@ Supply Chain Management

Or how Big Data is the wild wild west – where the saloon owners knew a lot more about who walked into their saloon than they themselves knew.

This article: How Target Figured Out A Teen Girl Was Pregnant Before Her Father Did explores a real incident about the way that Target’s marketing and information based corporation targets its customers (and dare I say keeps even its own store managers at the front line in the dark.)

Read more at my blog post at pachydata.com.

According to this news report: Apple’s new Foxconn inspections could start chain reaction, Apple has asked for inspections of Foxconn’s operation from an independent team of labor rights experts. Good for them.

According to Apple, a team of labor rights experts started inspections Monday at Foxconn City. Foxconn makes the iPad and iPhone for Apple. The Fair Labor Association (FLA) described itself this way: "Incorporated in 1999, the Fair Labor Association (FLA) is a collaborative effort of socially responsible companies, colleges and universities, and civil society organizations to improve working conditions in factories around the world. The FLA has developed a Workplace Code of Conduct, based on ILO standards, and created a practical monitoring, remediation and verification process to achieve those standards."

Tim Cook, Apple CEO, said in a statement: "We believe that workers everywhere have the right to a safe and fair work environment, which is why we’ve asked the FLA to independently assess the performance of our largest suppliers.

Cook has bristled at the argument that Apple doesn’t monitor its supply chain conditions. As noted before, Apple isn’t the only company that relies on China manufacturers for its wares.

In the relationship between Apple and Foxconn, I think it’s obvious where the leverage lies. For now. But tomorrow, who knows?

I wonder if this will not turn out into a shot from Rick’s café:  I’m shocked, shocked to find that gambling is going on in here!

Supply Chain Management Review blog has a post by Rosemary Coates called The Silk Road – the First Global Supply Chain.

I spent the holidays on vacation in Venice and Istanbul on a mission to understand more about these two important end points on the Silk Road. Starting around 200 BC and extending 4,000 miles, the Silk Road got its name from the lucrative Chinese silk trade and tea trade in exchange for spices, nuts and jewels from Europe and the Middle East.  In addition, various science and technology innovations were traded along with religious ideas and the bubonic plague.  The Silk Road was a significant factor in the development of the great modern civilizations.

and

Very few people actually traversed the entire Silk Road.  Mostly it was made up of agents and merchants who bought and sold goods along the way.  At major points, great bazaars opened to facilitate a meeting place for traders, such as the Grand Bazaar in Istanbul, which still thrives today.

Our modern supply chain story – the global supply chain story is not a new story. Rather it is an incarnation of an older story. The Silk Road (and I’ve explored its rich history along the different paths for my nascent book on the Supply Chain frontiers) is a recurrent theme because it fills a human aspiration – the social aspects of what it means to be human.

But take note, there was a heyday of the Silk Road and eventually it fell into ruin before it was reincarnated. Nothing in our Global Supply Chain story is permanent and this too shall pass when it comes under undue strain but the enormous benefits gained by individuals (rather than kingdom and the elites in the story of the Silk Road) this time round would be a profound loss.

Which brings me to my blog point – When Americans rue the loss of jobs to China, I doubt that what they’re really saying is that they’d like those jobs to come back as much as they’re wishing for the days of simplicity. Or in another sense, the days of yore and for questions for which we have ready answers. Those questions have been answered – it’s time to ask new questions which open up new frontiers.

Lastly, don’t buy the idea for a second that the ideas of tomorrow are those which only college education and college educated folks are only equipped to answer. There’s more under Heaven and Earth than can be found in the enclaves of academia.

Apple’s succession story has been in the news lately – or rather a story made necessary by Steve Job’s health situation. In this article on CNET : Apply supply chain sees smooth sailing ahead, the new head of Apple – Tim Cook, is reputedly a supply chain pro. In one sense, that’s a great thing but then I take a step back and ask myself : Is that what Apple really is?

I don’t think of Apple as a supply chain company with great products but a company with great products that has honed its supply chain quite well.

There is one quote from a Jeffries Analyst that speaks to the supply chain management voodoo at Apple:

"Even with the unfortunate events in Japan around the time of the iPad 2 release, Tim Cook was able to double or sometimes triple source component suppliers. To date, no competitor has been able to gain meaningful share in the tablet market; and, in our view, Cook’s leadership during the introduction was critical to this."

Perhaps, we will see Tim Cook elevate the next avatar of Steve Jobs from within Apple’s ranks that puts the key competitive advantage of Apple front and center. That would be “Giving people what they didn’t even know that they needed”.

Not easy but necessary.

Are you ready for the coming Recession? “Why, when did the last one end”, you may ask me. And the truth is that it never ended. The below chart captures it quite well – this is a 1 year chart of the Baltic Dry Index (never heard of it? Well, now you have)

The Baltic Dry Index is best described as (Baltic Dry Index: BALDRY):

The Baltic Dry Index is a daily average of prices to ship raw materials. It represents the cost paid by an end customer to have a shipping company transport raw materials across seas on the Baltic Exchange, the global marketplace for brokering shipping contracts.

and

The BDI is one of the purest leading indicators of economic activity. It measures the demand to move raw materials and precursors to production, as well as the supply of ships available to move this cargo. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand. Unlike stock and commodities markets, the Baltic Dry Index is totally devoid of speculative players. The trading is limited only to the member companies, and the only relevant parties securing contracts are those who have actual cargo to move and those who have the ships to move it.

However, if you want to place in context the fluff about the US (or World) economy floated by your “favorite” news agency or administration spokesman – just pull up the 5 year chart of the Baltic Dry Index.

The aftermath of the Great Recession and consequent efforts to revive the US (and worldwide) economy is reflected in the period of mid-2009 to mid-2011. All that stimulus and confidence measures have largely achieved naught.

If the Baltic Dry Index meanders at the bottom of the chart above on a go forward basis – then there is a great likelihood that the Great Recession from 2009 will resume with all its consequent effects.

Sorry folks – this is terrible news but forewarned is forearmed.

I want to highlight a “cool” scholarship made available by D.W. Morgan for college students – “Last Mile” Scholarship. I urge you to pass it on to individuals who may (and better yet, may not at this time) be considering a career in Supply Chain Management and/or Transportation Management. Talent is always going to be the differentiator when it comes to the Supply Chain Edge and such scholarships and experiences go a long way in creating those edges.

From the scholarship write up:

The D.W. Morgan “Last Mile” Scholarship
Imagine you’re a senior in college.  An ambitious, successful college senior, ready to take on the real world.  You graduate, move back in with your parents, and begin your job search.  Wouldn’t $5,000 be helpful?  $5,000 and your dream internship to help you get started?  I wish I had had that chance when I was there.
DW Morgan is making exactly that possible for 4 talented seniors by sponsoring a scholarship for students interested in supply chain, logistics and transportation management.
The task is simple: come up with a way to revolutionize the industry while making a positive global impact.  Easy, right?  Ha.  It’s called the “Last Mile” Scholarship, and the four winners are picked to receive $5,000 each, and the grand-prize winner out of those four gets the opportunity to intern at a DW Morgan location in the summer of 2011.
Interested?  Check out the website: www.lastmilescholarship.com for official rules, qualifications, submission guidelines and other information

In my earlier post, I had said that I was working on the idea/concept of a Living Wage. Some eyebrows might have popped at this – if not, this would be a good time to go a popping. After all, what is the connection between a Living Wage and the supply chain?

Take a look at this report for instance: Why is Wal-Mart blocking 35 cents an hour for Bangladeshi workers?

From that article,

Senior sewers are paid 1.7 cents for each pair of Wal-Mart jeans they sew. (Each worker must sew 10 pairs of jeans per hour, or one pair every six minutes—which is 10 percent of an hour. Ten percent of their 17-cent-an-hour wage amounts to 1.7 cents.)

That’s an hourly wage of US$ 0.17 for experienced sewers and the current demand is to raise the wage to US$0.35 (and up to US$ 0.51 by some accounts that I have researched).

The obvious question is : Is an hourly wage of US$0.17 a living wage? Is an hourly wage of US$0.35 or US$0.51 a living wage? If you think that US$0.17 is an absurdly small number, what do you make of US$0.35 or US$0.51? If you’re mortified by the idea that the designer jeans that you’re donning tonight was sewn together in misery, will you be gratified by the notion that they will be paid double that wage if you just bully the capitalist/retailer to forgo that marginal hit to his profits?

Now coming back to stateside, take a look at this site from Penn State that enables you to work out what constitutes a living wage in America, by state, by county – Living Wage Calculator. I live in Newburgh, NY and so I took a look at what constituted a living Wage for Newburgh, NY – A  living wage for Newburgh, NY.

A family with two adults and two children require a wage of $60,274 in order to “live” in Newburgh, NY which works out to a $28.98 hourly wage while the Minimum wage is $7.25 and Poverty Wage is $9.83.  Of course, this calculation does not include any governmental assistance which spans the spectrum of wages from ~ $20,000 to ~ $60,000 depending on family configuration.

The critical issue with the living wage is that is has nothing to do with living or working – it has to do with calculations in Ivory towers. There is no such thing as a living wage (just as there is no such thing as a minimum wage) – the effort to create a living wage is about replacing the antiquated notion of a minimum wage by something more substantial. What the residents and denizens of Ivory Towers and various social justice movements don’t understand is that a Living wage like the Minimum wage before it is a calculation that looks good on paper and might even absolve the bean counters and theoreticians from enjoying their privileged lives. It will do nothing to lift those Bangladeshi garment workers out of poverty and neither will it change the lives of those living stateside.

All that it will accomplish is that the annual wage of CEOs in the millions will then become in the billions, the annual wage of the consultant in the hundred thousands will be in the millions and so on. The poor will still be poor and probably poorer still because for the decade or so (and it will be much faster than that) that it would take to adjust, they will have adopted habits and lifestyles that will leave them worse off.

If you don’t believe what I say, take the hypothetical Bangladeshi worker who, through all the unrest in Bangladesh, doubles (from 17 cents to 35 cents an hour) or triples (from 17 cents to 51 cents an hour) his/her hourly wage. When that dramatic increase in wage happens, what I’d like you to do is tell me what happens to his/her life?

1. Wage – we know this already because it is a given, doubled or tripled.

2. Rent Cost – ?

3. Transportation Cost – ?

4. Food cost – ?

5. Medical cost –?

6. Taxes – ?

7. Entertainment costs – ?

8. Other costs – ?

Do you think items, 2 through 7, increase, decrease or remains the same?

I think that such misguided thinking betrays a mistaken notion of the concept of profit. I think that the most fundamental error that the calculators always make is to think that all that needs to be done is to carve out a portion of profit and return it to labor. And what always happens is that the profit margin remains unchanged or is impacted ever so slightly and everything else is adjusted accordingly.

Profit is notoriously difficult for the Ivory Tower to understand. And the reason is quite easy as well – they’ve never really worked in the real world. For some Profit is a subtraction of numbers and for others it is the recompense for overcoming fear – these two worlds will never meet.

A living wage is a confident calculation about the static nature of human enterprise and economy. And that calculation is wrong. Profit is a dynamic calculation of the nature of human enterprise and economy.