College apparel and provider sourcing strategies

Posted on September 24, 2011 by aviyer2010

A New York Times article (Sept 23, 2011) describes frustration expressed by student groups at Ohio State and University of Southern California because contracts for manufacturing their school apparel was granted to a unit of the Dallas Cowboys that has used sweatshop labor in the past. The students point to an El Salvador plant that had contaminated water and forced overtime and a plant in Indonesia that was closed with no worker payments. Should students have the right to dictate sourcing decisions at their University ? Should the University be held responsible for monitoring and ensuring supplier conformance to quality or should this process be managed by contract penalties ? If the supplier in turn uses an agent for sourcing does responsibility for compliance transfer to the agent or country of location of manufacturing ?

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Postponing Customization of the Prius to the NJ port

Posted on September 24, 2011 by aviyer2010

An article in the New York Times (Sept 23, 2011) describes customization of the Toyota Prius, manufactured in Japan, at the Newark port. Cars are tailored to customer requirements such bluetooth, accessories, quality touchup, satellite radios, alloy wheels etc.  This assembly postponement enables vehicles to be built standard in Japan yet cater to customer tastes in dealerships. Why is it optimal to customize at the port rather than at the dealer – is the supply chain better off this way or is it an attempt by Toyota to prevent dealers from installing generic options ? How far can this customization go before it impacts quality ? Given the fluctuating demand for hybrid cars – does this postponement enable pooling of demand uncertainty across regions ?

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Financing sustainability driven retrofits and thus manufacturing growth

Posted on September 20, 2011 by aviyer2010

An article in the New York Times (Sept 19, 2011) describes a new consortium, including Lockheed Martin and Barclays bank, that will finance retrofits of buildings to decrease energy costs, cutting energy use and utility bills by 33 %.  Building owners would pay for the upgrades through surcharges on property bills that will be lower than the energy savings.   Coordinated by a nonprofit, the Carbon War Room, these initiatives will require new windows, doors, insulation, lighting and mechanical systems, solar panels etc.  Lockheed martin is expected to do engineering tasks for large projects. Do you expect such financing arrangements to be game changer in the industry’s attempts to decrease energy costs ? Should manufacturers of capital equipment become part of such solutions to drive product demand ? Should utilities be part of the consortium because of the associated reduction in their own (power plant) capacity needs ?

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Airbus and Boeing long term airplane demand forecasts

Posted on September 20, 2011 by aviyer2010

An article in the New York Times (September 19, 2011)  states that Airbus predicts that a demand for 27,800 airplanes by 2030 with a potential revenue impact of $ 3.5 trillion and an implied air traffic growth rate of 4.8 %.   of this projected demand over one third is expected to be from India and China.  Earlier, Boeing had estimated a demand of 33,500 jets (across all categories) by 2030 with a value of $ 4 trillion.  Given these forecasts from competing major manufacturers, and their sensitivity to continued growth in India and China, how much reliability would you attribute to these forecasts ? These projected volumes enable amortization of initial startup (fixed) costs for new aircraft over a larger volume – how big a factor is that impact in the estimation of these volumes ? Given demands by governments for local content, how do you expect the demand locations to impact the global supply chains of the airplane manufacturers ?

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The efficiency benefit of eliminating van keys at UPS

Posted on September 19, 2011 by aviyer2010

A Wall Street Journal article (Sept 26, 2011) describes the efficiency benefit to eliminating keys for vans – they are instead using a keyless system to start vehicles with a digital remote fob on the drivers belt.  UPS claims to save time spent taking keys out of the ignition, turning around to unlock the bulkhead door etc – a total of 6.5 minutes per day which will generate an estimated $ 70 million in savings, in addition to reducing motion and fatigue.  Is this the kind of “kaizen” one should expect with logistics systems ? How can these ideas be incoporated by van manufacturers to save costs throughout the industry ? Would you expect these cost savings to be passed on to consumers as lower shipment costs ?

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The impact of infrastructure on Colombian exports

Posted on September 19, 2011 by aviyer2010

An article in the Economist (Sept 17,2011) describes the poor infrastructure in Colombia as resulting in export costs of a container that are 20 % higher than a similar task in Argentina. Thus, the poor infrastructure is estimated to be equivalent to a 10-15 % tax.  The Colombian govt estimates that improving infrastructure could raise the country GDP by 1%. This is a great example of a link between logistics capability and prosperity. Should one expect improvements in Colombia to be accompanied by similar changes in competing countries in the region so that the expected growth dividend will be much lower than expected ? Will infrastructure alone improve exports or will there need to be similar changes in approvals and customs to realize benefits ? Will better infrastructure enable exports of commodities or exports of value added manufacturing that can generate higher growth ?

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Measuring Hospital compliance with routines

Posted on September 17, 2011 by aviyer2010

A New York Times article (Sept 14, 2011) summarizes a report (http://www.documentcloud.org/documents/249296-joint-commission-report-on-quality-and-safety.html) that measures compliance to established protocols to treat diseases like heart attack and pneumonia.  The interesting outcome is that several reputed large hospitals did not make the list of the 405 hospitals that had a 95 % score of compliance.  Should hospital quality be measured as compliance with protocol ? Should large hospitals that deal with more risky patients be penalized for lack of compliance with established treatment protocols ? Or should outcomes be balanced along with compliance to measure quality ?

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Cold water laundry, consumer preferences and environmental impact

Posted on September 17, 2011 by aviyer2010

An article in the New York Times (Sept 16, 2011) describes continued resistance by consumers to doing their laundry in cold water – just 7 % of US white laundry loads.  About 75 % of the energy used,and greenhouse gases impact, of laundry comes from the hot water use during laundry. New detergents have been formulated to enable cold water laundry to achieve the same results as hot water, but sales of such detergents declined 16 % for Henkel and 5 % for P&G in recent years. Should consumers be penalized for use of hot water beyond their energy bills ? Should coldwater detergents be subsidized by governments because of the externality benefits they create through greenhouse gas reduction ?  Should laundry machine designs encourage consumers to shift their preferences ? How should the detergent supply chain be managed to improve its environmental footprint ?

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Will China’s inflation impact the USA ?

Posted on September 17, 2011 by aviyer2010

A report by Hale and Hobijn (http://www.frbsf.org/publications/economics/letter/2011/el2011-25.html) suggests that imports from China account for 2.7 % of US consumer expenditure. Of that 2.7%, over 55 % consists of services in the US, thus imports of China constitute 1.2 % of consumption. The article points out that for a $ 500 iphone, $ 179 is the imported cost of the hone assembled in China, but only $ 6.50 is the content from China, the remaining is $ 172.50 is imported into China.  Does this small fraction of imports suggest that the China manufacturing juggernaut is a mirage ? Given the potential for China to become a strategic component of the global supply chain, does the % of China content adequately reflect its global leverage ? Given that China only does assembly for the iphone, do its assemblers still gain the process knowledge to control the smartphone market ?

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Ecommerce, couriers and cash on delivery in India

Posted on September 15, 2011 by aviyer2010

An article in the New York Times (Sept 14, 2011) describes FlipKart – an ecommerce company in India that employs couriers for home delivery of orders with cash paid on delivery. Given the preference for cash transactions and payment ion delivery as well as an aversion to providing credit card information over the web, this last mile ownership by an ecommerce company seemed to be natural bundled extension.   Will such local firms continue to remain competitive if Amazon enters the Indian market ? Will Amazon have to evolve to include last mile delivery ? Is there a market for such services in the US – particularly for some market segments and products ?

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