Liner conferences and antitrust in Europe

Posted on May 18, 2011 by aviyer2010

Liner conferences involved ship owners who discussed sharing capacity, stabilized port fees, etc. They were legal in Europe until 2008. Ship owners claim that their role was benign, and only helped to stabilize prices by increasing efficiency. A recent investigation of shipping companies suggests that the EU believes that this practice continued after 2008 and hurt shippers. Ships are treated under a special maritime law in the US that permits them to swap loads to increase efficiency. The question is whether benign collaboration can be confirmed by ship owners ? Will costs go up in the absence of such collaboration ? Are the low prices during the downturn an indication of competitiveness of the industry ?

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Robots to pick drug dosages

Posted on May 14, 2011 by aviyer2010

An article in Forbes (May 23, 2011,62-66) describes robotic picking and lifting of drug dosages by Remedi Seniorcare. Conveyor style robots take pills from tubes and create individual patient daily dosage sealed plastic pouches. This saves time for nurses and avoids wasted tablets as patient conditions change in nursing homes, an estimated 17% of doses.  Will automation of such services be mandated by the Federal government as part of efficiency demanded for Medicare payments ?  Will transactional details such as patient location, condition changes etc, have to be synchronized with automation to realize projected benefits ?

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Royal weddings, product design and manufacturing

Posted on May 7, 2011 by aviyer2010

An article in the New York Times (May 5,2011) describes how Pippa Middleton’s (Kate’s sister) gown (worn during the British wedding celebration of William and Kate)  inspired the company Faviana as well as David’s Bridal to create versions for the mass market. In Faviana’s case, a design prototype was created by the end of the day, followed by paper patterns, fabric selection and more prototypes. A few days later design details and trims were sent to a manufacturer in New York to produce up to 3000 units which would then sell for about $ 320.  The design time frame was 2 days, manufacturing and distribution ot retail within 12 weeks.   Has the global supply chain enables this speed of response ? Does the New York manufacturer have an edge for these quick response manufacturing and if so, what capability does the company and its employees need to have ? Since this is a one season (potentially) product, could the company trade off  product durability for speed of response and if so, how does the design change ?

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Opening a US plant to make candles

Posted on May 6, 2011 by aviyer2010

A Wall Street Journal article (May 5, 2011) describes the travails of Chesapeake Bay Candle as they tried to open a plant in the US. Candles face a 108.3 % inport duty and thus only 20 % of their volume is imported. In addition, the increased need for next day shipment to retailers demands local production to order.  But Chesapeake Bay Candle claims that their efforts to open a US plant have taken more than 13 months and over 30 % of the costs have been related to “code compliance”, the result of a set of overlapping rules that have not been streamlined.  Should there be an effort to streamline rules and decrease compliance costs – and if so who should lead such efforts ? Should local economic development officials offer a “concierge” service to attract manufacturing jobs ? Which other industries do you think expect to have such “onshoring” opportunities ?

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Fragmented Trucking in China and Supply Chain Impact

Posted on April 29, 2011 by aviyer2010

An article in the New York Times (April 29, 2011) describes the fragmented, unregulated trucking industry in China and the consequent cost per mile of $ 2.50 to $ 3.00 per mile vs the US coat of $ 1.75 per mile. This is despite labor costs in the US of $ 17/hour vs China labor costs of 25 cents/hour.  The fragmented trucking in China means that owner operators compete on price, overload their trucks and ignore mandated safety related driver rest periods but are exposed to bribes, road tolls etc.  But as factories move further inland, the archaic network of trucks, barges etc and the increased fuel prices and government regulation  threatens the manufacturing efficiency that is China’s export hallmark.  Will the increased logistics costs derail the cost efficiency of China manufacturing ? Will a China government push to incent larger trucking companies with more stringent enforcement of rules improve the competitiveness of Chinese manufacturers ? Should OEMs who manufacture in China be held responsible for the working conditions of the truckers who carry their loads ?

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Rethinking JIT under supply disruptions and erratic growth

Posted on April 29, 2011 by aviyer2010

A Wall Street Journal article (April 29, 2011) describes companies like Terex and Al-jon Manufacturing and their increased inventories of raw material and finished goods given supply disruptions and increased sales growth.  Whil Just-In-Time inventories enable supply to be maintained synchronized with demand, risk averse suppliers in turn demand order commitments to enable JIT delivery or themsleves switch to JIT manufacturing and thus create erratic supply lead times.  The earthquake in Japan and increased demand in developing countries thus push responsibility to the OEM to build up buffer stocks, per this article.  Are there other schemes to enable supply demand matching without building up buffer stocks ? Could domestic (US) suppliers with shorter delivery lead times enable JIT despite such uncertainties ? Will flexible manufacturing capability or reconfigurable supply chains offer a way out ?

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Automobile OEM custom chips and Japanese supply bottlenecks

Posted on April 28, 2011 by aviyer2010

An International Herald Tribune article (April 27, 2011) describes the impact of the earthquake caused destruction to chip manufacturer Renesas Electronics with a 40 % market share of automobile microcontrollers.  The company was formed by the merger of three chip makers, thus creating one supplier to many auto OEMs.  Each OEM has its own unique chip design, thus making supplier switching more time consuming and expensive.  Will the fragility of their supply base cause more design standardization across auto OEM chips ? Or will the competitive benefit of unique designs trump the supply chain benefits from commonality ? Will common designs also hurt possible OEM influence on repair shops ad preferential value provided by OEM dealers ?

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Retailers compete by offering exclusive plants

Posted on April 28, 2011 by aviyer2010

A Wall Street Journal (April 27, 2011) article describes exclusive plants offered by Lowe’s and Home Depot as they compete for customer spend. For every $ 1 spent on plants, customers are reported to spend an additional $ 3 on shovels, hose etc, thus increasing the importance of plat sales.  At Lowe’s horticulturists are reported to winnow 1,000 potential plants down to the 10 hardiest and then offer them as exclusive varieties for a year or more.   Getting customers to focus on exclusive plants thus is key to retail competitiveness.  Should the result of retail competition be expected to produce such exclusive offerings instead of price competition based on similar items ?  Do exclusive plant offerings increase retail demand risk or is this the prisoners dilemma outcome of competition ?

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Conflict Materials Ban and Electronics Supply Chain Impact

Posted on April 27, 2011 by aviyer2010

A Wall Street Journal article (April 27,2011) describes the impact of the portion of Dodd-Frank law that requires companies to inform the SEC if any if their sources of tantalum, tin, tungsten and gold are from the conflict regions in the Congo or neighboring countries.  The articles describes the associated tracking problem for AT&T’s cell phones as requiring tracking of “35 manufacturers, 60 to 80 parts suppliers and 1000 commodity suppliers, brokers and distributors”.   But the best way to avoid this issue is to drop all sources in the Congo, which hurts the country as a whole.  Will the Dodd-Frank bill and its consequent supply chain costs enable the goal to decrease funding for warlords ? Should there be industry wide standards that are enforced to lower the costs to comply with such laws ? Or could certification of being “conflict materials free” and its demand side effects be an alternate strategy ?

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Retail paint price increases and titanium dioxide cost link

Posted on April 23, 2011 by aviyer2010

An article in the Wall Street Journal (23 April 2011) describes a 16 % increase in retail price of paint.  The cause is an increased demand for titanium dioxide, a paint ingredient that is also used in toothpaste, paper and plastic, and increased demand from developing economies like India and China. At the same time, lack of investment by mining companies and shuttering of titanium dioxide plants have caused a increase in price for this ingredient.  While paint manufacturers work to decrease the use of this ingredient or adjust paint grades, manufacturers of titanium dioxide like DuPont have seen profit increases.  Will such spillover cost effects due to capacity shortages become the norm in a global supply chain ? How should consumer products companies plan their designs, pricing etc to compensate for such rapid commodity price swings ?

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