Archive for September 11th, 2007

Improving Supply Chain Management

September 11, 2007

I had written a post on Great Moderation sometime back. The idea is the variation in output has gone down substantially over the years. There are three reasons cited for this moderation:

1) Structural Reasons: changes in economic institutions, technology, business practices, or other structural features of the economy have improved the ability of the economy to absorb shocks.

2) Improved Macro policies: particularly mon policy

3) None of the above or simply plain good luck.

In the previous post, I highlighted two arguments, one the speech by Bernanke which advocated 2) and a neat paper by Peter Summers which does a cross country analysis to show Moderation is a phenomenon in most developed countries and 1) and 2) look better explanations than 3).

The paper pointed out to this wonderful work on Supply Chain Management (SCM) by Thomas Siems. He posits that better SCM could also be a possible reason for the Great Moderation. SCM would lend more weight to 1) as it is part of structural changes.

Siems discusses the meaning of SCM and how there were various eras of SCM from Mass Production (Ford era) to Mass Customization Era.

Its main point is shown via couple of neat charts. Chart 4 shows volatility of both production and sales has come down showing SCM has indeed helped in lowering volatility. He then shows in Chart 8 and Chart 9 which shows as SCM has progressed from Mass Production to Mass Customization, both output and productivity have got stronger. (The charts could have been better, infact a lot better as they are hardly visible)

Read the whole thing to get a different perspective. It is pretty simple as well.


Assorted Links

September 11, 2007

1. WSJ Blog points out Marty Feldstein resigns from Presidency of NBER . Here is his resignation letter. St. Louis Fed to look for successor to its President, William Poole.

2. Fin Prof points to a pretty humorous article:

“Should shareholders in a company care if the chief executive’s child dies? What if the mother-in-law passes away?…..slid by about one-fifth, on average, in the two years after the death of a CEO’s child, and by about 15 percent after the death of a spouse. As for an executive’s mother-in-law, the old jokes seem to hold: The researchers found that profitability, on average, rose slightly after her demise.

3. Ajay Shah points to an interesting book.

4. TTR points out that funds are being created to buy distressed funds and such purchases are quite attractive.

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