Booming oil inventories in Catoosa, while East Coast price differences persist

Posted on October 5, 2012 by aviyer2010

An article in Bloombergbusinessweek (September 27, 2012) describes growing oil stocks in Catoosa, Oklahoma where oil generated in the Dakotas come to wait. A shortage of pipeline capacity to the East Coast means that prices in the East continue to remain high even as oil inventories grow. Some hedge fund traders are shipping oil via barge to gain in the price spread. But other pipelines are trying all other means of transport including reversing the direction of oil flow to gain outbound capacity. Even within the oil reservoirs, purchases are for specific blends – which means that matching the demand mix by mixing the appropriate supplies is a key role for the oil storage companies. Given differences in the quality of oil generated in Dakota vs that imported into the US, will refining capacity keep up with supply if pipe capacity increases ? Should the shift from pipe to barge or pipe to truck, and the consequent risk of contamination due to accidents weighed against the environmental cost of the new pipeline in judging their benefit ?

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Drug shortages and quality issues at backup compounding pharmacies

Posted on October 5, 2012 by aviyer2010

An article in the New York Times (October 4, 2012) describes an outbreak of meningitis caused a fungus that contaminated steriod solutions supplied by a compounding pharmacy in New England. Hospitals ordered the solution, which was in short supply, from the compounding pharmacy which mixed custom batches of products to compensate for shortages. But such pharmacies are not regulated as closely as manufacturing facilities because of their intermittent small lot production, thus generating quality issues. Is the real problem the low margins for generic products or the close regulation of manufacturing by the FDA that causes capacity swings ? Should regulatory oversight of compounding pharmacies be increased, even if means lower drug availability and thus higher prices for drugs ? How should penalties be structured to prevent such quality failures – is shutting down all manufacturing at the contaminated facilities the answer or are there alternatives ? Instead of compounding pharmacies, should products be imported government stocks (from Japan or Canada) to ensure quality compliance ?

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Google’s “RE < C" initiative and impact

Posted on September 22, 2012 by aviyer2010

An article in Fortune (July 23, 2012) describes an effort by Google to initiate projects to drive the cost of renewable enery (RE) to becom elower than the cost of coal (C) based sources. Server farms account for 2% of the total energy used, hence the pressure on Google to decrease its impact on coal based sources. But efforts to buy wind farms, create a server farm in Finland that uses seawater to cool etc ended up not generating the desired outcome. But new initiatives to reduce methane from landfills and hog farms seem to have generated more traction and a bigger environmental impact. How much responsibilty should search and other software companies bear for their role in using energy in the US that is generated by coal fired plants ? Will a commitment by large Silicon valley companies to shift to renewable energy provide the demand guarantee that will enable the alternate energy industry to build scale and technological advancement ? Or are these efforts distracting Google from doing what it does best – build software tools for search and mobile applications ?

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Allocating kidneys to improve survival years for patients

Posted on September 22, 2012 by aviyer2010

An article in the New York Times (September 21, 2012) describes a new proposal to allocate kidneys to recipients using an index to estimate the quality of kidneys and directing 20 % of the kidneys at the top of this index to patients expected to survive the longest after the transplant. This new index thus provides some benefits to younger patients while not all. An earlier plan had allocated kidneys based on patient age but was deemed a discrimination based on age and thus rejected. This new plan recoups about 50 % of the benefit of the old plan while enabling more effective allocation. In addition, wasted kidneys i.e., those allocated to patients but rejected because of associated quality, accounted for 2,644 kidneys that were discarded in 2011. A wider pool will now be offered access to the lower quality kidneys to decrease this waste. Given the need to balance access while reducing waste and increasing the life of the kidney, is this an acceptable outcome ? Should patients be allowed to provide preferences for kidneys by index and that data used to create allocations ? How much emphasis should be placed on reducing the wasted kidneys if the decision to refuse to accept them is based on their quality ?

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The projected impact of insufficient port improvements on the US economy

Posted on September 22, 2012 by aviyer2010

An article in the Supply Chain Management Review (Sept 17, 2012 http://www.scmr.com/article/the_american_society_of_civil_engineers_say_u.s._supply_chains_at_risk/?goback=.gde_115985_member_165825492) states that investments in US marine ports ad waterways upkeep from now to 2020 is planned to be $ 16 billion lower than required, while investments in airports is $ 19 billion lower than required. The projected impact is greater congestion and thus lead time delays and higher costs of operation. The economic impact is projected to be 1 million jobs lost and $ 1 trillion in personal income lost. Given the large ROI of these infrastructure investments, can one design a way to pay for these improvements based on the value they create ? Will greater congestion result in more inventory and warehousing and so more jobs, or will it just decrease competitiveness and thus lower revenue ? How should the beneficiaries of the investments in airports and marine ports be expected to pay for the costs for their implementation ?

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Lean increases productivity and profits at Harley Davidson’s York plant

Posted on September 22, 2012 by aviyer2010

An article in the Wall Street Journal (September 21, 2012) describes the transformation of Harley Davidson’s plant in York, PA, from 41 buildings to 1, with workforce cut by 50 %, using 10 % temporary labor but with an operating profit margin of 16 % now vs 12.5 % in 2009. Production is linked directly to sales and is ramped up or down flexibly. Job classifications are now 5 instead of the 62 earlier, thus providing for a wider range of skills for each worker. Do the changes in Harley’s York plant suggest that flexibility and its ability to match supply and demand will be a key capability for the future ? How much of this change requires product redesign to enable part commonality and to anticipate manufacturing costs for designs ? The report also cites the use of robots and information capture at earlier stages to synchronize later manufacturing steps – is this a case of swapping capital for labor, given the low interest rates, to improve profitability ?

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Can cheap, flexible robots assist workers to make US manufacturing globally competitive?

Posted on September 22, 2012 by aviyer2010

An article in Bloombergbusinessweek (September 24, 2012) describes new robots announced by Rethink Robotics, priced at $ 22,000 and reprogrammable to assist workers with repititive tasks. Teaching the robot requires simulating the steps by moving its arms, after which the robot repeats the steps. Armed with cameras and flexible arms, the inexpensive robot is meant to work next to workers, enabling them to become more productive. Will a new US manufacturing worker as a supoervisor of robots enable US manufacturing to regain its competitiveness ? Would the reliability of manufacturing close to design locations in the US, with robot assisted production, improve product designs and protect intellectual property ? Does the vulnerability of the global supply chain demand having such a capability at least as a backup to the existing supply base ?

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Does WalMart gain by not selling Kindles ?

Posted on September 22, 2012 by aviyer2010

An article in the New York Times (September 20, 2012) describes WalMart’s decision to stop selling Amazon’s Kindles once its inventory runs out. Retailers are concerned about customers browsing for online prices while in the store and buying products online. Amazon thus loses a display for customers to experience its products, but WalMart loses customers who might avoid it altogther. Does dropping the Kindle help WalMart protect its demand volumes ? Or does the availability of lower price tablets suggest a better alignment of its assortment with its customer base ? Amazon, whose volumes are 12 % of WalMart’s sales, is a fast growing etailer. Do such actions represent reasonable competitive responses to protect WalMart’s territory ?

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The Google and Amazon product search competition

Posted on September 17, 2012 by aviyer2010

An article in the New York Times (September 10, 2012) describes the growing battle between Amazon.com and Google to lead in product search. As Google tries to improve its product search and provide more ecommerce services, it has decided to charge firms to list their products. The company claims that charging for listing incents the retailer to maintain accurate information and improves search results. But opponents of this scheme claim that retailers will decrease the variety they offer, thus hurting customers and diminishing Google’s relevance as a serch tool for products. Does Google’s plan to charge for search to improve outcome accuracy help customers with better information outcomes ? Will the reduction in variety offered on Google survive as a competitive response by any retailer ? Given Google’s role in building the Android tools used by Amazon’s tablet products, will Google ultimately win as the search provider for customers, even if Amazon fulfils the demand ?

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Can data transparency reduce medical errors and increase coordination of care?

Posted on September 17, 2012 by aviyer2010

An article by Dr Marty Makary in Newsweek (September 24, 2012) describes medical error rates at 25%, with 100,000 people dying due to preventable errors. But he suggests that data transparency, such as the publication of heart surgery data by the New York health commissioner, reduced mortality rates at one hospital from 18% to under 1.7%. Public data dissemination increased teamwork and eliminated surgeons wi poor outcomes. But does data transparency cause riskier cases to be declined and treated in nearby states without such data transparency ? Will public data sharing without a context of patient criticality hurt patients in the end ? How important are individual incentives if the doctor is held responsible for all outcomes ?

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