Organic

I think that in many ways this research was ahead of its time.

The Organic Foods Supply Chain

It would be nice to do the same type of thing again.

Sports Talk Radio

I think that this quote from President Obama's State of the Union Address yesterday evening is right on the mark:

"We need to teach our kids that it’s not just the winner of the Super Bowl who deserves to be celebrated, but the winner of the science fair. (Applause.)"

Washington Wire, 2011. Text of Obama's state of the union address. The Wall Street Journal, Jan. 25.

I sometimes do not agree with the policies of our President. However, he is correct in talking about the over hype of sports that is currently common place in the US. It is clearly to the detriment of other important national economic and social priorities.

I like sports very much. To me it is occasional entertainment, not a pervasive thing to think about at all hours of the day.

For example, the ongoing dialogue of sports talk radio such as 98.5 The Sports Hub (Boston) adds little to the enjoyment of games or the journalism needed to chronicle opinion.

I have written several times in the past about this topic:

98.5 The Sports Hub - The Best CBS can do for Boston?

Boston 98.5 - The Sports Hub

Boston Sports Radio and Credibility

Food Markets, Price, and Speculation

I think many governments from around the world lose sight of the valuable role that speculators play in making a market for commodities.

This is a common rant:

"Excess speculation from 'investment tourists' aggravates instability, sending signals that aren't substantiated by fundamentals, said Abdolreza Abbassian, secretary for the Intergovernmental Group on Foodgrains at the United Nations Food and Agriculture Organization."

Mohindru, Sameer, 2011. Food-price rise puts focus on speculators. The Wall Street Journal, Jan. 26.

However, the article goes on to state that "Parsing out the impact of speculators can be difficult."

I stand with this opinion, and the following statement:

"Others are skeptical of the claims. 'I've seen some sort of studies [suggesting] speculation has added 20% to 30% to market prices, but they are never substantiated. What you can say is the futures markets at times trade at substantial premia to the underlying cash market,' said Ann Berg, a consultant to the U.N.'s food and agriculture agency."

While this type of debate always happens when commodity prices are rising, there are essentially no comments about price movements in smaller, less standardized markets that have no financial futures activity and include perishable products such as fruits and vegetables. My view is that these markets could benefit from the entry of speculators and a new approach to exchanging information.

This is why the idea of market efficiency in relation to the classic treatment of spatial and temporal utility for fruit and vegetable markets is so essential.

Technology exists to improve information flows in various local fruit and vegetable markets to unprecedented levels. Yet getting this technology into practice is far too slow in agriculture.

I am passionate about companies such as Eden's Bowl, Inc. where the combination of standardized technology along with some of my ideas from past research have the potential to change the marketing structure for fruits and vegetables for the better.

The problem in commodity and other agricultural markets is not an excess of speculators but a lack of information transparency, mathematical models for trade-offs and decision-making, and short (or uncertain) supply.

These are a few posts that might be of interest to readers:

Why I believe that Market Efficiency is so Important for Fruits and Vegetables

Specialty Crops - Variety

The Organic Foods Supply Chain

Marketing Services

Marketing Efficiency

Update - EB Project II

Update - EB Project

Eden's Bowl, Inc. (III)

Eden's Bowl, Inc. II

Eden's Bowl, Inc.

I hope to write a paper on this general topic for potential publication by the Cutter IT Journal and perhaps CSCMP.

The Divisions of Time

"Time has no divisions to mark its passage, there is never a thunderstorm or blare of trumpets to announce the beginning of a new month or year. Even when a new century begins it is only we mortals who ring bells and fire off pistols."

Thomas Mann

The Magic Mountain, Ch. 5.

Science Deficiency

This was a lead article in the WSJ Digital Edition for today:

Banchero, Stephanie, 2011. Student test scores show u.s. science deficiency. The Wall Street Journal, Jan. 25.

This is the key observation:

"Less than one-third of U.S. elementary- and high-school students have a solid grasp of science, according to national test scores released Tuesday." bold added

We need to do better.

Definition of Nanotechnology

I like this definition from the 2011 Agriculture and Food Research Initiative (AFRI), Competitive Grants Program (USDA):

"Nanotechnology is defined by the National Nanotechnology Initiative (NNI) as '…the understanding and control of matter at dimensions between approximately 1 and 100 nanometers, where unique phenomena enable applications. Encompassing nanoscale science, engineering and technology, nanotechnology involves imaging, measuring, modeling and manipulating matter at this length scale.' (http://nano.gov/)"

I am surprised that thermal-fluid-surface interactions are not mentioned.

Definition of Sustainable Agriculture

This is an interesting definition of sustainability from the 2011 Agriculture and Food Research Initiative (AFRI), Competitive Grants Program (USDA):

"The term 'sustainable agriculture' (NARETPA, 7 U.S.C. 3103) means an integrated system of plant and animal production practices having a site-specific application that will over the long-term achieve the following goals: 1) Satisfy human food and fiber needs; 2) Enhance environmental quality and the natural resource base upon which the agriculture economy depends; 3) Make the most efficient use of nonrenewable resources and on-farm resources and integrate, where appropriate, natural biological cycles and controls; 4) Sustain the economic viability of farm operations; and 5) Enhance the quality of life for farmers and society as a whole."

I notice that the 2011 AFRI calls for significant spending on small and medium-sized farms, entrepreneurship, and markets & trade.

This might be a very good area to apply my ideas regarding marketing efficiency.

The Rising Issue of Ethanol Use

The use of ethanol as a blend with gasoline is consuming large amounts of corn.

From the WSJ:

"In 2001, only 7% of U.S. corn went for ethanol, or about 707 million bushels. By 2010, the ethanol share was 39.4%, or nearly five billion bushels out of total U.S. production of 12.45 billion bushels. Four of every 10 rows of corn now go to produce fuel for American cars or trucks, not food or feed.

Review & Outlook, 2011. Amber waves of ethanol. The Wall Street Journal, Jan. 22.

This development will surely contribute to food price inflation.

Some Speaking Topics for 2011

Master Schedule Stability Under Conditions of Finite Capacity

A basic intro to this paper:

http://mit.edu/edmund_w/www/IJPR_stability_-Ver9.pdf

We are revising this paper for International Journal of Applied Management Science

It is a popular topic, however, it is limited to make-to-stock.

ABSTRACT

The Master production schedule (MPS) is the main tool to control product availability, which is the core element of improving customer service in the consumer goods industry. Calculation of the MPS becomes much more complex in a multi-product environment where forecast errors and capacity constraints can add a great deal of uncertainty to the planning process. This circumstance leads to a problematical issue known as MPS stability. In this article, we propose a new way to improve MPS stability under conditions of finite capacity. The approach has its genesis in a real world, make-to-stock situation that frequently occurs in the food industry and other related types of manufacturing. Using a comprehensive MPS model, we conduct a simulation study with experimental design to identify factors having a significant influence on MPS stability. Then we perform sensitivity analysis on select factors that hold the greatest promise for improvement by employing a simple predictive equation. Finally, we test a different way to plan safety stocks and report the results. In conclusion, we find that elimination of forecast bias and choice of safety stock method both are particularly important for improving MPS stability and ultimately customer service.

Keywords: master production schedule; stability; finite capacity; consumer goods industry; forecast bias; safety stock


An Update on Auto-ID Technology

An interesting area is using RFID tags as an ultra low cost sensor.


The Internet of Things

I am thinking about writing a book in this area, specializing in agriculture.

I can give an overview.

These are some links for ioT

The Convergence of Standards

Internet of Things - Description

Why I believe Marketing Efficiency is so Important for Fruits and Vegetables

In an era where food inflation will likely accelerate, it is absolutely critical to improve the marketing efficiency for items like fruits and vegetables. Otherwise, consumers will pay more and folks in the middle of the supply chain will take excessive profits.

This issue is not taken seriously by many.

I believe that marketing efficiency for the fruit and vegetable supply chain has been an issue for decades in America. It does not get enough research attention.

At a time when Americans need to eat more fruits and vegetables, it is important that prices are efficient and supply ample. As well, growers are perhaps not receiving the best prices. Finally, the loss in fruit and vegetable supply chains is excessive (at least 30%) and there appears to be little improvement over the years.

This is a worldwide problem that can be addressed through technology to the benefit of many. The problem will become worse as energy prices increase. A bit of an uptick in the global economy will trigger petroleum price inflation. Making the problem even more challenging, countries like China are extremely inefficient users of energy.

Though relatively modest investments in various technologies, I believe that marketing efficiency for fruits and vegetables can be increased a great deal and that new types of jobs can be created in rural areas.

Words and Breakthroughs

One thing that has always amazed me is when a scientist or scholar has an idea but no words exist to describe the idea.

For example, when Isaac Newton though about the calculus, he had no words to describe the concept. He invented a word, fluxion, to describe what he had invented.

It is the same with Old English and other languages like Latin. When major scientific and engineering advances happened, there were no words to describe the breakthrough.

AioT2012

I think the general idea of the Agricultural Internet of Things is a very good topic for writing. Maybe I can produce a comprehensive work in this area before 2012.

The New Chinese Export, Inflation !!

I very much encourage folks to consider subscribing to Barron's. The publication contains a wealth of information.

Up until now, I have believed that there is not much chance of inflation, all things being equal, from the Quantitative Easing II program being done by the Fed.

However, it has never occurred to me that inflation pressures in the US economy could come from outside of the country.

This quote from Alan Abelson's weekly column provides deep insight regarding global inflationary pressures:

"A nifty report by Bank of America/Merrill Lynch's crack Asian economics team describes how Chinese inflation is going global. In particular, prices of manufactured exports are now rising apace with quotes on commodities. In the latest Canton Fair in October-November 2010, the analysts report, export prices were hiked 3%-5% (in dollar terms) from those exacted from foreign buyers at the same fair held in the spring, while labor-intensive goods -- apparel, shoes, luggage -- were boosted an immodest 10%-20%."

Abelson, Alan, 2010. Street crime. Barron's, Jan. 22.

... and this does not tell the entire story. With rising petroleum prices, it is certain that international shipping cost will also contribute to the inflation mix.

With a huge dependence on China for manufactured consumer goods, America has few options but to pay more at a time when disposable income growth and consumer spending remain sluggish.

High unemployment and accelerating inflation might catch on to hit corporate earnings for the second half of 2011.

The Weak Recovery and Financial Distortion

For a long time, I have had great respect for the financial writing of Alan Abelson. His insight combined with a unique style are extremely effective.

This paragraph captures the essence the current state of the American economy:

"Yes, indisputably we have a recovery. But it's still far from a robust one, and certainly nowhere near as robust as the stock market's extraordinary upswing since hitting bottom in March '09 would suggest. Maybe this economy is just a late bloomer and will develop into something worthy to be called an expansion. Put us down as hopeful but unconvinced."

Abelson, Alan, 2010. Street crime. Barron's, Jan. 22.

Later in the article, Abelson highlights the financial research of Barry Ritholtz of Fusion IG. The title is "How Much has the Fed Distorted the Stock Market."

This is the bottom line:

"While it obviously can't be determined to the penny, Barry reckons that even if only half the market's superior showing compared with the best of previous postwar rallies can be credited to the Fed, it means that the U. S. central bank created out of thin air 'several trillion dollars in market cap.'" bold added

For related blog posts, see:

A Brief Analysis of Quantitative Easing II

The Rekindling of Speculation in the American Economy - Late 2010

Tough Talk on Quantitative Easing

The Macroeconomic Factor in Stock Prices

Capital Shift

Stock Performance

Economic Distortion

Krugman: "Dark Age of Macroeconomics is Upon Us"

Economic Distortion" Low Short-Term Interest Rates

It is hard to know the correct level of federal financial intervention. However, when distortions appear, it is often very clear to see.

Folks should read Barron's on a weekly basis!!!

Agriculture and Innovation - 2007

I wrote this in 2007,

" ... a need exists to conduct research in new technologies that have no previous precedent. The most useful inventions often do no resemble anything that currently exists. Perhaps the greatest challenge for the specialty crop industry is to create a balance between incremental improvement and break-through innovation."

Excellent Government Report - Specialty Crops (2007)

I have participated in this 2007 workshop, which was held in Arlington, VA.

This is the comprehensive report that summarizes some of the issues in the specialty crop industry:

Engineering Solutions for Specialty Crop Challenges

Folks who are interested should take time to read the report. It affects all of us!

From time to time, I will be commenting on some of the high points. One thing that stands out is that this is perhaps the first time that folks have mentioned supply chain in relation to the specialty crops.

My view is that various aspects of marketing efficiency, marketing services, and supply chain management will have a significant effect on the specialty crop industry.

I did a summary at the following link:

Schuster, E.W., "Specialty Crop Research," Summary of the April USDA Workshop, Self Published (January 2008).

It will be interesting to measure progress over time. Specialty crops are very important!

Specialty Crops - Variety

I think an overlooked aspect of encouraging Americans to eat more fruits and vegetables is marketing efficiency in relation to the supply chain.

If marketing efficiency improves; 1) there will be increased availability, 2) prices will be reasonable, 3) growers will be encouraged to innovate with new products.

Part of my USDA ARS work involved interviews with farmers in Maine. In one case, an organic farmer was growing more than 50 different products on a relatively small parcel of land. It was clear that this was too much variety! Though this helped to spread financial risk, the wide variety made operations very difficult indeed.

I believe that supply chain innovations will allow growers to determine the proper amount of variety in relation to risk and the needs of the marketplace.

Better price signals almost always lead to innovation!

The Organic Foods Supply Chain

In 2002, I was involved with a thesis about the organic supply chain. In many ways this was innovative research and touches upon the interplay between 1) marketing efficiency, 2) marketing services, and the 3) supply chain in general.

A short article that summarizes the research appeared in Logistics Review; Industry Focus: The Organic Foods Supply Chain.

Below are the various elements of the thesis study. At the end is a link to a paper that resulted from the thesis. I think any industry effort aimed toward regional agricultural systems should focus on these and other areas.

Vertical Integration - In light of the anecdotal evidence indicating the importance of vertical integration, we systematically studied the extent of vertical integration in the organic foods industry and the impact on supply chain efficiency. We sought to answer the question of if and how vertical integration can better meet consumer demands while protecting the organic integrity of the product.

Scope of the Industry – We studied the nature of firms that market organic products in terms of the scope of their involvement in this industry. We attempted to discover what proportion of firms that sell organic goods also engage in conventional business, and to what degree these “hybrid” firms are organic.

The Supply Pipeline - We investigated the supplier pipeline for firms in this industry. Sourcing channels, methods, and effectiveness were identified and evaluated. The existence and prevalence, or lack therefore, of long-term relationships and strategic alliances with suppliers for all players along the supply chain – farmers, cooperatives, shippers, manufacturers, distributors, and retailers – were studied and major reasons for formation of such relationships identified.

The Marketing Chain – We also studied the marketing chain in terms of selling channels, methods, and effectiveness. Customer characteristics were examined from the perspective of purchase patterns and behavior. The paper attempts to discover whether firms can respond to buyer requirements, and if so, to what extent. As with the study of the supplier network, this section also examined the role that business alliances and relationships with long-term customers plays in helping firms to satisfy demand more efficiently and achieve other mutual benefits that last well into the future.

Information Systems – Finally, we studied the degree firms in the organic foods industry adopted supply chain management information systems and processes that enable the sharing of information and coordination among firms up and down the supply chain. The paper identifies reasons for the lack of such systems and discusses how individual firms as well as the entire industry could benefit from successful adoption and implementation.

Chang, Mary Woei-Jiun, Schuster, Edmund W., 2003. Understanding the organic foods supply chain: challenges and opportunities from farm gate to end consumer. Unpublished Manuscript.

Marketing Services

In thinking about marketing efficiency, a key idea is the role of marketing services. This is extremely important for any effort to construct regional agricultural systems like the work of Eden's Bowl, Inc.

I think quantifying marketing efficiency and the importance of marketing services is the missing part of may initiatives to improve opportunities for local agriculture. Many times, folks take a simplistic view of the supply chain.

The following quote does a nice job of explaining marketing services in the flow of products from farm to retail:

"As agricultural products move from the farm gate to retail outlets, a series of marketing services are often performed that add to the final retail price. In the case of fresh produce, these marketing services might include product assembly, sorting, grading, cleaning, packing, transportation, and storage. The farm-retail price spread also reflects any profits that might have been obtained by marketing agents (e.g., brokers, wholesalers, retailers) above the actual costs of providing marketing services, as well as the cost of product losses sustained during the distribution process. Consequently, analyzing the farm-retail price spread is often useful in understanding how efficiently a particular market operates." bold added

Tropp, Debra, Skully, David, Link, John, Malaga, Jaime, 2002. Mexico's changing marketing system for fresh produce: emerging markets, practices, trends, and issues. United States Department of Agriculture, Agricultural Marketing Service.

Marketing Efficiency

Folks have sometimes asked me about the meaning of marketing efficiency. I think this is a concise definition in the agricultural context:

"The farm-retail price spread, a widely used indicator of marketing efficiency, is the difference between the price producers receive and the price consumers pay for the equivalent amount of a particular commodity. When markets are functioning properly, adjustments in prices are quickly reflected through the distribution system from the farm gate to the retail level, resulting in a farm-retail price spread that closely represents the costs of marketing services." bold added

Tropp, Debra, Skully, David, Link, John, Malaga, Jaime, 2002. Mexico's changing marketing system for fresh produce: emerging markets, practices, trends, and issues. United States Department of Agriculture, Agricultural Marketing Service.

Update - EB Project II

I am completing the SCRI proposal for Eden's Bowl, Inc. As I have written before, I am not sure that it will get filed with the USDA. However, I will have done my part as per the agreement. I carry through with my research.

I continue to maintain that the idea of improving market efficiency for regional agricultural systems is very good and has applications across the United States, perhaps in East Asia (China), and the world.

Folks deserve efficiently functioning markets for fruits and vegetables.

Water Hammer Research - Very Interesting !!!

This article has just appeared on the MIT home page:

Research update: How to tame hammering droplets

The article details some of Prof. Kripa Varanasi's research work and includes a very cool video plus some graphics. He leads the Lab for Nanoengineered surfaces, Interfaces, and Coatings.

I think the findings and technology in this area will perhaps be a leading development for energy systems of the future. Many countries would like to have this type of research capability.

Update - EB Project

For various reasons, it appears that the USDA SCRI proposal that I have put together along with Eden's Bowl, Inc. will not be filed by the Jan. 31 deadline. This is extremely disappointing as I believe that the USDA would welcome the proposal and I very much believe in the general idea.

The concepts associated with Eden's Bowl have a relatively high chance for practical application to the advantage of both growers and buyers. I very much believe that the approach, along with my ideas and modifications, could have made a difference.

I believe in the power of free markets to allocate resources, and the ability of technology to enhance market efficiency. Now was the time to put these ideas into practice through Eden's Bowl, both in the US and in China, as a means of combating food price inflation.

The barriers to filing the SCRI proposal with the USDA were relatively minor and could have been easily overcome given the proper cooperation, communication, and commitment.

I have more than 150 hours of time into the project.

I will post more updates soon about future research in this area as I try to re-group.

Equity Index Divergence

There was a significant divergence yesterday between the Dow Jones Industrial Average (down .11%) and the S&P 500 (down 1.01%. Nasdaq was down 1.46% probably because of the news that Apple's CEO Steve Jobs is taking a medical leave.

Asia and Inflation !!!

It appears that the sell-off has accelerated in Asia with Chinese index's down by as much as 3%.

I have not read through the details, however, the apparent cause seems to be the fear of inflation.

The global economy has not experienced a good bout with inflation for some time. Folks forget how devastating accelerating prices can be to an economy. I remain unsure that several countries in Asia are prepared to be able to deal with inflation.

A global policy of free float currencies will help a great deal in fighting inflation.

Asia Down Moderately

Asian stocks are down moderately across the board today. I am not quite sure of the reason; however, there appears to be continuing concerns about inflation in China and S.E. Asia. In my opinion, these economies will probably not be able to control inflation without massive financial measures that will limit economic growth in Asia and globally.

Eden's Bowl, Inc. (III)

One research area that has fascinated me for many years is the idea of market efficiency, and the ability to improve efficiency through technology.

The foundation of this research stream is in marketing science and supply chain management.

Through a great deal of experience in business, I have learned that there are only two ways to price a product, 1) cost plus a profit and 2) what the market can bear.

It is amazing how many times in business folks forget these two simple ideas.

I know of a case (from many years ago) at my former company, Welch's, Inc., where a sales manager priced grape concentrate for the industrial market based on cost plus and neglected to check the market price, which proved to be significantly higher (more than 10%). In a single afternoon, a shrewd broker (acting as a dealer) purchased the grape concentrate from Welch's and immediately resold same day for a $100,000 profit. In fairness, the manager was under a great deal of pressure from senior management to sell the product to make specific short-term goals.

It is these types of situations that give new meaning to the age-old phrase "big fish lives in murky water."

Given these ideas, I have been intrigued with Eden's Bowl, Inc. Without disclosing confidential details, the company seeks to improve the market efficiency for fruits and vegetables through new technology, a new business model, and an innovative business process. I think that with what the company has proposed combined with my ideas originating from research with various USDA groups dating to April 2007, the market efficiency of fruits and vegetables can be improved to near optimum. Though there are few reliable quantitative studies, I think the current case for many regions of the US is sub optimal.

Improved market efficiency should benefit both growers and buyers, and consumers.

I sincerely hope that Eden's Bowl, Inc. becomes a reality and that it is successful for all parties concerned.

Evergreen Solar

This is an interesting article:

Review & Outlook, 2011. Solar power eclipse. The Wall Street Journal, Jan. 18.

As folks know, this is close to home in many ways. The WSJ writes a detailed article on this subject. It is powerful.

It is hard to pick winners in industry. To some, this looked like a sure thing.

What is the future of solar energy in the US?

It is stories like these that make me like the risk profile of Eden's Bowl, Inc., which is reasonable (at least I hope so). I have been working on the idea with a colleague from Harvard and MIT. There is much more work to do.

This is something to contemplate:

"A Room with a View" and English Writers

My colleague and friend, Stuart Allen, passed along to me this wonderful quote from Hume:

“…the principles of commerce are much more complicated, and require long experience and deep reflection to be well understood in any state. The real consequence of a law or practice is ... often contrary to first appearances."

Hume, David (1778), The History of England, Indianapolis, Indiana: Liberty Fund, vol. 3, p. 74.

American Manufacturing - How Could This Happen?

For many years I have volunteered for the APICS - The Association for Operations Management and to a lesser extent the Council for Supply Chain Management (CSCMP). Both groups are non profit educational and research organizations that deal with various aspects of the US manufacturing sector from operations to supply chain management. Perhaps I have donated tens of thousands of hours of time in various capacities including leadership, meetings, and writing.

For both groups, I have been somewhat critical over the years. I felt that a different direction was needed to enhance American industry. I think many were skeptical of my message, especially for more quantification to improve productivity.

This quote from Oscar Schafer summarizes the manufacturing situation that we currently face in America:

"Let me throw a few numbers out. In the 1970s, the U.S. had 20 million manufacturing jobs, with a population of 220 million. Now we are down to less than 12 million manufacturing jobs with a population of 320 million. Manufacturing is a little different from science, but the point is it's much cheaper to manufacture stuff in China and India. That's not going to change, and that's why unemployment will stay high." bold added

Rublin, Lauren R., 2011. Attention, stockpickers. Barron's, Jan. 15.

These are sad statistics and paint a very bad picture for future employment trends.

Unfortunately these trends were evident many years ago, however, few paid much attention. Now as a nation we are collectively paying the price in terms of weak economic growth.

New England Patriot's and Management

Maybe Logan Mankins was 100% in the correct regarding his holdout with the New England Patriots and his comments about management.

The coach did not have the team ready for a playoff game today.

It will be interesting when the lockout happens.