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Swatch Wants Out of Supplier Game

By APICS Staff | 13 | 8 | April 16, 2013
Swatch Wants Out of Supplier Game

The Wall Street Journal reports that Swiss watchmaker Swatch is petitioning Switzerland’s Competition Commission for permission to reduce the number of parts it sells to competitors. For a long time, Swatch has sold internal watch parts__including springs, motors, and other mechanisms__to other companies as part of a government-permitted monopoly.

“We are in a ridiculous situation that would be like having BMW supply all the engines for Audi and Mercedes,” says Nick Hayek, Swatch’s chief executive. “In no other industry do you have one company supply all the critical parts to the people who then compete directly with it.”

Swatch’s value comes from the “Swiss-made” label of its products. Hayek says his company effectively subsidizes the competition by shouldering research and development and production costs, while competitors focus more exclusively on marketing.

In 2011, Swatch was granted permission to make temporary reductions in parts supplies, which led to an immediate backlash from competitors. A lawsuit filed by nine companies ultimately was dismissed.

Hewlett-Packard Seeks to Eliminate Conflict Minerals 

Within the next two years, Hewlett-Packard (HP) wants its suppliers to ensure minerals used in their electronics were not sourced from conflict areas, the New York Times reports. Minerals such as tantalite, tin, tungsten and gold are necessary for many of today’s laptops and tablet computers; however, they also are associated with financing warlords in countries such as the Democratic Republic of Congo.

To help this effort, HP published on Monday a list of 195 ore smelters that have been identified as supplying minerals for the company’s products. While HP’s supply chain is in some cases far removed from these smelters, leaders say they can compel good behavior based on their power as a major purchaser.

“We believe the upshot of this is, over time, to lower violence and repression,” says Tony Prophet, head of global supply chain for HP’s personal systems group. “The smelters are the chokepoint. Once you locate them, you can start to pressure them to set a standard.”

To ensure compliance with HP’s guidelines, smelters will be required to document the sources of their minerals.

Index Evaluates Auto Production Locations

Where are American cars made? The answer is not as simple as it sounds. To help shed some light on this question, Frank DuBois, a professor at American University’s Kogod School of Business focusing on global supply chain management, has devised an index to rank 253 vehicles sold in the United States based on the location of the automaker’s global headquarters; labor or assembly; research and development; inventory, capital, and other expenses; and parts. Also considered are data provided by the American Automotive Labeling Act.

General Motors’ GMC Acadia, Buick Enclave, and Chevy Traverse top the index, with scores of 88.5 out of 100. Some vehicles on the index with companies based overseas__such as Toyota’s Camry, Tundra, and Sienna—have index scores in the upper 70s; however, the Toyota Avalon beats the Ford Taurus with a score of 81 to 80.

DuBois says currently there are no vehicles sold today that are entirely American-made, and he is unsure which car was the last manufactured without any foreign parts. “I think you would have to go pretty back far in years to find that,” he says.

Natural Gas Prices to Stay Low Despite Vehicle Growth

Despite the increasing use of vehicles fueled by natural gas, and the projections that their use will become even more prevalent in the next 10 years, the effect on natural gas prices will be minimal. The American Clean Skies Foundation (ACSF) has published a report regarding the use of natural gas in automobiles and, in the organization’s highest-growth scenario, the rise in fuel prices is only about 5 percent.

“We expect the growth in natural gas vehicles over the next decade to provide adequate time for supply and infrastructure developments to keep pace with demand, and thus to moderate any incremental natural gas price impact,” says Gregory C. Staple, coauthor of the report and chief executive officer of ACSF.

The report’s authors believe this analysis shows confidence in the transition to natural gas–based vehicles and the diversification by the transportation sector away from petroleum fuels. Their highest-growth scenario predicts the switch will reduce the amount of oil consumption by about 1 billion barrels between 2013 and 2025.

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