China Control of Rare Earth Mines

Posted on January 21, 2011 by aviyer2010

A New York Times article (January 21,2011, page B1) describes the takeover of 11  districts in China that have rare earth deposits.  This increased control will let the government be more strategic regarding exports of rare earths but also reduce illegal mining. The article claims that 50 % of rare earth supply is from illegal production with acids and materials disposed off in waterways and that this supply will be controlled.  However, control of exports through quotas is banned by the W.T.O. and industry experts are worried that more control of the supply chain will permit Chinese officials to further control sales of these metals that are crucial for the alternate energy industry.  Is it reasonable to expect that greater supply chain control will decrease available rare earths ? Is the benefit of reducing illegal mining greater than the potential cost due to strategic actions by governments ? How should companies who make batteries or smartphones react to such potential supply disruptions and associated price surges ?

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Flexible Outfits – Swiss Army Knife like transformations

Posted on January 20, 2011 by aviyer2010

An article in the New York Times (January 20, 2011, E2) describes designers like Donna Karan, JNBY and Calvin Tran who have developed designs that can be worn as “a poncho, a dress, a kimono or a hooded cape” as Mr Tran is quoted in the article. The article mentions that while these designs are versatile, they lack the “hangar appeal” because their success requires the customer to drape or fold to achieve the look. Will such versatile designs, that permit customers to leverage their spend over a wider assortment of looks, become the trend in these frugal times ?  Or will the “hangar look” tradeoff doom such designs to niche markets ?

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WalMart and Healthy Food

Posted on January 20, 2011 by aviyer2010

A New York Times article (January 20, 2011, B1) described WalMart’s announcement to lower salt, fat and  sugars in packaged foods and decrease prices of fruits and vegetables over the next five years. Specifically the company plans to reduce sodium by 25 % and added sugars by 10 % by 2015. The foods affected include rice, soups, beans, salad dressings and chips – all sold under WalMart private label brands.  The article claims that WalMart will hold prices and decrease their own margins, with increased demand permitting them to maintain profits.  Will unilateral action by a large retailer cause consumers to adjust their food preferences ? Will the proposed reduction of fruit and vegetable costs by $ 1 billion a year come from reduced retailer margins, leveraging of volumes with suppliers  or increased demand at the lower price points ? Will such a strategy provide additional competitiveness to WalMart ?

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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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