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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Expiring Lipitor patent, supply chain impact

Posted on November 26, 2011 by aviyer2010

An article in the Wall Streeat Journal (Nov 22,2011) describes a plan by Pfizer to sell Lipitor (a cholesterol reducing drug) direct to consumers once its patent expires on Nov 30. Health care plans that have contracted to sell Lipitor will be billed geneic prices, thus costing the consumer less, after co-pay than generics.  But this direct selling channel creates a conflict with pharmacists, and potentially lasts 180 days, after which generic prices drop even further.  The reason, big pharma companies need the cash to finance their operations until the next set of drugs cme to market. Do you expect he associated channel conflict to impact sales of Pfizer’s branded products at pharmacists ? Given the steep cliff faced by demands after 180 days, how should Pfizer adjust capacity and inventory ? Given rising demands in China and India, and worries about drug quality, will foreign markets offer demand opportunity as cholesterol levels rise due to changing diets and lower exercise ?

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Cargill – matching global supply and demand of agricultural commodities

Posted on November 20, 2011 by aviyer2010

An article in Fortune (Nov 7, 2011) describes Cargill’s role inmatching global supplies of soyabean, cotton, palm oil, beef and salt from Indonesia, Australia, Argentina and North America to customers. Charter ships are routed to minimize empty miles – as an example, a ship might travel full of soyabeans from Brazil to Shanghai, then move coal from Australia to Japan, get rinsed and return to pick up soyabeans from Brazil. But when supplies of cocoa are unreliable, the company started growing cocoa in Vietnam, to supply markets in India. How should governments determine if Cargill is the creates commodity volatility or merely captilizes from it ? Given its ability to influence global supply, how should regulators ensure farm level negotiating power ? Cargill currently owns no farmland – would you see moving uostream as a way for them to decrease supply volatility ?

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Slower, larger, less polluting but on time ships

Posted on November 20, 2011 by aviyer2010

In an interview with Nils Anderson, CEO of Moller-Maersk, in Fortune (Nov 7,2011), he claims that ships have a 50% on time arrival rate.  His company is now adding larger but slower ships, which will emit 50% less CO2, but have a 95% ontime reliability.  The supply chain impact will thus be larger pipeline inventory, but larger cycle stock.  Is this supply chain tradeoff appropriate from a shipper perspective? Will the lower environmental impact have to be included to justify this choice by shippers ? Does the larger ship capacity decrease the shipowners ability to respond to trade shifts and thus increase risk?

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A closed loop CO2 Supply chain?

Posted on November 20, 2011 by aviyer2010

An article in Fortune (Oct 17,2011) describes the mismatch between demand for CO2, its indequate supply in pure form, but its prevalence in the air.  Demand for CO2 is from soda manufacturers to make bubbles, greenhouse gases to speed plant growth, dry ice manufacturers and liquid CO2 manufacturers. In addition, enhanced oil recovery uses CO2 to extract stranded oil in reservoirs.  Possible supply plans include capturing CO2 from the atmosphere, using chemicals to separate the CO2 and thus generating supply. Will a closed loop solution to recover CO2 dispersed into the air decrease use of new fossil fuels while maintaining industrial activity? Should such technologies be funded by cap and trade agreements? How Should the effluents from such recovery plants be regulated to ensure that the overall supply chain is more benign than current alternatives?

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The impending demise of vertical integration amongst oil companies ?

Posted on November 20, 2011 by aviyer2010

An article in bloombergbusinessweek(14 nov, 2011) describes the conundrum faced by Marathon Oil, whose oilfields in Angola and Norway were not close to its refineries and transportation assets. The result, most of the oil the company refined was purchased from competitors, thus negating the benefits of vertical integration. The company’s decision to only focus on oil drilling, and sell off all its remaining assets, is described as a strategy bein considered by many of its competitors. Will the demise of vertical integration across oil companies unleash sector level efficiencies ? Will the contracting terms across a fragmented supply chain adjust to enable overall cost efficiencies ? Is this a robust strategy or a reaction to the current situation and thus potentially bad for the long run ?

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Making brick and mortar stores like ecommerce sites

Posted on November 20, 2011 by aviyer2010

An article in bloombergbusinessweek (Nov 14, 2011) decribes worries by retailers regrading an increase in informed focused consumers, a decrease in impulse shopping, and steps to compensate. Pacific Sunwear offers iPads to salespeople to assist consumers with possible clothing combinations, with out of stock items seamlessly orded from its website. Brookstone uses iPads to get customers to consider its entire inventory, int the store and the site, to drive sales.  And Old Navy equips its salespeople with iphones to check inventory of any item.  As stores look more weblike, will the number of store shoppers decrease or increase ? Will the costs associated with equipping salespeople with technology generate a sufficient enough rise in productivity to enable lower retail headcount to provide thee required level of service ? Will the web integration, which can enable customers to visualize store configurations the way they perfer, enable a more targeted salesperson interaction and thus higher sales ?

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Rare earth price surge and global supply chain response

Posted on November 20, 2011 by aviyer2010

An article in Fortune (Nov 7, 2011) describes the impact of the 1500 % price increase for rare earth metals from 2009 to 2010, the result of a 50 % cut in Chinese exports of rare earth metals.  With China mining 97 % of the world’s supply, this cut sent prices soaring. The result was a $ 1 billion investment by Molycorp to open up their mines in California, but with newer technology that is more environmentally friendly.   New mines were announced in Australia, Mongolia, Kazakhastan and Afghanistan.  But manufacturers in Japan modified designs to decrease rare earth usage. The result – a projected 13 % reduction in demand when supplies seemed to surge Prices of rare earths are now dropping significantly.  How should the global supply chain react to this price volatility – hold on to the extra capacity or cut it ? Should manufacturers continue to focus on decreased usage as a hedge against supply volatility ? Is this the bullwhip effect in rare earth supply chains ?

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