Product package size and associated potential liability

Posted on July 29, 2011 by aviyer2010

A Wall Street Jorunal article (28 July 2011) describes a lawsuit in Las Vegas against generic manufacturers of propofol used in colonoscopy.  The manufacturers sold 50 milliliter bottles that could be used for at least two procedures.  However, labels on the bottles, which match those of branded manufacturers, state that they should be used only once.  Use of leftover drugs across patients caused hepatitis and the lawsuit blamed manufacturers for the larger pack sizes.   While Las Vegas courts agreed with the liability for manufacturers, the US Supreme Court in a related case claimed that generic manufacturers cannot be required to have labels beyond those of branded manufacturers. Is it rational that pack size and its associated “cutting corners” incentive, despite labels be a manufacturer responsibility ? Should monitoring product use and creating designs that will detect errors in use be part of the product designer’s responsibility (poka-yoke designs using a Japanese term) ?

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Boeing design choice for the new 737 and Airbus announcement

Posted on July 29, 2011 by aviyer2010

A Wall Street Journal article (28 July 2011) describes Boeing’s CEO McNerney defending Boeing’s plan to offer an upgraded design for the 737 versus an anticipated new design.   Many in the industry had anticipated a newly designed 737, and this announcement of a retrofit seemed a radical change in plans. Analysts worried that the design choice was a reaction to Airbus’s announcement of upgraded engines for the competing A 320.    How much of the design choice of firms should include a response to competitor choices ? Is it optimal for Boeing to follow Airbus or would sticking to its original design offer a more competitive alternative ? Was there a benefit to Airbus to announce its design and thus preempt a cost prohibitive design race ?

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54.5 mpg by 2025

Posted on July 29, 2011 by aviyer2010

A Wall Street Journal (28 July 2011) describes an agreement between the auto manufacturers and the US government to double the average mileage from 27.3 mpg to 54.5 mpg. Attaining this mileage can involve use of solar panels, battery power, credits for hybrid trucks, use of alternate fuels etc.  The calculus is that savings in fuel will cover the added cost of technologies to attain this fuel efficiency while decreasing environmental impact.  But the details of the regulation provide lower mileage requirements for trucks.  Will the regulation increase the incentive for consumers to drive trucks and thus worsen gasoline consumption ? Given the options to attain this limit without physically improving mileage, will competition result in solutions that do not improve mileage but rely on other cost saving loopholes ? Will attaining this mileage limit require the Federal government to subsidize creation of battery charging stations that are externalities across the industry ? Finally, how will consumer preferences impact manufacturer choices ?

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US Auto supply chain recovery from tsunami related glitches and growth impact

Posted on July 28, 2011 by aviyer2010

A Wall Street Journal article (July 27, 2011) links the impact of the tsunami, and part shortages, on US auto production (a drop of 5.9 %) and thus dampened growth of the US economy in the second quarter 2011 (1.9 %). But as supplt chains recover, firms such as Ford claim to increase production 7.5 %. This production surge, and consequent supply chain impact is expected to potentially increase US growth to 3%, given the auto industry’s projected 6 % share of US total employment.    Is US growth now so closely tied to supply chain adjustments, with few inventory buffers, that it reflects the industry production ?  Given the link between the Japanese tsunami and US growth, will improving supply chain resilience require more dispersed production  ? Should product designs have multiple versions, with associated sourcing, to accomodate such unforseen shocks ?

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Dropping rare earth prices in China and supply chain impact

Posted on July 27, 2011 by aviyer2010

The Wall Street Journal (July 6, 2011) reports that rare earth metal prices in China dropped by as much as 7.2 %, a remarkable change from a short few months when China’s cut in exports created worries of global shortages for inputs to alternate energy products.  With new production sources, such as the Malaysian facility operated by Lynas, expected to come online, and the WTO ruling against China’s curbing of exports, potential easing of supply may account for this drop. But there are environmental concerns about the radioactive waste generated by the Malaysian plant, which might dampen supply.  What does the price drop of rare earth metals tell us about supply issues ? Should plans to stockpile rare earth metals by countries and businesses react to price fluctuations ? Should US regulations be eased to permit new US mining of rare earths to resume ?

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The US and Mexico Truck Transport Agreement

Posted on July 27, 2011 by aviyer2010

A New York Times article (July 6, 2011) summarizes the recent agreement to let Mexican truckers carry loads into US destinations, thus decreasing trade frictions (cost and time delays) at the US-Mexico border.  In turn, this agreement decreases Mexican tariffs on US products and agricultural exports.  Will this deal generate an overall increase in US trade with Mexico and benefit the US consumer ? Will the lower priced Mexican truck labor impact small US trucking firms disporportionately ? How will mixed loads with different US destinations comply with the need to track truck deliveries to prevent their use for commerce between US locations and who, ultimately, will bear the responsibility ?

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JIT workers and Sales Impact

Posted on July 27, 2011 by aviyer2010

A Wall Street Journal article (July 27, 2011) describes the 2009 sales drop of 4.5 % and employment drop of 8.3 % and a ten year growth of 19 % while private sector jobs dropped 2 million.  One concept described is that of treatment of workers as variable cost because they can be hired “just in time”, due to the flexible labor market today.  In addition, the new workers added are often in foreign locations.  What is the point at which the potentially increased productivity of full time workers trump the flexibility of JIT employees ? Are there industries where a flexible labor approach, synched with demand, may increase costs over the long run ? How do we maintain the benefit of “process learning” in the face of an evolving employee pool ?

 

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Vertical Integration, Global Supply Chains and reliable power in India

Posted on July 27, 2011 by aviyer2010

The New York Times (July 27, 2011) describes a vertically integrated global supply chain built by the Adani Group – with coal mined in their mines in Indonesia, South Korean manufactured ships transporting it 4,000 miles to their port in Mundra (India) and then on to their power plants to generate electricity. Mining rights and their port in Australia are the future. All this to avoid the unreliable contract execution for Indian coal located 1,000 miles away, transported by a slow and unreliable state owned Railway.  The solution generated by the Adani group to scour the world and tradeoff distance for reliable supply illustrates the seemingly nonintuitive ways that global supply chains can be competitive in developing countries – whose voracious demand for electricity outstrips the available power supply and domestic capacity to plan.  Is this vertical integration globally a repeat of America’s gilded age (as described in the article) and a normal part of development ? Is the supply chain solution of the Adani group now more vulnerable to global risks – a tradeoff from domestic risk ? Give that the source of power remains coal, albeit the better quality coal from Indonesia, should we regard their supply chain as a more environmentally friendly solution compared to the domestic coal alternative ?

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Is US Inshoring of manufacturing and services a trend ?

Posted on June 17, 2011 by aviyer2010

An article in CNN Money (http://money.cnn.com/2011/06/17/news/economy/made_in_usa/index.htm?hpt=hp_t2) asks if the examples of companies inshoring i.e., bringing outsourced activities back to the US, is a long term trend. The articles identifies GE’s appliance plan in Kentucky that will produce refrigerators and water heaters, NCR’s decision to produce ATMs in Columbus, GA, and Carbonite’s decision to move their call center to Maine.  The drivers for these decisions vary from a lowering of the labor cost gap, higher turnover in foreign locations, increased shipping costs and the benefits for innovation to co-locate manufacturing and design.   Do these drivers constitute a long term trend and will that lead to increased domestic US manufacturing ? How will the competitive responses of the foreign locations impact this trend ? Finally, are these the type of jobs that will enable continued US competitiveness ?

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Impact of the DOT delay rule on flight cancellations

Posted on June 13, 2011 by aviyer2010

An article in CNN.com (http://www.cnn.com/2011/TRAVEL/06/13/tarmac.delays.cancellations/index.html?hpt=hp_bn12) describes the impact of the new Department of Transportation rile that penalizes airlines up to $ 27,500 per passenger for ground delays of more than three hours.  The result was a drop in such delays from 693 in 2009-2010 to 20 in 2010-2011. The number of cancelled flights associated with tarmac delays changed from 336 to 387, which seems minor.  But, with the new penalties, the number of flights with a two hour delay dropped from 5328 to 3386. Thus the number of cancelled flights were 11.4 % of the delayed flights as against 6.3 % earlier. The upshot – aggressive cancellation of flights by airlines in advance of impending delays.  The question – is cancelling in advance a benefit to customers ? How should one evaluate the overall system wide benefit of the additional penalties levied by the DOT ?

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