Month: November 2010

Guest Post: Teaching Quality Control with Olive Garden Breadsticks

Here is a great Chapter 6 teaching tip that is sure to make you popular with students – especially if you offer some extra credit.  Send them on a “breadstick quality control” mission.  A number of years ago, I helped the Olive Garden Restaurant chain solve an important problem.  Their breadsticks were inconsistent.  They were varying colors, sizes and shapes.  The breadsticks are a signature item for Olive Garden, so management needed to define the extent of the problem, and to change the quality control.

I will not go into the whole process of solving the problem, but I will tell you that I began by visiting Olive Gardens and observing the breadsticks, even measuring them and recording variations in color and shape.  There was no doubt about it, there was a striking inconsistency, indicating a quality control issue.  After working with their bakeries, and finding a problem in the production chain, the restaurants once again had a delicious, high quality, consistant product.

Are the breadsticks at the Olive Gardens still consistent?  Why not send teams of students to dinner and ask them to record their observations.  With today’s technology, they can even take pictures of “problem breadsticks” and share them with the class. You can also discuss these 3 questions with the class:

  1. Why are breadsticks such an important item in the Olive Gardens?
  2. What are other examples of signature items in restaurants or other businesses?
  3. Before you visit the restaurants to do a quality control survey, what equipment do you need, and what exactly will you be looking for?

    4. 

Prof. Bill Quain currently teaches at Stockton College in NJ. He previously held endowed professorships at the U. of Central Florida and at Florida International U.

OM in the News: Mission Statements that Need Some Work

One of our topics in Ch. 2 is mission statements, and we give examples of three of them we think are good : Merck, Hard Rock Cafe, and Arnold Palmer Hospital. When I cover this material, I usually ask students to each find a concise one of their own to share with the class.

The Wall Street Journal’s (Nov.26,2010) front page article provides a few  mission statements that might be a bit clearer. Let me share these with you:

Ingersoll-Rand: “World leader in creating and sustaining safe, comfortable and efficient environments”. Translation: the company makes locks, A/C equipment, and battery-powered golf cars. The chair of the Center for Plain Language responds, “I picture a large swath of Amazonian jungle under the gentle and effective care of Ingersoll-Rand”.

Parker Hannifin: “The global leader in motion and control technologies”. Their main products are pumps and valves. The Journal writes, “the description might equally apply to a maker of lingerie”.

TRW Automative Holdings: “The global leader in active and passive safety”. The rest of us call these brakes and seat belts.

DXP Enterprises: “A leading products and service distributor focused on adding value and total cost savings solutions to MRO and OEM customers in virtually every industry since 1908”. In plainer language, a VP says we distibute “pumps, tools, nuts, bolts and safety supplies such as hard hats”.

Finally, my favorite, Sykes Enterprises: “A global leader in providing customer contact management solutions and services in the business processing outsourcing arena”. Translation: they operate call centers and help desks.

Discussion questions:

1. Why is it so hard to write a good mission statement?

2. What do you do when you are a company like 3M, which makes about 55,000 diverse products?

3. Why is the Arnold Palmer Hospital statement (see Ch.2) so well written?

OM in the News: Incentives Spur Utah’s Growth

We raise the question in Ch. 8 as to why firms choose to locate in one area vs. another—and clearly incentives are one major factor. Today’s Wall Street Journal (Nov.27-28,2010) describes how Utah’s aggressive approach to courting businesses has fueled its high ranking job growth.

Adobe Systems, for example, is setting up a new technology campus there (which hopes one day to create 1,000 new jobs) , after Utah offered $40.2 million in tax credits. Other firms in the article are  also mentioned having responded to cash incentives.

But as Jay wrote in his Sept. 23 blog, in the long run, communities  are better off investing in honest government, good workers compensation programs, education, and quality of life. Utah seems to recognize this by offering  support from local colleges. The U. of Utah, for example, put together 5 new graduate programs in engineering to meet demand in the state’s growing medical devices industry.

Out of state firms say they are impressed with Utah’s pro-business strategy. “More so than any incentives, what makes Utah attractive to businesses is the state’s stable, predictable regulatory and tax environment”, says IM Flash Technology’s CEO. This pretty well agrees with Jay’s assessment. Its not so much the money, its a whole list of other factors that are at least as important.

Discussion questions:

1. Why are some incentives more important than money?

2. Why isn’t every state and county as aggressive as Utah?

3. Provide some examples of situations where financial incentives backfired.

Guest Post: Continuous Process Improvement Tools

We welcome  this Guest Post from  Kevin Watson, Asst. Prof. in the Dept. of Supply Chain and Info. Systems, at Iowa State U.

OM students are frequently reminded that data accuracy is a prerequisite to effective inventory management and operation of MRP systems- in fact Barry just blogged about this on November 4th. As professors, we often discuss the application of lean and quality improvement techniques; however, discussion tends to focus on manufacturing processes and students frequently miss that continuous improvement techniques can be applied to non-manufacturing activities. An article I just read, “Continuous Improvement Approach Reduces Errors in Records” , provides an example of continuous process improvement tools utilized to address paperwork errors.

The article discusses a holistic solution to address record errors in shop floor packets traveling with medical devices during manufacturing. MEDRAD, a 2003 Malcolm Baldrige National Quality Award recipient, experienced error rates as high as 20% in the paperwork necessary to track products through manufacturing ,resulting in compliance issues and causing unnecessary rework and delays. The company addressed this issue through the use of a quality improvement project utilizing technology, process, and people based solutions. The project resulted in a reduction of record inaccuracy to 2.2%, saving the company $40,000 and accruing significant non-financial benefits.

Addressing non-manufacturing errors while retaining the familiar touchstone of the manufacturing environment, it is an excellent means to expand student understanding of quality management tools applied to non-manufacturing processes and to begin the discussion of their application in the service/administrative environments. The article would be an excellent complement to the Quality Management chapters (Ch6/S6) and could be touched again during a discussion of inventory record accuracy in conjunction with Material Requirements Planning (Ch 14).

Teaching Tip: Queuing Up at Disney on Thanksgiving

Having lived in the Orlando area for over 2 decades, everyone assumes my family and I are regular visitors to the Magic Kingdom and the 5 other  Disney World properties here. After all, Disney World is a powerhouse,with over 62,000 local employees (called “cast members”)  and 48 million visitors last year. So when they find I have yet to take my 13 year old son to the Magic Kingdom, I appear to be some sort of ogre. (To my defense, my kids have been to Universal, Sea World, Wet n’ Wild, Blizzard Beach, Animal Kingdom, and on and on). To overcome this pressure, we all went to Disney today, Thanksgiving, 2010.

Here is what we learned. Thanksgiving is one of the  busiest days of the year. And Disney has a clear plan for dealing with this capacity situation (Supp.7): All free passes are cancelled, all cast members are called in, extra parades are scheduled, more refreshment booths are opened, and hours are extended…the Park didn’t close till 1am!

But the queues–oh the queues! Where else would a rational family of 4 pay $340 in entrance fees, $12 to park, and $50 for water and ice cream, only to wait in a series of 45 minute lines for 5 or 6 rides and shows…and then walk away happy as can be?

Here is the secret to the psychology of queuing theory…something Disney’s flock of Ph.D.s in OR and IE have mastered: (1) Keep your customers informed of how long each queue will take,with signs posted frequently…and overestimate, don’t underestimate. (2) Entertain them while they wait, with videos, music, and cartoon characters. (3) Keep the lines moving so progress seems to be taking place. And (4), make people walk long distances between the most popular features, with plenty of interesting activities en route.

I hope this leads to some useful class discussions about how how queues can be managed. Happy Thanksgiving to all!

OM in the News: Chrysler’s Gamble with Mass Customization

The year was 1973. Jay and I were both teaching at Boston U.’s brand new European  MBA program, just outside of Pisa, Italy. The most popular car on the Italian road was the “Cinquecento”, a midget of a  vehicle that could easily fit in the back of a Chrysler minivan. The Cinquecento had all the power of about 3 Vespa motorscooters, my vehicle of choice in college. When I left Italy I never thought I would see one again.

So yesterday’s Wall Street Journal article (Nov.22,2010) announcing that Chrysler was bringing the Cinquecento to the US–and planning to sell 50,000 of them in 2011–was a bit of news. The car will be called the Fiat 500 and be manufactured at a retooled Chrysler plant in Mexico. Five feet shorter than a Chevy Impala, the 500 will retail for $15,500. But the reason you may want to bring this topic to your class is Chrysler’s risky strategy of mass customization (Chapter 7). Where the Japanese mastered the global auto market by limiting production options (a typical Honda might have 2 transmission options, 6 paint choices, 2 interiors, etc.), the Fiat 500 will provide a dizzying array of features to choose from.

With 3 versions of body style, 14 exterior colors, 14 seat colors, 6 wheel styles, and so on, there will be about 1 million combinations of the new car. Chrysler hopes the chance to customize the 500 will draw a wide range of customers who may want a “one of a kind”. In the past, US auto makers learned the risks of mass customization: too many choices leave dealers with lots full of cars, but not the exact one a customer may want (and 80% of US customers want to drive their car off the lot the day they buy).

Further, suppliers are being asked to keep more parts on hand so they can more quickly build a seat or interior combination , then ship it to the plant within a few hours.

Discussion questions:

1. How interested are students in a unique, customized car that will take 30 days to deliver?

2. Why is Chrysler taking this approach?

3. What are the competing products and how do they fare?

Teaching Tip: Dealing With Cheating in Your OM Class

Today’s front pages headlines here in Orlando have centered on a sensitive topic, but one we must address nonetheless–cheating in our classes. The story concerns a B-School prof at U.of Central Florida (UCF), which is now the 2nd largest college in the US, with 56,000 students. This, of course, means large classes–often shown on closed circuit TV. In a class of 600 Strategic Management seniors, the instructor used a 300 question Test Bank (which he thought to be secure) to create the midterm of 55 multiple-choice questions.  Unusually high grades led to 206 students admitting they had studied from the Test Bank.

Nationally, about 21% of students admit to cheating, with more problems on large campuses and in large lecture classes. As the DSI Meeting takes place at this moment in San Diego, maybe this is a good time to raise the issue.

Yes, Test Banks are more and more available on-line, despite threats and suits by publishers. Our own publisher has taken legal action against people using our copyright material. But some schools using our OM text actually buy copies of the Solutions Manual and Test Bank and sell them as study tools to their students. So it is a fair assumption that some “ambitious” students will try to get an edge gradewise by whatever tool is on the market.

Jay and I have discussed the problem many, many times and have tried to foolproof our system to this extent: (1) we have a massive Test Bank, with well over 2,000 questions, and a text with over 900 problems. This gives the ability to keep from repeating the same questions from semester to semester; and (2), we created MyOMLab with a goal of making it as integrity-driven as humanly possible. The key is the algorithmic nature of the on-line problems that come from the text. You can assign them “bookmatch” (ie, identical to text), or “algorithmic” (ie, where each student gets her own data).

Randomizing questions from large Test Banks, using new assignments each year, and MyOMLab are just 3 ways to deal with this visible issue. Please share your comments.

OM in the News: Planes, Trains, and Drones–China’s Reverse Engineering Controversy

When the Japanese and European high-speed rail companies signed on to build trains for China, they eyed the $ multibillion contracts in the booming new market. What they got was competition from Chinese firms who took their technology and turned it against them within a few short years. Chinese companies, fueled by technology transfer, reverse engineering, and process redesign (Ch.7), are now selling trains even faster than foreign rivals Kawasaki, Bombardier, and Siemens. The national  strategy of boosting state-owned firms and obtaining advanced technology at the expense of foreign powers is challenging the US and other powers doing business in China.

Yesterday’s Wall Street Journal (Nov.18,2010) quotes a China rail official who says they are “learning and systematically compiling and re-innovating foreign …technology” and now have trains that go 37 miles an hour faster (236 mph) than European and Japanese rivals. Kawasaki’s view: a  few tweaks to exterior paint scheme…and a beefed up propulsion system is not a new technology. “Its nothing but deceitful propaganda”, says an exec.  Kawasaki had set up production facilities in China, trained Chinese engineers, and developed a supply chain for components.

Today, the Journal’s  headline addressed China’s advances in pilotless drones— putting the US and Israel at risk in their worldwide dominance. Same story: technology transfer by Israel propelled the 25 different models of unmanned aircraft…a major advance in only 2 years. And last week’s lead story was the unveiling of China’s C919 commercial jet, a direct threat to the Boeing 737.

So how is this different from post-war Japan (and Korea as well) transforming their economies by reverse-engineering foreign technologies in steel, autos, ship building, and computers? China’s share of manufacturing advanced  equipment could climb from 8% today to 30%  of global exports within the decade, writes the Journal.

Discussion questions:

1. Discuss the ethical issues that arise from these articles.

2. What is China’s long-term manufacturing strategy, and how is it changing?

3. How did companies like Kawasaki end up losing their dominance in the Chinese market?

Guest Post: Trials and Tribulations of Teaching OM in Large Sections At Texas Tech

Teaching any subject in large sections (100 to 300 students) is difficult, but teaching operations management with heavy doses of quantitative/procedural type material presents a lot of unique challenges. In a large lecture hall students are farther away from the professor and as a result don’t feel comfortable asking questions and seem to be a bit less engaged than in smaller settings. The trick is to make the large room seem smaller and the lecture more interesting. Many may not want to admit this, but teaching in this setting requires more entertainment value to keep the students engaged.

Over the years I’ve used a combination of tactics that seem to be effective. Five minutes before class begins I play rock videos on the video screen with volume turned up to a high level. It energizes me and wakes up the students. When class starts I show a short funny video (1 minute or so) to help the students relax. As I lecture I move around a lot (back and forth and up and down the aisles) utilizing exaggerated arm/hand movements. I don’t use a microphone since I have a big voice, but I do talk louder than my normal speaking voice with more variation in speed of delivery and voice inflection. The idea is to make you seem larger and the room seem smaller.

During the lecture I sprinkle in operations management examples from my career with a little self-deprecating humor added. Some of the examples have definite entertainment value, but examples seem to foster understanding and I ask questions on exams based on those examples. I also utilize the Turning Technologies personal response system “clickers” (I’ll discuss my experience with PRS in the next blog). Use of the PRS system (in Power Point form) has three distinct advantages:

  1. Refocuses the students’ attention (4 to 5 questions per lecture)
  2. Allows for collaborative learning
  3. Reinforces key points that may be exam questions (if students don’t get the correct answer I back track to bolster understanding).

PRS responses may also be utilized as an additional assessment tool for accreditation justification or for research purposes.  In short, variation seems to keep students engaged and at a point where they can retain more.

Phillip Flamm is an Instructor in the Information Systems and Quantitative Sciences department of the Rawls College of Business at Texas Tech University

OM in the News: What Should Boeing and Airbus Do?

If you used just one industry and product line to illustrate every aspect of OM in your course, it could easily be Boeing’s 737  and  Airbus’ A320. From supply chain to outsourcing to quality/reliability to assembly lines, these competitors provide a plethora of OM examples.

Yesterday’s New York Times  raises the  topics of time -based competition and product enhancements (see Ch. 5).  Boeing’s enhancements of the 737,  introduced in 1967, have made the plane the largest selling commercial aircraft in history. Together with the A320, another narrow-body plane, the pair make up 3/4 of the fleets at the major airlines. There are more than 10,000 in service in the US and abroad.

Now the problem: airlines, facing $80/ barrel oil, want better fuel economy—and this hasn’t happened in the 737 and A320 in well over a decade. Airbus leans towards investing $1.5-$2 billion in new fuel-efficient engines–product enhancement. Boeing has announced it will hold off on new engines and instead create a new plane by 2020–product migration.

While dominating the market for commercial planes over the past 20 years, the 2 companies have loved leapfrogging each other with bold advances. But as demand for new planes bounces back from the recession, Boeing and Airbus are hamstrung by OM problems.

Boeing is 3 years late on its most important plane, the 787, made of lightweight carbon composites to slash fuel use. (And a fire on its test flight last week did nothing to help). Airbus is being hammered with the need to fix its superjumbo A380 after an engine blew up on a Qantas flight (see our blog on 11/10/10). And now new competitors from China, Russia, and Canada are entering the narrow body market. The newcomers will soon find that making quality planes is much harder than it might look.

Discussion questions:

1. What are the advantages and disadvantages of enhancement vs. migration for these 2 firms?

2. Why doesn’t Boeing  jump right in the make a new jet to replace the 737?

3. What is China’s goal vis-a-vis the commercial jet industry?

Teaching Tip: Global Trade, Deficits, and Logistics

If the trade deficit is a topic that arises in your OM class, a visual image of the Port of New York and New Jersey is worth 1,000 words. Fortune (Nov.15,2010,pp.14-15) discusses the “Container City” one passes in driving on the NJ Turnpike.

In the first 8 months of 2010, 70,000 more full cargo containers entered the Port  than left it.  In other terms, 45% of the containers exported from the Port are empty, a reflection of the US trade imbalance. Yet a 3rd statistic: 1.80 to 1 is the ratio of imports to exports, up from 1.75 to 1  last year.

Six of the world’s largest ports are now in China, up from two just a decade ago. The largest port in the US in the Port of Los Angeles, the world’s 16th biggest, down from 8th ranked a decade ago.

What all of this means, of course, is that we are running a huge trade deficit, of which the logistics imbalance is one surrogate measure. Who benefits? My cousin Bob is the only one I know. He ships scrap metal to China for recycling and pays only a fraction of the shipping charges he would if he were sending  from China to the US.

OM in the News: The Rise of the (Orange) Warehouse Robot

If you remember back a decade ago, the e-grocery firm Webvan outfitted warehouses with 4.5 mile long mazes of conveyor belts and carousels meant to sort, box, and deliver groceries. The idea and company was a bust, going belly up in 2001. But its founder, Mick Mountz, decided  that what was missing was robots. So in 2003, he founded Kiva Systems to provide warehouses so automated that any e-commerce firm could compete with Amazon. “Now you can get  Amazon in a bottle”, says Mountz. “Everyone can have what Amazon has”.

According to this week’s Businessweek (Nov.10,2010),Kiva’s technology provides the backbone of Diapers.com, Zappos.com, and a dozen other retailers. Its squat orange robots scurry around warehouses and bring shelves of clothes, car parts, electronics, or whatever the product, to packing stations. There, humans pack and ship. The cheapest system ($1 million), comes with 30 robots and 2 packing stations. Most systems cost $4-6 million.

 Kiva  integrates with existing inventory management software and is smart enough to continuously reorganize inventory based on order flow. If there is an uptick for one SKU, the robots place that item closer to workers.

Here is an entertaining 4 minute video of the robots at work.

Discussion questions:

1. Why did Webvan fail?

2. What did Kiva do to change warehouse management?

3. What other kinds of firms could benefit from this approach?

Video Tip: Capacity Planning at Arnold Palmer Hospital

This is the 3rd  blog I am making about the series of 7 Arnold Palmer Hospital  video cases we filmed a few years ago. The 1st two were: The Quality of Culture (10/13/10) and Flowcharting Processes (11/2/10). If you plan to teach either Supp. 7, Capacity and Constraint Management, or Chapter 4, Forecasting, you may want to show this third  film (8.5 min.) and assign the accompanying case study.

I like this video because there just aren’t many videos available on the subject and  because this is such an interesting scenario. When the hospital decided to expand some years ago, it had already far exceeded its capacity. It had tried everything to increase throughput, including moving certain surgical procedures to a sister facility a mile away, having staff drive patients home as soon as they were ready for discharge….anything to free up a bed in a more timely manner.

When all else failed, the new building plan was put in place, but the issue of capacity planning continued. This time it was whether to build for forecast demand,  or actual demand. Using  Figure S7.6, the hospital used a lead stategy which allowed for major portions of the new building to be left in concrete shell form until a build-out was needed.

Although annual births had been on a constant increase for 15 some years, this turned out to be a good choice for capacity planning. As you may know, the economy in Central Florida (Orlando) has absolutely tanked, with less newcomers, and less births, in the area than was ever expected.

I usually present this video case when I teach Forecasting, as it presents an excellent integration of the topics of trend projection/regression analysis and capacity.

Supplier and Risk Monitoring

A good way to help students gain insight into the significance of  supply chain risks (Chapter 11 introduces the issue of supply chain risk)  may be to reference the  Dow Jones Supplier & Risk Monitor.  This Dow Jones approach may help students see that mitigating supply chain risk is a significant issue in the real world. So much so that firms (in this case Dow Jones) sell the service.   The DJ Supplier and Risk Monitor helps companies keep track of and evaluate events that may be critical to their supply chain. Dow Jones claims that they can identify potentially disruptive events, new products, product recalls, reputation problems, product safety issues, and other types of breaking news. Additionally, DJ believes they can help companies uncover potential problems by highlighting news stories by volume and relevancy.  Also available are company performance and financials. The system can provide graphic displays of selected priorities, instant alerting, and emailing.  The idea is to show students that commercial tools exist to expand risk scanning to all of the elements in the supply chain and potential partners.  Monitoring the supply chain and evaluating risk is not just an academic exercise.

OM in the News: The Shrinking Roll of Toilet Paper

As Fortune points out in its latest issue (Nov.15,2010, p.21), in an article called “When Less is….Less?”, everything shrinks during a recession: GDP, your stock portfolio, and most definitely, products on a store shelf.

In Chapters 5 and 7 we allude to the  choices the OM manager has to help increase profits when price increases are a bad option. Here are three: (1) cut your raw material costs, if possible; (2) cut the quantity—did you notice that OJ and ice cream containers are smaller?;  (3) enhance the product –maybe a richer ice cream, or a stronger rake, or more miles between oil changes?

As one example, here is Fortune’s sad tale of your shrinking roll of  Scott 1000 toilet paper over the past 15 years:

1995 –size of a sheet is 4.5 x 4.5″ when Kimberly Clark buys Scott Paper.

1999–size now 4.5 x 4.1″–called a “softness enhancer”.

2006–size drops to 4.5 x 3.7″–a nice pattern is added.

2010 –size reduced to 4.1 x 3.7″–“a 10% stronger tissue”.

The OM implications: not only less raw material usage, but smaller packages mean 12-17% more units fit on a truck. With fewer trucks, fuel use drops by 345,000 gallons per year.

Discussion questions:

1. Ask your students to name some other products that have “been enhanced” to increase profits or save money.

2. Besides smaller sheet size, what else can be done to reduce costs? (This was an alternative strategy chosen by Georgia-Pacific and P&G’s toilet paper changes).

3. How does sustainability enter the picture as an OM tool?