more supply chain news

Taking some of the heat off the Chinese, the Egyptians reportedly have introduced fake drugs into the U.S. supply chain. These are easy to make fakes which command a high price. Know what you are taking or are being given.

Caterpillar has announced in-sourcing. They are moving production of some of their equipment back to the U.S. to avoid many of the problems I outlined in my book.

Subsidies gone!!!

The U.S. Congress has repealed the subsidies for ethanol production along with the tariffs on ethanol which have kept Brazilian ethanol out of the U.S. market. Brazil makes ethanol from sugar cane instead of corn (maize) and does it much more cheaply that we do in the U.S. A big industry has developed in the U.S. based on these subsidies and tariffs, so this will have a major impact. It is not often that one can write about the repeal of a tariff or subsidy--note the day for you grandchildren!

California SC Transparency Law

The California supply chain transparency law that just took effect will have a major impact on global supply chains. Businesses will have to be able to certify that no human rights abuses took place in the manufacture of their products, no matter where in the supply chain they could occur. No more blindly buying parts and products; you need to know how they were made. Given the complexity of some supply chains (see my book for a reference to AT&T), this could be a real burden.

Supply chain disasters

The recent events in Japan and Thailand have raised the question of how much should firms spend to protect themselves against disasters. A firm can spend millions with no payoff unless there is a disaster. It all boils down to one's risk aversion. Look for this to be debated in the coming years.

Exports

Exports are still just over 20 percent of U.S. GDP, much smaller than export driven economies such as Germany and Korea. We all want to export, but someone has to import--unless we just dump stuff in the ocean. We depend upon the banks to lubricate trade, and the current crisis in Europe (and around the world, for that matter) is gumming up the works.

The Greek Bailout

I have been in Germany for three weeks, and there is a lot of tension about Greece and the euro situation. Germany is doing well economically, but they worry that their progress will be derailed. My students are ambivalent about Greece leaving the euro zone, but are generally in agreement that Germany should stay in. Getting out would leave them with a strong currency which would hurt their exports. And, Germany lives on exports. The macro statistics say that the Germans don't buy much, but stores selling expensive clothing and jewelry are everywhere and are opening every day. I wonder how some of them stay in business.

Technology Generation Skipping

The WSJ of 12 September has an article on Chinese telecoms in Africa. The real story is the rapid growth of smart phones in Africa. This is the telecoms 'generation skipping' I mention in the book. From May 2010 to May 2011, smartphone growth was 1280% in Nigeria, 189% in South Africa, 97% in Kenya, and 133% overall in Africa. Smart phones free them from the maze of bureaucracy and mismanagement in state owned land systems. They are incredibly innovative with their mobile phones.