Sunday, July 22, 2018

4TH INDUSTRIAL REVOLUTION....DESIGN COSTING ... SERIES 3

 
In my third series, I find that under the 4th Industrial revolution design based costing plays a pivotal role. Small things with huge capacity, cheap things with huge quality are the key boon to support the 4th industrial revolution.  I am talking about nanotechnology and its design costing impact on the global industry and the 4th Industrial revolution. I have discussed two subjects here where I find cost management and costing tools will have a huge impact in the coming days. The 1st one was Nanotechnology and the second is climate change and its economic aspect which leads to economic growth during these tough times of trade war without focusing much on export-driven economic growth. Well In my 1st part I will discuss the design costing and the upcoming Femtotechnology. But before all these, I will present the whole research in parts so that readers can absorb it slowly.

Cost management and cost reduction can be a boon for stopping the radical climate change. The biggest question which will strike everyone is that how this could be possible. Climate change has been a known global issue and no country is left from its curse. Cost management means efficiency in cost which is a reflection of the efficiency of the production process, improvisation of the traditional process and improvement in the society. Design costing has been an important topic which needs no introduction also since nanotechnology has changed the landscape of production and resources management. Nanotechnology is one of the finest products of design based cost management which improves the production and efficient resources management. This resource management creates a ripple effect on the climate and hence its boon.

Before we get into further we need to clear few meanings deeply. Nano is the prefix that refers to a one billionth of a quantity in many sciences like physics. Since dimensions of an atom are about 10nano-meters, this prefix is popular in studying atoms and molecules as well. Nano was coined by Richard P. Feynman’s classic talk at the annual meeting of the American Physical Society at the California Institute of technology in 29thDecember, 1959. Later, Feynman’s idea was followed by Eric Drexler.

The main difference of nanotechnology in comparison with other technologies lies in materials scale and structure of this technology. Thus, nanotechnology is in relation with the production process which has an important effect on the implementation of this phenomenon. This is one of the finest design based technological improvisation which has a huge impact on the climate.

Climate change targets can only be achieved when efficient production and resource management is being implemented and this subject is dominated by cost accountants since they are being taught about these two key areas. Cost reduction leads to the elimination of inefficiencies and hence journey from better to best in terms of manufacturing.

Capitalist and business models don’t want to deploy capital to change the traditional cost of production since they will have to face a longer gestation period in improving the production process. This has been evident in many countries due to which these countries don’t implement the climate change related trade policies in a faster way. Private segment shy away from the investments and they demand more tax benefits for implementing the same which is actually at the cost of the economy. Capitalist minds always stay away from these transformation phases. This area has now been broken and disruptive production and business models have come up to give a challenge to the capitalist mindsets.

Nanotechnology has a huge impact on the energy cost saving and reduction of carbon dioxide into the atmosphere. Costing tools improves the design cost and hence a vast number of industries gets to benefit from the Nanotechnology segment. Nan technological approaches like light-emitting diodes (LEDs) or quantum caged atoms (QCAs) lead to a strong reduction of energy consumption for illumination.

Lighter stronger materials are being produced in manufacturing which leads to efficiency in production and also saves energy cost significantly. Skyscrapers and construction industry get a significant boost up from the nanotechnology-driven production process with low-cost material but with a high density of quality. The current steel designs are based on the reduction in the allowable stress, service life or regular inspection regime. Extra copper of nano-particles reduces the surface unevenness of steel which then limits the number of stress risers and hence fatigue cracking. Design costing leads to business opportunities and creates disruptive growth avenues replacing the traditional process.

But the world is moving ahead of Nanotechnology now. The 4th Industrial revolution would improvise the efficiency of the production process and would lead a quantum jump in the cost management segment. Climate issues can be resolved provided the too much capital chasing limited assets are being realigned and focused towards the climate change. Climate change would result in a stupendous implementation of costing tools and design costing methods which leads to change of production process.  Export-driven economic growth is not the way for s sustainable economic growth. The recent trade war and its impact on the export-driven economy will be very harsh on the society and on the GDP growth. 

 It's not about a number, rather I am about the economic growth distributed among the society. We have seen historically that a huge amount of capital keeps chasing a limited asset class or segment. This is due to the capitalist mindsets and lack of government policies to frame equal growth within its own economy. Today we find that there is a wide disparity of economic growth within countries internal due to lack of vision. 

Climate change is an opportunity for the economic growth provided efficient policies are being deployed to bridge the gap which is existing within every country.  One can pick up any country to find the widening gap of growth. The best I can remember now is the growth of the German economy and the rest of the EU. China today is facing trade war problems, well it can easily mitigate the risk of slowdown provided it fasten the process of adhering to the climate goals. These goals itself are highly economic growth supportive. Climate change is an integral part of the 4th industrial revolution and one should work on the lines to get growth. I repeat again what I have said many times in my previous articles that all traditional economic theory is redundant and 4th industrial revolution will create new theories.

Sunday, July 15, 2018

4TH INDUSTRIAL REVOLUTION....COST MANAGEMENT SERIES 2

In this series of writing, I will be discussing and sharing the perspective of cost management and its role in the 4th industrial revolution on a global platform. India remains a nascent stage compared to others.  Efficient cost management could only make the 4th industrial revolution to be within the budgets for the emerging economies. Cost Management makes an economy grow since if production cost is low and cost-efficient and measurable then the GDP growth happens faster and stable for that economy. The 3rd industrial revolution has this biggest boon of cost management which made economies like Japan and China to grow supported by various other rationales.

The question which comes to mind is that what the significance of cost management, cost control and cost measurement in the 4th industrial revolution. The answer is simple cost management subject would help a country to fight against poverty, upgrade the society, make things affordable and more importantly uplifts the GDP of an economy. The growth of the society through cost control and cost measurement can achieve. The 4th industrial revolution married with cost management plays a pivotal for the next decade of GDP growth. Many countries have identified the same and the challenge is for the those who are still fighting with traditional protocols and not opening the gates for the next generation revolution.

A country like India needs to understand that low-cost production through traditional production methods are now on the verge of death and hence 4th industrial revolution married with cost management should be adopted at a faster pace compared to its historical trends. India needs to develop strategies and methods faster so that as the landscape of production is changing the GDP growth might get slower in the coming decade as 4th industrial revolution married with cost management is already being implemented by the other countries.
 It's up to the different countries about how they take up the 4th industrial revolution and become a developed economy. Bridging the gaps of the society should be the prime focus for the 4th revolution. I am happy to share that Japan has again strike the chord with its focus on revolution just like it did during the times of its cost management tool developments.

On the other hand, many economies started late on the 3rd industrial revolution and they became emerging economies as of now. This stark contrast can be eliminated in the 4th industrial revolution. Today we speak about nanotechnology. Well, nanotechnology is the product from the cost management. Efficient cost design and cost measurement have given birth to nanotechnology. Hence in this series of my writing, I will share my insights and analysis on the 4th industrial revolution and the cost management roles within the same. Productivity under the 4th industrial revolution would be very much linked with cost measurement since this revolution is more being carried by non-rich fellows coming from unknown segment not having a cash-rich segment for investments. They have the intellectual capacity and courage to take forward the 4th industrial revolution and hence for them every penny matters. Hence without proper cost management, the 4th industrial revolution might not take its full shape.

 The 4th industrial revolution is all set and many economies future growth will be dependent on the 4th industrial revolution.   The success of GDP growth of any economy is dependent on its cost management and cost measurement. A low-cost product has been the success demand for the economic growth. The 4th industrial revolution is all about IOT, AI autonomous vehicles, Robotics, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, quantum computing and big data analytics. All these are the cost management techniques under the 4th industrial revolution.  In the coming decade, the success of an economy will depend upon how efficient they are in adopting cost management through IOT,AI and big data analytics. The biggest question as of today is that how much the government is focused towards achieving the next round of economic growth through the 4th industrial revolution.

According to research reports, many economies are just yet to take participation in planning the 4th industrial revolution whereas many economies have already adopted the same in their economic growth agenda and have started well to work on the same lines. A Country like Germany was one of the first countries to increase digitization and the interconnection of products, value chains, and business models to drive digital manufacturing forward.

There are 25 Leading countries, concentrated in Europe, North America, and East Asia. All but two countries in this archetype are high-income economies. Japan’s Society 5.0 – a strategy to use emerging technology to transform not only production but all of society – followed in 2016. However, the majority of the economies including around 90% of the economies from Latin America, the Middle East and North Africa, Sub-Saharan Africa and Eurasia are under the nascent stage.

The government along with corporate needs to develop policies for the adoption and development of 4th industrial revolution. India needs to be extremely proactive in these areas. The 4th industrial revolution will not take the time as compared to 3rd industrial revolution. The 4th revolution is exponential and hence the government needs to be proactive so that they don’t miss the opportunity and became backward nations.

Cost management would play a pivotal role behind the 4th industrial revolution. Efficient cost measurement and cost control would amplify the 4th industrial revolution since many economies particularly the emerging ones would find 4th industrial revolution to be an expensive game hence through cost control the same could be made affordable.

Tuesday, July 10, 2018

4TH INDUSTRIAL REVOLUTION & COST MANAGEMENT SERIES 1


In this series of writing, I will be discussing and sharing the perspective of cost management and its role in the 4th industrial revolution on a global platform. India remains a nascent stage compared to others.  Efficient cost management could only make the 4th industrial revolution to be within the budgets for the emerging economies. Cost Management makes an economy grow since if production cost is low and cost-efficient and measurable then the GDP growth happens faster and stable for that economy. The 3rd industrial revolution has this biggest boon of cost management which made economies like Japan and China to grow supported by various other rationales.  The question which comes in mind is that what the significance of cost management, cost control and cost measurement in the 4th industrial revolution. 

The answer is simple cost management subject would help a country to fight against poverty, upgrade the society, make things affordable and more importantly uplifts the GDP of an economy. The growth of the society through cost control and cost measurement can achieved. The 4th industrial revolution married with cost management plays a pivotal for the next decade of GDP growth. Many countries have identified the same and the challenge is for the those who are still fighting with traditional protocols and not opening the gates for the next generation revolution.

A country like India needs to understand that low-cost production through traditional production methods are now on the verge of death and hence 4th industrial revolution married with cost management should be adopted at a faster pace compared to its historical trends. India needs to develop strategies and methods faster so that as the landscape of production is changing the GDP growth might get slower in the coming decade as 4th industrial revolution married with cost management is already being implemented by the other countries.
 It's up to the different countries about how they take up the 4th industrial revolution and become a developed economy. Bridging the gaps of the society should be the prime focus for the 4th revolution. I am happy to share that Japan has again strike the chord with its focus on revolution just like it did during the times of its cost management tool developments.

On the other hand, many economies started late on the 3rd industrial revolution and they became emerging economies as of now. This stark contrast can be eliminated in the 4th industrial revolution. Today we speak about nanotechnology. Well, nanotechnology is the product from the cost management. Efficient cost design and cost measurement have given birth to nanotechnology. Hence in this series of my writing, I will share my insights and analysis on the 4th industrial revolution and the cost management roles within the same. Productivity under the 4th industrial revolution would be very much linked with cost measurement since this revolution is more being carried by non-rich fellows coming from unknown segment not having a cash-rich segment for investments. They have the intellectual capacity and courage to take forward the 4th industrial revolution and hence for them every penny matters. Hence without proper cost management, the 4th industrial revolution might not take its full shape.

 The 4th industrial revolution is all set and many economies future growth will be dependent on the 4th industrial revolution.   The success of GDP growth of any economy is dependent on its cost management and cost measurement. The low-cost product has been the success demand for the economic growth. The 4th industrial revolution is all about IOT, AI autonomous vehicles, Robotics, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, quantum computing and big data analytics. All these are the cost management techniques under the 4th industrial revolution.  In the coming decade, the success of an economy will depend upon how efficient they are in adopting cost management through IOT,AI, and big data analytics. The biggest question as of today is that how much the government is focused towards achieving the next round of economic growth through the 4th industrial revolution.

According to research reports, many economies are just yet to take participation in planning the 4th industrial revolution whereas many economies have already adopted the same in their economic growth agenda and have started well to work on the same lines. A Country like Germany was one of the first countries to increase digitization and the interconnection of products, value chains, and business models to drive digital manufacturing forward. There are 25 Leading countries, concentrated in Europe, North America, and East Asia. All but two countries in this archetype are high-income economies. Japan’s Society 5.0 – a strategy to use emerging technology to transform not only production but all of society – followed in 2016. However, the majority of the economies including around 90% of the economies from Latin America, the Middle East and North Africa, Sub-Saharan Africa and Eurasia are under the nascent stage.

The government along with corporate needs to develop policies for the adoption and development of the 4th industrial revolution. India needs to be extremely proactive in these areas. The 4th industrial revolution will not take the time as compared to 3rd industrial revolution. The 4th revolution is exponential and hence the government needs to be proactive so that they don’t miss the opportunity and became backward nations.

Cost management would play a pivotal role behind the 4th industrial revolution. Efficient cost measurement and cost control would amplify the 4th industrial revolution since many economies particularly the emerging ones would find 4th industrial revolution to be an expensive game hence through cost control the same could be made affordable. 

Tuesday, July 3, 2018

CHINESE BUBBLE ...WAR WITHIN CHINA


The Chinese economy is going to face some hard days as the following reasons are grappling the economic growth engines to slow down, overheating in its real-estate sector, a roller-coaster stock market, and a rapidly growing shadow-banking sector. The battle is within the Chinese economy now more compared to US economy  These segments have been one of the key growth contributors for the Chinese GDP but now these factors are now being narrowed down to get the economy into a sustainable economic growth.  My Fear is only the bubble burst and not the rules of presently controlling the bubble. My article will accentuate these lines where prices are controlled but constructions are being supported. This would be a disaster for the Chinese economy in the long term.

Chinese real estate market is similar like US where bubbles were created. From June 2015 through the end of last year, the 100 City Price Index, published by SouFun Holdings, rose 31 percent to nearly $202 per square foot. That’s 38 percent higher than the median price per square foot in the US, where per capita income is more than 700 percent higher than in China. This is the very reason why China imposed many rules to control the bubble. They increased down payment requirements, tightened mortgage restrictions, banned the resale of property for several years, and limited the number of homes that people can buy.  But the restrictions have lead minimal effect currently based upon the data. Loans for individual purchases grew 20 percent year on year to reach 22.86 trillion yuan, with the growth rate declining 2.2 percent, as compared to the last quarter of 2017.

But the loan to developers is a significant threat. According to the data as of mid-2017, the volume of real-estate related loans at listed Chinese banks stood at 22.6 trillion yuan (approx. USD$3.59 trillion) as compared to 12.88 trillion in mid-2014, for an increase of over 75%. This is the very reason why banks are being restricted in the use of bank loans or trust funds to invest in the real estate market.

China’s real-estate sector accounts for an estimated 15% of GDP and 20% of the national demand for loans. The industry players have significant debt to equity ratio where many of the player's ratios go beyond 250%. The below chart depicts the name of the ones who are having a significant threat to the economy.



The rental market is not at all supportive for the rental as wages are low in China. Developers rent to consumers to make a 1.5 percent yield while paying a combined debt-and-equity cost of capital of almost 10 percent. This is a big gap and hence only buyers are the solution and excess construction has created a bubble. Rental markets will never grow and neither can be expected to be supportive of the Chinese real estate industry.

But I don’t find that there is any slowdown in the bubble formation. Based on the data new land purchase and the start of real estate projects have grown strongly in last 5 month of 2018. Investment in the residential real estate is up 14 percent and development loans are up 21 percent. Banks are again very actively getting into the speculative bubbles and mortgage growth is now 20%. This is a significant threat and I can promise more money and more avenues will open for this sector in the long term to balance the US trade restriction and investments. Long tenures of loans and another type of benefits will be doled out to balance the economy from the other side.

China has come up with a new set of rules for its real estate market to control prices speculation but how strong the same would be is a question mark. Enterprise buyers have to meet certain requirements including based in the city for five years or longer, paying a tax of at least one million yuan ($156,490), and hiring 10 or more employees with their accumulation fund and social insurance records of five years. Enterprises paying five million yuan tax are excluded. Further, the enterprises will be prohibited to resell the homes for five years instead of three years. This policy is curbing speculation. But my fear is speculation which already has been built will start coming down and that will create an immense problem for the Chinese economy. Those who are betting on the wealthy Chinese population, well they are buying more outside of China rather within China.

Funding restrictions are going to fail since many real estate developers are looking ahead for Mezzanine debt is a hybrid of debt and equity financing that gives the lender the right to convert to an equity interest in the company in case of default, after other senior lenders are paid. Hence a substantial growth in M&A will come up in the Chinese economy as many developers will lookout for offshore funding and getting into JV so as long-term period could be achieved. The developers want to wait for the removal of price caps and other restrictions as the current US trade war might force the Chinese officials to remove the restrictions and create the bubble further.

According to the data the US trade restrictions have created a serious mark on the Chinese economy and its a matter of concern for the 2nd largest economy and the rest of Asian economy. According to the sources, the recent economic data cast a deep shadow over the growth of manufacturing of the Chinese economy and the upcoming slowdown for the Chinese economy. In a brief statement, the General Administration of Customs said growth in China’s US-bound shipments slowed to 5.4 percent in the first six months from 19.3 percent a year earlier. June export growth was even slower at 3.8 percent, down 23.8 percentage points from the same time in 2017, the administration said.

If the export sector is going to face slowdown then other economic sectors will be given leeway or it will be total collapse based on the measures of cleaning the economy. The battle is within Chinese economy to balance its growth. I think China might be an example in the books of economics were chasing growth based on the export of an asset bubble, both turn into a nightmare.

These bubbles were being managed through various avenues but now with trade restrictions and US export market being turning into dry ground china will have to figure out new ways of economic growth. The construction industry will have to suffer a major setback at any point of time even if the funding restrictions are being removed keeping to balance the current economic growth based on US trade restrictions.

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