Bangladesh – an emerging apparel manufacturer ?

Posted on April 26, 2012 by aviyer2010

An article in the New York Times (April 23,2012) describes the doubling of apparel exports from Bangladesh, compared to four years ago. Li & Fung, a manufacturer of apparel increased its procurement to over $1 billion in 2011, a 41% increase over the previous year. But will the disruptions and costs due to power cuts, potholed roads etc be compensated by the low wage rates compared go China ? Or will the growing middle class, and a growth rate of 6%, generate domestic consumption that justify sourcing in Bangladesh ?

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

Coal supply issues, power supply and supply chain impact in India

Posted on April 26, 2012 by aviyer2010

An article in the New York Times (April 19,2012) describes coal supply difficulties in India due to price controls on power, rising prices of Indonesian coal and lack of incentives to use natural gas. The impact – erratic power supplies that cause production to adjust to accomodate, thus increasing costs, or incur the higher costs for use of diesel fueled generators. The associated impact is blamed for a drop in India’s growth rates from 10% to 7%. Should Indian manufacturers accept power generated from generators as their stable source and thus increase their energy costs for production ? Should coal supplies that are imported be subsidized by the Indian government to guarantee power supply – an infrastructure role similar to transport ?

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

Toys “R” Us retailing challenges – competitor impact

Posted on April 15, 2012 by aviyer2010

An article in the New York Times (April 7,2012) describes competitors to Toys”R” Us, and the resulting sales challenges. Target and Wal-Mart have slashed toy prices, with Wal-Mart allowing layaway. Amazon.com continues to be aggressive in the toys category while also attacking diaper sales. Sales of electronic games like Nintendo have declined as kids switch to apps. Toys “R” Us has responded by increasing its share of private label (of KB Toys and FAO Schwarz brands it owns) to 50 % of sales and using pop-up stores during the holidays to permit shopping convenience. What credible competitive choices can Toys “R” Us make to survive ? Can custom toys or Build-A-Bear type options enable the store to become a destination ? Or should the company move to toys rental – similar to Toygaroo ?

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

Wal-Mart, the Environmental Defense Fund and sustainable supply chains

Posted on April 15, 2012 by aviyer2010

An article in the New York Times (April 14, 2012) describes a partnership between the Environmental Defense Council (EDF) and Wal-Mart, as the retailer attempt to make its supply chain more sustainable. Wal-Mart would like to get to zero waste, 100% alternate energy and 20 % reduction in greenhouse gases and double its fuel efficiency. While EDF will have no contributions from Wal-Mart or other corporations, Wal-Mart’s improvements and direct measurement of its success provide tangible improvements to the environment. Wal-Mart claims an 80% recycling of waste, 60 % improvement in fuel efficiency from 2000 levels, 12.8 % reduction of greenhouse gases and 15 % renewable energy use. If Wal-Mart’s efforts decrease consumer costs and results in even more consumption, should that be treated as a sustainable supply chain ? Given that consumers seem to like sustainable products, but are not willing to pay the price, should these savings be used to pay for the potential cost increases, if any, for bio-friendly products ? Do you see the goal of these efforts to enable Wal-Mart to be positioned as a consumer destination i.e., are these efforts a more effective advertising approach ?

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

Service constraints abroad and market access impact

Posted on April 15, 2012 by aviyer2010

An article in the New York Times (April 10,2012) describes restrictions on flight paths for UPS in China, and the consequent service disruption due to bad weather. The lack of route flexibility thus impacts service guarantees offered by UPS. Given that unreliable delivery hurts product and service competitiveness, should this service constraint be treated as an export tax on US goods ? Similarly, if US insurance companies were restricted to one territory per year in China, and thus not able to follow their clients across the country, does that hurt US goods ? In short, should the US government focus on constraints on service companies as a tax on manufactured exports ?

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

The potential impact of capping patient co-pay on drug prices

Posted on April 15, 2012 by aviyer2010

An article in the New York Times (April 12,2012) describes efforts to cap the patient co-pay amounts to shield them from he high cost of specialty drugs – that account for 1% of the units sold but 17 % of the cost. Opponents claim that the only beneficiaries will be pharmaceutical companies, who will be shielded from the demand impact of their costs. But others claim that this will put pressure on health insurance companies to adjust their margins. Will caps on patient co-pays prevent customers from being forced to forgo treatment or will they decrease availability of such treatments altogether ? Are pharmaceutical companies let off the hook by such rules ? How should one infuse competition in these markets, given the high research costs for discovery and approval of these drugs ?

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

Did Apple’s agency model for ebooks enable collusion ?

Posted on April 15, 2012 by aviyer2010

An article in the New York Times (April 12, 2012) describes a Justice department lawsuit accusing Apple and five publishers of e-books price fixing. Given declining e-book prices, five large publishers agreed to an “agency model” of pricing whereby Apple was paid 30% of retail, with publishers setting prices. Apple also got a “most favored nation” clause so that no other retailer could sell e-books for less. The result was higher prices, which, Amazon.com claims, was forced on them. But authors and publishers claim that the models enabled them to maintain reasonable margins upstream. Are the approaches by Apple an attempt to coordinate the channel or derive an unfair advantage and dampen retail competition ? Why would higher retail prices and 30% margin hurt Amazon.com – is it because of the lower demand levels or the reduction in the margins that Amazon gets from cross selling other products ? Will steps by the Justice department ultimately be bad for consumers due to lower book variety associated with prices that are too low ?

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

“Good African Coffee” – its supply chain and sustainability

Posted on April 8, 2012 by aviyer2010

An article in the New York Times (April 8,2012) describes the efforts by Good African Coffee – a company that roasts coffee grown in Uganda, and brands the coffee rather than sell commodity coffee beans. Going up the value chain of coffee requires higher yields, better growing techniques, roasting equipment, cupping to separate tastes etc. But it also improves the food eaten, houses lived in, opportunities for education etc for farmers, and replaces aid with trade as the driver for change. Should Good African Coffee’s supply chain be described as being sustainable ? Should efforts such as this be included in a definition of sustainability – beyond purely environmental metrics ? Given that trade can leverage the impact of aid, should aid be used to subsidize the capital equipment required to move up the value chain ?

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

Pepsico’s “water positive” schemes and Jugaad Innovation

Posted on April 8, 2012 by aviyer2010

In a book titled “Jugaad Innovation”, Radjou, Prabhu and Ahuja write about Pepsico’s water positive supply chain in India i.e., the company saves more water than it uses. The secret – enabling “direct seeding” rice planting, thus saving 70% of the water use, and using local village innovators and low capital intensity solutions, called Jugaad innovation. Given that this water saved exceeds water use in the rest of the company’s operations in India, they are termed water positive. Should efforts by a company to create savings that net out its use be a permissible definition of water positive supply chains ? Is the logic the same if a firm were to purchase “water credits ” or “carbon credits” to net out its carbon or water usage ? How important is the need for these innovative approaches to reduce environmental impact to be low capital intensity projects ?

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

China’s export mix and target region shifts and global impact

Posted on April 8, 2012 by aviyer2010

An article in Bloombergbusinessweek (April 9,2012) describes a shift in China’s exports towards heavy machinery, cars and ships from shoes, consumer electronics and clothing. Inland locations with abundant labor, targeted government loans and a focus on emerging markets like Brazil and India have resulted in a decrease in exports to Japan, US and Europe from 56% down to 48%. Chinese companies have a 41% share in ships, and the composition of heavy equipment in exports has increased from 29% to 39 %. How will US companies like Caterpillar and GE be impacted by these changes ? How will the lower priced Chinese capital goods increase the competitiveness of emerging economies ? Will Chinese financing of these purchases increase overall manufacturing global competitiveness ?

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