Workshare programs to retain skilled workers during downturns and impact

Posted on January 27, 2013 by aviyer2010

An article in Bloombergbusinessweek (January 28, 2013) describes the impact of work share programs that enable access to Federal funds to support a fraction (70 % or so) of a worker’s wages when the employee works at least 40 % or more of usual hours. An example company cited is Saint Gobain, a producer of plastics, whose employees availed of the program by working 70% of usual hours temporarily until the economy improved. Will such rollbacks of working hours supported by Federal support generate the estimated $1.64 for every $1 invested ? Or will it just postpone the hard capacity reduction decisions that are necessary because of the distortion caused by the government subsidy ?

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Quicksourcing – using manufacturing in Tijuana to support design in the US

Posted on January 27, 2013 by aviyer2010

An opinion piece in the New York Times (January 26,2013) by Chris Anderson describes his company, 3D Robotics, that has a factory in San Diego and another in Juarez, 20 minutes away but across the border in Mexico. He describes this choice of manufacturing as quicksourcing, creating a short supply chain that provides flexibility. The benefits are listed as (a) small lot sizes that cover weekly demands, (b) lower risk against use of pirated parts and protection of intellectual property and protection against increasing Chinese labor costs, (c) Faster delivery and (d) ability to make design changes and distribute across the supply chain quickly. Given these benefits, how much higher can Mexican costs be while still being competitive ? For what products will a combination of Mexican engineering and manufacturing beat the production costs in China for similar products ?

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The overturning of E.P.A.’s mandate for biofuel use and associated questions

Posted on January 26, 2013 by aviyer2010

An article in the New York Times (January 26, 2013) describes the overturning of a mandate by the Environmental Protection Agency (EPA) regarding use of “liquids made from woody crops and wastes in car a truck fuels”. But the lack of availability of cellulosic fuel has prevented it incorporation as per the federal mandate. But the mandate itself has provided financial justification for the companies that have built plants to produce cellulosic. If the mandate to create a market is dropped, as the courts say, then will that in turn end the incentive for creation of these biofuels ? Should the government instead subsidize the companies themselves through attractive loan incentives rather than use mandates to stimulate demand for their product ? How should the impact on the environment, an externality that is protected by the government, be communicated back to producers and consumers?

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“Earth’s Balance Sheet” discussion by Nestle

Posted on January 26, 2013 by aviyer2010

A discussion with Nestle’s Jose Lopez (http://www.youtube.com/watch?v=ulB-ETDI2wA) focuses on the idea of the Earth’s balance sheet, a concept described by Solomon Darwin in (http://openinnovation.berkeley.edu/Solomon_Darwin_Balance_Sheet_Earth_Executive_Summary.pdf). The idea is to account for the assets that are removed from the earth and not replenished in order to realize the profits that are generated and services offered. This balance sheet and its contributions by individual supply chains, nations, consumers etc is described as an accounting for the long term impact on the Earth as an entity, just as all the other stakeholders lay claim to a company’s impact. Should each company be required to examine their contribution to the Earth’s balance sheet and be required to be involved in offsetting consumption of assets with equivalent replenishment of other assets or reduction of liabilities ? How should the rules of sovereign nations regarding their individual responsibility with respect to the Earth’s balance sheet be balanced with a company’s goal to maximize shareholder value ? Is the Earth a shareholder to a corporation too ?

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Supply Chain Transparency for apparel by Bruno Pieters in honestby

Posted on January 24, 2013 by aviyer2010

The fashion apparel store (http://www.honestby.com) by Bruno Pieters promises to provide a full description of the supply chain associated with the garment including prices paid at each stage, material details etc. An example look at a 100% silk short sleeved tunic shirt with side slits, sold for 451.73 euros, shows that the cost was 69.14 euros, wholesale markup 200% and retail markup 270 %. The cost in turn is broken down into fabric cost of 11.88 euros, with sewing thread, buttons etc specified along with manufacturing costs of 24 euros. The store believes that this transparency enables customers to understand the product supply chain better and generates demand. Given such transparency, will it generate customer demand or get them to worry about justification of wholesale and retail markups ? Is sourcing information of components necessary for consumers to appreciate the global supply chain associated with their purchase ? Will such details be required of products in the future ?

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Reclothing, Upcycling – the Schmidttakahashi way

Posted on January 24, 2013 by aviyer2010

An article in the Brander (http://www.thebrander.com/article.php?o=391) describes the Berlin based Schmidttakahashi manufacturer of clothing that creates new apparel from used apparel. The donor of the clothing keeps part of the numbered label and can track the garment’s evolution downstream. But the buyer can also learn about the history of the garment from donor stories to generate a life story. New apparel is generated from old that is cleaned and redesigned along with new elements – thus suggesting a piece of art rather than just clothing. Will such story telling enable an increased consumer valuation of recycled content in clothing ? Can such strategies be extended to other recycled content used in products – and if so, can technology, such as QR codes enable the stories to be updated over time and thus add to the attributes of a product ? How should global supply chains respond to such opportunities ?

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The promise for US gas exports in the future and current plans – a dream or a likely outcome

Posted on January 21, 2013 by aviyer2010

An article in the New York Times (January 4, 2013) describes worries that the promise of US natural gas exports may falter. Currently, US natural gas prices are reported to be $3.30 per thousand cubic feet, while prices in Asia for the same volume are over $15. But the rising demand for natural gas and the rapidly improving technology suggest that other countries will also start fracking initiatives and thus develop their own sources of supply closer to demand. If global prices dropped to $ 6, the export market economics would vanish. A US terminal for exports would cost over $ 100 million and could only be financed with long term purchase agreements. Does the export risk suggest that dreams of vast export volumes are likely to fizzle ? Will exports of natural gas raise domestic prices and decrease incentives for growth in domestic US production of chemicals and plastics ? Should the focus be on exporting fracking technology and chemicals rather than exporting gas ?

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WalMart’s plans to increase sourcing in the US by $50 billion over 10 years

Posted on January 21, 2013 by aviyer2010

A news release (http://www.prnewswire.com/news-releases/walmart-to-boost-sourcing-of-us-products-by-50-billion-over-the-next-10-years-186934711.html) describes plans by WalMart to increase US sourcing by $10 billion over 10 years. The steps include longer term purchase agreements for domestic sourcing stability, hosting a manufacturing summit to encourage stakeholders to coordinate including government etc. But the article also claims that currently 67 % of products sold at WalMart are made, sourced or grown in the US – contrary to public perception. The same news release also describes a commitment to hire 100,000 veterans at WalMart over five years with a commitment to hire any honorable discharged veteran applying within 12 months of leaving service. Will decisions by WalMart to source locally following the rules above increase domestic sourcing and job creation ? Will it just encourage suppliers to move to the US or encourage US manufacturers to expand to become suppliers ? Will associated consumer prices have to increase to cover the possibly higher sourcing costs or is the move to US sourcing inevitable given rising Chinese labor costs and a desire to lower carbon footprint at WalMart ?

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Nokia’s sharing of 3-D print files for cellphone cases and the future

Posted on January 20, 2013 by aviyer2010

An article in the BBC website (http://www.bbc.co.uk/news/technology-21084430 describes plans by Nokia to make 3-D print files available to customers so they can print cases on demand on 3-D printers. The ease of access to customizable cases thus lowers the customer’s cost to accessorize the phone. But will reducing the costs for cases increase customer preference and thus demand for Nokia phones ? Will the main beneficiaries be the case manufacturers, whose costs of production are now decreased or will it increase competition across case manufacturers and reduce costs for consumers ? Will the lack of a profit incentive for case manufacturers in turn decrease the variety of cases available to consumers and thus hurt Nokia ? Or is this the future for OEMs i.e., to ensure that customer costs are not increased by accessory manufacturers ?

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Using the new Silk Road for trade with China’s interior plants

Posted on January 20, 2013 by aviyer2010

An article in Bloombergbusinessweek (December 20, 2012) describes plans by Hewlett-Packard to ship notebook computers by rail to Europe – the new Silk railroad, at 1/3 the cost of air transit, double the cost of shipment by sea, but taking just 21 days instead of the 40 days by sea. The new production locations in the interior locations in China are to reduce manufacturing costs given rising labor costs in larger urban cities. Other companies such as BMW, Audi and Volkswagen are using the return trip to ship auto parts back to China. Does this rail connection, the new Silk Road, which provides a balance of speed and cost between that of air and sea, have the potential to significantly alter the economics of global supply chain flows ? Will nations along the route now offer alternative production locations given the ease of transport ?

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