Do increases in accounts receivable by Chinese firms suggest anything ?

Posted on October 31, 2012 by aviyer2010

An article in CNN (http://www.cnn.com/2012/10/30/business/china-corporations-slowdown/index.html?hpt=hp_t3) describes increases in accounts receivable by Chinese firms – 83 % increase for machinery manufacturer Sany Heavy, 169 % increase for First Tractor, and a 69% increase for Zoolion. Some reports suggest that firms are continuing to produce and ship even when demand slackens. But banks do not seem to show any changes in credit quality. Should such dramatic increases in accounts receivable suggest an increasing risk associated with Chinese firms ? Or should they be treated like temporary inventory changes of financial flows, and thus considered irrelevant in understanding Chinese industrial supply chains ? In general, how should financial flows and the link to physical flows be reconciled across a supply chain ?

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Hospital payments linked to patient satisfaction scores a good idea ?

Posted on October 23, 2012 by aviyer2010

An article in the Wall Street Journal (October 15,2012) describes a plan to hold back $1 billion in reimbursements that will be distributed based on patient satifaction survey scores. The scores measure whether patients were treated with courtesy, whether they were treated adequately for pain etc. But hospitals treating patients who come through the emergency room or hospitals with the greatest fraction of nonpaying patients, claim they are disadvantaged and will loose reimbursements just when they need them. Should patient satisfaction be given prominence or should reimbursements only focus on health outcomes ? Will the incentive to improve satisfaction create changes that might decrease health care costs ? Will it cause investments by hospitals in measures that are now justifiable – such as more frequent nurse visits and better communications ?

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The economics of vertical farming in downtown locations in cities

Posted on October 23, 2012 by aviyer2010

An article in the Wall Street Journal (October 15,2012) describes vertical farming – growing crops in greenhouses in cities – close to customers. A twelve floor vertical farm in Sweden is the largest such effort – claimed to save transport costs, enable land to be returned to the ecosystem and that will reduce greenhouse gases. But others claim that the energy used to grow these crops outstrips the saved fuel costs from transportation. How should the benefits of vertical farming close to customers be calculated to include all costs ? Should the govenment support for insurance, fertilizer etc be counted as part of the savings from vertical farming if it is independent of weather impact ?

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Climate neutral products from Eosta

Posted on October 23, 2012 by aviyer2010

An article in Sustainable Business newsletter describes Eosta (http://www.eosta.com/index.cfm?vid=64DD31DB-AB5A-D733-DF31869591EFD001), a Dutch company that sells fruits and vegetables claimed to be climate neutral. Use of organic fertilizer that does not release methane, avoiding mineral fertilizers and thus saving nitrous oxide and increased carbon storge due to the humus content in the soil are claimed to decrease greenhouse gas emissions across the supply chain. These reductions compensate for the transportation, packaging and cold storage related emissions to bring these fruits to market. Is it fair to count the life cycle of these products and claim that they are climate neutral ? Should avoidance of packaging, transport etc by growing close to the demand be preferred to shipping Argentinian applies to the Netherlands ?

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Will shifting patients to retail clinics for minor treatments improve service and lower costs

Posted on October 10, 2012 by aviyer2010

An article in the New York Times (October 10, 2012) describes the rise of retail clinics in Manhattan, with costs of care 30-40% below doctor’s offices and 80% lower than emergency care. The result of many retail locations is a drop in patients at full service hospitals and closure of St Vincent’s – a Greenwich Village hospital. As services provided to patients fragment, the consequent capacity realignment, along with doctor and nurse practitioner service provision locations, is uncertain. Should hospitals link up with these clinics to move care to the most effective location, increasing service quality while lowering costs ? Will the fragmentation of treatment across locations decrease visibility and increase overall costs ? How should information systems be standardized to permit seamless service to patients ?

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Intellectual property rights on visible car parts in France and rising repair costs

Posted on October 10, 2012 by aviyer2010

An article in the Wall Street Journal (October 9, 2012) describes a regulation in France that grants automakers intellectual property rights over the external looks of the car, thus guaranteeing that mirrors, bumpers, windshield wipers etc have to be purchased from the manufacturer. The result is a 30 % growth in maintenance costs between 2000 and 2010. A new proposal would eliminate this regulation and increase the participation of independent mechanics. Will the decrease in margins downstream require automakers to raise prices for new cars and will this make the French auto industry less competitive ? Will customers, who might now have to consider certification of their mechanics see a lower cost as a result or will they face more frustration as they attempt to discern the quality of repairs done ? Will automakers who offer long warranties benefit as a result ? Given the absence of such regulations in other countries, will such changes increase or decrease the competitiveness of French automakers globally ?

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Auditing conflict materials free suppliers and cost impact

Posted on October 10, 2012 by aviyer2010

An article in the Wall Street Journal (October 9, 2012) describes the number of conflict materials free smelters as 27 out of 200 to 400 worldwide. With the Dodd-Frank law demanding that companies declare the extent of use of tin, tantalum and tungsten from Democratic Republic of Congo in their supply chains, pressures to get conflict free sources are expected to cost between $3 to $4 billion in year 1 and $200 to $600 million in subsequent years in audit costs. Should firms focus on getting to conflict free or declare the audited level of conflict free sources ? Will firms that save costs and declare a less than conflict free supply chain face a competitive disadvantage even if they offer lower prices ? Should customers be allowed to choose their extent of preference (for conflict materials free supply chains) or should zero tolerance be enforced ?

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Global trade slows, but continues to be robust in pockets

Posted on October 8, 2012 by aviyer2010

An article in the Wall Street Journal (October 1, 2012) describes the slowing of global trade flows. The Los Angeles port claims a 10.5 % drop in US exports shipped, while the Shanghai port reports a 6 % slowdown. While Europe demand is dropping, demand in Latin America is growing for a toy helicopter company. The stronger Japanese yen, Chinese growth slowdown are impacting Sri Lanka – a new destination for apparel manufacturing that is a cheaper producer than China. Given the shifting demand growth locations, how should companies plan their marketing to access these world markets ? Given the shifts in production locations to keep costs competitive, how should companies plan their supply base to adjust ? The article claims that global trade growth has been faster than the global economy and that slowdowns in India and China reflect overall trends – does this suggest a different approach to thinking about global supply chain locations to adapt ?

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Ban plastic bags ? Or worry about unintended consumer costs ?

Posted on October 8, 2012 by aviyer2010

An article in the Wall Street Journal (October 8, 2012) describes two sides of a decision to ban plastic bags. On the one hand, plastic bags clog up recycling equipment, create clean up costs and add up to $ 30 a year to consumer costs in grocery stores, in addition to potentially being a bad design for the job of carrying products. But eliminating bags will require consumers to carry their own reusable bags and incur costs estimated to be $ 10 million in return for $ 300,000 in savings to water and carbon consumption. Should plastic bags be considered bad designs and banned even if their elimination increases costs to consumers ? Is the potential disintegration of bags and impact on marine life, estimated to be 3 % of marine litter, a significant enough concern to act now ? Or should the costs of alternate packaging have to drop significantly enough before action is taken ? Should consumers be charged the full cleanup costs of a bag to hinder use ?

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Will passengers bear airline fuel risk for lower upfront fares ?

Posted on October 8, 2012 by aviyer2010

An article in Bloombergbusinessweek (October 8,2012) describes an effort by Allegiant airlines, with ticket prices at $89, to share airplane fuel risk with passengers. The proposal – passengers pay a lower fare upfront and a fuel charge based on actual airplane fuel prices, or pay a higher upfront fare to lock in seat prices. The impact will be to share risk with passengers ready to accept it, thus benefiting both entities. Will such solutions be accepted by passengers as similar to baggage fees ? How can passengers be convinced of the appropriateness of the fuel charges levied later? What other service industries can use such risk sharing schemes ?

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