Slow Steaming, Extra Slow Steaming and Antitrust Exemption

Posted on January 19, 2011 by aviyer2010

A Supply Chain Digest article (January 13, 2011,http://www.scdigest.com/ontarget/11-01-13-1.php?cid=4091) describes discussions between shipping carriers that transport between Asia and the US to slow down speeds and decrease their environmental impact. Slow steaming reduces speed from 25 knots to 18 knots and is reported to save 60 % of fuel consumption, while extra slow steaming reduces speed to 12-16 knots and decreases costs even further.  But such discussions between carriers was just approved by the Federal Maritime Commission as part of an initiative to enable carriers to adopt steps to decrease their environmental impact.  Will the gains from such discussions across carriers outweigh the potential coordination across competitors ? Will such arrangements be required for supply chains to fully leverage environmental benefits ?

 

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U.S.Manufacturing jobs grow 1.2 %

Posted on January 19, 2011 by aviyer2010

A report in the Wall Street Journal (January 19, 2011) describes a 1.2 % growth in manufacturing jobs in the US in 2010, with a projected increase of 2.5 % in 2011. The article also states that while manufacturing output increased 7.1 %, hours worked grew 3 %, suggesting increased productivity or use of technology.  The reasons for such growth is claimed to be replacing capital equipment, incentives, sustainability initiatives to save energy and relocation of manufacturing to save shipping costs. Examples of increased domestic production include Whirlpool appliances in Ohio, Caterpillar excavators in Texas and Dow chemicals in Michigan.  Will the US, long a demand source, now become competitive again as a manufacturing location – thanks to the weak dollar, a focus on reducing emissions and unpredictable demand ? Will such manufacturing shifts bring along increased product innovation and next generation technologies ?

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Incorporating Manufacturing efficiency in Japanese farms using IT

Posted on January 18, 2011 by aviyer2010

An article in the Wall Street Journal (January 18, 2011, page B5) describes the head of a Japanese commercial farm who uses information technology to optimize his farm’s output. The article describes the use of sensors to monitor temeprature, soil and moisture. Cameras in the fields and GPS cell phones allow crops to be monitored for infections.  The impact is the increased use of kaizen in the field to optimize the crops to be planted.  As Japan’s farmers age, and imports of produce into Japan increases, such use of technology is expected to permit the tacit knowledge that farmers carry around to be converted to algorithms and procedures to maximize output.  Will technology at this level of use enable Japanese farmers to compete ? Will such technologies become commonplace in developed countries ? Or should agriculture shift locations, just as manufacturing, and move to the most efficient production locations ?

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Initiatives to protect the Global Supply Chain

Posted on January 18, 2011 by aviyer2010

Janet Napolitano, Secretary of Homeland Security, wrote an Op-Ed piece in the Wall Street Journal (Januray 6,2011) describing the challenges and efforts to protect the Global Supply Chain. Products ordered by consumers today may often involve components, subassemblies and packaging that involve manufacturers and distributors spread across the globe. The secretary describes efforts to (a) share information regarding shipments across countries, (b) shield transportation hubs and (c) identify ways to make the supply chain more resilient to disruptions. An important question for companies is to understand how such efforts will impact lead time and costs.  Would it be optimal to create “fast track” approvals for companies who register their shipments and are “certified” ? Will such schemes result in a preference for large companies vs small companies or will it encourage shippers , like UPS, FedEx or DHL, to play a larger role in coordinating shipments ? Are there other technological innovations that will lower the cost of screening ?

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US Factory Output, Capacity Utilization Increases

Posted on January 17, 2011 by aviyer2010

An article in the Wall Street Journal (January 15,2011) reports that US factory output rose 0.8 % in December (from November).  Capacity utilization was reported to increase to 76 % from 75.4 % in November and business inventories increased 0.2 % over the previous month but sales increased 1.2 %.  The combination of these supply chain measurements suggests that production may be expected to increase to bring supply and demand in sync.  Do you agree with this assessment ? Or, given that the data also suggests that auto and construction sectors were weaker than others and show production losses, portend a continued grim outlook for manufacturing ?

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The weak dollar vs Yen and Toyota’s production decisions

Posted on January 17, 2011 by aviyer2010

An Associated Press article (January 15,2011, http://finance.yahoo.com/news/Toyota-Rising-yen-could-force-apf-1661264517.html?x=0) describes the impact of the current 83 yen to the dollar exchange rate on Toyota’s decisions regarding production. Toyota has the largest Japanese production of all Japanese automakers, and the strong yen decreases the profitability of that decision.  Toyota’s President Akio Toyoda describes the company’s responsibility to preserve manufacturing in Japan and its role to deliver profitability to shareholders and suggests that the company may have to shift production out of Japan.  How long should the strong yen persist before the switching costs of production are dominated by production shifts ? Will the weak US dollar succeed in bringing increased production to US plants ?

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Rice Husk Power Supply Chain in India

Posted on January 17, 2011 by aviyer2010

An article in The New York Times (“A Light in India”, January 10,2011) describes a sustainable supply chain for electric power in the state of Bihar, India.  A short summary of the article – “In the past, over 1.8 billion kgs of rice husk rotted in fields.  The company, Husk Power, takes this waste and, using gasifiers, converts it to electricity that is sold to poor households at a cost that is 50 % of their current costs to have kerosene based light sources.  The waste after rice husk is burned is used to create incense sticks.  The incense stick business employs 500 women, while door to door electricity bill collectors have become distributors of soap etc.  In short, the generation of power from waste, coupled with a supply chain that creates jobs in the poor communities, generates a sustainable power supply chain.”  Will such sustainable supply chains have to become the norm to solve the power availability problems for the 1.5 billion people with no electricity ?

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US Solar panel producer closes MA plant

Posted on January 17, 2011 by aviyer2010

An article in the International Herald Tribune (January 15,2011) describes closure of the MA plant of Evergreen Solar – that shifted production to a plant in China.   The article reports that company had plans to decrease its costs from $ 3.39 per watt in 2008 to $ 2 by 2010, but Chinese manufacturers were selling the same panels for $ 1.60 per watt.  In the article, the company’s managers cite the ability of Chinese plants to form partnerships with local government entities and thus avail of low cost financing with no interest payments due until 2015.    Thus, even with labor costs being a small part of the overall costs, capital financing costs caused the closure of the plant.  How much of the lack of competitiveness of US manufacturing can be tracked to higher financing costs ? Is there a strategic reason to provide low cost financing for alternate energy industries or should global comparative advantage determine sourcing locations ?

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Plug-In Hybrids – how clean are they ?

Posted on January 17, 2011 by aviyer2010

An article in Fast Company (Ariel Schwartz, January 13,2011) summarizes a  MIT study (http://web.mit.edu/mitei/research/reports/transport-electrification.html) that tracks the sources of electricity that will power electric plug-in cars.  Plug-ins using alternate energy sources such as nuclear, biomass etc are estimated in the study to decrease emissions by 66 % compared to gas powered engines.  But, given coal as the source of energy for many states, what can be done to convert the apparent “clean” energy benefits to be realized ? The study suggests a pricing scheme that encourages “green power” derived from alternate energy sources that enable such emission savings to be realized.  Should such supply chain wide impact be “required” to be calculated and displayed by automakers – who can use GPS and other information sources to calculate emissions ?

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Energy Efficiency for troop tents to save fuel convoys

Posted on January 14, 2011 by aviyer2010

An Op-Ed piece in the New York Times (January 13,2011) describes the over 1,000 US troops who have been killed on fuel related missions. The author, Steven Anderson, proposes a solution – using foam insulation on the exteriors of bases to improve fuel efficiency by 80 % and thus decrease the fuel convoys required.  The benefit – save a significant amount of the $ 24 billion in fuel cost and save troop lives due to fewer convoys.  A study reported in the piece claims a $ 1 billion saving from a $ 95 million investment in Iraq.  The links between sustainable structures in war zones and the impact on fuel costs and troop lives is an innovative supply chain connection.  Should such calculations – the link between efficiency and costs as well as risk be required computations in the future ? What are other cases where the cost reduction, efficiency and risk reduction go in the same direction ?

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