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Archive for the ‘Innovation’ Category

Three weeks ago, I had the pleasure to visit one branch of my extended family and BMW Welt (BMW World), the “multi-functional customer experience and exhibition facility of the BMW AG, located in Munich, Germany.” Supposedly, BMW Welt is the second most popular tourist destination around Munich, after Neuschwanstein Castle which inspired Disneylands’ Sleeping Beauty Castle. If you like architecture or cars, you should visit BMW Welt.

OK, but this is the Operations Room, so what else is worth knowing? It turns out that this month, BMW starts selling in Germany its long-awaited i3 (the USA will have to wait until 2014) and here’s some personal pictures to highlight three aspects:

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So far, our blogs on offshoring have considered its domestic impact in terms of jobs and competitiveness. Today, I report on the first data I have seen to shed light on the link between production offshoring and domestic innovation.  The question is: Do firms that offshore production innovate more or less than firms that do not offshore?  This question has led to national debate on competitiveness. Here is some key data and a data-driven answer:… (more…)

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This blog entry is a direct continuation of Marty’s post on Textiles in America and part of our ongoing posts on reshoring of work.  The New York Times Replica Edition is an exact electronic version of the in-print newspaper where I first saw these two nice pieces of data.  (I LOVE data.  Recall: “In God we trust, all others bring data”–according to quality guru Edward Demming.)

jobs evolution since 1990. (Source: Bureau of Labor Statistics, as reported in New York Times of Sep 20, 2013)

Jobs evolution since 1990.
(Source: Bureau of Labor Statistics, as reported in New York Times of Sep 20, 2013)

This chart provides hard data of the stories often told about job losses.  The huge transformation of textiles and apparel is striking–mind you, the data spans the relative recent 18 years!  I can only imagine the devastating impact to families working in that sector…  From an economic perspective, two key explanatory changes are: 1) offshoring to low cost countries after deregulation and 2) innovation leading to increased automation, and the substitution of capital for labor.  (I purposely use the “big” innovation word; later I shall also write about recent data linking innovation to offshoring.)

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So how much innovation can there be in supply chain design for cut flowers? Once the industry globalizes (as it has), it would seem that airfreight is the only option. Customers value freshness and cut flowers are the essence of a perishable flower. However, there may be more room for process changes than you would think as there is a trend of shipping flowers by sea (Fresh-Cut Flowers, Shipped by Sea?, Wall Street Journal, May 11).

The delicate business of transporting fresh-cut flowers from field to vase is being quietly rearranged, with more and more blooms taking a slow steam by sea from South America and Africa instead of being whisked by air.

Global cut-flower sales approached $14 billion last year and most move by cargo plane, but high jet-fuel costs and improvements in chilling technology are prompting a shift to more ocean shipping, particularly for imports to Europe.

Ocean transport costs can be half those of airfreight, an important consideration for price-conscious supermarkets and florists. Mom is unlikely to notice the difference in her Mother’s Day bouquet. Proponents say certain roses, carnations and other hearty varieties show no ill effects from the sea voyages spent in refrigerated containers a degree or two above freezing.

According to the article, some industry participants say that ocean shipping could account for a significant chunk of the market in coming years. Currently, airfreight accounts for 99% of shipments.

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Chris Anderson, the former editor of Wired and current 3D printing cheerleader, has an intriguing piece in the New York Times (Mexico: The New China, Jan 27). it deals with his experience running 3D Robotics, a maker of civilian drone aircraft. 3D Robotics competes with firms that sourcing their production in China and hence they have had to find a way to take on competitors with low labor costs. Their answer? Tiajuna, Mexico. 3D is based in San Diego so engineering is done on the north side of the border but assembly is done on the south. Labor costs may higher than in China (but, as the article notes, the gap is closing as Chinese wages rise) but Anderson sees many advantages in his firm’s “quicksourcing” model that depends as much on speed as cheap hands.

First, a shorter supply chain means that a company can make things when it wants to, instead of solely when it has to. Strange as it may seem, many small manufacturers don’t have that option. When we started 3D, we produced everything in China and needed to order in units of thousands to get good pricing. That meant that we had to write big checks to make big batches of goods — money we wouldn’t see again until all those products sold, sometimes a year or more later. Now that we carry out our production locally, we’re able to make only what we need that week.

This point obviously depends on owning one’s own facility in Mexico or having a very tight relationship with the Mexican supplier. If a small buyer doesn’t have much negotiating power with a supplier it will still likely face large minimum purchase quantities when buying from Mexico. Still it is an interesting observation and suggests that some start ups may be making ill-advised trade offs between cost savings and flexibility. (more…)

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