The impact of post office cost and rule changes

Posted on March 28, 2012 by aviyer2010

An article in the New York Times (March 26,2012) describes how different industry sectors might be impacted by decisions made by the post office. Greeting card manufacturers and drug distributors claim that increased post office rates will decrease their demand and make them less competitive. But beer and wine distributors want to permit delivery by the post office, thus decreasing their delivery costs. How should the post office adjust its rates while anticipating the possible demand impact on different sectors ? Should current industries who get a break in delivery costs be provided assistance from the Federal government ? Should the post office decision just be based on covering post office costs ?

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“Pay for response” model for drug payment and consequences

Posted on March 18, 2012 by aviyer2010

An Op-Ed by Sam Waksal in the New York Times (March 7,2012) suggests a pay for response model for drug payments, where the measurable impact of drugs would trigger payments. The author claims that such payment schemes would incent drug companies to invest in understanding when drugs do not work and incentivize targeting drugs to specific patient characteristics. But will such schemes decrease overall drug costs or increase payments from patients who experience successful outcomes ? Who should decide on which measurements determine success, the drug company, the health insurer or the FDA ? Given such payment schemes, will patients not assured of good outcomes be denied the probability of cure ?

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How many US jobs did Apple create ?

Posted on March 18, 2012 by aviyer2010

An article in the New York Times (March 7,2012) describes a report by Apple claiming go have created 517,000 US jobs. While the number includes jobs created at glass panel and chip manufacturing plants at Corning and Samsung, it also counts the package delivery jobs created at FedEx and UPS. The study estimates that 40 package deliveries a day require one person to be hired. Is it reasonable for Apple to count delivery jobs created by its packages as part of its supply chain job creation impact ? How about retail or repair or apps created for its products, are those reasonably attributable to Apple ? Should one identify the marginal jobs created, net of those replaced by Apple’s technology ?

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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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