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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Aravind Eye Hospital’s “maximize patients” to reduce costs strategy

Posted on January 19, 2013 by aviyer2010

An article in the New York Times (January 17, 2013) describes the Aravind Eye Hospital in India, where patients pay whatever they can afford but are provided high quality care regardless of payment. While a patient with no money might lie down on a mat on the floor after care, another with the means might get an air-conditioned room, but both would get the same quality of eye care with doctors rotating across all patient types. The clinic claims that poor patients who are provided free care enable more volume across the chain and thus decrease costs and improve quality for all patients, hence a focus on maximizing the number of patients treated. Do you agree that the volume of patients as a focus can enable a successful low cost, high quality service system ? Given low revenues, is the use of relatives who are eye surgeons, and can sacrifice incomes, an important component of the clinic’s success ? Do you agree with the strategy by the clinic to vertically integrate into lens manufacturing to lower costs as a long term strategy ?

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Regulate sulphur content of ship fuels or offer more incentives in Hong Kong?

Posted on January 19, 2013 by aviyer2010

An article in Bloombergbusinessweek (January 14,2013) describes the low sulphur content fuel (0.5 percent sulphur), which is 14% of permissible limits, used by the Maersk shipping line. The Hong Kong port offers a 50% reduction in port costs, but that only covers 40% of the cost to use this reduced sulphur fuel. The benefit if all shipping lines used this fuel in Hong Kong would be an 80% reduction in sulphur dioxide emmissions. But Maersk claims many shipping lines are using the higher sulphur content, cheaper fuel, thus making Maersk uncompetitive. Should the government accede to requests by Maersk wants to issue regulation requiring use of low sulphur fuel ? Or would it be better to increase the incentives for those shipping lines that do comply ? Or would the demand side benefits to Maersk, from shippers who want to reduce their carbon footprint, more than cover the additional cost of the fuel?

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How can garment factory fires be prevented by retailers ?

Posted on January 18, 2013 by aviyer2010

An article in the New York Times (December 10,2012) describes the fires that have killed 400 people in two fires, one each in Bangladesh and Pakistan. The Bangladesh supplier was dropped by Walmart for not passing audits, but made the clothes on subcontract to the supplier who got the contract. Some labor groups claim that a 3% higher price could pay for safety, but how can the buyer be assured that will happen.Others claim the need for an independent auditor whose costs will be paid by the buyer, but the costs become reasonable only if many buyers share these inspection costs. How should these deadly fires be prevented by buyers and how should consumers demand accountability? Should retailers only purchase from certified suppliers and if so, how will they track subcontracting to non-certified suppliers ? Should technology be leveraged i.e., sensors and cameras as well as RFID (Radio Frequency Identification), to monitor garments as they are manufactured ?

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Who is responsible for preventing apparel factory fires in Bangladesh?

Posted on January 18, 2013 by aviyer2010

An article in the New York Times (December 29, 2012) describes the struggle between apparel retailers who outsource manufacturing to factories in Bangladesh, labor advocates and the government. While the $37 a month wage rate makes Bangladesh an attractive sourcing location, enforcement of building codes, fire exit laws and reaction to fires is a sovereign right for the country, claim importer groups for retailers. Labor advocates claim that WalMart, Sears etc have to contribute to improve worker safety, but their auditors claim lack of jurisdiction over enforcement. Should the poor enforcement and associated costs to get safety standards implemented be included as part of sourcing costs and be paid by the importer? Should enforcement of safety be a Bangladeshi government responsibility? Or should a global cooperative audit group across retailers be permitted to certify working conditions before a supplier is used, even at the risk of antitrust violations?

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Same day delivery options, pricing and retail competition

Posted on January 18, 2013 by aviyer2010

An article in the New York Times (December 28,2012) describes same day delivery options offered by stores to compete with Amazon. For $ 5, Ebay Now offers delivery options to coffee shops, homes etc same day. Amazon offers same day or next day delivery for $10 in five cities. Net-a-Porter offers delivery same day for $25 for its clothing. Task Rabbit offers to pick up from stores in the city and drop off for $10. Is this a trend that will enable local stores to compete effectively with e-commerce sites ? Will the US Postal service’s plans to offer same day delivery enable them to compete at these price points ? How much would local volumes need to grow to make such services a sustainable alternative?

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Apple’s increased oversight of global supply chains and impact

Posted on January 18, 2013 by aviyer2010

An article in the New York Times (December 28,2012) describes Apple’s hiring of over 30 people in their social responsibility unit, alliances with employee advocacy groups like the Dutch Sustainability Trade Initiative and pressure on suppliers to comply with fair practices. Apple has also committed to provide monthly data regarding supplier audits. But should these costs be borne by suppliers or by Apple? Should these costs be passed on to customers as higher prices ? How will such demands for direct oversight and compliance with local laws impact global supply chain management and its competitiveness ?

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Planning Recommendations to the New York Governer following hurricane Sandy

Posted on January 18, 2013 by aviyer2010

An article in the New York Times (January 4,2013) describes recommendations by two committees examining planning before and improving performance after a disaster strikes. The recommendations include building local fuel stockpiles, requiring some gas stations have generators that can assist fuel availability during power outages and building reserves of emergency equipment. In addition, it recommends having databases to track elderly who may need assistance. Should all these tasks be done by the state government or contracted to private industry with performance specifications ? Should the government pay for the generators or can prices at gas stations be allowed to rise during catastrophes to cover the cost of operating the generators ? Should the government contract to use retail inventories during catastrophes thus avoiding holding them all the time ?

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