Month: October 2018

Teaching Tip: Attracting Students to Supply Chain Management Careers

Perhaps it’s not too much of a stretch to compare the changes that the current workforce is experiencing to the first time that human beings stood upright, writes IndustryWeek (Oct. 23, 2018). This change certainly feels life-altering to employees who have gone from a world where intelligence resided in their own minds to now working directly with intelligence housed in machines.

“Robotics, Big Data manipulation, machine learning and artificial intelligence techniques are enabling machines to match or outperform humans in a range of work activities, including ones requiring cognitive capabilities. These rapid advances also make it possible for workers to turn over the more analytical tasks to computers and move on to activities that require human intervention, such as resolving problems and managing change,” explains Prof. Richard Crandall, at Appalachian State U.

Where historically there was a strong emphasis on quantifiable capabilities, now it is the softer skills that are needed. Skills such as the ability to work well in teams and being innovative and creative when evaluating problems are at the top of employers lists. The challenge today is to find that person who is proficient at the technical level and can provide leadership. (One study, by the way, found the demand for supply chain professionals exceeds supply by 6 to 1.)

In a recent report by Deloitte, talking about talents that supply chain employees should have, 73% of respondents say it is extremely or very important to have technical competencies. But even more, 79%, say leadership and professional competencies are extremely important. Other skills that are becoming more important are the ability to manage global/virtual teams, the ability to persuade and communicate effectively, and the skills to both lead and develop others.

The good news in all of this is that Millennials have career preferences that exactly align with what is needed. They are looking for challenging work and like being on teams. So when you are talking to your OM students about careers, supply chain management may ideal. Employees are touching the lifeblood of the organization and doing foundation work that is influencing how decisions are made.

OM in the News: UPS, Capacity, and a Busy Holiday Shipping Season

UPS is counting on a big boost in shipping capacity to avoid logjams in its network during the peak holiday shipping season, and the delivery giant is raising prices to help offset those investments. The company is planning to deliver 800 million packages in the U.S. between Thanksgiving and Christmas, up from 750 million last year, reports The Wall Street Journal (Oct. 25, 2018). Nearly every delivery day during that stretch will see volume of more than 30 million packages!

To handle the surge in packages driven by online shoppers, UPS is building more automated sortation hubs, including its 3rd-largest U.S. facility that just opened in Atlanta. UPS says it has added 7 times more processing and sorting capacity this year than it did in 2017. To offset those costs, it is pushing up prices on domestic deliveries and adding surcharges on oversize packages. In the U.S. business, revenue per piece rose 4.8% in the 3rd quarter, the fastest growth since 2011.

UPS also working closely with more of its largest shipping customers, like Amazon, on better forecasting demand during the period, including predicting volume based on where it’s shipped from and coordinating with shippers when they have promotions. The company hopes to avoid unexpected volume surges that caused delivery delays in the past. “The last couple (years) we’ve been constructively dissatisfied,” UPS’s COO said. “Our goal is to have this peak be the peak we all want it to be through the eyes of our customers.”

UPS is addressing its recent declining profit by trying to woo more higher-quality businesses—including small- and medium-size customers and health care companies—to offset predominantly lower-margin shipments tied to e-commerce.

Classroom discussion questions:

  1. What tactics for matching capacity to demand that we discuss in Supplement 7 is UPS employing?
  2. How might UPS’s moves impact profit and revenue?

Teaching Tip: Talking to Students About Manufacturing

Our OM students hold many misconceptions about the manufacturing industry. There’s a widespread belief that the U.S. manufacturing industry is in decline, that jobs are going overseas, and that the industry doesn’t provide fulfilling or well-paying careers, particularly for younger workers. But this couldn’t be farther from reality.

The Manufacturing Institute says that nearly 3.5 million manufacturing jobs will need to be filled in the next decade, and 2 million of those jobs will go unfilled (Industry Week, Oct. 23, 2018). The available jobs, even at the lower rungs of manufacturing, pay well, too. According to the Bureau of Labor Statistics, the average annual salary for manufacturing production jobs is $44,595 ($21.44 per hour). In truth, the average pay for the manufacturing industry is comparable with jobs in the technology sector. For example, the average base pay for a manufacturing supervisor is $64,118, for a manufacturing engineer $71,679, and for a director of manufacturing, $146,412. That’s significantly more than what most students expect when they think about compensation in the manufacturing industry.

There’s also a perception that manufacturing jobs are repetitive, monotonous, underpaid, and involve working in decrepit, dirty factories. But the industry has evolved and is more dynamic and complex than it used to be. There’s more technology, more data, more analysis, more creativity, more gamification, more critical thinking, and more problem solving.

Our students often don’t view manufacturing as a desirable career option, and that poses a big problem. The growth of industry depends on worker participation of all demographics. Hopefully, our OM course will show that there are real opportunities for them, from professional growth to dynamic learning environments to competitive compensation. While the service sector remains a big part of the U.S. economy, manufacturing also contributes mightily and isn’t going away anytime in the foreseeable future.

OM in the News: Lean Production and the New York Times

 

Many of the instructors following our OM blog are looking for interesting articles in the press that they can share with their students. I like this particular piece in the New York Times (Oct. 11, 2018) that provides several interesting examples of lean operations (the topic of Chapter 16). The article traces back to the roots of lean in the vaunted Toyota Production System developed in Japan in the late 1940s, which was aimed at streamlining processes to eliminate waste, improve productivity and, ultimately, grow profits.

Roughly 40 years later the term lean production was coined by John Krafcik, CEO of Waymo, the autonomous driving car company. Krafcik was part of a team led by the research scientist James Womack, who became founder of the Lean Enterprise Institute. The Institute’s approach, which differs in some ways, focuses on eliminating waste, rethinking work flow and improving productivity, from entry-level employees to high-level executives. “When we came up with the name lean production, what we meant was the complete system,” Dr. Womack said. “What the world heard was factories. But the frontier has been outside of the factory world for the last 20 years.”

Sometimes, seemingly tiny changes exemplify the lean approach. The president of Cambridge Engineering, a manufacturer of industrial heating and ventilation technologies said a new entry-level line employee, Justin Meade, realized he was wasting time each hour just to discard trash. Meade, who had little technical training, came up with the idea of attaching a trash can to a chair to cut 15 steps. Over the next 6 months he continued to make more revisions to devise an even better version. The result: shaving an estimated 70 minutes from a 90-minute job.

About 20 years ago, Toyota set up the T.P.S Support Center, a nonprofit that aims to help businesses and nonprofits, like the New York Food Bank. The beneficiaries need not be in Toyota’s supply chain. Instead, the company hopes to help smaller North American companies streamline their operations.

Classroom discussion questions:

  1. Provide examples of lean from the NYT article.
  2. What is the history of lean?

 

OM in the News: Hurricanes, F-22 Fighter Jets, and Chapter 17

We are well aware that Chapter 17, Maintenance and Reliability, is not reached by semester end in many syllabi. But we would suggest that it is an important topic, especially when we consider the terrible impact of Hurricane Michael in Florida 2 weeks ago. About $2 billion in fighter jets were trapped on the ground because of maintenance issues and forced to ride out the Category 4 hurricane.

As many as 17 of Tyndall Air Force base’s 55 F-22s sustained damage or have been destroyed during the storm. (Considering the level of destruction, all of them could be damaged). One F-22 jet costs about $139 million. The aircraft were unable to escape with the rest of the base’s F-22 fleet to Wright Patterson Air Force Base, Ohio. The jets left behind were parked inside hangars as officials hoped for the best.

But why can’t F-22 jet fighters, of all things, escape a storm? Answer: They lack the parts to be operational. “Welcome to a fighting force damaged by bad political decisions and misguided priorities”, writes The Wall Street Journal (Oct. 17, 2018). Of the Air Force’s 186 F-22s, only about 80 are “mission capable,” meaning less than half are flyable at any given time.

Part of the F-22 problem is upkeep on a coating that helps the planes evade radar. Another issue is the supply chain for parts now that the U.S. no longer produces the airplane, and some original manufacturers no longer make the parts or are completely out of business. Air Force officials say that a simple wiring harness requires a 30-week lead time for finding a new contractor and producing the part. Ripping out parts from planes that work, or “cannibalizing,” is now common practice in military aviation.

Classroom discussion questions:

  1. What OM policies could the Air Force implement to deal with this issue?
  2. Which graph in Figure 17.4 provides a better representation of the F-22 costs?

 

OM in the News: How Robots Will Change Retail Forever

This Amazon distribution center in Baltimore can fulfill a million orders in a day. It may not need humans for long.

What if your company could store and deliver goods as easily as data? Amazon, Walmart and others are using AI and robotics to transform everything from appliance shopping to grocery delivery. “Welcome to the physical cloud,” writes The Wall Street Journal (Oct. 15, 2018).

Take, as an example, Amazon’s one-million-square-foot distribution center in Baltimore. Its scaffolding and seemingly endless conveyor belts disappear at a vanishing point within the building. The machine is a dazzling combination of chutes, ladders, rollers and 11 miles’ worth of conveyor belts. Customers’ orders move from shelving into bins and from bins into boxes as they travel via the machine straight into delivery vans, passing by stationary workers at various points along the way. Humans are rarely required to move around here. It’s much faster, and cheaper, to have stuff brought to them.

This is where robots come in. Kiva robots can carry up to 750 pounds of goods in their 40-odd cubbies. After a customer places an order, a robot carrying the desired item scoots over to a worker, who reads on a screen what item to pick and what cubby it’s located in, scans a bar code and places the item in a bright-yellow bin that travels by conveyor belt to a packing station. AI suggests an appropriate box size; a worker places the item in the box, which a robot tapes shut and, after applying a shipping label, sends on its way. Humans are needed mostly for grasping and placing, tasks that robots haven’t mastered yet.

Amazon’s robots signal a sea change in how the things we buy will be aggregated, stored and delivered. The company requires 1 minute of human labor to get a package onto a truck, but that number is headed to zero. Autonomous warehouses will merge with autonomous manufacturing and delivery to form a fully automated supply chain.

Classroom discussion questions:

  1. How does this latest Amazon facility differ from the one we describe in the Global Company Profile that opens Chapter 12?
  2. How is AI being used in this warehouse?

 

OM in the News: Making Packaging Recyclable

Mouth of the Los Angeles River, Long Beach

By now most people are aware of that a lot of plastic is floating in our waterways. One study estimated that 8 million tons of plastics are swept into waterways annually — equivalent to a garbage truckload every minute. In the marine environment, plastics break down into indigestible particles that marine life mistake for food. If no actions are taken, oceans are expected to contain more plastic than fish by 2050.

In an effort to reduce waste, many companies are reviewing their packaging plans, reports IndustryWeek (Oct.11, 2018). And they have been pushed to do this over the past several years by an activist group called As You Sow.This month, food and beverage giant Mondelez International committed to making all of its packaging recyclable by 2025. Mondelez packaging was the fifth most frequently found brand waste collected as part of more than 200 audits done in 42 countries by environmental groups working on plastic pollution.

In 2014, P&G agreed to make 90% of its packaging recyclable, and Colgate-Palmolive pledged to make packaging recyclable in 3 of 4 operating divisions, both by 2020. In 2017, Unilever agreed to a similar commitment by 2025, Target agreed to engage with its suppliers to phase out the use of harmful polystyrene foam for e-commerce packaging, and Unilever agreed to make 100% of its packaging recyclable, reusable, or compostable by 2025. This year, McDonald’s agreed to stop using polystyrene foam cups globally by year end, and made a bold, unprecedented commitment to recycle all packaging in its restaurants worldwide by 2025. At the same time, Dunkin’ Brands publicly committed to a schedule for phasing out foam coffee cups. And KraftHeinz agreed to make all packaging recyclable, compostable, or reusable by 2025.

Classroom discussion questions:

  1. Why is sustainable packaging an important OM issue?
  2. What more can be done to eliminate plastic garbage?

OM in the News: Auto Makers Plan to Shift More Manufacturing to North America

Some vehicles assembled in North America use engines or transmissions from outside the region. (Source of engine in gray, transmission in red).

Foreign car makers are considering moving more of their manufacturing to North America following the recent U.S. trade deal with Canada and Mexico, writes The Wall Street Journal (Oct. 8, 2018). As the U.S. and Canada reach a pact to replace the roughly 25-year-old North American Free Trade Agreement, foreign car makers suggest changes to their supply chains that would result in more auto-parts manufacturing in the U.S., Canada and Mexico.

Daimler said the new agreement could force the company to move more engine manufacturing to the U.S., where it builds vehicles at a factory in Tuscaloosa, Ala. The Renault-Nissan-Mitsubishi alliance said the new pact would spur the car-making group to invest more in both the U.S. and Mexico.

The deal, which replaces Nafta, requires auto makers to build at least 75% of a car’s value in North America to remain duty-free within the region, up from 62.5% currently. Cars that don’t comply with the new rules will be subject to a 2.5% tariff. (Foreign-based car brands made up 56% of light-vehicle sales in the U.S. last year.)

The new rules will be phased in over the next 2-5 years, about the time it takes to develop a partially or fully revised car model. Car makers are likely to look at moving engine and transmission production first, because those parts make up roughly 30% of a car’s value.

Classroom discussion questions:
1. What is the significance of the graphic on the left? (Click to blow it up).

2. What will be the impact on domestic car manufacturers?

OM in the News: Honda to Invest $2.75 Billion in GM’s Self-Driving Cars

Honda’s investment will give the auto maker a 5.7% stake in GM Cruise.

Honda is investing $2.75 billion in GM’s self-driving car unit, for the joint development of a mass-produced fully autonomous car, writes The Wall Street Journal (Oct. 7, 2018). Auto makers and technology giants have been scrambling to plant stakes in a transportation landscape that is swiftly being reshaped by technology. Honda will work with GM Cruise LLC to develop a driverless car from the ground up that can be manufactured in high volumes and deployed globally. (GM set up Cruise as a separate business unit to draw in investors who don’t want exposure to the cyclical, low-margin business of manufacturing cars).

Honda’s decision to invest in GM’s self-driving arm reflects a culture change under way at the Japanese car maker, which long prided itself on its engineering prowess, shunning technologies developed by outside companies. One industry analyst said he expects only a handful of “winners” to emerge from the race to commercialize driverless vehicles. That prospect and the large capital outlays required to develop the technology could lead to more collaboration among automotive competitors.

Car companies have been teaming up with tech firms and suppliers to develop driverless technology. GM’s pact with Honda is a further sign that traditional auto makers will look to join forces with one another as they try to fend off Waymo and others vying to lead in a technology that could upend the transportation sector.

Fiat Chrysler has joined a BMW-led consortium to develop self-driving car technology with the aim of producing fully automated vehicles by 2021. BMW launched the partnership with Intel and Israeli car-camera software provider Mobileye. Toyota just announced it would invest $500 million in Uber to work jointly on autonomous vehicles. Uber will integrate its self-driving technology into Toyota minivans for use in Uber’s ride-hailing network.

Classroom questions:

  1. Name other companies that are forming “alliances” ( a topic in Chapter 5).
  2. Why are such alliances useful in designing goods and services?

OM in the News: From Reindeer to Robots, Automation Set to Deliver This Holiday

Warehouse robots created by GreyOrange resemble shelf-moving systems developed by Kiva Systems, now part of Amazon, but add AI to the technology

Never mind the reindeer and elves. This year, robots are helping deliver the holidays. Gap is using automated arms and AI to sort the retailer’s clothing orders. Walmart is testing robots that roam store aisles to check inventory and tell workers where to find goods. And logistics providers are sending mobile step-stools mounted with shelves through fulfillment centers to help pull online orders.

With the busy holiday peak looming, retailers and logistics companies are ramping up automation as surging demand for labor outstrips the number of available workers, reports The Wall Street Journal (Oct. 4, 2018). Much of the technology is being used in distribution operations, where workers are increasingly working alongside machines built to keep goods moving at a rapid pace. The use of robotics and other automation technology in industrial operations is growing, although the vast majority of warehouse work remains largely manual. About 16% of organizations across several industries including warehousing are now using commercial service robots, and 21% have them in pilot programs. Online fulfillment centers—where companies like Amazon pick, pack and ship consumer orders—require 2-3 times as many workers as traditional warehouses.

XPO said this week it is deploying 5,000 autonomous mobile units from GreyOrange at logistics sites across North America and Europe. The robots, which resemble Roomba autonomous vacuum cleaners, sync up with XPO’s warehouse-management software to help workers fulfill up to 48 orders at a time. The robots more than doubled the speed at which orders are processed and help the company keep better tabs on inventory. Logistics-industry interest in robotics is spreading as the technology gets cheaper and easier to adopt. Collaborative robots for example, can work safely alongside humans and be added quickly to existing sites without disrupting operations.

Classroom discussion questions:

  1. How are robots being used in retailers and warehouses?
  2. Why will robots not replace most warehouse workers?

OM in the News: Does Tesla Have a Quality Problem?

A car in the Scottsdale lot marked “inv,” or inventory, indicating it has no buyer, with service needs noted.

Tesla has been parking hundreds and hundreds of cars at lots and industrial buildings in Burbank, Antioch, and Lathrop, Calif, reports The New York Times (Oct. 2, 2018). Last week, a batch of about 100 Model 3s turned up in Bellevue, Wash., with smaller collections in Chicago, Dallas, Las Vegas and Salt Lake City. The parked vehicles were discovered over the last two months by amateur detectives who closely follow the company stock.

Elon Musk recently acknowledged that the company was having difficulty shipping cars to customers, saying Tesla was in “delivery logistics hell.” He attributed the problem to a shortage of trucks to haul cars around the country. But the Auto Haulers Association says it is not aware of any shortage of car haulers, and that other automakers that are not having shipping troubles.

Is Tesla simply gathering cars together before shipping them to customers, or bringing cars with defects together to repair them before delivery? If the former, it suggests Tesla failed in a critical task: It didn’t set up an efficient way of delivering hundreds of cars a day as it was scrambling to produce 5,000 a week. A more worrisome problem would be if Tesla built these cars and now doesn’t have customers willing to take them. Musk had long promised that the Model 3 would be available for as little as $35,000. But the least costly version available now starts at $49,000.

In some cases, cars have been marked — with a bar-coded sticker or with grease pencil on the windshield — to indicate that they are inventory vehicles, meaning they have no customers awaiting them. Some markings indicate repairs required before the cars can be sold. In the rush to ramp up Model 3 production, Tesla has faced growing issues with vehicle quality. Some customers have complained that cars arrived with scratches, loose parts and other manufacturing defects. And a new headache has cropped up: severe shortages of replacement parts. Owners needing repairs have complained of waiting a month or longer for parts.

Classroom discussion questions:

  1. What is Tesla’s biggest OM issue?
  2. Why is the company only producing high-option models of Tesla 3?

 

OM in the News: 787 Dreamliners Facing More Rolls-Royce Engine Flaws

Rolls Royce engine of a Boeing 787 Dreamliner

Faulty Rolls-Royce engine blades are deteriorating faster than expected, prompting additional groundings of Boeing Co.’s 787 jetliners for early repairs, reports Businessweek (Sept. 27, 2018). The discovery affects about 120 Trent 1000 turbines,  8% of the global fleet, and has frustrated efforts to reduce the number of idled planes after a series of engine issues.

Rolls-Royce uncovered the part’s shorter life-span in December, when Air New Zealand Dreamliners suffered in-flight turbine damage on successive days. The flaws add to Rolls-Royce’s struggle with design faults to the engines, which have already prompted the company to record $1.5 billion in charges. The engine maker also faces a blow to its image because the faults involve the high-profile 787, Boeing’s most advanced model, leaving airlines rushing to find replacement aircraft for long-haul routes. Air New Zealand said it will cost the airline $26 million this year. With as many as five of its 13 Dreamliners grounded at any given time, the carrier has had to lease three aircraft to make up for the shortage.

The intermediate pressure turbine blades — which had already been flagged for replacement — aren’t lasting long enough to meet the previously set maintenance schedule. Engine makers like Rolls-Royce typically foot the bill — including for the leasing of replacement aircraft — when design or production issues delay deliveries or force airlines to idle jets that are already in service. The U.K. manufacturer has gone on a fence-mending campaign as customers for the engine — including British Airways, Virgin Atlantic, and Norwegian Air — have been forced to hire jets this summer as turbines go in for repairs.

Classroom discussion questions:

  1. Why are flights being grounded?
  2. What is the cost to Boeing? To customers? To Rolls-Royce?

OM in the News: Where Did Your Steak Come From?

Consumers around the world are demanding to know where their food comes from and how it was produced, increasing the pressure on processors to invest in new technology to stay ahead of the game, report The Herald (Sept. 3, 2018) and The Wall Street Journal (Oct. 3, 2018) With customer expectation for quality and value increasing, supply chains are expanding, and this is making them less transparent and harder to control.

Silicon dioxide particles are sprayed onto meat as it is packed. It is scanned at the point of sale to confirm the product’s authenticity.

Remember the scandal of 2013 when frozen beef products being sold in the UK and Ireland were found to contain traces of horse DNA? That same year it was revealed that a parmesan cheese being sold to Australian customers didn’t actually contain parmesan, but did include wood pulp. In 2015, $483 million of smuggled meat was seized by Chinese authorities, some of it was found to be up to 40 years old!

In a world-first for the food sector, PwC has developed an electronic etching procedure that creates an invisible, trackable barcode for beef based on edible, non-toxic silicon dioxide. Soon, it will be possible to point your smart-phone at a cut of beef to reveal the meat’s entire history including where it was raised, what it ate and when and where it was processed. The revolutionary beef-tagging technology is expected to be launched this year.

The procedure starts when sides of beef are sprayed with particles of silicon dioxide as fine as sugar. This natural, edible fingerprint, forms a crypto anchor that can be scanned using a hyper-spectrum gun. This shines a light onto the micro particles of silicon dioxide and refracts back a wavelength signature, or what PwC  calls “a unique serial number on a piece of steak”.

Classroom discussion questions:

  1. Why is this a supply chain issue?
  2.  How does this technology differ from blockchain?

 

OM in the News: Paying with “Wearables”

A cashier ‘thought it was some sort of scam,’ says the customer of his payment ring

Smartphones already have apps that let users tap to pay. Now banks and tech startups are developing “wearables” that can do the same thing—and can leave cashiers puzzling and curious onlookers quizzing the wearer, writes The Wall Street Journal (Sept. 24, 2018). Customers are paying with rings, watches, bracelets and key rings in a trial this year in the Netherlands by Dutch bank ABN. Barclays has a wearables service in the U.K., which, along with options such as key fobs and wristbands, offers stickers customers can use to turn almost anything into a payment device.

Bankwest, part of Commonwealth Bank of Australia, says it has sold some 10,000 rings at 39 Australian dollars each and hasn’t received complaints from confused businesses. About 400 Bankwest employees helped test a prototype of its ring and a key fob, bracelet and clip that goes onto a watch strap.  But ”no nose rings,” says the bank. Contactless payments are growing around the world, and industry analysts say Australia has been a big early adopter.

Yet paying by ring still confounds some Down Under. One ring-wearer working in mining logistics was at a cafe last month in a coastal tourist spot. The barista, seeing her payment go through with no visible card, thought she bought her coffee using the New Age technique of reiki, which purportedly involves energy passing through hands.

Classroom discussion questions:

  1. Will “wearables” be the new standard in 5 years?
  2. What are the advantages  from an OM perspective? Disadvantages?