A new report on Apple’s China Supply Chain and associated pollution

Posted on September 3, 2011 by aviyer2010

A recent report (http://www.ipe.org.cn/Upload/Report-IT-V-Apple-II.pdf, published August 31, 2011) questions whether decisions made by Apple’s suppliers continue to have a negative environmental impact.  The report identifies suppliers who release hazardous chemicals into the river or environment, the speed of ramp up (76 days to set up a plant to make Ipad2’s) and associated construction disasters, short training times of 2 to 3 days, explosions at the Ipad2 plant that claimed lives etc.  The report suggests that Appel’s attempts to audit suppliers do not seem to reveal the kind of violations that this report found.  A key claim int he report is that Apple has changed its reported role in monitoring its supply chain by shifting from the word “ensure’ to the word “require” in its decription of appropriate environmental stewardship by its suppliers. Should Apple be held responsible for actions by all suppliers across its entire supply chain ? Should the local Chinese auhtorities be responsible for monitoring compliance to their laws or should Apple be responsible for such compliance ? Should speed of ramp up be considered a proxy for risk of environmental endangerment ?

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The logic of producing more HP Touchpads at a loss

Posted on September 3, 2011 by aviyer2010

An article in CNN Money (August 31, 2011)  describes a possible reason HP would produce Touchpads and sell them at a loss (for $ 99, from a list price of $ 499) even though the division is being shut down.  Upstream suppliers were claimed to have components to build over 100,000 HP Touchpads.   Rather than leave suppliers out in the cold based on pre-committed orders,  producing and satisfying demand may well be the profitable option that repairs relations with suppliers and permits customers to feel loved.  Does this logic explain the decision by HP to continue to produce and sell at a loss ? Should suppliers have been paid instead to find alternate channels for their components ? Given that the Touchpads will probably have to be jailbroken to install another operating system such as Android, will HP’s decision hurt other Android based tablet manufacturers ?

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Importing Indian rosewood to Gibson guitar plants, and customs office reaction

Posted on September 2, 2011 by aviyer2010

A New York Times article (August 31, 2011) describes a raid on factories owned by the Gibson Guitar Corporation that disrupted the company’s supply chain. The focus is on rosewood and ebony fingerboards imported from India. While Indian laws prevent exports of fingerboard lanks that are more than a centimeter thick to protect woorworking jobs, Gibson maintains that the Indian trade officials permitted these exports.   Should the US customs department interpret Indian laws and shut down US manufacturers ? Should Gibson have been given an opportunity to adjust their supply chain impact or is the cost of the disruption justified ? Given the adhoc reason for the Indian protectionist laws, is enforcement in the US appropriate ?

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Plan to tighten Clean Air Rules abandoned

Posted on September 2, 2011 by aviyer2010

A New York Times article (Sept 2, 2011) desctibes a plan to abandon improving air quality rules to reduce smog causing chemicals, thus moving to a relaxed standard set in 2008.  Worries about the impact of this new legislation on industry costs, and thus job creation, were presumed to be a driver of this decision. but a planned study of the regulation in 2013, after the presidential election, may also be areason.  Should the regulatory impact of improved air quality legislation be acceptable as a reason to roll back legislation ? If poorer environmental standards made US manufacturing competitive while increasing health risks, is the tradeoff worth it ? If European manufacturers survive in a more regulated environment, will they be ultimaltely more competitive ?

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Advancing US Manufacturing Future

Posted on August 30, 2011 by aviyer2010

An Op-Ed piece in the New York Times (August 29, 2011) by Susan Hockfield, President of MIT, suggests the need for federal investments in advanced manufacturing, similar to past US govt investments to create innovation in electronics, computing, the Internet and aviation.  Given the statistic that the 70 % of private industry research employs 64 % of US scientists and engineers, the article suggests that investments in basic research and development can be an engine for advanced manufacturing sector growth.   Examples from lithium ion battery materials using nanotechnology, high energy butane cartridges for hand held chargers and DNA analysis to detect diseases suggest the potential. Should federal funds be focused on the high risk upstream research to assist in job creation ? Or should the federal govt focus on downstream commercialization of already completed research ?  What can the federal govt do that the private markets do not do ? Should this be considered an ideal outcome or a competitive reaction of other govts and their choices ?

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Should the US Government assist battery manufacturers ?

Posted on August 30, 2011 by aviyer2010

A New York Times article (‘Does America need manufacturing”, August 24, 2011) described the supply chain impact of federal govt investment in battery manufacturing – the potential impact on scientific research, mining, building contractors, designers, engineers and shop floor employees. The article estimates that manufacturing employs 65 5 of US scientits and engineers.  Should the federal government consider its role as the nurturer of the supply chain and make investments that are an externality to the supply chain ? Would such govt investments be considered as competitive responses, since other govts such as the Korean or Japanese govt do so regularly ? Should we include the “jobs not created” in the calculation of the benefit of such Federal investments ?

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Steve Jobs, Apple’s product demand and Asian supplier network impact

Posted on August 27, 2011 by aviyer2010

An article in the Wall Street Journal (August 26, 2011) describes the potential impact of Steve Jobs resignation as CEO of Apple on the company’s possible new products and demand. Given that many of Apple’s suppliers are in Asia and include Samsung, Toshiba and LG, a drop in Apple’s product demand will immediately impact their component demand. But the same companies also participate in products competing with Apple, thus permitting them to increase demand for their own end products. Given the rapid ramp up of Apple’s products the past few years, will Apple’s new leadership result in an overall negative impact on Asian suppliers ? Will a possibly weakened Apple product development enable more competition in the tablet and smartphone market ? Will these changes increase or decrease costs for customers to get innovative products ?

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Incompatible plug-in for electric car battery charging

Posted on August 27, 2011 by aviyer2010

A New York Times article (August 26, 2011) describes the incompatible standards for fast charging 480 volt chargers that can charge a Nissan Leaf in half an hour. The issue is that standards for these fast chargers are not set, thus creating problems with charging cars on the go.  While the Society for Automitive Engineers has a standard for the 120 volt home chargers, will delays in introducing standards for fast chargers dampen growth of this industry ? Is there any strategic reason for auto manufacturers to resist common standards for battery charging ? Will there be an incentive for manufacturers of these charging stations to have their own proprietary standards ?

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China rare earth exports policy and new plant location

Posted on August 25, 2011 by aviyer2010

A New York Times article (August 24, 2011) describes the impact of China’s policy to limit exports of rare earth metals on new plant location decisions by Showa Denko of Japan and Intematix of the United States. Showa produces alloys made with rare earth metals for hybrid cars. Intematix uses rare earth phospers to made light emiiting diodes.  Both these companies located their end product manufacturing in China to have cheap and reliable access to rare earths – which would cost a lot more if used outside China due to export taxes imposed by China.  Is China’s policy to control exports as a way to force assemblers to locate in China a sustainable supply chain approach ? Will the expected increase in rare earth supplies, as new mines start producing, cause manufacturers to move out of China as soon as supplies ease ? Given worries about intellectual property in China, will manufacturers be better off focusing on decreasing the use of rare earths and recycling ?

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Resolving Shortages of Cancer Drugs

Posted on August 21, 2011 by aviyer2010

A New York Times article (August 19, 2011) describes the problem of shortages of several cancer drugs that are now made by generic manufacturers.   These drugs are used for breat cancer, colorectal cancer and bacterial infections.  The article claims that the erratic supply is linked to global manufacturing sources that have not been subject to FDA inspection.  Significant price increases (factors of 10 or 20) and continued shortages could impact timeliness and thus effectiveness of treatment. Should the Federal government build stockpiles of dry ingredients that can then be mixed to form the required drugs ? Should inspection costs of foreign manufacturing facilities be paid by branded manufacturers to ensure supply ? Should it be the manufacturer’s responsibility to warn hospitals of impending shortages ?

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