Innovation seems to be pouring out of the Tata Group (TTM) at a very rapid clip. The Tata Nano, which relied heavily on the company’s suppliers for their cost savings and creativity, raised the proverbial innovation bar by dramatically lowering the cost of an automobile thus making them available to a larger portion of the Indian population (and perhaps the rest of the world in the future). Now the company is back in the headlines with a new, revolutionary, potentially life-saving product with huge demand. The Tata Swach is a low-cost water filter aimed at the HUGE number of people in India and worldwide who lack access to clean, safe drinking water.

I’ll let this CNBC video fill you in on the details of this low-margin, high volume (in terms of sales, not water volume) water purifier Tata wants to have in 3 million Indian homes within the next 5 years.

This post may be venturing off into “rant” territory, which is largely uncharted water for me. But an article in yesterday’s Wall Street Journal about the negative impacts that the Buy American Clause is having on some of the very businesses it’s supposed to help shows the fallacy of drafting government policy-by-marketing-slogan.

The Journal tells the story of Aquarius Technologies, a Wisconsin based company that makes sewage treatment equipment. Their industry has received billions of dollars in stimulus funds for projects around the country. Yet by their estimates, Aquarius may lose up to 25% of their total business if neighboring Ontario can no longer utilize them, due to Canadian retaliatory protectionist policies - a direct result of the Buy American Clause.

Yesterday, the Institute for Supply Management (ISM) announced an August PMI of 52.9, a full 4 points higher than July and the highest we’ve seen since June 2007. Although many news sources and even President Obama himself were quick to declare the improved number as a sort of economic victory, ISM chairman Norbert J. Ore urged caution and realism:

While this is certainly a positive occurrence, we have to keep in mind that it is the beginning of a new cycle and that all industries are not yet participating in the growth. The 4 percentage point increase was driven by significant strength in the New Orders Index, which is up 9.6 points to 64.9 percent, the highest since December 2004. The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand.

Not long ago, many people wanted to leave GM on the rusty scrap heap of history. They wrote the company off as a health care provider who happened to make cars, too behind the times and inflexible to keep up with global demand for more efficient cars or cope with America’s plummeting sales figures on their profitable SUVs. But recently, GM announced two new strategies, which if executed properly (and profitably), could mark a turning point for the auto maker; selling cars on eBay (EBAY) and plans for a $4,000 car.

Last week, GM began selling new cars on eBay through their own branded eBay portal. While the auto OEMs have long used auctions to get better value from their suppliers, they’ve never taken the plunge when it comes to new cars. And while used car auctions (live and over eBay) are a staple for dealers, car flippers and used car buyers, now new car customers can get in on the action … and savings.

President Obama defended the US stimulus package’s ‘Buy American Clause’ Tuesday at the Three Amigos Summit in Mexico. The President stressed the limited reach of the clause, the possibility for states and provinces to circumvent the provisions in some cases, and the administration’s interpretation that the policy is legal under WTO rules.

Frankly, it struck me as a rather lackluster endorsement of this controversial provision. Stating openly that he didn’t feel the Buy American Clause was necessary (but was not worth going to the mat over) and that there are potential avenues around it for Canadian Provinces signals that this protectionist measure is still up for negotiation.

According to NOAA scientists, El Niño conditions are emerging in the Pacific and are expected to last through the 2009-10 winter. It is still too early to tell the severity of this year’s El Niño, with computer model forecasts ranging from relatively weak to strong intensity. But, given El Niño’s tremendous capacity for influencing weather worldwide … and thus, cost drivers for business … it’s worth monitoring the situation and taking some precautionary measures.

When we think of weather’s impact on supply chain costs, risks and logistics, we’re usually discussing discrete events, such as hurricanes. But El Niño is a whole other beast, capable of turning weather patterns on their heads for months at a time. Think back to the winter of 1997-98, the last year we had a severe El Niño. As The Times reported, that winter “torrential rains pulverized California, heatwaves swept across Australia and Brazil, forest fires blanketed Indonesia, eastern Africa was flooded while southern Africa withered under drought, and floods and storms caused billions of dollars’ damage to crops and buildings.” Undoubtedly, supply chains and corporate bottom lines across the world experienced the wrath of El Niño.

No one can ever claim Ryanair (RYAAY) isn’t creative. The European low cost airline (which has the largest international passenger volume in the world) is famous for its innovative approach to getting passengers from Point A to Point B … for very little money. For example in 2008, it offered 1 million seats for £0.01 each. The promotion was so successful, it crashed the company's website. And despite public outcries, it has yet to abandon the possibility of charging passengers for mid-flight visits to the bathroom.

In its latest move, it was reported yesterday that Ryanair’s “plans to cut costs by making fliers perch on stools with seatbelts around their waists. Chief executive Michael O’Leary has already held talks with US plane manufacturer Boeing about designing an aircraft with standing room.” The motives for the move are clear, since “Ryanair estimates it would be able to pack in 30 per cent more passengers while slashing costs by 20 per cent.”

I recently wrote about Tata Motors collaborating with their suppliers to foster innovation and costs savings while creating their $2,500 Nano. Reactions to this model on the blog and in various LinkedIn Groups ranged from wonder and jealousy to disbelief that it would work in the US, where some readers accused processes and paradigms as too closed off to new approaches. But as Apple’s new iPod Shuffle shows, American OEMs and their suppliers can indeed work closely together to create cutting edge products … at remarkably low price points and HUGE profit margins.

Business Week’s Technology section ran an article this week titled Deconstructing Apple’s Tiny iPod Shuffle. As far as Apple (AAPL) products go, this new iPod is actually somewhat controversial, since it literally has no buttons and talks to you (bring to mind a recent piece in The Onion - Apple Introduces Revolutionary New Laptop with No Keyboard). BW’s article is based primarily on the research of iSuppli, a market intelligence firm that tears products apart to estimate the cost and manufacturer of the components. iSuppli found that, without including shipping and design, the cost of components for the 3rd generation Shuffle is $21.77, or 28% its $79 retail price. And by comparison to other Apple products, parts for the 2007 iPod Touch and Nano were 49% and 40% of their retail price. So the Shuffle has an extremely healthy margin in a marketplace full of mp3 player options.

Last year, Tata Motors' (TTM) plan to produce a car for approximately 1 lakh (approx. 2,500 USD) was greeted with equal parts excitement, envy...and skepticism that they could deliver the shockingly inexpensive car. 14 months later, the Tata Nano has arrived. As you can see in the test drive video below, the car drives surprisingly well - always a concern since many joked that at that price it would have a top speed of 40mph or loose parts as it rolled down the street.

So the questions remain; how did they do it? And can their supply chain cost reduction model be replicated?