Will Apple succeed in changing supplier working conditions ?

Posted on March 18, 2012 by aviyer2010

An article in the New York Times (March 7,2012) describes pressures to improve Apple’s supplier, FoxConn’s working conditions, and the comparison to apparel supply chains. Unlike apparel supply chains, Apple’s products have higher margins, require quick response to design adjustments, and rapid delivery. Can Apple accomplish supply chain outsourced labor conditions improvements while retaining supplier capability Unlike apparel supply chains? Or will it be optimal for Apple to switch to some other country which has better enforcement of labor conditions or subsidized facilities ? Will the pressure to monitor its supply chain justify US manufacturing ?

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Minimum wage hikes across China and impact

Posted on March 18, 2012 by aviyer2010

An article in Bloombergbusinessweek ( March 12,2012) describes minimum wage hikes of 9% in Beijing, 14% in Shenzhen and 35% in Henan. Given the Chinese system where minimum wage is a local decision, and local demand supply conditions demanding such adjustment, what should US manufacturers currently sourcing in China do ? Should manufacturing be moved to inner China locations with lower wages but higher transport costs ? Should production be moved to other countries, even then US as a possibility ? Will such minimum wage mandates resolve the accusations of sweatshop conditions that are being waged against manufacturers like Apple ?

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The Jones Act of 1920 and today’s gas prices

Posted on March 18, 2012 by aviyer2010

An article in the New York Times (March 11,2012) describes the impact of the 1920 Jones Act, that mandates use of US carriers, with US built ships and employing US cargo, for domestic cargo transport by sea. Thus, US oil that is moved to domestic destinations costs more to move using US based carriers, both because of lack of capacity and higher charges for transport. Thus, gas prices in the Northwest have not gone down as quickly as otherwise, even when US production in North Dakota has increased and West Texas intermediate crude prices are lower. Should the US suspend the Jones Act to lower gas prices ? Should attempts be made to require domestic carriers for all imported oil, to level the playing field ? Should smaller barge carriers be incented to expand capacity to increase competitiveness ?

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Multiple suppliers for the new iPad’s components

Posted on March 18, 2012 by aviyer2010

An article in the Wall Street Journal (March 16,2012) describes a teardown of the new iPad – and shows multiple suppliers for memory chips and the high resolution display. Chips are provided by Qualcomm, Broadcom and Elpida, for example. Will the split of volumes across multiple suppliers increase Apple’s negotiating power over prices or decrease it given lower volumes for each supplier ? Is this a strategy to decrease supply risk (in response to the Japanese earthquake or Thai floods), and will it thus decrease average costs over these scenarios ? Given more suppliers, will you expect the components to be have more standard specifications, thus potentially impacting Apple’s competitiveness ?

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Boeing, Delta disagree regarding global supply chain impact

Posted on March 18, 2012 by aviyer2010

An article in the Wall Street Journal (March 16,2012) describes an attempt by Delta to cut the extent of loans provided by the US government financed Export-Import bank to Boeing’s potential customers. While these loans help Boeing grow its exports, they also strengthen Delta’s competitors like Air-India, whose pricing has driven down margins on long distance routes fro he US to India. While reduced US financing helps Boeing, does it hurt Delta more than competitive financing provided to Airbus by European governments ? Will reduced Boeing customer funding merely get foreign airlines to switch to Airbus ?Overall, how should the global supply chain impact of US govt financing on business competitiveness be analyzed ?

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Forced Drug patent licensing in India

Posted on March 18, 2012 by aviyer2010

An article in the New York Times (March 18,2012) describes a decision by the Indian government to make Bayer compulsorily share its patent for a kidney cancer drug with the Indian firm, Natco Pharma, in return for 6% royalty. Bayer’s defense was that another Indian firm, Ciple, alady made a generic version – but Bayer was simultaneously suing Cipla.  Should the argument by the indian government to require consideration of consumer willingness go pay, rather than cost recovery by the inventor, appropriate ? Could compulsory licensing while accepting patent laws, an appropriate soverign choice, disrupt the global supply chain pricing for pharma companies ?

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US low manufacturing wages and global supply chain impact

Posted on March 18, 2012 by aviyer2010
 An article in the Wall Street Journal (March 17,2012) describes manufacturing wage rates in Indiana of $12/hour with no unions in Muncie, IN, compared to twice that rate in Caterpillar’s Canadian plant. The impact – closure of the Canadian plant and expansion of the Muncie plant. Is this low wage, no union, low state corporate tax rate competitive success for US manufacturing a sustainable advantage ? Will these lower wages and smaller tax base enable local governments to maintain required services – and will voters vote with their feet as the economy improves ? Do you expect low wages and worker schedule flexibility to become the norm for US manufacturing employment ?
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Mexico auto exports to Brazil capped to settle a trade spat

Posted on March 18, 2012 by aviyer2010

An article in the Wall Street Journal (March 16,2012) describes Mexican auto exports growing to 20% of all imports into Brazil. Recent agreements between the countries have planned an auto import limit of $1.6 billion, down from the current $2.1 billion. With cars in Brazil costing twice that in Mexico, high Brazilian currency exchange, high tax rates in Brazil, these caps will lmit the options available to consumers in Brazil. But will this agreement cause even smaller cars to be shipped to Brazil, thus increasing price pressures within Brazil? Will these caps increase the pressure for changes to Brazil’s tax structure ? How is it that imports from other Mercusor countries to Brazil have not kept pace, is it mainly a currency effect ?

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The supply chain impact of minimum wage increases in China, Vietnam and Indonesia

Posted on March 18, 2012 by aviyer2010

An article in the Wall Street Journal (March 14,2012) describes the impact of wage increases in China on Charming Shoppes, owner of the Lane Bryant, Fashion Bug and Catherine labels. In addition to wage increases, the company realized that 60% of the employees (2000 in all), at one of their plants did not return after the New Year visit back to their villages. The company started moving production to Indonesia and Vietnam, but their wages are now going up 10-12%. The next option – Egypt and Jordan, countries with dutyfree agreements with the US. How should apparel companies plan in a world where rising wages create aspirations across developing countries ? Should apparel supply chains develop a portfolio of capacity, distributed across countries, to hedge against such sudden shifts ? Will countries with policy consistency now have an edge in attracting foreign manufacturers ?

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Sharp’s delivery delays and Samsung’s competitiveness with Apple

Posted on March 18, 2012 by aviyer2010

An article in the Wall Street Journal (March 14, 2012) describes delivery delays for Sharp’s LCD screens for the new iPad.  The new screens were planned to be higher resolution with lower energy consumption. This makes Apple depend on Samsung for iPad screens, increasing Samsung’s power over Apple. Will such dependence decrease the bargaining power of Apple in is legal tussle with Samsung over smartphones and tablets worldwide ? Does delivery delay decrease the potential future share of Apple’s orders to Sharp, or is Sharp shielded from such penalties by the supply base for such displays being restricted to just a few global players? Given that Sharp’s delays are impacting iPad deliveries, does this provide an opportunity for Samsung to win market share with its Android based tablet ?

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