Legal copying, trends and demand generation

Posted on September 2, 2012 by aviyer2010

An article in the Wall Street Journal (August 11, 2012) describes how legal copying, permitted in fashion apparel, financial instruments, food etc, help those industries. By speeding up adoption of new ideas and designs, these industries benefit from the buzz or trends, and create a desire to move to the next trend, thus generating continued demand. In addition, many of the customers who buy copies of a product, trade up to buy the original product later, thus generating demand for the original designer. Which industries should push to promote legal copying, given such benefits ? Should the differing intellectual property protection across countries be treated as a reflection of individual country preferences for such industry benefits ? When can this go too far, and stifle the incentive for innovation ?

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The supply chain impact of shutting down the Federal Helium stockpile

Posted on September 2, 2012 by aviyer2010

An article in the Wall Street Journal (August 11, 2012) describes a plan to shut down crude helium reserves currently held by the US government that satisfy 33% of the world demand. Given that US pricing focuses on covering debt related costs, it impacts the market price, and, by keeping prices low, decreases the incentive for producers of helium. But the expected rise in prices for helium, used in welding and by medical imaging equipment, as well as party balloons, has a downstream impact. Rural imaging locations may have to shut, impacting the distance patients have to travel. But helium prices will rise to reflect market prices, without a Federal role. Is this increase in helium prices the right direction for the industry ? Should national need suggest that the Federal government treat their role as an externality and thus keep the stockpiles ?

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The interaction between the Renewable Fuel Standard, drought and hunger

Posted on September 2, 2012 by aviyer2010

An article in the Opinion section of the Wall Street Journal (August 11, 2012) describes the Renewable Fuel Standard (RFS, which requires use of 13 billion gallons of ethanol based fuel this year and 36 billion gallons by 2022) and its use of 40% of corn output in 2011. With drought causing a 13% drop in corn yield, the diversion of food to fuel has been opposed by international food agencies. Should this act be relaxed to compensate for the lower corn crop yield, and to keep food prices from rising due to low supplies ? Should the EPA’s mandate to consider “impact on human health” consider the health impact of higher food prices globally and the impact of RFS? Will relaxing the standard increase costs for automakers whose capacity and production plans rely on the Federal commitment to ensure ethanol availability?

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Boeing’s delivery delays, airline order cancellations and profit impact

Posted on September 2, 2012 by aviyer2010

An article in the Wall Street Journal (August 24, 2012) describes a decision by Quantas Airlines to cancel orders for 35 Dreamliner airplanes. Delivery delays meant that the promised 20% fuel efficiency and 30 % lower maintenance costs did not arrive in time to help Quantas’s profitability. At the same time, analysts suggest that Boeing loses $100 million for each plane delivered due to penalties and cost overruns. In addition, other analysts suggest that the order book had 30 to 40% more planes than the industry needs. Is this dismal performance the result of an aggressive design or an unwieldy global supply chain ? Could more effective manufacturing management have prevented this purported outcome ? Or is this the result of a global slowdown in economic activity, that would have occurred independent of Boeing’s actions?

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Boeing plans to ramp up production rates

Posted on September 2, 2012 by aviyer2010

An article in the Wall Street Journal (August 30,2012) describes plans by Boeing to add another production line in Washington, in addition to one in North Carolina, thus increasing production rate to 10 Dreamliners across locations per month from the current rate of 7. To contain costs, the company plans to have each assembly line in Washington do half the work in both lines, while adding new workers. This process will be repeated in North Carolina to increase production to 14 airplanes a month. Given the split of volume across two assembly plants, do you expect Boeing to maintain its planned learning curve and thus hit cost targets ? Given the large demand backlog, but gradual increase in rates, with consequent delay penalties, should Boeing speed up production even faster, even if production costs increase ? Are suppliers or assembly expected to be the bottleneck ?

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Boeing’s 66th Dreamliner aircraft first to go to preflight from assembly

Posted on June 9, 2012 by aviyer2010

An article in the Wall Street Journal (June 8, 2012) describes a milestone reached by the 66th Dreamliner aircraft – the first to reach normalized production i.e., go from assembly to preflight testing. That milestone was reached by the Airbus 380 between its 26th and 36th aircraft. Boeing also plans to spread the cost of the 787 over 1100 aircraft as against 400 in the past, increase production rate from 3.5 aircraft a month to 10 by the end of 2013 and decrease costs at a rate that is 50% faster than recent 777 aircraft. Are these aggressive goals realistic given the large fraction of outsourced components and assembly ? Is it fair to compare production stablization across aircraft models and manufacturers solely based on their customers being similar ?

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Trading zero emission credits to comply with state regulations

Posted on June 9, 2012 by aviyer2010

An article in Bloombergbusinessweek (June 7, 2012) describes California’s regulation requiring 2 % of cars sold by automakers selling 60,000 cars annually to be zero emission by 2014 and 15 % by 2025. But automakers can also buy credits from manufacturers whose cars exceed the limit – such as the Nissan Leaf that gets three credits to trade and the Tesla Model S with seven credits. These credits trade for $ 5000 to 10,000 dollars each, but credits beyond 2012 do not expire while credits before 2011 expire in three years. Thus, a Tesla Model S that retails for $ 70,000 earns an additional $ 35,000 in credit trading. Will the incentive to trade credits lower prices for electic cars ? Will the ability to buy credits decrease the incentive for automakers to manufacturer electric cars by permitting an easier route to comply with laws ? Given that the credit purchase costs are purely market driven, will automakers preempt such price increases and establish competitive advantage by signing long term credit purchase agreements from electric car makers, such as Honda’s deal with Tesla ?

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Barnes & Noble claims elimination of agency pricing will increase prices

Posted on June 9, 2012 by aviyer2010

An article in the New York Times (June 8, 2012) describes the Justice department’s settlement with publishers to eliminate “agency pricing” which was claimed to enable collusion among publishers for ebook prices. Under agency pricing, five publishers were allowed by Apple to set their ebook prices and pay Apple 30%. The publishers had claimed that this prevented Amazon.com from dropping prices to uncompetitive levels for ebooks, thus stressing hardcover sales. Would elimnation of agency prices raise consumer prices because the supply chain would be less coordinated ? Does Barnes & Noble prefer agency pricing because it would decrease Amazon’s pricing competitiveness ? If the Justice department’s ruling decreases retail prices to make it uncompetitive for writers’to participate, will the supply chain be worse off ?

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India’s large grain stockpiles, yet 21% undernourished

Posted on June 9, 2012 by aviyer2010

An article in the New York Times (June 8, 2012), describes the 71 million tons of grain stockpiles in India, the world’s second largest invenory. But distribution to its poor citizens through ration shops is inefficient and corrupt, leaving 21% of the population undernourished. Given the inefficient distribution, should the poor be given money to shop, rather than physical product ? How should the system ensure that the poor are provided grain – will more spending to distribute product improve efficiency ? Is the government’s price support the culprit that distorts the market and makes grain non affordable ?

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A shift from camel to colorful jeans

Posted on June 1, 2012 by aviyer2010

An article in the Wall Street Journal (May 31, 2012) describes the shift in the color palette from camel, six months ago, to mango, neon pink, purple, red etc. The new trend has customers shifting to color and thus buying new accessories – shoes, scarves, blouses etc. Even men’s jeans have started introducing green – with sales for demins in the US growing 2.7 % and prics rising 7.5 %. The trend was reported to have started last year and become mainstream this year. Will the colorful extravganza be followed by muted colors next year, to keep demand growing ? Or will trend continue next year with color variations across Fall ? Or will it be back to the usual blue denim ? How will the global supply chain adjust to such fashion shifts – will local US manufacturing become more attractive to ride these trends ?

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