Month: June 2020

OM in the News: Why the Consumer Has Fewer Choices–Maybe for Good

Consumer-oriented companies spent the past decades trying to please just about everyone, as we discuss in Chapter 7’s treatment of mass customization. The pandemic made that impossible, and now some no longer plan to try. Sellers of potato chips, cars, meals and more have been narrowing offerings since the coronavirus snarled supply chains and coaxed consumers back to familiar brands, writes The Wall Street Journal (June 27-28, 2020).

Some IGA grocery stores now offer only 4 choices of toilet paper. “We may not need 40 different choices of toilet paper.” says IGA’s CEO. Georgia-Pacific switched all production of its Quilted Northern toilet paper to 328-sheet rolls; it had been also producing the brand in 164-sheet rolls. It plans to stick with the bigger rolls even after the pandemic, which let it speed production and make distribution more efficient. Retailers also had an easier time keeping Northern toilet paper in stock by having fewer varieties on shelves.

In grocery stores, the average number of SKUs was down 7% over the past month, with some categories, such as baby care, bakery and meat, down 30%. Frito-Lay, featured in Chapter 13’s Global Company Profile, stopped producing 1/5 of its products. Over the past 45 years, Lay’s has gone to 60 varieties of chips from 4. Since 1984, Campbell Soup has quadrupled the types of soup it sells to about 400.

Those efforts helped consumer-goods makers claim more shelf space as supermarkets expanded into big-box stores. In 2018, the average U.S. food retailer stocked 33,000 different items, compared with 9,000 SKUs in 1975, But now food makers have cut back on options, streamlined supply chains and concentrated production on the most-demanded goods.

Darden Restaurants said it was going to largely keep slimmed-down menus it started during the pandemic, which have helped reduce prep work and costs. And while last year, auto makers offered more than 605,000 vehicle configurations (even before taking different colors into account), showrooms today offer choices more limited because of supply-chain bottlenecks and lower volumes.

Classroom discussion questions:
1. What are the advantages of stocking fewer SKUs?

2. Why is this a supply chain issue (see Ch. 11)?

OM in the News: Apple Gains Control by “Insourcing”

“Apple built its gadget empire by outsourcing production to a vast ecosystem of chip makers and other component specialists. It is now taking a lot of that business back,” writes The Wall Street Journal (June 24, 2020). The company, which released its first iPhone processor in 2010, plans to ship Macs this year with custom chips, a move that ends a 15-year technology partnership with Intel. (Intel stands to lose about $2 billion in laptop chip sales annually). Apple said the custom-designed chips are more efficient and offer higher-performance graphics.

The plan fits into Apple’s broader strategy of replacing many third-party parts with components designed in house. Apple’s built-for-purpose parts now account for 42% of the costs of core iPhone components, up from 8% five years ago. Custom components have cut costs, boosted performance and increased Apple’s control over future releases. The new Mac processors will shave $75 to $150 off the cost of that computer.

The strategy springs from Apple’s philosophy—fostered by Steve Jobs—that owning core technologies provides a competitive edge. Customized chips and sensors can help its iPhone, iPads and Macs leapfrog rivals in battery performance and features. It also can protect Apple from Chinese rivals that buy universally available parts. Apple relied on third-party components for years while it built the engineering depth and expertise it needed to design more components itself. Apple’s chip division has mushroomed over the past decade to thousands of engineers.

The initiative—called insourcing—can give Apple a 2-year jump on competitors in device performance because Apple can plan how multiple chips work together to limit power consumption and free up space inside iPhones and iPads for other components. Many companies continue to supply Apple, which provides substantial revenue, even as they fear Apple will start making the very components they provide it.

Classroom discussion questions:

  1. What are the reasons Apple chose to “insource?”
  2. How is Apple achieving competitive advantage through OM? (Hint: See pp. 36-39 in your Heizer/Render/Munson text).

OM in the News: Post-Pandemic Supply Chains and Automation

A U.S.-based engineer working from home uses  software to examine a manufacturing line in China.

Factories around the world are turning to technology to help them safely open back up after being shut down by the coronavirus pandemic, reports The Wall  Street Journal (June 15, 2020). Software, sensors, robotics and A.I. tools that make it easier for workers to keep their distance in factories and let engineers monitor and fix problems remotely have surged in demand. “Covid has really been the catalyst for the adoption of software solutions to automate workflows and make it more efficient when you have less people around doing things,” said one industry expert.

Manufacturers are focusing on using software to dynamically change assembly lines. And they are using A.I. to remotely do quality inspections in real-time. For U.S. electronics manufacturers, mistakes, defects and wasted time add up to 25% of  costs and often require engineers from the U.S. to visit factories in China to fix problems. A.I. systems can scan images of every product produced on an assembly line to identify anomalies and defects. Engineers can then analyze and fix them remotely.

One Calif. food manufacturer remained open during the pandemic by using enterprise resource planning (ERP) software to remotely manage its manufacturing, supply chain and finances, letting 30% of its employees work from home. Meanwhile, technology is helping manufacturers deal with disruption to global supply chains stemming from factory shutdowns. Clear Metal, in San Francisco, has proprietary data from sources such as satellite data, shipping ports and trucking companies, along with A.I. that can predict problems in supply chains and help companies change shipping methods or suppliers in real-time.

And of course, supply-chain problems caused by factories closing in China have caused companies to look to move manufacturing closer to home. The only way to do that is automation, with factories closer to customers. Previously, automation was only used by large factories with budgets of millions of dollars with long production cycles. But automated assembly lines are now available for use in smaller spaces than large factories, with one machine doing the work of 3 people at a fraction of the cost.

Classroom discussion questions:

  1. How can technology help improve OM?
  2. Why is automation important in reshoring?

OM in the News:McDonald’s Improves Operations with a Smaller Menu

McDonald’s plans to keep dozens of items off U.S. menus for the foreseeable future, after sparer operations implemented during the coronavirus pandemic led to improved service times and better margins. Salads, bagels and yogurt parfaits are among around 100 items that they removed from menus after the pandemic hit the U.S. to simplify store procedures and supply. The changes mean operators will have to stock fewer goods in their restaurants.

Many restaurant chains stripped down their menus during the pandemic in light of supply and labor constraints, reports The Wall Street Journal (June 19, 2020). Some, including Red Robin Gourmet Burgers, have reported improved operations as a result of the more limited menus, including faster service times and less waste.

McDonald’s executives said such changes had a bigger impact than they anticipated. Drive-through times fell by an average of 25 seconds during the pandemic, and customers reported in surveys that their food was better and their orders were more accurate. “Our menu strategy really has been focused as a result of Covid and the success we’ve had with a limited menu,” said McDonald’s CEO.

McDonald’s menu had ballooned in recent years as the company tried to attract new customers. That caused drive-through times to increase to levels that troubled executives, prompting the chain to test forms of automation and remove some more-complicated items. McDonald’s began offering breakfast all day in 2015, one of its biggest operational changes in years. The change improved sales in the U.S. for a time. It now allows owners to choose what breakfast items to serve all day to simplify their operations.

Classroom discussion questions:

  1. In Ch. 5 of your Heizer/Render/Munson text, we describe 5 ways to design more efficient service systems. Which approach(es) works best at McDonald’s?
  2. What are the advantages and disadvantages of the more limited menus?

OM in the News: Strained Supply Chains and Circularity

 

In a fast-moving, understaffed crisis, medical facilities produce lots of items that may not be easily recyclable.  Remanufacturing and circular economy experts are anticipating an increased need for recycling, writes Supply Chain Dive (June 10, 2020). Some are targeting the healthcare sector specifically while others think the coronavirus crisis highlights how essential recycling and reuse can be for other industries struggling to cope with ruined supply chains. All this upheaval could reveal how circularity may serve everyone better than pre-pandemic protocol did.

Stunted (or overwhelmed) supply chains partially explain why “reuse” has become integral to coping with this pandemic. “Anytime there’s a resource-constrained situation, it’s important to extend the lifespan of products,” says the U.S. Chamber of Commerce, an organization that works with businesses to help them pursue circular economy practices. For example, mask shortages prompted interest in sanitizing N95 masks with vaporized hydrogen peroxide.

There will be plenty of remanufacturing needs once the pandemic is over. Many ventilators made for desperate hospitals will get put in storage, for example, and someone will have to figure out how to keep them in good condition in case the machines need to get rolled out again.

Pressure comes as recycling access in the U.S. has deteriorated in certain ways, and the balance between reuse and disposal could shift in a post-pandemic world. Single-use items, like the stretchy plastic gloves that gum up recycling facilities, could boom when people are hyper-concerned about sanitation.

Reuse might be a future need in some industries — but others have to adopt its companion, recycling, even more quickly. Paper mills that produce packaging for General Mills, Pillsbury and other food suppliers still need raw materials to meet customer demand and higher grocery store sales. Residents are also moving forward with at-home construction projects, and regional suppliers of plastic or wood-composite lumber still need those supplies. Recycling fills those supply chain needs, and importantly, keeps paper mills and other manufacturing facilities open.

Classroom discussion questions:

  1. What is the “circular economy”? (Hint: See Supp. 5 of your Heizer/Render/Munson OM text)
  2. Why has recycling “deteriorated in certain ways”?

 

OM in the News: Coronavirus Makes Augmented Reality’s Potential a Reality

An engineer in the Netherlands using AR glasses developed by Microsoft to guide maintenance.

Intel’s semiconductor production hit a stumbling block in March. A chip plant in Arizona needed work done, but the engineer for the job was stuck in Germany because of coronavirus flight restrictions. If Intel couldn’t recalibrate existing machines and install new ones, America’s largest chip maker faced a production slowdown just when demand was surging as PCs and the cloud became critical to facilitate remote work.

Unable to fly in the German expert, Intel transported him virtually using augmented-reality goggles that had been developed mainly to show training videos. The stranded engineer, watching a video feed his counterparts at Intel relayed via their goggles, walked them through the repair, allowing the work to be completed on schedule. At Intel, this success launched remote maintenance from an experiment to part of the company’s permanent operational plans.

Across multiple industries, augmented reality, or AR, has transitioned during the pandemic from intriguing experiment to everyday tool, reports The Wall Street Journal (June 10, 2020). That makes AR, discussed in Chapter 5 (p.172) in your Heizer/Render/Munson OM text, more useful in a world where business travel and direct human interaction are restricted—and likely to stay that way for a while. Porsche’s usage of AR glasses in its U.S. dealerships more than tripled during the pandemic as technicians performing complicated repairs on the pricey sports cars called in virtual help from repair experts hundreds of miles away.

Globalfoundries, another major chip maker, faced a similar problem to Intel’s. When one of its multimillion-dollar machines needed work, an engineer at one of its plants donned a HoloLens headset and called up a video chat to consult an equipment expert in the Netherlands to guide him through repairs. That company is now using iPads, headsets, and AR or virtual reality tools to do jobs once done by traveling engineers.

Classroom discussion questions:

  1. What is the difference between AR and VR? (See Ch. 5)
  2.  How else might this tool be used in manufacturing or healthcare?

OM in the News: Why New Yorkers Are Dying

NYC hospitals hard hit by coronavirus

The Covid-19 virus has hit N.Y. harder than any other state, cutting through its dense urban neighborhoods and devastating the economy. The state’s death toll has accounted for 7% of the world’s deaths and 27% of American deaths.

In the first few days of March, Gov. Cuomo and Mayor de Blasio assured New Yorkers things were under control. On March 2, de Blasio tweeted that people should go see a movie. Only after the disease had gripped the city’s low-income neighborhoods in early March did the two leaders mobilize hospitals to create more beds and ICUs. The hasty expansion that ensued produced mistakes that worsened the crisis, according to an extensive analysis by The Wall Street Journal (June 12, 2020).

As you might suspect, this an OM issue: virtually everything that went wrong centers about an OM decision gone bad. Here are the missteps identified by 90 front-line doctors, hospital administrators and government officials that the Journal interviewed:

• Improper patient transfers. Some patients were too sick to have been transferred between hospitals and arrived in worse condition than when they left, sometimes without names and treatment information . Squabbling between Cuomo and de Blasio contributed to an uncoordinated effort. (Ch.2 OM Strategy)

• Insufficient isolation protocols. Hospitals often mixed infected patients with the uninfected early on, and the virus spread to non-Covid-19 units. (Ch.6 Managing Quality)

• Inadequate staff planning. Hospitals added hundreds of intensive-care beds, but not always enough trained staff, leading to improper treatments and overlooked patients dying alone. (Supp. 7 Capacity Planning)

• Mixed messages. State, city government and hospital officials kept shifting guidelines about when exposed and ill front-line workers should return to work. (Ch. 15 Scheduling)

• Overreliance on government sources for key equipment. Hospitals turned to the state and federal government for hundreds of ventilators, but many were faulty or inadequate. (Ch. 11 Supply Chain Management)

• Procurement-planning gaps. While leaders focused attention on procuring ventilators, hospitals didn’t always provide for adequate supplies of critical resources including oxygen, vital-signs monitors, and dialysis machines. (Ch. 4 Forecasting)

• Incomplete staff-protection policies. Many hospitals provided staff with insufficient protective equipment and testing. (Ch. 10 Human Resource Strategy)

Classroom discussion questions:

  1. Review each of the 10 OM decisions in Table 1.2 on p. 8 in your Heizer/Render/Munson text. How does each apply to an aspect of the pandemic?
  2. How can effective OM mitigate the SCM issues?

OM in the News: The High Cost of Long ER Waits

Crowded emergency rooms have long been a problem in the U.S., writes The Wall Street Journal (June 9, 2020),  In our discussions of queuing theory in Module D, we typically focus on the many attributes of the waiting line–length, time, cost–and on occasion we add the cost of adding multiple servers. However, a recent study by a S. Carolina prof shows that when a new ER opens, crowding at nearby facilities instantly falls an average of 10%. When comparing mortality rates at the older ERs before and after the change, the research found that a 10% drop in patient volume leads to a 24% reduction in mortality rates in the first 30 days and a 17% reduction over 6 months.

In ERs across the U.S., many patients wait for hours to be seen, and about one in 50 leaves before receiving treatment. ER patients awaiting admission to the hospital often have to wait in hallways on gurneys, while ambulances may be turned away from busy facilities. Researchers have long sought to quantify these costs of crowding.

The drop in mortality rates could be attributed to fewer people leaving against medical advice. Ten percent less patients in the ER reduced the number of patients walking out by about 51%. That is important because about 46% of people who leave the ER without being seen still need immediate medical attention. In fact, 11% are hospitalized in the next week. Since patients often come back for care soon after they leave, that could help explain why the drop in mortality rate was most significant in the first 30 days.

The study also examined whether the drop in patent volume affected “boarding”—that is, when patients wait on stretchers, sometimes for hours, before being admitted into the hospital. But patients from the ER tend to generate less profit and consequently often have to wait anyways for beds, so the study concluded that boarding is not impacted by ER crowds.

Classroom discussion questions:

  1. Why is this study important?
  2. What OM issues are faced on a daily basis in ERs?

OM in the News: 3-D Printing Hobbyists to the Rescue

Owen Plumb helped start a group in Alberta that has printed 1,000 face shields.

Practically overnight, 3-D-printing enthusiasts have remolded their home-based hobby into an emergency production line for scarce personal protective equipment for front-line workers, writes The Wall Street Journal (June 9, 2020).

Thousands of volunteers have banded together on several continents to help in the face of the pandemic crisis. Some 8,000 members of a British design group called 3D Crowd UK have printed parts for more than 170,000 face shields using 3-D printers in their homes. The group also arranges for the face shields’ assembly and distribution to hospitals and other health organizations in Britain.

The group is just one of a growing number of supply chains to spring up in Britain, the U.S. and Canada, staffed by 3-D-printing hobbyists and entrepreneurs helping to make PPE for health-care and other front-line workers. The groups illustrate the potential for harnessing the power of distributed manufacturing to deliver products on a large scale. Such community-driven approaches are “incredibly agile and well-suited to respond quickly to local needs'” says a U. of Cambridge prof.

Before Covid-19, Owen Plumb, 13, who lives in Alberta, Canada used his 3-D printer to create robots and toy-rocket parts. In March, Owen helped create a local group that has now 3-D-printed 1,000 face shields, many of which have been distributed to front-line essential workers at a local hospice and to other institutions lacking PPE. Likewise, the nonprofit Glia Project in London, Ontario, has provided roughly 5,000 face shields to small and midsize hospitals and clinics around Canada. And at Michigan State University, one professor has helped organize a group of 40 people who have printed 8,000 face shields for health-care workers in Michigan.

Classroom discussion questions:
1. What are the strengths of 3-D printing (often called additive manufacturing). Hint: see Chapter 7, p.295 of your OM text.

2. What are the downsides of this grass roots system?

 

OM in the News: Hobbled U.S. Supply Chains

Wanxiang America’s automotive components Michigan plant just resumed normal production with measures in place to reduce contact between employees.

Manufacturers emerging from weeks in hibernation during the pandemic are accelerating production with jumbled supply chains and less efficient plants, reports The Wall Street Journal (June 4, 2020).

Some U.S. factories are looking for alternative suppliers to compensate for plants that remain closed or are overwhelmed by orders for items in high demand. Other companies say new protective equipment and procedures to add space between workers will weigh on their profits and productivity. Ardisam Inc., for example, which makes fishing and gardening equipment that is in high demand from people spending more time outdoors, hasn’t been able to get enough parts for fence-post diggers and chicken pluckers from factories in China.

Wanxiang America, an Illinois-based unit of one of China’s largest auto-parts makers, restarted more than 20 plants in the U.S. last month after undergoing modifications to reduce contact between employees.  But some of its suppliers have gone out of business this year because they were not viable at lower production rates anticipated across the auto industry. “Any one failure is going to impact everybody,” said Wanxiang’s CEO. “We’re all co-dependent on each other.”

GM last month delayed plans to increase production of pickup trucks because of a shortage of parts from Mexico. O-I Glass, the biggest producer of glass bottles, is using more expensive raw materials to make glass because of a shortage of recycled glass. The volume of recycled glass from states with deposits on beverage bottles plunged by 2/3 after redemptions on empties were suspended as a safety precaution for retail workers. “We’ve built our supply chains based on recycling,” said an O-I Glass exec. Housewares company Honey Can-Do International said its overhead costs have climbed, because its distribution center is less efficient with operations reconfigured to separate employees.

Classroom discussion questions:

  1. What seem to be the major problems firms are facing as they restart production?
  2. Which of the supply chain risks listed in Table 11.3 in your Heizer/Render/Munson OM text relate to the pandemic?

OM in the News: Data Analytics for Factories

A Norsk Hydro aluminium plant in Norway. The company’s CIO, called the availability of data during the pandemic “a clear game-changer.”

Manufacturers will be spending far more on data management and analytics tools in the aftermath of the coronavirus outbreak, and will be using those tools for deeper insight into operations, sales and supply chain disruptions, reports The Wall Street Journal (June 3, 2020).

Data—produced by shop-floor scanners and other hardware tools—can now be used to more accurately measure and improve the performance of production-line machinery.  Such benefits are expected to spur annual spending by global manufacturers on data management and analytics to nearly $20 billion by 2026, up from $5 billion this year.

Advanced data tools will give factories a clearer view of operations and equipment performance, allowing them to speed up production, reduce waste, improve their product quality and avoid downtime by more quickly identifying maintenance issues, among other things. Factories will also be able to identify and extract relevant data sets to feed into artificial intelligence software designed to predict production and supply chain problems. “It’s a case of going from reactive analytics, reporting on what happened, to proactively analyzing what might happen and the suggested actions to take,” said one industry expert.

The pandemic has made manufacturers aware of the need for more sophisticated ways to monitor operations, especially when plants are accessible to only a handful of workers. “We’re working with clients on taking unprecedented amounts of data and deriving insights that can shift decision-making,” said the CIO of NTT Data Services, referring to streams coming from shop-floor sensors, machinery, supply-chain fleets and other systems. Manufacturers are using that data to get a better view of equipment performance and maintenance needs, quality control and workplace safety.

Classroom discussion questions:

  1. What is the difference between descriptive, predictive, and prescriptive analytics (see Module G in your Heizer/Render/Munson OM text)?
  2. Which of these methods is discussed in this article? Why?

OM in the News: Postal Package Deliveries ‘Bogged Down’ With Delays, Backlogs

Surging e-commerce volumes during the coronavirus pandemic are straining the U.S. Postal Service’s parcel network as staffing shortages and backlogs in hard-hit areas slow deliveries, reports The Wall Street Journal (June 1, 2020). The problems have delayed some packages for days and even weeks, shippers and consumers say, holding up orders at a time when many people are shopping more online to avoid infection with the virus.

The slow deliveries have complicated business for e-commerce sellers who rely on the Postal Service to ship packages at affordable rates, and tracking services have added to the frustrations, with some items appearing to get stuck at certain locations or vanishing altogether. Transit times for USPS shipments to customers in some cases doubled or even tripled in recent weeks. Like private delivery giants UPS and FedEx, the Postal Service is coping with unexpected holiday-level package volumes as the pandemic adds to operational and financial stresses. UPS is imposing extra fees to help offset those costs, while FedEx is limiting the number of items some retailers can ship.

Coronavirus has also taken a toll on postal workers. About 2,830 of the Postal Service’s 630,000 employees have tested positive for Covid-19. Between April 19 and May 23, USPS delivered 89.5% of priority mail packages on time, compared with 87.4% the prior month. (UPS delivered 96.5% of business-to-consumer shipments on time that same period). “The parcel volumes have gone up, we are probably working at a holiday volume rate, but we’re doing it with about a 74% staffing level,” said a USPS union official.

Classroom discussion questions:

  1.  Why is the USPS struggling to keep up with competition?
  2.  What can be done to meet budget deficits?

Guest Post: Research on Student Perceptions of Online vs. Face-to-Face

Dr. Lynn A. Fish, who is Professor of Management at Canisius College, provides today’s Guest Post

Since 2012, Dr. Coral Snodgrass and I have been researching student perceptions of online versus face-to-face (FTF) education at Canisius College. Our most recent research focused on whether changes in business student perceptions had occurred. Our survey includes questions on individual factors (motivation, discipline, self-directed, independence, schedule flexibility, time investment, cost investment, happiness and appropriateness of online education), and program factors (difficulty, student-to-student interaction, student-to-instructor interaction, cheating and program preference). If administrators, who perceive FTF and online education as equivalent, are correct, then students should be indifferent to all education factors.

Our 2012 research indicated that business students preferred FTF over online education on most factors. And as of 2018, business students still generally preferred FTF. (See our article in The BRC Academy Journal of Education, 8, no. 1, 2020). However, changes occurred for the online student population from the original study with respect to their views on self-directed, time investment, and appropriateness of online. With respect to the FTF student population, changes in perspectives from the original study occurred for self-directed, preference and student-to-instructor interaction.

As noted in our prior studies, the context of the study (private versus public, large versus small, and program of study) may be a critical factor to consider in understanding student activity preferences. This study occurred at an institution usually taught through FTF courses to small classes (average 18-20 students). Online education at the institution occurs through decisions entirely made by the individual instructor, as no instructional designers are available.

Other institutions may deliver online and FTF education through other methods, such as using instructional designers or digitally-enhanced courses, and therefore students may perceive online and FTF education differently than here. Other studies demonstrate that research into student perceptions are ‘mixed’ as the results vary on each factor studied. There is no clear answer as to what students’ perceive and appears to vary between institutions.