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Posts Tagged ‘Supply Chain’

Have you ever thought about pallets? You know, those wood contraptions that can hold a pile of stuff off the floor while letting a forklift easily scoop up said pile? Here’s a snapshot of one that just happened to be lying around the Northwestern campus.

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So in many ways, there is nothing particularly special about pallets except that they play a key role in logistics and supply chains. They basically make schlepping stuff modular. What is actually stacked on the pallet doesn’t matter; a guy with a forklift can just pick it up and put it on or take it off a truck. Which is not to say that pallets are uninteresting. The people at Planet Money did a whole episode on pallets (Episode 545: The Blue Pallet, Jun 11) that makes for great listening. Here, check it out:

The key point is that there has in fact been innovation in the pallet market. What you see above is your basic stringer pallet. It consists of 15 pieces of wood and a bunch of nails. Note that with those three pieces of wood sandwiched between the other twelve, a forklift can only pick it up from two sides — either the front or back in the picture above. The alternative is to have a block pallet. A block pallet replaces that those three pieces of wood with nine blocks. Those blocks give extra spacing on the other two sides and a forklift can hoist the thing from any side. That additional flexibility increases efficiency. Go to a Costco. They have essentially mandated all their suppliers send stuff on block pallets. If you unload as many tractor trailers as Costco does, the productivity boost from block pallets really adds up. (more…)

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Wearable computing is often talked up as the next big thing. So how hard can it be to build a smart watch? Pebble, an independent (i.e., not owned by an existing tech company) competitor had some significant delays as it moved from Kickstarter campaign to actual product. It essentially underestimated complications of sourcing materials and getting things built. But it doesn’t have to be so hard (Shanzhai: China’s Collaborative Electronics Design Ecosystem, The Atlantic, May 18).

A different story emerges in the burgeoning wearable electronics market of Southern China, one that is based on a rapid, flexible and open ecosystem called shanzhai 山寨.

Take, World Peace Industrial (WPI), a Taiwanese electronic sourcing company located in Shenzhen, as an example. The company’s application technology unit (ATU) spends millions annually to develop reference circuit boards, called gongban 公板 (“public board”). A gongban can be used by a variety of different companies, who either incorporate it in their products directly or build atop it as they please via modifications. ATU develops 130 gongbans annually in areas ranging from smart phones, tablets, smart watches, smart homes, and industrial controls—and distributes the designs for free. WPI then makes money by trading in the boards’ components.

“We call this shanzhai in Shenzhen. It’s a mass production artwork,” explains Lawrence Lin head of the Application Technology Unit at WPI. Thirty some companies in Shenzhen are shipping their own smart watches with gongban from ATU and gongmo (‘public case’) sourced from the massive shanzhai ecosystem, which consists of tens of thousands of companies that manufacture and distribute goods. …

In the emerging area of smart watches, WPI and other solution houses create gongban, which provide common electronic functions including Bluetooth connectivity to mobile phones, and sensors to measure the wearers’ movement, as well as monitor heart rate and other vital bodily statistics. These gongban are designed to fit into a variety of gongmo that are ready to be branded on order. The flexibility to mix and match gongban and gongmo enable companies to quickly put together their own smart watches with customized functions and styles for various niche markets. Today, customers of WPI ship close to 100,000 smart watches per month.

What do a gongban and a gongmo look like? Take a gander:

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(more…)

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When you thing of the auto industry, you likely focus on big players like Ford, General Motors, Toyota and Mercedes. Names like Magna International and Denso may not mean a whole lot to you. But you should know those names. They likely make more of your car than you realize. “Mega suppliers” like Magna and Denso have been growing for years and in the process have been sifting the balance of power in the industry (Age of mega supplier heralds danger for carmakers, Financial Times, May 18).

There are now 16 major car manufacturers that sell more than 1m vehicles a year. But those cars are built from parts supplied by just 10 major component makers – meaning that under the individually styled bodywork, cars are sharing more parts.

Whether a driver chooses to buy a BMW, an Audi or a Mercedes-Benz five-door saloon, the chances are high that the anti-lock brakes will be built by Continental, the battery will come from Johnson Controls, and Denso will have provided the exhaust

Bosch, the world’s largest automotive supplier by revenue, reckons that at least one of its parts is built into almost every new car sold anywhere in the world – regardless of brand, market, price point or geography.

The article goes on to note that the top ten suppliers capture 60% of the revenue generated by the top 100 suppliers.

Given this situation, two questions seem relevant. First, how did automakers find themselves in this situation? Second, what are the implications for how the industry functions? (more…)

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Check out this spiffy graphic from Automotive News on the evolution of auto assembly in Mexico (Japanese automakers march into Mexico, set up export base, Mar 10).

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That expansion has to a large extent come at the expense of the rest of the North American industry as this graph from the Chicago Federal Reserve demonstrates.

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Note that overall assembly capacity has declined. That’s not too surprising. The industry was generally seen as being overcapacitated, and the Big Three took the never-let-a-crisis-go-to-waste route to reduce the number of factories and resize their business. But Mexico clearly gained and it is forecasted to gain even more. Here’s another graph from the Chicago Fed.

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It should be noted that this growth is driven by Japanese brands. GM is the only US or European firm to open a new plant following NAFTA. All the action lately has been due to the likes of Honda, Mazda and Nissan. Given this growth in capacity, it is not too surprising that Mexico is expected to pass Japan this year and Canada next year to become the top source of imported cars in the US. But why has there been such a rush invest there? (more…)

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Given that it is Valentine’s Day, it seems appropriate to consider the supply chain for roses. So behold this wonderful graphic from Supply Chain 24/7 (The Logistics of Delivering Fresh Roses In Time for Valentine’s Day, Feb 13).

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Flexitanks

I keep an empty wine bottle from Chateau de La Rivière in my office. It says right on the front label “Mis en bouteille au chateau,” that is, that the wine was bottled at the winery. It turns out that at least in the British wine market bottling at the winery is becoming the exception, not the rule. According to the Financial Times, a large numbers of wines imported into the United Kingdom are now imported in plastic bladders (see the image above) and bottled in the UK (Crate expectations, Jan 31).

In the past few years there has been a huge structural change in how wine is delivered to those who drink it. The UK, for example, is the most important market for one of the world’s most enthusiastic wine exporters, Australia. In 2008, fewer than three in every 10 bottles of Australian wine on British shelves contained wine that had been shipped from Australia in bulk rather than in bottle. Four years later that figure was eight in every 10, and the total amount of wine shipped out of Australia in bulk overtook the volume exported in bottle.

Australia is far from the only country to ship substantial quantities of wine sloshing around in a tank inside a container rather than neatly sealed in bottles. Spain and Italy export far more wine in bulk than any non-European wine producer, and 65 per cent of all South African wine exports were bulk last year. (Chile is an enthusiastic exporter of bulk wine and earns the highest average price per litre for it.) According to the OIV, the global wine statistics-gatherer, the total volume of wine shipped around the world in bulk rose 61 per cent between 2005 and 2012 to represent more than 40 per cent of all exported wine.

So what is driving this rapid conversion from bottle to bulk? (more…)

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The weather in Chicagoland over the last week has been miserable. I have shoveled the walks way too many times and it now feels like we’ve been transported to Hoth. That has gotten me thinking about road salt. That and a New Yorker article on the Atlantic Salt’s operations on Staten Island (The Mountain, Dec 23). The mountain referenced in the article’s title is a giant pile of salt — a third of a mile long and four stories high. It’s big enough to see on Google Earth. Check out the multicolored tarps.

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In any event, managing the inventory of road salt is an interesting challenge. (more…)

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What follows Christmas? Returns, of course. This is especially true for on-line retailers who must generally offer more forgiving returns polices than conventional retailers. In Europe, this is a matter of law. In the US, it is often a necessary part of gaining customer trust. But how much do returns cost retailers? According to The Economist, it can be quite a bit (Return to Santa, Dec 21).

Return rates can be alarmingly high: for some online retailers up to half of everything they sell comes back. Studies find that just handling each returned item costs online sellers between $6 and $18, and that is before the losses from items that are returned in unsaleable condition. …

A new study by Christian Schulze of the Frankfurt School of Finance and Management seeks to put some hard numbers on the scale of the serial-returner problem. Mr Schulze studied 5.9m transactions in Germany, involving 166,000 customers, for a large European online retailer. He looked only at those who had bought at least five items over a five-year period, and found that 5% of them sent back more than 80% of the things they had bought; and that 1% of customers sent back at least 90% of their purchases. Without the cost of returns, the retailer’s profits would be almost 50% higher, the study found.

But is this necessarily a bad business? (more…)

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Christmas is just a couple of days away and that means that UPS and other shippers are rushing to get every package and gift to its final destination. Just how much work does that take? Quite a bit. Businessweek reports that UPS starts planing for its peak season in the previous January (UPS’s Holiday Shipping Master: They Call Him Mr. Peak, Dec 19).

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Have you finished your Christmas shopping yet? You apparently are not alone in procrastinating.  Shoppers are buying later and that is causing problems for firms trying to make sure they can get the right items to the right markets. Take, for example, toy maker Lego (Predicting Holiday Sales Poses Issues for Lego, Dec 13, Wall Street Journal).

The Christmas shopping season is getting trickier to navigate as buyers are waiting longer to purchase holiday gifts, Lego’s chief financial officer said Friday, and the trend is creating a need to get more immediate buying data from retailers, particularly in the U.S. …

In a telephone interview, John Goodwin said “this year is going to be the greatest stress test we have ever had.” While a late Thanksgiving contributes to the stress, “people are pushing off their gift buying later and later into their calendars.” …

[A]ccurately tracking buying patterns during the December shopping rush is of critical importance to a company such as Lego, which holds out as long as possible to package its bricks for shipping to individual markets. Many of Lego’s basic bricks are the same, but buyer tastes rapidly change, Mr. Goodwin said. So the company waits to decide what volumes of specific play sets to assemble.

“It increases the importance of getting very good data, so we can supply the retailers with the right products at the right time. We have to be as close to the ultimate purchase as possible in order to respond…nobody wants a disappointed child on Christmas.”

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