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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Refining capacity mismatch and gas price impact

Posted on March 6, 2012 by aviyer2010

An article in Bloombergbusinessweek (March 5,2012) describes the East coast refining capacity as dependent on Nigerian oil, but the Midwest refineries process higher sulphur content, cheaper Texas crude. Nigerian oil prices fluctuate with MidEast crisis, and thus make East Coast refineries less competitive, thus causing refinery closures. The resulting capacity shortage and transport costs of MidWest gas have all contributed tothe higher gas prices. Will this capacity mismatch get sorted out in few years ? Will future refineries use equipment that can flexibly shift between crude inputs from different global sources, even if startup and operating costs are higher ? Will a planned pipeline to the East Coast resolve these pricing issues faster than current trends ?

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India, China trade flows and market access

Posted on March 6, 2012 by aviyer2010

An article in Bloombergbusinessweek (Feb 27,2012) describes the 43 billion dollars of exports from China to India and the 10 billion exports from India to China. This trade imbalance has resulted in 46 complaints by India to the WTO about Chinese companies.  Does the success of Chinese suppliers suggest a market access issue or just the competitiveness of Chinese companies ? Should the Indian government provide similar assistance to its own companies as it alleges the Chinese givernment does or should it respond by closing its markets to Chinese companies or raise import duties ? Do global supply chains evolve in a balanced manner or should they be expected to evolve in an unbalanced manner across country boundaries ?

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Elpida bankruptcy and supply chain competitiveness

Posted on March 6, 2012 by aviyer2010

An article in the New York Times (Feb 29, 2012) describes the bankruptcy of Elpida, a Japanese DRAM chip manufacturer. Falling PC volumes, competition from South Korean manufacturers have caused prices to drop 85%. With the Japanese govt reluctant to provide additional support and focused more on the impact of last year’s tsunami, Elpida seemed to have few options.  Is this the normal process of global supply chain competition or an exception ? Should the Japanese govt intervene due to a strategic need or is this an expected outcome ? Given that Japanese DRAM component manufacturers had earlier caused the demise of US manufacturers due to their competitiveness, would you expect manufacturing to move further downstream in Japan ?

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GM, Peugeot Alliance

Posted on March 6, 2012 by aviyer2010

An article in the New York Times (Feb 29,2012) describes a decision by General Motors to invest in 7% of Peugeot, creating an alliance. The associated $125 billion spend of the two companies is expected to deliver synergies in the billions, albeit with risks.  Reduction in capacity, common architectures, while maintaining seperate brands – can that deliver the desired synergies ? What are the associated supply chain risks in this alliance ?

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California’s Supply Chain Transparency Act and Enforcement

Posted on March 6, 2012 by aviyer2010

An article in Bloombergbusinessweek (Feb 27,2012) describes the California Supply Chain Transperancy Act requiring retailers with more than $100 million in sales to ensure that their supply chains do not involve slave labor. But  the article reports allegations of slave like conditions for Indonesian laborers aboard Korean fishing trawlers, that sell fish to Australian distributors.  Because the catch is comingled, retailers are unable to track their product back to the trawler.  Should retailers be required to develop tracking systems to guarantee compliance ? Is it sufficient for retailers to sign a contract wih distributors to ensure compliance or should they be required to confirm compliance by monitoring operations ?

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Fastenal’s variety competition

Posted on March 6, 2012 by aviyer2010

An article in Bloombergbusinessweek (Feb 27, 2012) describes the greatest growth compan since 1987 as Fastenal, a distributor of fasteners. Fastenal’s 10,261 pages of fasteners provides the greatest variety of fasteners, available at 2,600 outlets.  Does variety provide a distributor with a competitive advantage in small margin, low cost but high variety items ? Given sourcing flexibility, would service be a barrier to entry for other distributors and enable it to charge a premium ?

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iPad Accessory makers and race to be ready for the new version

Posted on March 6, 2012 by aviyer2010

An article in USA Today (March 6, 2012) describes a race by accessory makers to be ready with products for the new iPad 3, debuting on March 7.  The market for iPad and iPhone accessories is estimated to be $ 2.3 billion, with a market penetration to 90 % of device owners. But the secrecy surrounding the new product and its dimensions, and the large benefit to being first, means that suppliers have to risk creating product inventories in advance of product specifications.  Should Apple maintain such secrecy to create a competitive market for accessories ? Does this approach provide an advantage to Apple created accessories ? What is the correct timing of product information sharing that would be best for the overall supply chain ?

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