Airline sustainability goals and biofuel role

Posted on October 9, 2011 by aviyer2010

A New York Times article (Green Column, Oct 9, 2011) describes the airline industry goal to become “carbon neutral” by 2020 and cut emissions by 50 % by 2050, given that they account for 2 % of all human generated carbon emissions. Some of the efficiency come from new designs and materials for aircraft and engines have made engines 70 % more efficient than 40 years ago. Other gains are expected to come from use of biofuels, from palm oil, jatropha weed and algae. But a great source is municipal waste generated by the very cities that these airplanes fly to.  Will these different sources of efficieny enable the industry to reach its goals ? Will fuel sources have to be subsidized to enable the industry to reach its goal while retaining competitiveness ? Will the industry have to slow down its growth and role to attain its goal ?

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The Impact of concentration in the Global Electronics Supply Chain

Posted on October 8, 2011 by aviyer2010

An article in the Economist (Oct 8, 2011) describes how concentration of manufacturing by Taiwanese firms has enabled price decreases and feature increases faster than chip prices. At HTC, new product development time has dropped by six months compared to two years ago. NVIDIA has seen potential demand for its $ 20 chips go from $ 4 billion in PCs to $ 40 billion in smartphones.  Multicore chips have enabled energy savings by swiching ff, while flas memory technology has enabled increased storage.  As the increased incorporation of the cloud becomes widespread, what is the future mix of  software and hardware that we should expect ? Will the separation of design and software development in Silicon valley and production in Taiwan remain the dominant supply chain configuration in this industry ? At what point will manufacturers, like HTC, become proficient enough to develop their own closed configurations (like Apple) ?

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Toyota retools in Japan, plans for a weaker yen

Posted on October 8, 2011 by aviyer2010

A Wall Street Journal article (Oct 7, 2011) describes efforts by Toyota to retool, reduce production batch size and plan to be competitive when the yen gets weaker. This strategy is counter to efforts by other automakers to move production out of Japan. The investments will enable flexible manufacturing and multiple tasks on short assembly lines. The aproach trades off setups for flexibility but can be managed because engine capacity is for six million while only 4.5 million are produced. Is the smaller batch, higher flexibility Toyota gamble a competitive gamble ? Will Toyota’s moves to invest on flexibility provide the required capability adapt to global conditions ? Is the increased automation a response to the graying Japanese workforce ?

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Yuan Appreciation, labor flexibility and back to US manufacturing

Posted on October 7, 2011 by aviyer2010

A Wall Street Journal article (Oct 7, 2011) describes decisons a furniture manufacturer and high end earphone to move production back to the US. The reasons – a 30 % yuan appreciation from 2005 to 2011, US union flexibility and thus lower wages and fewer rules, higher US productivity and lower lead time demands from retailers.  The cost gap with China has thus dropped from 50 % down to 10%.    When can we expect the projected 800,000 manufacturing jobs to return to the US ? Will decreases in fuel prices slow the trend ? Will manufacturing return with more automation and, thus less labor impact, to maintain quality ?

 

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Blocking generics by adding a second score

Posted on October 7, 2011 by aviyer2010

A Wall Street Journal article (Oct 6, 2011) describes a decision by the firm Warner Chilcott, which sells tables for its drug Doryx, which was scheduled to go off patent, to add a second score on the tablet so it can be divided into thirds.  As a result, generics planning to sell the original tablet, which could be divided into halves, could be asked by the FDA to match the tablet, as per the company’s request. The delay may enable the firm to retain its monopoly of the $ 3000 per 180 count bottle market for severe acne.  Should cosmetic changes that do not impact the chemical composition be permitted to be used to block generics ? If dosage is the constraint, should nonscoring packaging solutions that enable dosage control be considered equivalent by the FDA ? What supply chain strategies by the patent holder should be accepted as reasonable in their attempts to deter competition for off patent drugs ?

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Otis decides to return manufacturing to an American plant

Posted on October 7, 2011 by aviyer2010

A Wall Street Journal (Oct 6, 2011) report describes a decision by Otis to move production from Mexico to South Carolina. Reasons cited include (a) 70 % of its customers will be closer to the new plant, (b) Freight and logistics costs lowerd by 17.3 %, (c) Efficiencies from deisgn and production being colocated would generate another 20 % savings, (d) Greater automation will decrease labor’s content of the total cost.   Given changes in US labor and other costs, has US manufacturing closed most of the cost gap with other global loactions ? Are rising fuel prices diminishing most of the cost gains from global manufacturing locations ? Is the attention, and consequent marketing gains, that is derived from this decision sufficient to compensate for any associated cost increases ?

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How should retailers deal with the new “frugal consumer”

Posted on October 5, 2011 by aviyer2010

A Wall Street Journal article (Oct 4, 2011) describes the emergence of the frugal consumer who buys what they need, focus on promotion purchases, avoid premium products, clip coupons and combine shopping trips to save on gas.  The impact of trading down is expected to stress apparel retailers who had to place orders in early spring when the economy was rebounding. These retailers also expected to pass along the increased costs of cotton. Pressure on inventory and on costs is expected to require creative retail solutions. Should retailers focus on specific promotions (buy one and get half off second item) discounts or use discounts linked to their store credit or debit card consumers to retain their loyalty and increase their instore spend ? Will smaller pack sizes and private label sales do the trick ? Or will growth of Dollar stores be the wave of the future ?

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Why are diaper sales dropping and diaper-rash ointment sales increasing ?

Posted on October 5, 2011 by aviyer2010

A Wall Street Journal article (Oct 4, 2011) describes sales decreases of 4 % for Kimberley Clark’s Huggies diapers and 2.5 % for Proctor and Gamble’s Pampers, and a 0.5 % drop in generic diapers. At the same time diaper-rash ointment sales are up 8% and a pediatrician is quoted as saying that cases of diaper rash are up 5-10 %.  Are parents changing diapers less frequently due to the economy and does that explain the phenomenon ? Are decreasing birth rates the reason for the drop in diaper sales ? Are new diapers with “wetness indicators” permitting parents to be proactive in changing diapers and thus decreasing volumes ? Or are parents potty training children earlier to save the estimated $ 1500 per year to keep a child diapered ?

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Sprint guarantees Apple it will take 30 million iPhones ?

Posted on October 5, 2011 by aviyer2010

A Wall Street Journal article (Oct 4, 2011) describes a guarantee by Sprint that it will buy at least 30.5 million iPhones in return for the opportunity to offer those phones on its network.  Such volumes in turn enable Apple to guarantee volumes to its suppliers and thus reserve capacity and lower component costs.  Sprint claims that not having the iPhone was causing customer losses, and that its superior service coupled with the iPhone can enable the company to attract customers back.  Given the different revenue and cost impacts of the volume guarantee, did Sprint have a choice regarding this decision or was it a forgone decision ? Given that future cheaper iPhones could decrease Sprint’s cost, is there a logic in volume (units) commitment rather than a dollars of sales commitment ? Will the Apple demanded volume commitments from phone companies ensure stock pressure on the downstream market and a focus on selling Apple products rather than Android or Microsoft powered phones ?

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Estimating Apple’s potential revenue based on supply chain partner volumes

Posted on October 4, 2011 by aviyer2010

A Bloombergbusinessweek (Sept 12-16, 2011) article describes the Apple company forecast that sales will drop 12 % this quarter. But analysis of Apple’s outsourced supply base consisting og Foxconn, Samsung etc that provide 75 % of Apple’s cost of goods sold, suggests that Apple’s revenue will come it at $ 31.2 billion, in line with a 17 % growth since last quarter. Should markets triangulate a company’s sales based on its supply chain partner companies numbers to estimate potential performance ? Why would Apple underestimate sales – is to to permit the company the option to drop prices to match competitors if necessary ?

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