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The Bullwhip Supply Chain is Beginning

January 31, 2010 by Charlie

Wednesday’s Wall Street Journal has a noteworthy front-page article about the “bullwhip” effect, as it is starting to play out in businesses as the economy recuperates. What’s the bullwhip effect? The WSJ article explains:

“This phenomenon occurs when companies significantly cut or add inventories. Economists call it a bullwhip because even small increases in demand can cause a big snap in the need for parts and materials further down the supply chain.”

For more details about “the bullwhip effect” — and what causes it — see the classic 1997 MIT Sloan Management Review article on the topic, “The Bullwhip Effect in Supply Chains.”

In that article, Hau L. Lee, V. Padmanabhan and Seungjin Whang argue that the bullwhip effect results from rational behavior by companies within the existing structure of supply chains. As a result, companies that want to mitigate the impact of the bullwhip effect need to think about modifying structures and processes within the supply chain – in order to change incentives. The authors explain four major causes of the bullwhip effect — as well as ways to counteract it.

Filed Under: News Tagged With: trends

Living beyond our means

January 31, 2010 by Charlie

The federal budget picture, including a quote from the CBO Director:
For more of the Director’s comments, click here.
.

Filed Under: News Tagged With: trends

Bus trip to "Pack Trials" planned

January 22, 2010 by Charlie

The January 29 deadline to register for a Greenhouse Grower’s trip to this year’s California Spring Trials (this used to be called the Pack Trials) is fast approaching.

An intense, educational and entertaining trip is planned to several of the key Spring Trial locations from April 10 -12, 2010. The trip is designed specifically for greenhouse growers and other floriculture professionals.

The trip itinerary is jam-packed; the days begin early and continue at a fast pace late into the evening. Attendees should plan to arrive on Friday, April 9 and will stay at a designated hotel near the San Jose Airport. The journey begins at 7 a.m. on Saturday, April 10, when the bus departs from the hotel. That first day, the group will visit Pacific Plug & Liner and Agrexco in Watsonville, followed by Syngenta Flowers and Goldsmith Seeds in Gilroy, Speedling in San Juan Batista (along with exhibitors HEM Genetics, GreeNex USA, Schoneveld Twello, Thomson and Morgan, MasterTag, and Plant Source International and finally ending the day at American Takii in Salinas, with an optional stop at Matsui Nursery. Participants will stay in Salinas on Saturday night.

On Sunday, April 11, the day will begin with a bus drive to San Luis Obispo, where the first stop will be Dummen USA. After a short drive to Arroyo Grande, the group will visit Greenheart Farms to celebrate their 30th anniversary. The last stop of the day will be in Santa Barbara where the participants will visit Jiffy Products along with their exhibitors Northern Innovators Inc., Skagit Gardens, Florist de Kwakel, and GGG-international.

Monday, April 12, will be a busy day beginning with the bus departing at 7 a.m. and driving to Carpinteria to visit PlantHaven, HIP Labels, and Westflowers. Following this stop, the group will arrive at Santa Paula to visit Ball Horticultural Co. along with Ball FloraPlant, Selecta First Class, PanAmerican Seed Co., and Kieft Seeds. Lunch will be hosted by Ball. In the afternoon, Green Fuse Botanicals will be visited along with GroLink in Oxnard. The last stop of the day will be in Somis, CA to visit Suntory. Participants will spend Monday night at a hotel in West Hollywood, CA. This hotel is conveniently located midway between the Los Angeles (LAX) airport and the Burbank Airport. There is a shuttle service and taxi service to both of these airports from the hotel.

This package trip includes the cost of first class hotel accommodations for four nights from April 9-12, bus transportation from the first day to on the last day, lunches for 3 days, and experienced guides. Participants need to arrange their own transportation into San Jose on April 9 and out of West Hollywood on April 12, and cover their own dinner costs. A travel agency is available to assist with plane reservations (go to the website listed below). The cost of the trip will be $450 per person in a double room or $720 per person for a single room. These rates are based on 47 participants and will be adjusted slightly if minimum capacity is not met. The trip is subject to change.

**Space is limited** Register by January 29, 2010 to reserve a seat on this trip. For on-line reservation, go to www.concepts.us.com and click on Event Registration at the bottom left of the site. Be sure to go to the site labeled: Greenhouse Growers Spring Trials 2010. If you have questions, contact Dr. Mark Bridgen at mpb27@cornell.edu or at 631-727-3595.

This group trip to the 2010 California Spring Pack Trials is a new, one-of-a-kind venture for growers! All greenhouse growers and floriculture professionals are invited to attend. It is an opportunity to meet fellow growers, breeders, and other plant company representatives to share ideas, update your understanding of what’s happening in our industry, and travel with trained professionals.

Filed Under: News Tagged With: growers, trends

The view from 30,000 feet

January 12, 2010 by Charlie

Click here to read my latest article published in GrowerTalks regarding the stage being set for 2010.

Filed Under: News Tagged With: trends

In the aftermath of the Great Recession

January 4, 2010 by Charlie

Today’s column by Robert Samuelson emphasizes the role of trade and entrepreneurs in shaping the economic growth of the next decade. He specifically mentions florists as an example. See below.

One insistent question at the start of a new decade involves the lingering effects of the old: What scars will the Great Recession leave? We are already seeing some. Americans are moving less than at any time since World War II, reports demographer William Frey of the Brookings Institution. People are tied to existing homes, can’t get loans for new ones and won’t move without job commitments, Frey says. Only 1.6 percent of Americans are now moving across state lines, half the rate of a decade ago.

With a grim job market, the young also seem more cautious. A new survey by Fidelity Investments found that a quarter of workers ages 22 to 33 want to stay with their present employer until retirement; in 2008, that was only 14 percent. John Irons of the liberal Economic Policy Institute worries that many young Americans, lacking tuition funding, will delay or abandon attending college, lowering their long-term earning power.

So the Great Recession’s nastiest scar could be an era of economic frustration, characterized by slower growth and contentious competition for scarce resources. Stunned by huge wealth losses in stocks and real estate, Americans save more and spend less. Businesses suffer from weak demand. Hiring remains sluggish. Worse, the slowdown coincides with an aging population, which could compound the effect. In 2020, the projected number of Americans 55 and older will reach almost 100 million, 29 percent of the total population. That’s up from 59 million, or 21 percent, in 2000.

“Younger people . . . tend to be more innovative, more willing to take risks, more willing to do things differently,” Stanford University economist Paul Romer says in an interview for the book “From Poverty to Prosperity” by Arnold Kling and Nick Schulz. As noted, today’s turmoil could make even the young more risk-averse. Or older and middle-aged people could increasingly dominate corporate hierarchies and university research grants, as Romer worries. An aging society could become a stand-pat society, protective of the status quo and resistant to change.

Against this glum prospect, the standard rebuttal evokes history. The U.S. economy is amazingly resilient, the argument goes. It has been a consistent job creator: 21 million in the 1970s, 18 million in the 1980s, 17 million in the 1990s, 12 million in the past decade through 2007. (Lower gains reflect slower labor-force growth, not less dynamism.)

A “can-do” culture — combining intense ambition with a flexibility to adapt and an instinct for innovation — ensures that the economy will ultimately rebound strongly. The harsh recession may have actually improved the long-term outlook by purging high-cost firms and forcing efficiencies. Productivity (output per hour worked) has risen 4 percent in the past year. Profits are already up 21 percent from their low; surviving firms will soon expand.

Which vision will prevail?

The answer may hinge on two things: trade and entrepreneurship. Most economists see stronger exports as a substitute for weaker consumer spending. Unfortunately, that depends heavily on economic growth and trade policies abroad. By contrast, entrepreneurship is a sleeper issue that depends on what Americans do.

If you doubt its importance, consider this: All net job creation from 1980 to 2005 came from firms that were five years old or less, according to a study by economists John Haltiwanger of the University of Maryland and Ron Jarmin and Javier Miranda of the Census Bureau. In any one year, that may not be true; but over time, mature firms lose more jobs than they create. “It’s not small firms but young firms that count,” says economist Robert Litan of the Kauffman Foundation, which sponsored the study.

If Americans don’t continue to create firms — not just high-tech start-ups such as Facebook but construction companies, florists, restaurants, dry cleaners, engineering firms — the economy may languish. Beginning a business is a risky, exhausting, chaotic process. Every year, there are roughly 500,000 to 600,000 company “births” and almost as many “deaths.” Half of new firms don’t make it to year five, says Litan.

Some harbingers of growth look unpromising. In 2009, disbursements by “venture capital” firms — investors in start-ups — to first-time recipients hit an all-time low since statistics were begun in 1995. True, VCs support only a tiny fraction of new firms, mostly high-tech start-ups. But “angel investors” — friends and family of entrepreneurs who support many more — have also suffered huge losses in stocks and homes. They, too, have less to invest.

There’s a warning here for the Obama administration: Complex regulations or high taxes may discourage start-ups and job creation. As for broader questions, the answers may remain murky for years. Has the mix of economic trauma and aging made us prudent — or merely fearful? Has economic resilience survived — or given way to a stand-pat society?

Source: Click here

Filed Under: News Tagged With: recovery, trends

U.S. population over 308 million

January 3, 2010 by Charlie

From the WSJ — As the first decade of the 21st century comes to a close, the Census Bureau projects that on Jan. 1, 2010, the total U.S. population will be 308,400,408. This would represent an increase of 2,606,181, or 0.9%, from New Year’s Day 2009. In January 2010, one birth is expected to occur every eight seconds in the United States and one death every 12 seconds. Meanwhile, net international migration is expected to add one person every 37 seconds to the U.S. population in January 2010. Combined with births and deaths, that means an increase in the total U.S. population of one person every 14 seconds. Close to the end of the new decade, in July 2019, the Census Bureau projects the U.S. head count will have risen to 338,190,000.

That’s a lot of potential green industry consumers.

Filed Under: News Tagged With: trends

American Consumption and the New Normal

December 31, 2009 by Charlie

American consumer attitudes about how we think about and spend our hard-earned dollars are undergoing the biggest change since the end of the Great Depression and World War II. As in the 1940s, we now find ourselves in a moment of turbulence, confusion, and new beginnings. Heading into a new year and a new decade, we’re starting to get an idea of what our “new normal” may look like for consumers. At the end of… more, click here

Filed Under: News Tagged With: retail sector, trends

All you need to know about economics

December 28, 2009 by Charlie

Here’s a reprint of an article that summarizes all you need to know about economics in 10 easy steps. They come courtesy of the best-selling introductory economics textbook by Gregory Mankiw of Harvard University.

*************************************************************

Economics is the study of how society manages its scarce resources, where ”scarce” means there are fewer resources than we’d like to be able to use.

The first four of Mankiw’s 10 principles concern the way people make decisions, and the first is: people face trade-offs. That is, to get one thing we like we usually have to give up another thing we like. Economics is about the trade-offs people – and societies – have to make, and about helping people improve the trade-offs they’re making. One common trade-off society faces is between efficiency and equity. Efficiency in the allocation of resources means society getting the most it can from its scarce resources. Equity means the benefits from those resources are distributed fairly among the members of society. Often, the things we could do to make the cake bigger (efficiency) make the slices of the cake more unequal (equity) and vice versa.

The second principle is: the cost of something is what you give up to get it. That is, its ”opportunity cost”. Economics is about comparing the costs and benefits of alternative courses of action. The benefits of doing something or buying something are usually pretty obvious, but they need to be weighed against the costs involved to see whether option A is superior to other options. The cost of going to university full time is not the cost of accommodation and food (because you’d face those even if you didn’t go to uni), nor even just the cost of the uni fees and textbooks. The biggest cost is the income you lose by not being able to work full-time – a classic opportunity cost.

Third, rational people think at the margin. Marginal changes are incremental adjustments to a plan of action. Say you’re running a short course for 10 students at a total cost of $10,000 – that is, an average cost of $1000 per student. Now say an extra student wants to join the course. How much should you charge him – $1000? No. The first question is: what’s the marginal cost of adding an extra student? It’s probably quite small – say, $50 for the extra set of course notes. This means that any price you charge above the marginal cost of $50 will leave you ahead on the deal. But if you name a price that’s too high and the student decides not to pay it, you’re worse off to the extent that the amount he would have been willing to pay (marginal revenue) exceeded $50.

Fourth, people respond to incentives. Because people are assumed to make decisions by comparing costs and benefits, their choices may change when the costs and benefits change. If so, they’re responding to incentives. When Cyclone Larry caused the price of bananas to skyrocket in 2006, most people ate fewer bananas and more apples and pears. They were responding to changed incentives.

The next three principles concern the way people interact. The fifth is: trade can make everyone better off. Trade between Australia and China is not like a sporting contest where one side wins and the other loses. Rather, trade makes both sides better off (though not necessarily equally better off), which is why it happens. Trade between countries is merely an extension of all the trade that goes on within countries between businesses and households.

Sixth, markets are usually a good way to organize economic activity. A market economy is ”an economy that allocated resources through the decentralized decisions of many firms and households as they interact in markets for goods and services”. The other main way to organize economic activity is to have central planners make all the decisions about what goods and services are produced, how many are produced, who does the producing and who gets to buy what’s produced. It doesn’t work.

Seventh, governments can sometimes improve market outcomes. Government intervention in markets may be justified in cases of ”market failure” – ”a situation in which a market, left on its own, fails to allocate resources efficiently”. One common cause of market failure is the existence of an ”externality”, where a transaction between a buyer and a seller affects – whether favorably or unfavorably – the well-being of third parties. Another cause is ”market power,” where one or a small group of firms is able to substantially influence market prices (and thus make profits well in excess of the opportunity cost of the capital they have put up and the risks they are taking).

The last three principles concern how the economy as a whole works. The eighth is: a country’s standard of living depends on its ability to produce goods and services. The value of a country’s production of goods and services during a period is measured by gross domestic product. A simple measure of its material standard of living is its GDP divided by the size of its population. Income per person is very much higher in the developed countries than the developing countries. Why? Mainly because the rich countries have higher productivity – each hour of a worker’s time produces more goods and services. Why? Because the rich countries’ workers are better educated and trained (”human capital”) and have better equipment to work with (”physical capital”).

Ninth, prices rise when the government prints too much money. This proposition is usually true, but it doesn’t apply when – as now in the United States and Britain – the demand for goods and services is falling far short of the available supply of goods and services.

Tenth, society faces a short-run trade-off between inflation and unemployment. Usually, the things governments do to reduce inflation have the effect of increasing unemployment and the things they do to reduce unemployment have the effect of increasing inflation. This relationship is known as the ”Phillips curve” after the Kiwi who invented it, but in the long run the trade-off breaks down and if you push it too hard you can end up with high inflation and high unemployment. If you can get people’s inflation expectations down, however, you can enjoy the best of both worlds.

If you’ve followed me this far you’ve passed the course. Your reward: look up the economics professor and stand-up comedian Yoram Bauman on YouTube and watch his send-up of these 10 principle

s.

Filed Under: News Tagged With: trends

Making Cents Word Cloud for 2009

December 23, 2009 by Charlie

Click on the word cloud below to enlarge.
Thank you for following Making Cents during 2009. Perhaps it was not the best year the Green Industry has ever seen, but it sure wasn’t dull. Looking forward to sharing 2010 with you!

FYI — try www.wordle.net to make your own word cloud — a great marketing/navigational tool for your website.

Filed Under: News Tagged With: trends

ANLA webinar now online

December 17, 2009 by Charlie

Click here to watch the recording of my latest webinar sponsored by ANLA. Here is the webinar description:

Got Recovery?

In the aftermath of arguably the worst downturn in recent economic history, the economic climate continues to feel sluggish. Though we are in the midst of what the media refers to as a “jobless recovery,” many green industry firms continue to struggle to survive. In this webinar, Dr. Charlie Hall will provide an overview of where do we stand in terms of today’s economy, how far down the path of recovery are we, what is the near-term economic outlook for 2010, and more importantly, what do we do NOW to position ourselves for spring and beyond?

Filed Under: News Tagged With: recovery, trends, webinars

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