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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A New Pentagon lab and better gas mileage for cars

Posted on May 19, 2012 by aviyer2010

An article in Bloombergbusinessweek (May 21, 2012) describes a new Pentagon lab in Warren, Michigan to test alternate fuels, improve energy efficiency of parts amd thus improve tank designs. But the same technologies may assist automakers trying to increase their mileage to the madated 54.5 mpg by 2025. The army’s lab aims to improve part designs like radiators, air filters etc that drain energy, recapture wasre heat and convert it to electricity etc. Should such innovations be shared with the industry or be licensed to generate income for the government ? Should the industry be required to share in the costs so as to save taxpayer funds or participate in the research as award grantees ? How should taxpayers be permitted to recover the benefits to industry from the US government sponsored research – should it be a shared free good to improve the environment or otherwise ?

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The ripple effect of auto sales on the supply chain

Posted on May 19, 2012 by aviyer2010

An article in Bloombergbusinessweek (May 21, 2012) describes the growth in auto sales to 2008 levels (14 million) – back to 2008 levels – and its ripple effect across the supply chain. Tooling and ficture manufacturer Apex Tool claims growth, as does fuel system tuneup kit manufacturer 3M, railroads that transport cars, car interior manufacturer Faureica and the credit arm of VW Credit. In short, increased car sales grows the economy $ 2.02 for every $ 1 spent. But the low inventory to sales ratio of 1.9, as agianst a level of 2.4 in 2008, suggests that increased sales will be passed through as increased production to keep pace. Does the low inventory in the auto supply chain suggest increased volatility that has to be borne by supply chain participants ? Given a volatile demand, with low inventory buffers, will margins erode ? Will the impact on restaurants and other services generate an even larger supply chain impact across the economy ?

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Lost opportunity for Pakistan’s textile mills ?

Posted on May 18, 2012 by aviyer2010

An article in Bloombergbusinessweek (April 30,2012) describes Pakistan’s textile industry as one of the world’s largest,employing 20% of the country’s labor and $14 billion in exports. But in the Pakistani city of Faisalabad, that produces 50% of the output, power cuts for days at a time and shortages of natural gas have caused 50% of the power looms and 10% of the spinning mills and fabric printing mills to shut down. Given the opportunity to benefit from textile sourcing moving out of China because of rising wages and the appreciating yuan, these energy issues have dampened growth in Pakistan. Instead, Bangladesh and Cambodia have prospered. Should retailers step in to solve the power problem or just move to another supplying country ? If power disruptions imply the need for expensive generators, should they be provided by the government as a stopgap while power stations come online ? Or should Pakistan’s producers target the higher margin products that can pay the higher rates in return for artisan level production ?

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Dealing with rising prices of “down”

Posted on May 18, 2012 by aviyer2010

An article in the Wall Street Journal (May 8,2012) describes the impact of rising prices of goose down ($12 per pound in 2009 to $28 now) and duck down ($9 to $19). The driver of these price increases range from less farming in China as people move to cities, increased consumption of meat and fish and not duck and geese. Some retailers are switching to more duck down to maintain prices, others are increasing prices 50 to 60%. Yet other retailers are either using synthetics or wool. Will product adjustments be the approach to deal with price increases of down, or are retailers better off passing along higher prices ? Will the substitution of synthetics result in a permanent demand reduction for down, thus lowering prices ? Do you expect production in other countries to increase to compensate for China’s reduced production ?

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Amazon’s fashion plans

Posted on May 18, 2012 by aviyer2010

An article in the New York Times (May 8,2012) describes Amazon.com’s plans to sell more fashion product, with the logic that shipping costs are independent of item price and thus fashion goods offer greater margin. Amazon does not plan to ask for markdown money when items do not sell, it plans to have no returns of leftovers, will pay a wholesale price and decide retail pricing and offers, at times, to take the entire collection. Will Amazon.com’s ability to spend its over $5 billion to improve its website and use analytics to target consumers make it the retailer to beat ? Should fashion manufacturers develop separate assortments and colors for Amazon to protect physical stores ? Will fit and coordination of looks put Amazon at a disadvantage or will it adopt the Zappos (now owned by Amazon) model of flexible returns after trying on many alternatives solve that problem ?

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Target pulls Kindles from its stores in a spat with Amazon

Posted on May 18, 2012 by aviyer2010

An article in the New York Times (May 3,2012) describes a decision by Target to stop selling Amazon’s Kindles in its stores. The article describes worries by Target that “showrooming” – a practice of scanning items in the store to get online discounts (like the Price Check app by Amazon that offered 5% off up to $5 for scanned item and prices from stores) hurts the retailer. But Kindles continue to be sold at other retailers, and the app can be run on any smartphone. Does this decision hurt Target or Amazon, given the relatively small number of units sold by Target ? How can physical stores combat the power of e-tailers, given their inherently larger cost to own and display local inventory ? Target’s letter to vendors recommends that they consider assortments and inventories offered to physical retailers, is it in the self interest of vendors to differentiate between Amazon and Target ?

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Figuring out if Chinese solar panel manufacturers are dumping in the US

Posted on May 18, 2012 by aviyer2010

An article in the New York Times (May 16, 2012) describes possible countries whose cost structure could be used to estimate costs in China. In the past, costs in India i.e., labor, material, rent, electricity have been used as a surrogate. But recent US Commerce department rulings have listed Thailand, Colombia, Ukraine and the Philippines as surrogate cost estimation sources. The US solar industry now demands that costs in Thailand be used to decide if the Chinese solar panels are being dumped. But Chinese manufacturers now demand that the economies of scale of solar panel production suggest that India should be used as a basis. Is there a fair process to estimate costs using other country data and should that country be declared in advance ? Is it reasonable to shift the basis country depending on the product ? How should economies of scale of production be combined with the country’s cost structure in general to determine suitable basis cost structures ?

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