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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The Impact of New Emission rules for power plants

Posted on March 28, 2012 by aviyer2010

An article in the New York Times (March 28, 2012) describes new EPA rules that limit the CO2 emissions of power plants to 1,000 lbs per KWh. The new rules are easy to meet for new natural gas fired plants. They do not apply to old coal fired plants. But new coal fired plants will have 30 years to get their annual average emissions to the new standard. Given that complying with the new standard will involve use of expensive current technology, does the bias of the regulation in favor of the current cheap natural gas source increase the long term risk for this industry ? Should some of the addiitional costs for the new coal fired plants be subsidized by the efficiencies of the new natural gas plants to enable a energy source posrtfolio of power generating facilities ?

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Increased recycling by manufacturers to help themselves and municipalities

Posted on March 28, 2012 by aviyer2010

An article in the New York Times (March 23, 2012) describes plans by Coca Cola to recycle 100 % of its cans by 2015 and by Starbucks to enable paper cup recycling at 100 % of its outlets by 2015. Similarly, Stonyfield Yoghurt offers recycling collection for its plastic yoghurt containers at Whole Foods – these cups are then converted into toothbrushes or razors. The article claims that manufacturers offering their own product recycling choices decreases the load on local municipalities and helps sustain local government during the current economic stress. Will this shift to individual manufacturer collection increase the level of recycling due to competitive benefits ? Will the absence of a common pooled collection put smaller manufacturers at a disadvantage ?

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The impact of natural gas extraction on steel mills

Posted on March 28, 2012 by aviyer2010

An article in the Wall Street Journal (March 26, 2012) describes the doubling of steel tubes, pipes etc in the last two years – thanks to the demand from natural gas extraction facilities across the US. But the abundant supply of natural gas has, in turn, dropped prices for gas by 35 %, thus making it an alternate to coal as a source, and dropping steel production costs. This makes the US steel production competitive and drives demand. At the same time, lower gas prices drives other industrial expansion, from chemical to fertilizer, and can potentially increase steel demand. Given that natural gas competitiveness decreases the incentive for further investments in even less environmental impact sources, should taxes for natural gas be increased ? Should regulations for natural gas extraction be eased knowing that the gas will replace coal and thus generate an overall supply chain benefit ?

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The global supply chain for outsourced services

Posted on March 28, 2012 by aviyer2010

An article in Bloombergbusinessweek (March 19,2012) describes new locations for higher level outsourced work – accounting, research, marketing etc. New locations in Argentina, Guatemala, Poland and Brazil, enable these tasks to be performed closer to the customer, despite being more expensive than India. Knowledge of US business, accents similar to the US, large pools of educated young employees – are described as the reason. Once these outsourced processes are standardized, will work travel once again to locations like India to realize even more savings ? Are the desired skills teachable or do they have to be ingrained ? Will higher speed data networks and video transmission diminish physical distance as the metric ?

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Nike’s knit shoe design and global supply chain impact

Posted on March 28, 2012 by aviyer2010

An article in Bloombergbusinessweek (March 19,2012) describe the flyknit shoe design by Nike – whose upper is knit from thread as one piece, thus saving 35 parts and 66 % less waste. The reduced labor intensive assembly also makes US production more competitive, once transport costs and lead time a accounted for. In addition, shoes can be custom fit easily by being knit to fit like a sock. Will Nike’s new technology bring manufacturing profitably back to the US ? As consumers move to demanding custom fit at close to current prices, will domestic manufacturing lead times provide a competitive advantage ? How will current labor intensive production capacity in China and Vietnam be redeployed ?

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Green jobs in the US Economy

Posted on March 28, 2012 by aviyer2010

The New York Times (March 22, 2012) describes a US government report that claims that there were 3.1 million green jobs in the US economy. Green jobs were defined as those involved in activities that either decrease energy consumption or benefit the environment. These jobs include alternate energy products (e.g., batteries, wind turbines), energy efficient appliances etc. But should any energy efficient product be treated as a green job even if it occurs as part of an industry’s learning curve? Is the generous use of the label an attempt to justify government investments in the environmental sector ? Should employees who produce software to optimize routes and save energy be classified as having green jobs ? Is the growth of such green jobs stimulated by the high gas prices ?

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The forest food chain and noise pollution

Posted on March 28, 2012 by aviyer2010

An article in the New York Times (March 26, 2012) describes the impact of noise pollution on the forest food chain consisting of pinyon pine trees and their pinyon nuts, scrub jays, mice and hummingbirds. Noise pollution seems to drive away scrub jays, that help propagation of pinyon pine by storing their nuts for future consumption. The uneaten hidden nuts provide the seeds for new trees. But, in the absence of jays, mice eat up all the pinyon nuts thus hurting the pinyon tree propagation. But his causes hummingbirds to flourish. Should the impact of noise pollution consider the consequent population imbalance ? Since any choice of acceptable noise pollution impacts the balance of plants and animals, should the current mix be regarded as the desirable standard ? How should companies be incented to endogenize the impact of the noise they generate ?

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