Nokia’s smartphone component costs vs Apple’s iphone component costs

Posted on June 1, 2012 by aviyer2010

An article in the Wall Street Journal (May 31, 2012) describes an estimate by iSuppli that components for the Nokia Lumia 900 cost $ 209 while those for the 16GB iPhone cost $ 190. But the Lumia sells for $ 450 without a contract, while the iPhone sells for $ 649. The margin for Apple is thus twice as much as Nokia. Are the Lumia components more expensive because they are better i.e., larger screen and more wireless chips, and thus justified as a means to attract customers by lowering margins and being competitive ? Are Apple’s supply chain and procurement processes inherently superior to Nokia’s ? Or is it Apple’s cash hoard that enables early cash payments to suppliers, thus enabling lower component costs ?

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Amazon requesting some of its sales tax back from California cities

Posted on June 1, 2012 by aviyer2010

An article in the Wall Street Journal (May 31, 2012) describes a request by Amazon, which recently agreed to collect sales taxes for purchases soon, to get back some of the sales tax as an incentive. The company claims that its warehouse locations were justified based on location and logistics costs, but claims to follow practices used by other retailers such as Kohl’s. Given that a portion of the sales tax is meant to cover local costs, should cities be allowed to give it back to retailers or should they just reduce tax rates ? Given that many other retailers do not receive such incentives, could providing such incentives to Amazon be a competitive requirement ? Could the jobs generated by the warehouse, and associated tax benefits, be considered a sufficient reason to provide a break to Amazon ?

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Export US gas or keep it to reduce energy costs at home

Posted on June 1, 2012 by aviyer2010

An article in the Wall Street Journal (May 31, 2012) describes a US decision to hold exports of natural gas, whose generation capacity has grown rapidly. Countries like Japan want to use liquified US gas in the future to replace their nuclear power sources. But others want the US to focus on ways to stimulate US demand for natural gas thus decreasing the country’s dependence on foreign oil. Given that exports serve as a willing market for gas today, should they be prevented ? Should the US government charge for the energy independence in the future as exports are prevented now, to assist producers ? Are gas prices so low because the full cost of fracking has not been charged to producers ? Or is the steel pipe demand (discussed in earlier blogs) and associated jobs growth generated by the gas industry a sufficient societal benefit that compensate for the apparent pollution impacts ?

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Battery manufacturing capacity rampup and short and long term impact

Posted on June 1, 2012 by aviyer2010

An article in the Wall Street Journal (May 31, 2012) describes the US government’s $ 1.26 billion investment in battery capacity, and demands for rapid ramp up and hiring to create 6400 jobs. The slow growth rate implied only 2000 workers and excess capacity, with plant shutdowns looming or completed. But the size of the battery capacity implies that car manufacturers can count on available batteries as they launch their electric vehicles, thus providing a domestic source of supply. Is it appropriate for the Federal government to invest in component capacity to reassure or stimulate downstream demand ? Is this an example of market failure and will such industries always require the government to step in ? Should DOE’s supply driven evaluation be modified to permit battery manufacturers to synchronize supply with demand ? Or should the US let Chinese battery manufacturers accept the demand risk and thus be suppliers to US automakers ?

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The challenges in estimating health system response to waiting time measurement systems

Posted on May 27, 2012 by aviyer2010

An article in the Wall Street Journal (May 25, 2012) titled “Long Medical Waits prove hard to cure” describes different waiting time measurements and the consequent dysfunctional system response. Measuring the waiting time experienced by patients served or focusing on service within 48 hours creates an incentive to prioritize more recent patients to improve performance. A focus on the number waiting to see a specialist creates an incentive to wait to add patients to the queue. A Veterans Administration report claims that while records suggested that 95 % of patients seeking mental health waited less than 14 days, the actual % was 64 %, if one considered the total wait time. But perceptions of patient waiting time can also be erroneous. How should the system be measured to decrease the incentive to create unintended consequences ? Should the referral process be tracked across doctors and clinics to ensure end-to-end measurements ? How should the patient’s perspective be ensured in these measurements ? Could incentives be designed that wille ensure prompt service while maintaining quality ?

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Pipeline flow direction in Canada to accomodate tar sands output growth

Posted on May 27, 2012 by aviyer2010

A article in the Economist (May 26, 2012) describes the increased oil production from the tar sands in Alberta, Canada, estimated to gow to 72 % of Canada’s output by 2020 (from 58 % now). But getting that oil, which can emit three to four times the greenhouse gases as regular oil, to market, has been a challenge. The holdup of oil pipelines from Canda through the US has now required potentially reversing the flow of a pipleine in Ontario – increase its utilization – which has dropped to 50%. Canadian gas exports have decreased as US exploration of shale gas has increased. Should the Canadian government focus on getting the gas to Canada’s eastern regions, that currently use more expensive imported oil ? Or should they focus on getting the tar sands oil to China via ports in British Colombia, albeit with a riskier long pipeline through native lands ? Should the nature of the oil flowing on existing pipelines, and the direction of flow, be subject to regulation ? Is the focus on blocking pipelines as a means to reduce exploration of tar sands, an acceptable approach for environmentalists ?

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Can coordination of health care save 30 % of costs ?

Posted on May 27, 2012 by aviyer2010

An article in the New York Times (May 23, 2012) describes an effort by UCLA’s Health System to save 30% of costs by coordinating the hospital, patient, doctors and health insurers. These reductions will come from decreasing the number of X-rays per patient per day from 10 down to two, discouraging unnecessary blood transfusions (given the $ 400 cost per unit of blood), eliminating fried foods and encouraging wellness etc. Given the current $ 2.7 trillion cost of health care, can coordination of efforts and encouraging “accountable care organizations” enable realization of expected savings ? Will patient followup and after care responsibility have to be assumed by the accountable hospital to ensure compliance to medicine ? How will the system be incented to deliver on these expected savings ?

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The deceptive global supply chain for Mercury

Posted on May 26, 2012 by aviyer2010

An article in Bloombergbusinessweek (May 28, 2012) describes the demand for mercury in Colombia, to extract small gold deposits, the lethal impact of vapors and errant disposal, and the global supply chain for its supply. Mercury exports were banned by the European Union in 2011 and US exports will be banned starting in 2013. But the 3 million pounds of mercury shipped from the US to the Netherlands (56 % of US mercury exports) enters an “in transit” status when in a warehouse in Rotterdam (and thus does not show entry into Europe) , then moves from Rotterdam to Colombia. From a paperwork perspective the US exports of mercury disappear from the global supply chain and appear in Colombia. When the European regaultors elimintaed the in transit exemption, mercury moved to Singapore as an in transit site before heading to Colombia. How should the global supply chain prevent errant use of mercury for gold extraction ? Should the inability of the Colombian government to enforce regulations (and thus deprive many citizens of a livelihood, albeit in a toxic environment) shift the responsibility to the exporting nations ? Or should the gold sales to donwstream customers require certification of an environmentally benign extraction process, thus dropping demand for gold extracted by toxic processes by small producers ?

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Should GMO food be labeled ?

Posted on May 25, 2012 by aviyer2010

An artcile in the New York Times (May 25, 2012) describes an unlawful effort to put stickers identifying food conatining GMOs (Genetically Modified Organisms) – now prevalent in most corn or soyabeans grown in the US. Proponents of GMO foods describe the reduced use of pesticides and reslience of plants and their ability to feed a growing population. Opponents want the food labeled to enable consumers to choose. Any labels stuck on boxes would be a violation of manufacturer trademark or be considered store trespassing. Should information regarding GMOs be passed on to the consumer to let them decide ? Should scientific laims that GMO food is not unsafe be justification for them to skip labels identifying their use ? Should nonGMO foods claiming their supply chains be sufficient for consumers to express their preference ?

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From fashion show to web sales in a day

Posted on May 25, 2012 by aviyer2010

An article in the New York Times (May 23, 2012) titled “Trying to Click Online”  describes sales of Oscar de la Renta fashion items, immediately after the fashion show, in the website TheFancy.com, with five sweaters sold within 24 hours for $ 2490 each, per prior arrangement with the designer. Will such quick sales of items from a show be useful in forecasting product demand ? Will the observed demand be a useful indicator of customer preferences ? Should items be sold at a discount to encourage customers to both buy early and provide an early read of preferences ? Should early sales be satisfied by domestic production to ensure quick delivery ?

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