ontarget/13-02-13-1.php?cid=672) describes a Droptag – a device developed by Cambridge Consultants consisting of a battery, bluetooth transmitter, accelerometer and memory chip to monitor whether packages have been dropped or mishandled. Upon delivery, the customer could detect if the package was subject to significant G-forces by getting a binary read using a bluetooth device. The hope is that refusing delivery will reduce damage processing costs and identify the reason for the damage as well as provide the appropriate data. Should such droptags be included by parcel handling companies to protect their liability during transportation ? How should pay the suggested $2.50 per tag for the trip, and could reuseable droptags make these costs affordable by spreading their costs over multiple trips ? Will such devices reduce the insurance costs for large items, such as furniture, which have high damage rates ?

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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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