Ecommerce Robustness during economic downturn

Posted on August 15, 2011 by aviyer2010

A Wall Street Journal article (August 14, 2011) describes the potential growth of ecommerce businesses (10 % in 2011 and 9 % in 2012) even as overall retail sales are expected to decrease. Increased selection, pooled inventory that can be sold across the globe, fullfillment efficiencies, and use of efficient entities (such as Amazon’s fulfillment) by small retailers – all all listed as the driver of this growth.  Will the potential efficiencies afforded by ecommerce herald a significant push into that space by traditional retailers ? Will a crowded ecommerce space swing the pendulum back to old name retailers with brand recognition ? How will retailers distinguish the customer shopping experience in their e-space?

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Decreased US Federal government spending and private supply chain impact

Posted on August 9, 2011 by aviyer2010

An article in the Wall Street Journal (August 9, 2011) describes the impact of decreases in spending by the federal government ($ 917 billion in cuts over 10 years) and the impact of the loss of their consistency in spending and reliability in contract execution.   From 97 % for Lockheed Martin to 27 % of volume for Dell , government contracts have a large impact.  Will the supply chain cost impact be larger than the magnitude of the demand impact due to a decrease in demand stability ? Will these demand changes result in a ripple effect across the supply chain ?  Will these changes have a disproportionate impact on domestic suppliers due to the need to satisfy “Buy American” policies for many government contracts ?

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‘Green deliveries” by Office Depot

Posted on August 8, 2011 by aviyer2010

An article in Sustainable Life Media (http://www.sustainablelifemedia.com/news_and_views/articles/office-depot-rolls-out-greener-deliveries?utm_source=newsletter&utm_medium=brandsweekly&utm_campaign=august8) describes Office Depot’s delivery option to customers – receive supplies in paper bags with over 40 % recycled content – transported in plastic reusable totes with 60 % recycled plastic.  The goal is to replace 5 million boxes with bags in one year, thus saving about 20,000 trees.  Is this approach to reducing waste – by customizing delivery processes to shipper choices – an optimal way to reduce the environmental footprint of supply chains ? Given the need to manage plastic tote flows – will there be a potential impact on routing efficiency that should be accounted for ? If the packaging choice impacts product integrity, does the customer accept the associated liability, or should Office depot be required to guarantee that packaging choice does not affect product quality ?

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Global Trade, earthworms and potatoes

Posted on August 6, 2011 by aviyer2010

A Saturday essay by Charles Mann (Wall Street Journal, August 6, 2011) provides a fascinating story of the impact of stowaways as a party of global trade. He describes how earthworms made their way as part of the English dirt used to grow tobacco in Virginia (itself imported from the Amazon). The earthworms had disppeared from the US Midwest and New Englad during the Ice Age. These newly imported eathworms flourished and changed the nutrient structure of the soil, wiping out some native plants at the time (wild oats for example). As a result of the nutrient rich soil, the eathworms changed US agricultural productivity. He describes how potatoes that we imported into Ireland enabled a jump in productivity of farms and enabled it to supplant grains.  But centuries later, potato blight wiped out these firms and, in Ireland, killed two million people in two years.  Global trade has unforeseen impacts over time, both positive and negative. How should individual companies and nations plan their trade choices or regulations to aniticipate such impacts ? How much of the liability for such accidental traffic should be imposed on the individual company supply chain ?

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Toyota’s Toyotag and engaging consumers

Posted on August 3, 2011 by aviyer2010

A New York Times article (August 2, 2011) describes Toyota’s use of Toyotags – a “logo inside a ring” that permits customers with smartphones to get specific product information from the mobile bar code, but also permits use of a standard mobile phone.  The goal is to find ways to get information directly to the consumer about cars, maintenance plans etc, while also gathering information about end consumers.  Is Toyota’s attempts to go downstream to the end consumer as an extension of its supply chain an effective use of the web by a durable goos manufacturer ? How far can Toyota go with its reach without creating a channel conflict with its dealers ? Should the Toyota link to customer be expanded to include customer feedback regarding product performance and use ?

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“Better Place” battery swapping stations in Denmark and the future of EVs

Posted on August 2, 2011 by aviyer2010

An article in the New York Times (July 29, 2011) describes recently opened battery swapping stations by “Better Place” in Denmark. Oweners of electric vehicles lease batteries and drive into swap stations to replece batteries. A robot operated device removes the old battery and replaces it with a new one in under five minutes. By keeping charged batteries ready in inventory and leasing them to customers, the station decreases wait time to levels similar to gas stations.  But efficient operation will require car manufacturers to adhere to some standards – something that has yet to happen.  Will a leased battery approach enable faster adoption of electric vehicle technology ? Should these bettery swapping stations, that cost more than $ 3 million each, be subsidized to cover the environmental benefit they generate ? Should governments or other standard making entities step in to coordinate battery location and access standards across competing auto manufacturers ?

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“Tide Dry Cleaners” as P&G takes downstream role

Posted on August 2, 2011 by aviyer2010

An article in the New York Times (December 8, 2010) describes dry cleaning stores opened by Proctor and Gamble to popularize its Tide products.  A similar effort focuses on Mr Clean Car washing locations.  The goal is to use these outlets to spur revenue growth in the U.S.  But competition in local retail markets for dry cleaning and car washing is fierce, based on cost and service.  Will P&G be able to compete effectively to survive in these markets ? Is going downstream into retail an effective approach to grow product demand ? Can efforts to compete lcoally assist with brand growth thorugh new product introduction ?

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China’s new products – high end pearls using high tech methods

Posted on August 2, 2011 by aviyer2010

A New York Times article (August 1, 2011) describes fine pearls being developed in China to compete with Tahitian pearls, but at 10-15 % of the price.   Using proprietary technology and custom equipment to sort pearls enables the Chinese firms such as Grace Pearl, the firm manages to compete for high end products.  Newer technologies developed by the firm, some in collaboration with Zhejiang University, use genome sequencing of mussles and live tissue to develop purple, pink and bronze pearls that do not use dyes to get their color.  Does this approach – development of proprietary technology and use of high end equipment, suggest a different China manufacturing capability ? Given the need to protect home grown technologies, should we expect a greater enforcement of intellectual property in China ? Does the industry- university collaboration for technology development, described in the article, portend a new research direction in China ?

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Making the case for “cost effectiveness” of new drugs

Posted on August 1, 2011 by aviyer2010

A story in the Wall Street Journal (August 1, 2011) describes the challenges in launching new drugs, given the “cost effectiveness” concern by health authorities. This means that new drugs have to be effective in treatment, but also deliver sufficient enough value over existing treatment plans, given increasing frugality by insureres and governments.  Such demands impact pricing and the hurdles for new drugs. In addition, such approvals for ‘cost effectiveness” are done separately by each country.  Furthermore, physician worries about the liability of  potentially unknown side effects of drugs has further slowed adoption. How will such worries impact the drug company incentives for new product launches ? Will such trends decrease prices for new drugs or decrease R&D spending on new drug development ?

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Walmart’s plans to buy vegetables and fruits locally

Posted on August 1, 2011 by aviyer2010

A Wall Street Journal article (August 1, 2011) describes plans by Walmart to double its local purchase of fruits and vegetables by 2015 – with local defined as purchases from the state the store is located.   Thus Walmart buys jalapeno pepper from 30 states while about 10 years ago Florida provided most of the product.  The higher local prices are compensated by avoided transportation costs and is also in line with locavore movements.   But growing in different climates requires use of pesticides to maintain quality.  Local farners get volume commitments that makes their business viable.  But is Walmart’s decision driven by a response to consumer needs or a cost reduction strategy or both ? Is a local procurement level of 9 % for perishables by 2015 a significant local push or a marketing tool for Walmart ? Do you expect greater product variety – like heirloom tomatoes – as a response to such a local procurement strategy ?

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