Is Amazon vulnerable because it does not control last mile delivery ?

An article in WIRED magazine (May 8, 2014) titled “Amazon Should Make the Postal Service Its Own Personal Courier” describes Amazon’s service vulnerability because it does not control outbound transportation from distribution centers, unlike WalMart. The UPS delivery slippage last Christmas and its impact on Amazon suggests how vulnerable the company is to third party transportation. But should Amazon convert fulfillment centers to sortation centers and team up with the US Postal Service to efficiently use postal carrier delivery routes ? Should Amazon create its own fleet of dedicated delivery trucks and, if so, how will it ensure effective utilization to keep delivery costs low and ensure the close to 150 deliveries per route required to be effective ? How will Amazon’s same day delivery goals match up with these realities ?

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Will the SupplierPay program boost small business sales ?

An article in the Wall Street Journal (July 11, 2014) titled “Apple, Coca-Cola Among Firms Signed on to White House Plan for Small Suppliers”, describes a voluntary plan announced at the White House under which small suppliers would be paid faster, usually within 15 days of delivery. The goal is to increase access to capital at lower costs and mimics the federal government’s QuickPay program. But will the faster payment terms also mean that prices charged by suppliers will be forced to decrease, given that their costs are now lower ? Will faster payment just shift the cost from the supplier to the buyer, albeit at a lower financing rate, thus lowering supply chain wide costs ? Why are such programs not already in place driven by buyer self-interest ?

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Amazon’s 1 cent shipping in France

An article in Slate (July 11, 2014), titled “France Banned Free Shipping. So Amazon made it cost 1 cent”, describes Amazon.com’s response to a new French law that bans free shipping and permits only bricks and mortar bookstores to offer the up to 5% discount on books. These laws were meant to restore the competitiveness of traditional bookstores. But will Amazon’s counter with a 1 cent shipping charge, far below the actual cost, negate the impact of the law force publishers to lower their costs to Amazon ? Will the real benefits competitive advantage to Amazon be the flexibility for customers to order at any time and access used and out-of-print books which may offer Amazon greater margins ? Will a more coordinated supply chain whereby Amazon works with local bookstores to permit ordering of brick and mortar store books (new and used) be a more appropriate resolution for customers ?

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Should “pay to delay” launch by branded pharma be considered illegal ?

An article in the International Herald Tribune (July 10,2014) titled “EU fines drug makers over generics”, describes the $450 million fine levied in Servier, a branded producer of the blood pressure drug perindopril. The company is accused of buying up rights to an alternate manufacturing process after its patent expired, and paying generic manufacturers to delay production, thus propping up drug prices. Once these tactics stopped, prices for the generic drug dropped 90%. Should such tactics by patent owners be banned to increase price competition? Will prices of drugs during the patent period increase if business tactics to reduce competition after patent expiry are banned ? Should such rules consider alternative treatments as competing options or should they apply to each individual drug ?

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France’s laws to protect bookshops

An article in the International Herald Tribune (July 10,2014) titled “The French do buy books. Real books”, describes two French laws, the “Lang Law” that says that book prices cannot be discounted more than 5%, and a new rule that states that discounted books sold online cannot be shipped free. The two laws aim to eliminate the advantage for online booksellers like Amazon,while preserving choice for consumers. Will such price constraints, which increase costs to consumers on average, create benefits of increased book variety ? Should books be treated differently than other products in preserving their availability?

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Will the US catfish inspection program derail the TPP pact

An article in the New York Times on June 28, 2014 (“US Catfish Program Could Stymie Pacific Trade Pact, 10 Nations Say”) describes the Agriculture Department’s catfish inspection program that is being protested by Vietnam with support from Thailand, Philippines, Myanmar and Indonesia. The inspection program was setup in response to the declining US catfish industry whose volumes have dropped 60% from its peak. In addition, the US government’s General Accounting Office calls catfish a “low risk food” with inspection not changing the safety of catfish. Should the inspection be considered as a ploy to protect the interests the US catfish industry or necessary to protect the US consumer from potential unsanitary conditions at suppliers ? Given the risk to TPP, should this lower risk inspection be withdrawn or is it worth the cost ? How should consumer demand for a secure food supply chain be reflected in the product – would certification by independent third party agencies or retailers be an alternative ?

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Surging prices for railcars as demand runs up against supply shortages

An article in the Wall Street Journal (May 30,2014) titled “Driller’s Pain is Railcar Owner’s Gain”, describes 33% price increases for tank cars, 50% increases for cars hauling sand and 40% increases for grain hoppers. These price increases reflect the interaction between cars that were scrapped in 2008 and reduced capacity, delayed orders and deliveries for new railcars and large crop yield of corn and soy-beans, fracking industry shipments. Will the new railcars that hit the market be too late for the current demand surge and thus drive down prices and create overcapacity? Will the planned US and Canadian rules for puncture resistant cars justify this capacity increase even if demand drops ? Should there be some market coordination of railcar deployment to prevent hazardous cargo from being moved to trucks ?

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