What are GM’s choices for the Opel plant in Bochum, Germany ?

Posted on April 3, 2012 by aviyer2010

An article in the New York Times (April 2,2012) describes worker frustration at GM’s Opel plant in Bochum, Germany, with worries that it will be shut down in 2014. Wages at the plant are six times the wage rate in GM’s plant in nearby Poland. Shutting down the plant will cause GM to incur cleanup costs for the former coal mine site, and high severance payments. The plant produces a popular minivan, the Zafira, but the company has made no investments in the past few years, and the two story plant layout is not as efficient as a single floor. Should GM keep the plant open to save shutdown costs ? Should new investments be subsidized by the local or central government to preserve jobs ? Should employees offer productivity improvements to keep the plant alive ? How should this plant justify itself in GM’s global supply chain ?

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The reuse vs recycling decision at Starbucks

Posted on April 2, 2012 by aviyer2010

An article in Sustainable Brands (http://www.sustainablebrands.com/news_and_views/articles/starbucks-increases-recycling-backs-away-reusable-mugs?utm_source=newsletter&utm_medium=businessweekly&utm_campaign=april2) describes a decision by Starbucks to shift from reuseable to recylclable cups. Reuseable mugs were related to a 5 % increase in water usage in 2011, after and 17 % drop from 2008 to 2010, so the company decided to lower its target use of reuseable mugs from 25 % to 5 % by 2015 (the current level is 1.9%). Should the reuse vs recycling debate include the impact of water usage in addition to greenhouse gas impact etc ? Should Starbucks planned use of 100% renewable enrgy by 2015 be considered in conjunction with its container choice and design to assess progress towards sustainable service provision ? To get to the target of 100 % recycling, how should the responsibility for provision of recycling bins be shared between Starbucks and municipalities ?

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The risk in Apple’s IP protection and litigation strategy

Posted on April 1, 2012 by aviyer2010

An article in Bloombergbusinessweek (April 2, 2012) describes Apple’s jihad against Google, Samsung, Motorola and their Andrioid powered hardware devices. But each specific IP case dredges up prior art – work by other several years ahead of Apple, thus casuing the firm to loose its claim of superior design and software. But it also damages the software and design driven firm’s relations with Samsung – producer of $ 7 billion worth of parts, chips, screens etc. Does Apple’s IP focused jihad present a supply chain risk for the firm ? Will successive rulings that go against Apple make the company more like every other, thus damaging the brand premium that customers are willing to pay ? Will faster innovation, rather than slowing down competitors be the only defendable competitive strategy for Apple ?

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How many hours should Chinese workers work at Foxconn’s plant ?

Posted on April 1, 2012 by aviyer2010

An article in the New York Times (March 31, 2012) suggests that only 18% of the Chinese employees at Foxconn’s plant have complaints about working longer than the Chinese government mandated maximum of 49 hours each week, with overtime for any hours worked over 40. About 48% of employees claimed the current hours were reasonable, 34% preferred to work longer hours, with many claiming that their single status and lack of alternatives meant that they preferred to made it easier for them to 60 hours to earn more money. Do you accept the logic from the Chinese government that workers will not be able to refuse management’s request to work longer hours, thus requiring a cap ? Should workers who want to work longer hours be permitted to do so, if the laws adjust and it is legal ? Given that the overtime hours were used only because of labor shortage, how should Foxconn manage compliance – will higher wages resolve this issue ?

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The collapse of Sony’s interest in Sharp’s Sakai plant

Posted on March 29, 2012 by aviyer2010

An article in the Wall Street Journal (March 29, 2012) describes a collapse in Sony’s interest in Sharp’s Sakai plant, whose production of high end LCD displays was expected to decrease costs for Sony, and garnered a 7 % investment from Sony. But when demands for TV sets increased due to a Japanese government incentive to switch to digital broadcsts, Sharp’s low yields prevented a reliable supply. But by the time yields increased, prices of LCD panels from other suppliers crashed, thus diminishing Sony’s interest in the plant. The result – Sony now feels it should get out of any further investments and sell its stake. Is this a case of a supply option that got undone by low yields at the plant ? Will the resulting observed risk and thus need by Sharp to to sell a stake to a Chinese manufacturer, Hon Hai, increase retail pressure on Sony ? How should capacity investments be structured to anticipate possible yield risk ?

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Ban “pink slime” or let the market decide ?

Posted on March 29, 2012 by aviyer2010

An article in the Wall Street Journal (March 29, 2012) describes a move by supermarket chains to ban ground beef containing “pink slime”, an additive made from leftover beef trimmings, that is used as a filler in beef. Iowa’s governer is reported to say that banning pink slime will mean the killing of 1.5 million head of cattle to maintain current production. Should retailers offer beef with and without the filler and let the market decide ? If the increased use of pink slime is a way to keep prices low and food affordable, but it is deemed unhealthy, should regulations be passed to prevent its use ? How should the supply chain impact of this filler be anticipated and managed ?

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The ripple effect of Foxconn’s changes

Posted on March 29, 2012 by aviyer2010

An article in the New York Times (March 29, 2012) describes widspread violations discoverd by the Fair Labor Association, hired by Apple to audit its suppliers, at Foxconn. The supplier, Foxconn, has committed to adhere to Chinese law, which restricts factory employees to work less than 49 hours each week (compared to 60 hours a week), while maintaining their wage levels. The impact is expected to increase labor costs, require more employees, and impact all consumer electronics manufacturing. Will these changes by Foxconn increase prices of electronic products or will it cause OEMs to cut their margins to maintain prices ? Will the improved compliance in China increase the magnitude of the manufacturing in China ? How will these increased wage rates ripple across all manufacturing in China ?

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Uniqlo’s global expansion

Posted on March 28, 2012 by aviyer2010

An article in the Economist (March 24, 2012) describes the Japanese retailer’s expansion into the US and China. The company focuses on producing large volume, low cost items that are sold across the season. Given that weather patterns in China are similar to Japan, as are shapes and styles, will the larger global footprint with a Japanese design aesthetic enable the company to generate profits ? Given that Uniqlo’s profits are 33 % of Zara, despite being 60 % of Zara’s sales volume, will this global expansion make the firm more competitive ? Will the global impact of the fashion choices made by the company increase or decrease overall risk ?

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Inditex’s supply chain as it goes global

Posted on March 28, 2012 by aviyer2010

An article in the Economist (March 24, 2012) describes the fact that future growth for the parent company of Zara will come from Asia and the US, rather than the current 70 % of sales in Europe. Zara, known for its fast fashion approach of fast cycle product design and replenishment to respond to trends, as well a production in high cost Europe, has been very successful with its European design base, production and supply chain. But will sales in China require a separate, Chinese supply chain, that can similarly respond to trends in China ? Will a similar be required for success in the US ? Will the idea of short life cycle clothing disappear as consumers look to use accessories (belts are described as one such option) to use clothing for longer periods of time ?

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Using the US Strategic Petroleum reserves

Posted on March 28, 2012 by aviyer2010

An article in the Economist (March 24, 2012) discusses a plan to use the US Strategic Petroluem Reserves to dampen US oil prices. The reserve was set up to provide an inventory buffer against emergencies and has been used after Persian Gulf wars and Hurrican Katrina. But the mere announcment of a plan to use the reserve usually gets prices declining – however, they soon rise back up to their earlier levels. What is the best use of this safety stock to stablize oil prices ? How should natural supply-demand levels be separated from emergencies in the rational use of this reserve ? Is it reasonable to use the threat of release of stocks to influence oil price direction and manage its impact on the economy ?

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