Manufacturing hubs with entire supply chains in Ohio to be competitive

Posted on September 2, 2012 by aviyer2010

An article in Fortune (June 11, 2012) describes a plan proposed by Mark Kwamme to create Manufacturing hubs consisting of entire supply chains to compensate for higher labor costs. The goal is to reduce logistics costs and thus decrease overall costs. Whirlpool’s CEO agrees with this strategy as enabling US manufacturing competitiveness. Will supply chains consisting of the capability to make most of the components of a product be the key to become globally competitive in manufacturing ? Should Ohio invest state funds to enable such competitiveness ? Is there a positive externality to such supply chains that justifies state intervention ?

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Moving production to the US despite lower Chinese manufacturing costs

Posted on September 2, 2012 by aviyer2010

An article in Bloombergbusinessweek (June 25, 2012) describes several examples of companies that moved production to the US from China, despite up to 30% lower Chinese manufacturing costs. For Lightsaver, the 30% lower manufacturing costs were compensated by costs of coordination and quality issues, making US manufacturing 2 to 5% cheaper. For Ultra Green Packaging, intellectual property concerns caused the move back to the US. For Unilife, a maker of syringes preloaded with medicine, moving to the US ensured lower costs to ensure FDA compliance. Given these examples, how much should costs in China drop below US costs to justify making products there ? Will manufacturing in China be for their markets or will intellectual property concerns justify importing to satisfy Chinese demand ? Are these moves to the US the result of dropping US wages too ?

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Should natural gas filling stations be subsidized ?

Posted on September 2, 2012 by aviyer2010

An article in the New York Times (June 21, 2012) describes the abundant availability and low prices of natural gas, even though it could provide a cheaper, less polluting alternative to oil if available widely. A move to enable natural gas distribution through tax breaks for infrastructure was opposed by the chemical industry which feared it would cause high input prices. Should higher gas prices be treated as a cost increase to chemical companies and thus not be improved ? Should consumers be encouraged to fill gas containers from their gas pipes with subsidies on the equipment ? How should the government balance social goals and individual impact ?

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A shortage of jute bags hurts storage of a bumper wheat crop in India

Posted on September 2, 2012 by aviyer2010

An article in the Wall Street Journal (June 23, 2012) describes the large wheat harvest in India, but a shortage of jute bags. Indian law specifies that 100% of the wheat should use jute bags, to protect the industry and its employment. But while wheat production has grown 82% since 1990, jut production has grown only 33%. Options to import from Bangladesh are blocked by a desire to apply the rule only to Indian jute. But the jute industry claims orders were placed late, not that there was a shortage of capacity. Given the desire to protect jute bag production, while preventing the 13% of possible output wasted, what should the government do? Should plastic bags replace jute to protect the harvest? Who should be held responsible for the wasted output, when malnutritution remains rampant ?

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Google’s “Made in the USA” media player

Posted on September 2, 2012 by aviyer2010

An article in the New York Times (June 27, 2012) describes Google’s new media player assembled by a contract manufacturer in California, about a 15 minute drive from Google’s office. Rising wages in China, worries about intellectual property and an increased focus on time to market are described as drivers for this decision – which may portend a new direction for electronics manufacturers. But will consumers pay the higher price for the product to justify the manufacturing location related costs ? Will faster learning curves to accommodate consumer feedback grow sales faster or drop costs rapidly to make the product price competitive? Will the reported supplier locations in the Midwest and the rest of the country grow to enable supply chain efficiencies for the product – described to consist of high % of US made components?

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Using UPS to outsource drug delivery

Posted on September 2, 2012 by aviyer2010

An article in the Wall Street Journal (June 28,2012) describes pharmacists at UPS’s hub in Louisville filling prescriptions for insulin or other drugs for quick delivery to customers. The same supply chain allowed Walgreen to ship vaccines to Laos, with associated custom clearance and temperature tracking. Is the pressure to cut logistics costs and increase service the result of low prices for generic drugs ? Will UPS’s growing drug delivery service make owning warehouses an obsolete division for drug companies ? If competing logistics companies drive prices down, will the market fragment to create a prisoner’s dilemma outcome that hurts all supply chains ?

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Should broadband providers be permitted to charge by usage?

Posted on September 2, 2012 by aviyer2010

An article in the New York Times (June 26, 2012) describes plans by some internet providers to use usage based pricing. Under this model usage for regular subscriptions will be capped or discounts provided for lighter usage. But content providers claim that this will hurt their business and should not be permitted. Should pricing based methods to ration content remain the prerogative of the internet provider ? Should a desire to enable job creation by content providers suggest blocking such pricing as uncompetitive ? Or is the problem a lack of sufficient competition in the internet provision market ?

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WalMart’s supplier workplace allegations by third party activists and impact

Posted on September 2, 2012 by aviyer2010

An article in the New York Times (June 29, 2012) describes allegations by the National Guestworker Alliance against WalMart’s seafood and vegetable suppliers regarding worker wages and working hours. But WalMart and the suppliers allege that the data was aggregated from 1980 to 2012, with different incidents grouped together. WalMart also claims that the activists are against nonunion suppliers. Given WalMart’s low price focus, how much impact will allegations by activists have over the supply chain ? Should supplier qualifications be restricted to current practices or go back in history ? If US law punishes violations with fines, is it appropriate for WalMart to further punish the supplier with order cancellations ?

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Topshops within Nordstrom stores – a beneficial alliance for both ?

Posted on September 2, 2012 by aviyer2010

An article in the New York Times (July 12, 2012) describes a decision to open Topshop stores within Nordstrom’s stores. The limited line of Topshop fashion apparel, with new items delivered weekly, will enable Nordstrom to increase the speed of its fashion changes and reflect new trends. Topshop, new to the US, will learn about US consumer preferences, and use that data as it expands its own stores across the US. Will the learning about preferences from Nordstrom’s consumers enable Topshop to tune its offerings to the US consumer ? Will a 2500 sq ft Topshop store within a large Nordstrom retail store have a sufficient fashion speed up benefit for Nordstrom? Do you see such alliances as win-win partnerships ?

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Private Equity ownership and bulk purchasing savings

Posted on September 2, 2012 by aviyer2010

An article in the New York Times(July 12,2012) describes the private equity firm, the Blackstone Group, which owns 74 companies with a combined 700,000 employees. Across its companies, the firm buys 15 million reams of paper, 35 million FedEx shipments and 900,000 car rentals. Centralized buying through a group purchasing program called Coretrust has enabled savings of 10 to 50%, but requires companies to switch to a common supplier and specifications. Is this switch to more detailed operations a new capability of private equity firms ? Could the focus on savings through common specifications destroy revenues at the individual companies ? How should such programs be managed so that they do not hurt individual firm preferences – should participation be made voluntary ?

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