New Caterpillar US plant location and state level competition

Posted on November 30, 2011 by aviyer2010

A Wall Street Journal article (Nov 25, 2011) describes a decision by Caterpillar to move its small excavator production fom Japan to the US, to be closer to customers. The $150 million plant, expected to generate 1000 jobs, has set of competition across states eager to win location in their state. Access to ports, state infrastructure commitments, trained labor, tax breaks etc., will all impact the final decision. Should Caterpillar focus on locations recently abandoned, such as the Whirlpool plant in Arkansas ? Should being close to its supply base be a key consideration, or should suppliers be expected to relocate closer to the new plant ? At what point is the state ending up with a winner’s curse i.e., spending more to attract the plant than the benefit to the state’s residents ? How should states position themselves go succeed ?

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The “Save our Industries Act” Poplin agreement Involving the US and Philliphines

Posted on November 30, 2011 by aviyer2010

A report on the “Save our Industries Act” (http://www.mb.com.ph/articles/342819/shorter-garment-export-categories-okayed) describes the potential agreement between the US and Philippines under which poplin cloth, exported from US producers to the Philippines for garment manufacturing, would be granted zero duties when exported back to the US.   The goal is to grow jobs in the US and the Philippines, jobs being lost to China. But the agreement proposed decreases the number of garment categories that will be charged duties from 17 to 9, thus decreasing the lost tax revenue for the US to $ 250 million rather than the original $ 500 million. The tradeoff is potential jobs created in the US and the Philippines.  Should such bilateral supply chain related tax deals be accepted for the apparel supply chain ? Given that overall costs will increase under this tax preference, how will other industries and consumers be affected ? Why should specific fabrics be targeted and not others in the global supply chain ?

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Creston Electronics and US manufacturing

Posted on November 30, 2011 by aviyer2010

An article in Forbes (Dec 5, 2011) describes Creston Electronics, a N.J. based company that creates over 1,500 complex electronic products in small volumes with low errors. The company’s founder claims that his strategy was to bring outsourced work in house during the recession in order to keep his employees.  In addition, maintaining 80 % of manufacturing in the US is claimed to enable long term employees who can enable growth. Is Creston’s strategy feasible only because it is a privately held company ? Does the effectiveness of this strategy require a continued focus on small volume innovative high margin products ? Is a stable workforce a necessary ingredient for continued innovation and growth ?

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The Northern Distribution Network to Afghanistan

Posted on November 29, 2011 by aviyer2010

An article in the CNN.com site (http://www.cnn.com/2011/11/29/world/asia/afghanistan-military-railroad/index.html?hpt=hp_c1) describes a route for supplies of toiler paper, bottled water and socks to Afghanistan from the North.  One of these routes involves shipping to Riga in Latvia, moving on trains across Russia, crossing deserts in Kazakhstan and Uzbekistan and entering into Afghanistan 10 days later.  This route serves as an alternative to the uncertain supply routes involving travel 1,000 miles by land from the port of Karachi (in Pakistan) to Afghanistan.  Given that a lot of logistics is outsourced to private contractors, how should the cost of establishing rail routes be recovered by the military ? Given the need to maintain tracks to be operational, do these fixed train routes provide a more or less secure delivery system ? To maintain negotiating power with countries through which these routes pass, how many different independent routes do you think should be developed ?

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Light Bulb regulation in January 2012 and supply chain impact

Posted on November 26, 2011 by aviyer2010

An article in he New York Times (Nov 16, 2011) describes the impending regulation that bans manufacturing of the traditional light bulb in January 2012. While sales from inventory can continue, new light bulbs will be required to be more energy efficient.  Under the new laws, the brightness of 100 watt bulbs have to be generated using no more than 72 watts. The replacements could be compact flourescent lights or Light Emitting Diodes, but their costs and performance are yet to be accepted.  The article suggests that 13% of customers may hoard bulbs, while individual states such as Texas try to repeal the legislation.  How should current bulb manufacturers plan for this transition? Given the uncertain future product technologies, how should retailers and consumers react? Given the mercury used in the new bulbs, could even newer regulations cause another shift in the supply chain?

http://tiny.cc/lqo3v

 

 

 

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Paper pallets at IKEA and supply chain benefit

Posted on November 26, 2011 by aviyer2010

An article in Bloombergbusinessweek (Nov 28, 2011) describes efforts by IKEA to replace its 10 million annual usage of wood pallets with paper pallets. The paper version is 90% lighter, designed to pack more load, is single use and can be assembled on site by suppliers. The lighter weight saves the company 140 million euros in transport costs, while adding about 90million  euros to pallet costs and forklift costs. Will IKEAs unilateral use of paper pallets provide as large a benefit as shared pallets over the long run? Will he new forklifts etc required for handling, and their associated replacement impact, continue to show the paper pallet as a more sustainable solution?

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Private Label growth in US grocery retail and branded goods impact

Posted on November 26, 2011 by aviyer2010

An article in Bloombergbusinessweek (Nov 28,2011) describes grocery retailers like Safeway and Kroger rejuvenating private label products for antibiotic free meat, frozen pizza, pasta etc.  Consultants such as Mckinsey estimate that 75% of customers who try private label brands are retained, while Deloitte researchers claim that under 30% of current branded goods consumers a brand loyal.  Will the 30% lower price for private label cause this demand to be lost even when the economy recovers ? Given that branded manufacturers absorb the cost of advertising, how would they react to compensate ? Will manufacturer appeals to consumers increase to build btand loyalty? Will the internet build different communication links across the grocery supply chain?

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Walmart’s environmental efforts in China and US retail impact

Posted on November 26, 2011 by aviyer2010

An article in the Atlantic (December 2011) suggests that 70 % of Walmart’s $420 billion in sales are provided by 20,000 Chinese suppliers. Walmart’s efforts at decreasing waste, pollution etc thus impact its supply chain in China significantly, and increase compliance without any government role. But will improved environmentally compliant supply chains in China buy US customer loyalty? Will the possibly slightly higher prices hurt US demand  ? Will increased Chinese customer demand provide profits to cover the potentially higher supply chain costs or will the costs drop in the long run?

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Turkey vs chicken supply chains in 2011

Posted on November 26, 2011 by aviyer2010

An article in the Wall Street Journal (Nov 22, 2011) describes the impact of demand volatility on chicken and turkey manufacturers. Turkey manufacturers are smaller and spread out, while chicken has a few large manufacturers. While chicken manufacturers expanded given current trends, and now have excess capacity that is driving down wholeslae prices, risk averse turkey manufacturers cut capacity and thus see a 26% wholesale price increase this Thanksgiving. But not all of the wholesale price incerase shows up in retail, given customers tendency to buy the turkey and all other items in the same store. Should turkey manufacturers consolidate to better read demand, or is heir fragmented supply chain optimal ? If customers split up their shopping across stores, will turkey prices increase ? As bank lending to small farmers eases, will such drastic supply chain impacts disappear ?

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U.S. multinationals global job growth in the 2000s

Posted on November 26, 2011 by aviyer2010

A Wall Street Journal article (Nov 22, 2011), describes an analysis by the Commerce Department showing that US multinationals cut 865,000 jobs in the US and added 2.9 million jobs in the rest of the world.  In the manufacturing sector, 2.1 million jobs were cut in the US, and 230,000 added in the st of the world.  Capital investments grew at 4 % in the rest of the world, but at 0.2 % in the US.  The report thus suggests that most of the global growth was to supply global demand, not to supply US demand.  But the increases captial investments also suggest that labor costs were not the driver for global capacity expansion. The data also show that growth in services is the main reason for growth in foreign employees. Given this data, what might be the possible  local jobs impact of closing US tax loopholes for US corporations? Given that global demand drives capacity, should US employees be encouraged to travel overseas to work for US corporations? What changes might incent growth in US manufacturing, if demand in the US remains flat ?

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