Category Archives: Miscellaneous

2013 Supply Management Predictions (Evil Style)

It’s been six (6) years, six (6) months, and six (6) days since SI published it’s first post. Religiously speaking, I believe that means SI should be evil today. As a blog, this presents SI with a bit of a conundrum. How can a blog be evil? A few years ago, SI would not have been able to answer this, but today, thanks to Twitter, it can. A blog can be evil by publishing its entire post to Twitter, and forcing you to read it in 140 character increments. Quite evil in fact. So, if you want to read the rest of today’s post, and find out two things that will tank your Supply Management Organization in 2013 if you’re not ready, you’ll have to follow @sourcingdoctor on Twitter! ha, hA, HA, HA, HA!

When Sourcing Goes Wrong Part II

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

Jon Stewart said it all already:

The Employees Strike Back
(Video was only available in the U.S.)

(And it starts with a Jack in the Box ad that is pretty satirical in itself considering the US obesity rate.)

and continuing on…

The Employees Strike Back Part II
(Video was only available in the U.S.)

More seriously with respect to Hostess, management was unable to

    • build a “we’re all in this together” spirit in the company due to voting themselves high pay and
    • strategize beyond making chemical garbage and staying entirely in a declining market

Thanks, Dick. (Global Supply Training)

If America is Going to Be Number One Oil Producer By 2020, Will Canada Be Number Two?

According to this recent Economist Article on Energy to Spare, America is on track to produce all the energy it needs at home. Considering that Americans burn three and a half times as much energy as the average Chinese person, and hasn’t been able to meet its energy needs in over half a century, this seems like a tall order. Especially since, demand has more than doubled since America was last able to satisfy its energy needs from domestic sources.

However, the International Energy Agency is forecasting that America could become the world’s largest oil producer by 2020, when it could be churning out 11.1 Million barrels a day, and be energy self-sufficient by 2035. Coupled with the fact that demand is waning due to increased fuel efficiency, the prediction is that rising production and falling demand will equal out in 2035.

It’s an interesting prediction, but so is the prediction about the Athabasca Oil Sands north of the American border. Right now, production is about 1.3M barrels per day, but estimates are that production can get to 5.1M barrels per day. As per this article in the Economist, on The Sands of Grime, Canada’s oil sands contain over 170 Billion Barrels of oil that can be recovered economically with today’s technology. With the third largest proven oil reserves in the world, it’s quite likely that production can ramp up to make Canada at least fourth in oil production by 2020, with third place a strong possibility. Right now, Venezuelan production for 2020 is estimated at 6.5M barrels per day and Saudi Arabia, at close to 10M barrels per day, expects it can get to 11 M barrels per day (Source). With the difference between Canadian production estimates and Venezuelan production estimates for 2020 less than 30%, it would only take a 15% increase in Canadian production and a 15% decrease in Venezuelan production for Canada to edge in third.

Unless Saudi Arabian reserves are less than estimated, or Canadian production ramps up exponentially beyond expectations, we probably won’t make number two, but number three is a strong possibility.

Is the California High Speed Rail Authority Saving a Dime and Losing a Dollar?

A recent article in the Economist on California High-Speed Rail (HSR), touted Cheaper, Slower as if it was a good thing. Quoting the “Fresno Bee”, The CEO of the HSR Authority has decided to extend the first phase of the project, which was due to complete in 2017, until September 18.

As a result of this extension, which is expected to result in less weekend and overtime work, the California HSR Authority is expecting to save $150 Million of taxpayers’ money. This is being promoted as a good thing. I’m not sure I agree.

You see, for Taxpayers to benefit, the State as a whole has to be financially sound. This means that Revenues Minus Expenditures has to be at least zero, if not positive, and anything that increases revenue or decreases expenditures is generally good, unless the State is running a deficit, in which case the State needs to look at each action and see what the costs of the action are.

In this case, the cost of delaying the project is delaying revenues another year. If you look at the revenue projections for the project, available at this link on the California HSR site, you will see that they are massive. Over 2 Billion annually. Now while it’s true that this is just one piece, from Bakersfield to Fresno / Madera, due to the lack of travel options in the area and the fact that it is a vital part of the corridor between LA and San Jose, the revenue projections for this piece alone appear to be over 25% of the total projections. In other words, to save this 150 Million, the State is delaying at least 500 Million of Revenue by at least a year. Now, HSR does have a high operating cost, we don’t know what the profit margins are, and the HSR might actually be projected to lose money early on, but I’d like to see a full cost benefit analysis of what it is costing in the long run to achieve a projected savings of $150 Million. Until someone does this, we have no idea what the projected savings really are, and even less of an idea as to what the savings will even be as they might not even materialize when you consider expected labour increases, expected material cost increases (given the fact that inflationary times are back), and the fact that a whole slew of things could go wrong to cause delays that need to be made up with overtime.

I’m a little disappointed the Economist took the Fresno Bee at their word. An analysis really is needed here.