Making TVs in Detroit ?

Posted on May 24, 2012 by aviyer2010

An article in the Wall Street Journal (May 23, 2012) describes a decision by Element Electronics to assemble 46 inch flatscreen TVs, to be sold for $ 499 at Target, in a plant in Detroit. The company claims that the 5 % duty for imported TVs (about $ 27), the lower transport costs to retailers and the demand lift from the large US flag on the box with an assembled in the USA label, justify TV assembly in the US. But streamlined assembly, rising wages in China also help justify the decision. Will the demand lift from a US assembly label be sufficient to make this US production viable ? Is the competition that should be considered a production or assembly in China or in Mexico, where 50 % of US TVs are currently assembled ? Given that the 5 % duty justifies US manufacturing – is it a good idea to retain it and this increase costs for US consumers or is a better aproach to demand an even higher US productivity to justify domestic production ? Does the fact that the plant is owned by a Chinese producer and product sold by a branding company impact evaluation of its success in generating jobs in the US ?

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Samsung and Sony attempt to enforce their prices at retailers

Posted on May 24, 2012 by aviyer2010

A Wall Street Journal article (May 23, 2012) describes a move by Samsung and Sony to force retailers to sell at manufacturer recommended prices or risk consequences. These might include loss of financing to market new products or restricted supply. Such price restrictions have been declared to be legal by the US Supreme Court. But LG, Panasonic and Sharp do not plan to have such restrictions. Some retailers have requested unique products to prevent consumer shopping at stores followed by ecommerce shopping. All of this is in response to the 15 % price drops for TVs between 2009 and 2012. Will the moves by Sony and Samsung hurt the manufacturers and retailers or help them retain share ? Will the lack of participation by the other manufacturers disrupt the system ? Is it in the retailer’s interest to comply or break away when the holiday season demand is at its peak ? Are potential retailer penalties credible or will they just involve the manufacturers shooting themselves in the foot ?

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Should oil field truckers have special rules even if they cause accidents ?

Posted on May 23, 2012 by aviyer2010

An article in New York Times (May 14, 2012) described exemptions for oil field truckers that lets them take 24 hours off for 60 hours of work over seven consecutive days vs 34 hours for commercial truckers. This exemption was granted in the 1960s to permit flexibility for drivers in that industry. But inspection of oil and gas trucks in Pennsylvania showed 40 % were unsafe, and over 300 oil and gas workers have been killed in the past decade – the highest fatality level of any industry. The industry suggests that given the high demand for oil truckers, eliminating the exemption will bring in less experienced truckers and increase accidents. Should the reasons provided and the associated costs be the consideration for maintaining exemptions or should safety on the roads be the paramount reason for the decision ? Given that time not spent driving is spent waiting at the oilfields, should that time be included in the working time or not ? Should there be technology based solutions to log truckers hours to ensure compliance ? Or is the safety issue related to purported drug use at sites and a rush to earn money while the fracking boom is underway ?

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Uniqlo’s strategy for low priced apparel

Posted on May 23, 2012 by aviyer2010

An article in the New York Times (May 22, 2012) describes the Japanese apparel retailer Uniqlo’s low price strategy for T-shirts ($ 9.90) and cashmere sweaters ($ 79.90). The company claims that it does not follow fashion fads but, instead, reserves factory capacity and produces steadily year around. This manufacturing enables low prices in constrast to the chase trends and last minute production strategy. Given the fickleness of fashion, will Uniqlo’s strategy also demand a lower margin because their clothese may not be in fashion ? Is the risk of being wrong regarding trends balanced by the lower prices and this more assured demand levels ? Is the sharing of demand across their global retail base enable fashion demand risks to be mitigated ? Given their planned rapid expansion in the US to $ 10 billion in sales by 2020 from $ 1.07 billion now, do you expect their strategy to enable them to succeed ?

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Global Twinning with a Belgian plant to improve a US steel mill

Posted on May 22, 2012 by aviyer2010

An article in the Wall Street Journal (May 21, 2012) describe an approach called twinning, pairing a weaker and stronger plant to share productivity improvement methods, and thus increase productivity. ArcelorMittal paired their Burns Harbor plant in Indiana with a highly automated facility in Gent, Belgium. The goal was for Burns Harbor to implement techniques from Gent to match its productivity. This required employee exchange, shifting from pencil to computer, computerized poruing of liquid iron etc. The result – Burns Harbor is at 1.32 man hours per ton, second only to Gent at 1.25 manhours per ton and more efficient than the US average of 2 manhours per ton. How does twinning speed up productivity improvements across plants, and should it be accompanied by appropriate incentives to be successful ? Given that the better plant will continue to improve, does twinning create a continual race to be better and thus help both plants ? Given that the productivity improvement at Burns Harbor had to be accompanied by headcount reduction to increase profitability, how should the improvement process be sustained ?

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Will parents pay more for US made baby cribs ?

Posted on May 22, 2012 by aviyer2010

An article in the Wall Street Journal (May 22, 2012) describes a decision by Stanley Furniture to move production of its baby cribs to Robbinsville, NC from China. Four reasons cited are (a) the worries about poor quality products (think pet foods, lead paint in toys etc) from China and it impact on children, (b) increased productivity in the US plant with automation playing a role, (c) grandparents sharing in part of the purchase costs, thus justifying a higher spend and (c) a large selection of over 85 colors. The company moved production to the US despite a hourly wage in Asia of 63 cents per hour vs a US wage from $ 10 to $ 18/hour. But the expectation is that consumers will pay $ 700 for a crib that could otherwise be sold for $ 400 if imported. Will safety considerations be sufficient to convince a large enough group of consumers to pay for the US made crib ? Given the continued focus on productivity required to justify US manufacturing, how will the shift in costs from labor to capital impact the firm ? How will the efficient manufacturing of the greater variety be managed in the US, or will it require longer delivery lead times ?

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The logic for making $ 39 hand mixers in the US

Posted on May 22, 2012 by aviyer2010

An article in the Wall Street Journal (May 22, 2012) describes a decision by Whirlpool to move production of its hand mixers, that retail for $ 39, back to its plant in Greenville, Ohio. This decision was despite US wages of $ 12.40 to $ 16.50 per hour compared to $3.40 to $ 3.50 per hour in China. But the US plan has an hourly production rate 24 % higher than when the product was outsourced and generates one mixer every 30 seconds. It is also produced in a plant that makes KitchenAid stand mixers, a premium product that was always produced in the US. In contrast, a competitor, Hamilton Beach, continues to source in China. Is Whirlpool’s choice an artifact of the existence of the premium KitchenAid stand mixer plant or could it be justified even without the existing plant ? Given that many products now have a low labor content, will factors other than labor cost determine the sourcing location in the future ? Given the higher productivity required in the US plants, and the small number of resulting jobs (i.e., 25), will such manufacturing shifts be significant enough to impact overall employment levels ?

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Nature’s closed loop supply chain at the Palmyra Atoll

Posted on May 19, 2012 by aviyer2010

An article in the New York Times (May 19, 2012) describes a closed loop supply chain fosterd by nature. Birs, in this case red-footed boobies, nest high on the trees and feed on fish and squid. Their waste, guano, is rich in nutrients and falls to the gorund and nurtures the forest. Rains wash these nutrients to the coastal waters and thus feed plankton. The fish feed on the plankton and are a source of nutrients for the birds, thus closing the supply chain. What lessons can these sustainable closed lop supply chains fostered by nature provide for industrial supply chains ? Given nature’s resilience, should one expect these links to adapt to human intervention, such a pollution, or collapse as a result ? Should the focus be on protecting the weakest link in this supply chain to nurture its continued survival, and, if so, how should laws be enacted to protect such links ?

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The direct to consumer farmers market sales

Posted on May 19, 2012 by aviyer2010

An article in Bloombergbusinessweek (May 21, 2012) describes the move by farmers to sell direct to the consumer in farmers markets – now accounting for 2 % of US farm sales. Since retail prices are often four times the price received by farmers, this direct to sonsumer model enables farmers to change their product from being commodities to now linked to specific farms as branded items. Will this direct to consumer model, which decreases the purchase flexibility for consumers, enable a more equitable distribution of profits across the produce supply chain ? Will the net margins for farmers, given their responsibility for perishable inventory until sales, increase ? Will these direct to consumer sales enable farms to brand their produce and command higher prices ?

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Including the pesticide in the paint to fight malaria

Posted on May 19, 2012 by aviyer2010

An article in Bloombergbusinessweek (May 21, 2012) describes a microcapsule technology to embed pesticides in paint developed by Inesfly Africa – a Spanish company. The technology embeds a mix of pesticides in microcapsules and releases them slowly – thus decreasing drug resistance while preventing the ingredients from interacting. The goal of the company is to produce in Ghana, this lowering costs and increasing the availability of the paint. Given the longer life cycle of this paint – two to four years – how should the costs be subsidized to enable adoption ? The company now aims to produce at a profit and donate its profits for humanitarian efforts rather than donating the paint – do you accept that logic as encouraging more adoption and impact ? Given the reluctance in using treated bednets, will this technology enable more widespread adoption and thus a greater success in decreasing malaria, dengue fever etc ?

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