EPA Dioxin limit proposal and food supply chain impact

Posted on January 10, 2012 by aviyer2010

An article in the Wall Street Journal (Jan 4,2012) describes a propsal by the EPA to recommend a 64 picogram limit of dioxin for a 200 lb person. The EPA wants to ensure that prolonged exposure at this limit is reasonable. But food suppliers, restaurants and grocery stires worry that some products, like hot dogs, already exceed that limit and may see demand drops. Should the EPA set targets over larger time periods or focus on individual portions ? Should food portions be required to adjust to comply with these limits ? Should limits be set as average over time to permit an occassional hot dog without worry ? Or should the limits be raised to permit current consumption (estimated, in some cases, to be two times the limit based on diets) ?

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Caterpillar’s US plant labor costs vs Canadian costs

Posted on January 10, 2012 by aviyer2010

An article in the Wall Street Journal (Jan 7, 2012) describes Caterpillar’s assertion tha labor costs in its US plants are 50% of the costs in Canada. Given the Canadian plant’s lack of global competitiveness due to labor rule inflexibility, Caterpillar plans to use its US plants as the alternative. With US wages having dropped 13 % while wages in Europe and Canada have risen, is US manufacturing the global low cost alternative ? Will cheaper shale gas costs, which will lower US energy costs, combined with lower US labor costs, bring manufacturing back to the US? Is this competitive position stable for the global supply chain or is it a temporary victory ?

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Dynamic Pricing of taxicab fares and fairness

Posted on January 10, 2012 by aviyer2010

An article in the New York Times (Jan 9,2012)  describes taxi pricing at Uber, a company that charged $27 per mile at the start of New Year’s Eve and $135 per mile late night.  Prices were revealed at the wnd of the ride, and charged automatically to credit cards.The company claims dynamic pricing as the reason, with the supply of taxicabs in the region being low relative to demand, and price enabling the market to clear. Is this approach to dynamic pricing reasonable or does it violate an implicit contract regarding ricing stability ? Is the timing of fare revelation i.e., start vs the end a factor in terminng fairness ? Do you expect such pricing schemes to decrease average prices while increasing temporal variability of prices ?

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Corn Storage Capacity increase and supply chain impact

Posted on January 10, 2012 by aviyer2010

An article in Bloombergbusinessweek (Jan 9, 2012) describes a significant increase in corn storage capacity at the farm level. The result, farmers hold their crop to sell at the best price, thus corn prices have increased 23 % over the previous year.  Inventory holding capacity also means that entities such as Cargill are forced to negotiate with farmers and pay a premium over futures prices to get delivery.  Will the supply chain power due to corn storage capacity remain at the level observed in the long run ? Given the higher wholesale prices, will downstream demand be expected to drop ? Is there a risk that farmers will face even more volatile prices as the timing of inventory availability starts depending on inventory release ?

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Whirlpool dumping charge against LG and Samsung and possible supply chain response

Posted on January 2, 2012 by aviyer2010

An article in the Wall Street Journal (Jan 2, 2012) describes a claim by Whirlpool that LG and Samsung have dumped residential washing machines, at prices below production costs, and requests import duties to be levied.  Whirlpool claims that the higher margins in the protected South Korean market enables LG and Samsung to afford such US pricing. But aggressive import duties may incent LG and Samsung to set up manufacturing plants in the US, and compete even more aggressively with Whirlpool. Are Whirlpool’s claims a reasonable way to manage its competitiveness in the US ? Should the strategies used by LG and Samsung, which are good for the US consumer, be prohibited – thus increasing prices for consumers ? Given the modern global supply chain, with design, production and distribution spread across the world, what constraints regarding pricing should be prevented to enable effective competition ?

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Court Blocks California use of life cycle greenhouse gas estimation for fuel producers

Posted on January 1, 2012 by aviyer2010

An article in the New York Times (Dec 29, 2011) describes a Federal judge’s decision to block the state of California from computing the life cycle impact of greenhouse gas emissions by furl producers. The plan was to include the carbon impact of production and transportation of fuel to California but was deemed to discriminate against producers from other states choice of farming methods or choice of electricity source by attempting to regulate activity in other states.  How should individual states use a life cycle analysis of carbon emissions if they do not have jurisdiction beyond their boundaries ? How should green labels be placed on products by manufacturers in the absence of a Federal mandate ? Given the complexity of modern global supply chains, how should supply chain participants be incented to decrease carbon impact ?

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DEA, FDA coordination issues and ADHD drug shortages

Posted on January 1, 2012 by aviyer2010

An article in the New York Times (Dec 31, 2011) describes shortages of ADHD drugs and root causes. The Drug Enforcement Agency (DEA) , concerned about use of ADHD drugs among college students as a memory stimulant, forecasts overall demand and allocates supply quotas to manufacturers. Individual manufacturers use that quota to choose production quantities of specific branded vs generic drugs. The result – profit maximizing choices by drug manufacturers have decreased the amount of generic drugs, thus causing shortages of affordable generics. The Food and Drug Administration (FDA) is responsible for managing drug availability, but is powerless to solve the issue. Should drug quotas be lifted so that demand can be met ? Should enforcement move from supply control to demand regulation ? Should manufacturers be required to trace the drugs across the supply chain to guarantee effective use ?

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Defining organic agriculture – include sustainable water and energy too ?

Posted on December 31, 2011 by aviyer2010

An article in the New York Times (Dec 31, 2011) describes the growth in organic farms in Mexico that comply with US definitions of organic farming – a ban on use of synthethic fertilizers, hormones, pesticides etc. But Swedish certification of organic also requires greenhouses to use 80 % renewable fuel, and organic milk laws in the US requires cows to spend sufficient time in open pastures. Should organic labels include specifications regarding the type of fuel or energy sources used ? Should the water used be required to be sustainable ? How should the depletion of acquifers due to water shared by multiple farms be precluded ? In general, should organic farming require the associated energy and water use to follow sustainable practices ?

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iPad 3 rumors, product transition and possible supply chain impact

Posted on December 30, 2011 by aviyer2010

An article by Louis Bedigian (Dec 29, 2011 http://www.benzinga.com/trading-ideas/long-ideas/11/12/2231119/ipad-3s-most-significant-upgrade-will-be) describes rumors regarding a new iPad 3 and possible design choices. Will the new iPad 3 replace the older iPad 2 – as suggested by the Apple supply chain’s participants noticing a decrease in orders for the iPad 2 ? Will Apple retain the iPad 2 at a lower price point, to compete with the Kindle, while upgrading the iPad 3 with a faster processor, longer lasting battery and a new retina display ? Or will the iPad 2 be coupled with a redesigned iPad 2 with a smaller screen and a lower price point ?

 

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Ad Free product cost and Supply Chain Impact

Posted on December 30, 2011 by aviyer2010

An article by Michael Schulder in CNN.com (Dec 29, 2011 http://www.cnn.com/2011/12/29/tech/gaming-gadgets/kindle-ads-schulder/index.html?hpt=hp_bn6) describes the choice between an ad free Kindle for $ 109 and one with ads for $ 79. Clearly Amazon is estimating the ad related revenues as $ 30 over the life of the product. Now imagine similar opportunities for refrigerators, cars, washing machines, stoves etc – as each of them become internet connected. How might the various supply chain participants in these supply chains share in the ad revenue and adjust product price for these products ? How would product designs have to adjust to increase the consumer’s dependence on the internet to use these products ? As internet enabled products become ubiquitous, would we expect the benefit of the associated ads to decrease or increase ?

 

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