Fracking in the US and guar seed farmer impact in India

Posted on September 2, 2012 by aviyer2010

An article in the New York Times (July 16,2012) describes how growth in fracking for oil has resulted in increased demand for guar, a water absorbing seed grown primarily in India. With prices rising dramatically amidst growing oil company demand, sales of tractors, house building etc have all increased as Indian farmers spend their new wealth. But the high prices caused seeds to be sold, thus creating stress on future yields. Will the higher prices cause guar to be grown in other countries, thus depressing prices ? Will substitute seeds replace guar demand ? Can guaranteed price commitments to farmers enable risk to be transferred from the farmer and ensure supply ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , , , | Leave a comment

Impact of faulty US government data on pecan prices

Posted on September 2, 2012 by aviyer2010

An article in the Wall Street Journal (April 5,2012) describes an overstatement of US pecan exports to Hong Kong and China in 2010 and 2011, which was corrected recently. The impact of higher exports was perceived impending shortages and thus higher prices. But as the data got corrected, prices dropped, but some buyers had already left the market. The impact – growers in the eastern US got higher prices, while those in the west saw lower prices. Buyers who built up inventory were left facing lower market prices than their costs. Should the US government be held responsible for the market risk impact of the data error ? How should the “cost” of the data quality be shared with the market ? Should the risk by buyers part of the “caveat emptor” view of data ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , | Leave a comment

Programmable NFC Tags and supply chain impact

Posted on September 2, 2012 by aviyer2010

An article in Bloombergbusinessweek (July 16,2012) describes programmable tags using NFC (Near Field Communications) technology on physical objects. These tags can be read by NFC readers or smartphones with the read capability. Uses include tags on spice jars that can be read by smartphones to provide recipes, and bracelets with email addresses that can be read by NFC readers to send recipes as emails. Can use of such tags enable supply chains to extend to customer’s consumption points ? Will tags enable customers to interact with physical objects and the internet at stores and thus stimulate store level choice decisions and hence demand ? Will the ability of cell phones to substitute for expensive RFID (radio frequency identification) readers from the past hasten use of tag technology ?

Posted in Collaboration, Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , , | Leave a comment

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 ?

Posted in Global Contexts, Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , , | Leave a comment

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 ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , | Leave a comment

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?

Posted in Global Contexts, Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , | Leave a comment

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?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , , , | Leave a comment

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 ?

Posted in Operations Management, Supply Chain Issues | Tagged , , , , , | Leave a comment

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 ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , , | Leave a comment

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 ?

Posted in Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , , | Leave a comment