Fiat’s Italian auto productivity vs Poland’s auto workers

Posted on November 6, 2011 by aviyer2010

A Bloombergbusinessweek article (Oct 31-Nov 6,2011, pg 30) describes Fiat’s Italian workers producing 30 cars per year per worker, earning 3 times their Polish counterparts and operating at 33 % of capacity. In contrast, Polish workers produce 100 cars per year per worker, operate at over 73 % capacity and earn 1/3 the Italian labor.  Gievn such producitivity disparities, it takes 22,000 Italian factory workers to produce 650,000 cars while Fait’s 6,100 Polish workers produce 600,000 cars. Do you sympathize with plans by Fiat to cut its manufacturing in Italy ? Should Fiat continue to produce in Italy despite a sales drop to a 30 year low or optimize its supply-demand equation to maximize profits ? Is Fiat a crucial symbol of Italian manufacturing that should remain as part of its role in establishing confidence in the Italian economy ?

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Chinese oversight of US sources of apple juice in the global supply chain

Posted on November 6, 2011 by aviyer2010

An article in the wall street journal (Nov 4,2011) states that 72 % of US apple juice is sourced from China, and is part of over $3.2 billion in food imports. But concerns about food quality has caused the US FDA to work with Chinese regulators to prevent contamination rather than inspection to ensure quality. This would entail supplier certification and tracking in China and sharing of quality databy US regulators.  Will incentives for tracking and monitoring for chinese regulators be sufficient to ensure food safety for US consumers? Should responsibility for quali assurance be retained by Us FDA? In the presence of long supply chains that aggregate sources, how will complaince across the chain be ensured ?

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Rare earth mountains and Federal supply chain assistance ?

Posted on November 6, 2011 by aviyer2010

A bloombergbusinessweek article (Oct 31-Nov 6, 2011, pg 85) describes a private company’s attempt to mine rare earths from the Bokan montain in Alaska. The mountain represents the highest purity source of rare earths in the US.  But China represents 97% of the world’s of rare earths, and thus owns most of the supply chain including rare earth metals separation, creating alloys, manufacturing magnets etc – all crucial value added steps required to extract and use the metals from the ground. Given its strategic importance, from defense to sustainable energy, should the Federal government subsidize creation of the supply chain? Should defense contract commitments for output be used to finance operations ? Should environmental laws for mining be relaxed to enable national priorities to be met ?

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Thai floods, supply chain and insurance impact

Posted on November 4, 2011 by aviyer2010

An article in the Wall Street Journal (Nov 3, 2011) describes the floods in Thailand impacting 25% of the world’s supply of hard drives. The Honda plant’s water damage impacted global supply of components, and a plant in Brazil had its production cut to provide components for the rest of the global supply chain.  Will the increased insurance costs due to inadequate flood infrastructure drive production out of Thailand ? Should supply chains diversify global production as a hedge for all components ? Is the lean supply chain to blame ? Will price increases for components solve the problem by attracting new supply sources ?

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OEMs, Yuan contracts and supplier costs

Posted on November 4, 2011 by aviyer2010

An article in the Wall Street Journal (Oct 3, 2011) describes China’s attempts to make the Yuan a global currency and its role in supplier contracts. Current rules to buy and sell yuan involve a lot of paperwork, as a result of which contracts are stated in US dollars. But the associated currency risk for Chinese suppliers causes prices to be higher.  Should US firms move to contracts denominated in yuan to lower supplier prices ? Should the associated paperwork etc to pay in yuan be treated as a switching cost whose benefits will be realized over time due to lower supplier costs ? Given that the yuan is not a freely traded currency, will US firms end up with a lower or higher overall risk in their supply chains ? Will it require more careful monitoring and use of their global supply chains to manage the associated risk ?

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Federal response to vital Medicine shortages in US hospitals

Posted on October 31, 2011 by aviyer2010

A New York Times article (Oct 31, 2011) describes Federal attempts to ease shoratges of sterile injectables that constutue 74 % of drug shortages.  The government blames market concentration – 90 % of the medicines are bought by five hospital purchasing groups, and one global company supplies 90 % of the supply in many cases.   prices have increased eighty fold in some cases – a leukemia drug price went up from $ 12 to $ 990 per vial.  Will the proposed solution to increase the number of inspectors, by charging a fee to generic companies, resolve the shortage problem ? Would making it the legal responsibility of manufacturers to aniticpate shortages resolve the problem ? Or should the federal government intervene more directly by stockiling or manufacturing the drugs ?

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Defense support for biofuels for aircraft and impact

Posted on October 31, 2011 by aviyer2010

A Bloombergbusinessweek article (oct 31-Nov 6, pg 44-45) decsribes plans by the navy and Marines to shift 50 % of their fuel to renewbale sources by 2020, the Army 25 % by 2025. Sources include camelina (an oil bearing plant), chicken fat, plant waste etc. In addition to sustianability, security is a reason – with one Marine killed for every 50 fuel or water convoys in Afghanistan.  Once the defense department shifts its $ 14.5 billion spend away from fossil fuels, their decision could bring costs down from $ 10/gallon to $ 4/gallon for commercial uses.  Should the federal govt commit to specific fuel purchases to drive down the costs for the rest of industry ? Should the associated costs to convert aircraft to accomodate these feuls be borne by the manufacturers ? Can shifting to renewable sources, obtained locally, and associated decreased risks for defense personnel in the war theater , provide sufficient justification for such decisions ?

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Barnes & Noble swapping book space for e-readers

Posted on October 29, 2011 by aviyer2010

A Wall Street Journal article (Oct 29, 2011) describes a plan by Barnes & Noble to double the square feet devoted to e-readers to 2000 sq ft in a 26,000 Sq ft store. The space will be freed up by decreasing books titles in stock as well as DVDs and music. The company expects intense competition as Amazon’s Fire becomes available and in response to the 27 % growth in digital books. Earlier changes at the store freed up space for educational toys and games. Are the shifts at Barnes and Noble an inevitable consequence of the competition with Amazon ? Do these  product mix changes suggest a prisoner’s dilemma outcome where Amazon and Barnes & Noble hurt each others profits ? Or is the competition in the e-reader market, and the lower price points, an attempt to take share away from Apple’s iPad, which has more functionality but a higher price ?

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Restructuring the global supply chain at Whirlpool

Posted on October 29, 2011 by aviyer2010

A Wall Street Journal article (Oct 29, 2011) describes the extra capacity held by appliance makers anticipating a demand rebound from 25 % low in the US and a 15 % drop in Europe compared to past levels. But continued sluggish demand has caused Whirlpool to drop expensive or old plants – closing the plants in Fort Smith,  Arkansas and  Neunkrichen, Germany, expanding production in Poland and using capacity in eight other US sites. The consolidation enables Whirlpool to better synergize its Maytag acquisition.  Is this capacity reduction given current demand levels using up the potential benefits of the supply chain capacity option if demands rise ? Should  the remaining plants increase their flexibility to accomodate product mix shifts ? Given the continued rise in steel costs and a reluctance to use price promotions to maintain sales volumes, should Whirlpool move to consolidate its remaining capacity to avail of scale economies ?

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Now Thai floods and Japanese auto supply chain impact

Posted on October 29, 2011 by aviyer2010

A Wall Street Journal article (Oct 29, 2011) describes the impact of flooding in Thailand, which has resulted in two Sony plants deluged, Toyota suppliers impacted, a Honda plant impacted for six months etc. Given the disruption caused by the Japanese earthquake earlier, the floods are expected to further disrupt auto supplies to Japanese OEMs that have increasingly moved to Thailand.  A World Bank study is quoted as claiming increased risk of flooding in Bangkok, Manila and Ho Chi Minh city – all potential low cost locations for auto suppliers.  Should supply chains consider the weather related disruptions in these locations and thus shift production ? Or should they hold inventory to hedge against these disruptions ? Or should the global supply chain maintain some excess capacity to provide a hedge ?  Or will the lower demand in these location mitigate the cost of disruption ?

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