Mongolia’s rapid growth and logistics options

Posted on January 31, 2012 by aviyer2010

An article in the Economist (Jan 21, 2012) describes the rapid growth of Mongolia’s coal mining industry, with output expected to grow from 16 million tons in 2013 to 240 million tons by 2040. Worried about being too dependent on China as a customer, plans are afoot to build rail line to take the coal to Russia and then to Korea and Japan. Other plans include taking the coal to the China-North Korea border and then to South Korea.   Will the abundant supply of coal suggest usage at location to produce electricity or other product that consumers electricity ?  Given the logistical challenges, are estimates of such rapid Mongolian growth merely vaporware ? Given the worries about coal and its pollution impact, will world demand for coal dampen the enthusiasm of the miners over time ?

Posted in Global Contexts, Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , , , , | Leave a comment

Traffic jams in New York City and coordination options

Posted on January 31, 2012 by aviyer2010

An article in the Wall Street Journal (Jan 30, 2012) describes the impact of customer delays on the US economy as $ 100 billion, 0r $ 750 per commuter.  But adding taxis is estimated to increase congestion – the equivalent of adding 40 private cars, as does expanding roads.  One alternative described is congestion pricing – which would incent deliveries to grocers, department stores etc to occur in cheaper off peak hours.  But will congestion pricing have to be preceded by investments in mass transit to convince commuters to switch ? Will the need to deliver at nonstandard hours increase costs for retailers even as it decreases congestion costs ? How should consumers be made to absorb the pollution externality associated with their driving decisions ?  Will changes in the pricing of road access cause higher finished goods inventory, thus driving up working capital requirements ?

Posted in Collaboration, Operations Management, Service Operations, Supply Chain Issues, Sustainability | Tagged , , , , , , | Leave a comment

WTO disapproval of China’s use of GATT to justify export controls of metals

Posted on January 31, 2012 by aviyer2010

An article in the New York Times (Jan 30, 2012) describes a decision by the World Trade Organization (WTO) against China’s use of export controls for zinc, bauxite etc t0 incent manufacturers to locate plants within China.  Use of GATT (General Agreements on Tariffs and Trade) to justify these export controls based on scarce resources or environmental reasons were rejected.  China was thus claimed by the WTO to use export controls to distort international trade.  Will rejection of these export controls increase the odds of a similar ruling for rare earth metals ? Should one expect an increased movement of manufacturing out of China or is the location decision only marginally affected by such restrictions ? Given the growing Chinese consumer demand, will the logic of manufacturing in China in a global supply chain be to sell to the Chinese market and not export it out ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , , | Leave a comment

Supply Chain Coordination issues – Book Publishers, Apple and Amazon

Posted on January 28, 2012 by aviyer2010

An article in Bloombergbusinessweek (Jan 30,2012) describes the conflict between publishers and Amazon.com ebook pricing plans of $ 9.99, the publisher controlled pricing model for sales on Apple’s iPad (termed agency pricing), and the resulting threat to without sales on Amazon.com by Macmillan which caused ebook prices to rise to $ 12.99.  The new threat is Amazon’s plans to start publishing books and competing directly with book publishers.  Is the earlier Macmillan, Apple alliance to drive up prices a collusion in the ebook industry ? Given Amazon’s publishing plans, how will it affect the use of Amazon as a selling channel for publishers ?

Posted in Collaboration, Ecommerce, Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , , , , , | 1 Comment

Danish wind energy production surges and the cost of smoothing supply

Posted on January 27, 2012 by aviyer2010

An article in the New York Times (Jan 22, 2012) describes the power surges due to high winds in Denmark and the payment to other countries to take the energy generated.  Surges in wind and the consequent energy generated are part of the risks in alternate energy sources such as wind and the cost associated with Denmark’s plan to generate over 50 % of its energy from wind. Solutions include storing wind energy by pumping water uphill, building connections with other countries, better forecasting of wind patterns and using using the energy to extract hydrogen that can run fuel cells.  How should the overall cost of wind energy be evaluated, given the need to plan for variability of supply ? Will the Danish wind energy generation target effectively increase the cost of power in denmark overall, given these additional surge management costs ? Should industries that can absorb this power by scaling up usage rapidly be targeted by the Danish government to generate a competitive supply chain solution ?

Posted in Global Contexts, Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , , | Leave a comment

Economies of scale vs risk in concentrating hard drive production in Thailand

Posted on January 27, 2012 by aviyer2010

An article in the New York Times (Jan 20, 2012) describes the quandry faced by hard drive manufacturers in Thailand whose plants were deluged during the floods.  Slow recovery of manufacturing raises the benefit of concentration of this industry (40-45 % of world production by over 60 companies) in Thailand.  Should the benefit of economies of scale and the supply of skilled workes justify the risks of sourcing in one location ? Should hard drive firms create a portfolio of production sources, albeit at different cost levels, to enable sourcing flexibility ? How should the Thai government react to retain the hard drive industry and reassure manufacturers that the sourcing risk is manageable ?

Posted in Global Contexts, Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , , , | 1 Comment

Design for repairability for cell phones

Posted on January 25, 2012 by aviyer2010

An article in Sustainable Brands (http://www.sustainablebrands.com/news_and_views/articles/sprint-pushes-phone-makers-design-reparability?utm_source=newsletter&utm_medium=brandsweekly&utm_campaign=january25) describes a push by Sprint to produce environmental standards for design of cell phones, in partnerhsip with Underwriters Labs (UL). The goal is to develop modular designs so that only the specific broken part is replaced.  A phone by Samsung (Replenish) is the first such certified design. Is the incentive for repairable design for the supplier significantly different from the phone carrier ? If, in the limit, phone can be adpated to new network conditions, how will the supplier remain profitable ? Will modular designs encourage new parts suppliers who will drive down phone costs ?

Posted in Global Contexts, Supply Chain Issues, Sustainability | Tagged , , , , , , , | 1 Comment

Apple’s global supply chain and US jobs

Posted on January 22, 2012 by aviyer2010

An article in the New York Times (Jan 21, 2012) describes Apple’s global supply chain  for the iPhone with suppliers from Germany, Taiwan, Korea, Japan, Europe, rare metals from Africa and Asia and assembly in China. The article highlights the ability of assemblers in China to scale quickly (adjust to screen changes in the iPhone within 96 hours with 8,000 employees ready to work immediately), the availability of over 8700  engineers to guide assembly and the capacity expansion in anticipation of orders subsidized by the Chinese government.   Is Apple’s required supply chain capability far more than cheap labor that would be difficult to replicate within the US ? Is the cost of establishing such supply chains in China reasonable because of specific Chinese policies or the capability of Foxconn, the assembler ? Should social costs of these supply chains be the responsibility of Apple or the sovereign country of the employees ?

Posted in Global Contexts, Supply Chain Issues | Tagged , , , , , , , , , | 2 Comments

WRAP certification and supplier competitiveness

Posted on January 18, 2012 by aviyer2010

An article in the Sourcing Journal (https://www.sourcingjournalonline.com/wrap-surge-demand-compliance-certification-emerging-asian-markets) describes the increasing demand for WRAP (Worldwide Responsible Accredited production) from suppliers in Bangladesh, India, Vietnam and Pakistan, in addition to China. As OEMs are forced to certify their supply chains, suppliers with WRAP certification can use it to lower costs for many buyers, thus increasing their global competitiveness. Are private certification entities like WRAP the solution to the supplier certification problem ? Should world bodies, like the UN, sponsor ISO like certifications for supplier plants ? Should the OEMs demand their own level of certification to reflect the perspectives of their end customers and associated price points ?

Posted in Global Contexts, Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , , , | 1 Comment

Coal, barges and the global supply chain

Posted on January 17, 2012 by aviyer2010

An article in Fortune (Dec 26,2011) describes the US barge industry, with each barge having a capacity 15 to 17 times a railcar and more than 60 times a truck, using less fuel per mile and thus lower emissions and one third the cost of rail. But industry capacity determines rates and delays, and thus delivery uncertainty, are due to the management of the water along the rivers.  Thus, despite a rise in corn production, barge use had not changed significantly because corn is being used to produce ethanol. However, coal now drives barge traffic, with power plants and exports driving volume. Federal investments in river management impact the competitiveness of the industry, as does capacity addition by barge companies.  Should the Federal government provide antitrust exemptions to this industry to enable coordination of traffic flow ? Given the significant impact of capital investment projects on industry competitiveness, should the Federal government consider permitting the industry to absorb the capital costs in return for favorable rates during use ? Given the focus on sustainable transportation, will river barges make a comeback as part of reducing supply chain emissions ?

Posted in Collaboration, Global Contexts, Supply Chain Issues, Sustainability | Tagged , , , , , , , , | 1 Comment