Author: Barry Render

OM in the News: Airlines and the Capacity Issue

Because of my early career experience in the aerospace industry (design team for McDonnell Douglas’ DC-10, then the engine for that jet at GE), I have always followed the airline industry closely. Capacity issues have haunted airlines for 6 decades now, going back all the way to 1942, when demand plummeted during that recession. Buying planes is a long term decision, but difficulties after 9-11 and during our current trying times created dramatic drops in demand for seats. This is a great classroom example when you are teaching Capacity in Supp.7.

How do airlines respond? As today’s New York Times reports, airlines trim capacity by grounding planes, reducing the number of flights between cities, and flying smaller planes. At the nation’s largest parking lot near the California Mojave Desert, some 200 aircraft of all sizes (from A320s to 747s) sit tip to wing tip. The dry air keeps the planes from rust and corrosion. Students will enjoy the photo in Supp. 7 showing this image.

The cost, up to $60,000 per month per plane. But the 7% cut in capacity last year  helped raise ticket prices modestly.  Airlines now fly at 80%  of seat capacity, a full 10% higher than their traditional measure.

With the mergers of Delta with Northwest, United with Continental,  Midwest with Frontier, and Southwest with AirTran, there is little growth in demand for more jets forecast in the US. Only 38 wide body planes are on order for delivery in this country by 2015. By contrast, 627 are going to be delivered to foreign carriers during that same 5 year period.

Discussion questions:

1. Why are airlines willing to spend enormous sums to park their planes in the desert?

2. Who can benefit from airline overcapacity?

3. The new Boeing 787 Dreamliner has run into such bad supply chain problems (Ch.11) that it is now 2 years late. How does this impact the airlines that ordered them?

Teaching Tip: Helping Your Students Find Jobs

We all know the economy is still weak ( to put it mildly), and this means our students are  in  tough positions to find their first jobs. Where we stand in Florida, it seems as though the alligators are nipping at our economic feet. With a quarter of the economy here in Orlando driven by construction, you can buy a nice condo that sold for $160,000 in 2007 for $20k today!

So what can we do to help our OM students to be more competitive as they enter the job market?  Since everyone graduating already has the same basic set of skills (eg., Excel, Powerpoints, etc.), how can OM  add value?  Here are 2 suggestions:

1.Project management is an interesting topic (Ch.3) that is certainly useful in so many jobs. We cover MS Project lightly towards the end of the chapter. But I am convinced that mastering MS Project can give a competitive edge. Last year, I provided all 75 of my students the chance to build their resumes by offering a 1-credit independent study course called “Using MS Project in Project Management”. All they had to do was find a project with at least 30 activities, and create a series of MS Project charts, along with a 1-page report. Our publisher’s reps at  Pearson will provide you with as many free copies of the full-blown MS Project ( time limited) as you request. It includes an excellent Tutorial, which picks up where the text leaves off. Amazingly, 25 students signed up to build their transcripts/resumes. They produced some impressive reports and picked up a useful skill.

2. The 2nd hot button I like is to get a Six-Sigma Green Belt while in school. My colleague Jim Gilbert offers his TQM course every Fall semester.  As an option, Jim arranges (at an extra lab fee of  $900) for students to get certified as Green Belts. Over 30 students a year take this option and enter the workforce with a wonderful credential.

OM in the News(and Video): Ford’s Lean Auto Plant in Brazil

Ford’s most progressive plant in the world may well be in northeast Brazil, where it uses lean manufacturing, sophisticated supply chains, and a vast array of robotics to produce the EcoSport SUV and Fiesta. A  colleague in that country, who is using the Portuguese edition of our text,  just emailed me the link to a video about which he is justifiably proud.  This 3.5 minute video illustrates all 3 concepts: lean, SCM, and automation and makes a nice presentation in Ch11 or Ch.16. (I do need to warn you that the last few seconds are a bit anti-union).

In 2009, the Ford plant produced over 207,000 vehicles. This South American operation brings so much profit to the parent company in Dearborn,Michigan,that the firm was able to turn down federal loans in 2009 that both GM and Chrysler accepted.

Brazil is becoming a leader in lean auto making, with another plant churning out VWs with a similar layout in which suppliers produce, on-site, with their own employees, the parts that are installed in the final vehicle. If you look at the Global Company Profile that opens Ch.16 in our text, you will see a  layout at the Toyota Tundra plant in San Antonio, Texas that also resembles what we see in the video.

Discussion Questions:

1. Why is it doubtful that this Ford plant will be replicated in the US?

2. How does the supply chain differ from most US plants?

3. Why is this an example of lean manufaturing?

Guest Post: How We Use Software at Temple U.

Here is our 1st Guest Post. It comes from Prof. Howard Weiss at Temple U. As I mentioned in my Teaching Tip blog on 9/21, Howard has developed  and maintains the software that accompanies our texts. He has been on the cutting edge of using computers to teach OM for over 2 decades.

Howard Weiss writes:

When I began using software in my OM class it was Lotus 123…remember that?! I would display the spreadsheets from the front of the classroom. But on their teaching evaluations, several students requested hands-on use of software rather than just watching me. I experimented by running half of each course in the classroom and half in the public computer lab. Recall that this was at the time when few students had PCs at home. The experiment was a success, and  my departmental colleagues followed the half-time lab model. At the same time, in addition to public labs, teaching labs were being configured. Since then, roughly at the time when Windows and Excel began to become popular, all of our sections have been scheduled for half- time in the classroom and half-time in the teaching lab. We are a large school, so to make scheduling easier we have two sections of OM taught simultaneously. One section is in the classroom while the other is in the lab and vice-versa for the other lecture that week.

Changing to the alternating classroom/lab format meant a restructuring of the lectures. I try to lecture on qualitative material on the first day and then use the lab on the second day for the quantitative material rather than mixing the qualitative and quantitative material. My labs include exercises in Excel in order to build the students’ Excel skills, use of both POM for Windows and Excel OM so that the students can decide which they prefer, and use of the Active Models that accompany the Heizer/Render textbook.

Having developed POM for Windows and Excel OM, I spend a significant amount of my personal time continuously maintaining and improving these packages. I am always available to respond to any requests for help of any sort from you or your students. You can reach me at dsSoftware@prenhall.com.

 If you would like to share your teaching experiences, please just email us and we will post your Guest Blog.

OM in the News: Toyota’s Quality Problems

Toyota’s sterling reputation for quality took a major hit in 2009-2010 with the recall of 5 million vehicles for unintended acceleration and braking issues. The auto maker was also slow to tell federal regulators about sticky accelerator pedals and was fined a record $16.4 million…not exactly the quality image the firm had built up over the past 4 decades! These quality problems led to a temporary shutdown of all US plants and a halt in the sales of 8 popular models.

The Wall Street Journal (Oct.5,2010) has just reported that all 2011 Toyota, Lexus, and Scion models are equipped with “black boxes” to help identify the cause of accidents.

Toyota’s situation would likely cause my mentor Phil Crosby to turn over in his grave. “There is absolutely no reason for having errors or defects in any product or service”, he wrote in his 1979 book Quality is Free.

Quality, it turns out, is not to be taken for granted, even when one is the leader in the field. Mercedes faced this same recall issue in 2004-2005, when its suppliers cut corners on quality in response to Mercedes’ desire to pump up corporate profits. Its recall was 1.3 million cars, costing $600 million. You may recall seeing a photo in Ch.6 of our book’s 9th ed. of an E -Class Mercedes setting itself on fire in Tokyo.

Companies that take their eye off the quality ball find that “quality is not free”, and that it may take several years to rebuild a  reputation.

Discussion questions:

1.What was Toyota’s initial response to the “floor mat problem” (which it claimed caused the accelerator to stick)?

2.What is Toyota doing today to deal with customer complaints?

3. Name some other recent major recalls of cunsumer items. How were they handled?

Video Tip: SPC at Frito-Lay

Of the 30+ videos Jay and I have produced to accompany our books, I would have to say my favorite is the one called “Frito-Lay’s Quality Controlled Potato Chips” (to accompany Supp.6, SPC). Why is it top of my list?

There are a few reasons. First, its the only video we ever made where I got to star! Normally, our films are narrated, then Jay and I come on at the end to summarize a few points. But in this one, I act as narrator. Second, this is a pretty exciting topic…watching how chips are made and seeing how critical a role SPC and TQM take.  Third, because my older son and some of his friends were given a cameo eating chips (early in the video).

But the most important reason I like to show this 10 minute video in class is because it shows the SPC process from start to finish. We see how the chips are inspected and tested at 9 checkpoints. Even better, we create, from scratch, an X-bar chart. This means setting the upper and lower control limits in a real company, for a real process that every student can relate to. So this video is a tutorial of sorts.

When I teach SPC, I stop the video at each math step along the way and recreate the numbers in the video on the board. I like to take my time and make sure the students comprehend each calculation in the video. Supp.6 takes on a more important role when the class sees that an everyday firm has to use all the tools we talk about.

OM in the News: China’s Massive Foxconn Facing Wage Increases

Foxconn, the giant Chinese manufacturer employing 920,000 workers,may not have been a household name a year ago. But that is rapidly changing. Business Week’s cover story recently highlighted Foxconn (see our Blog dated 9/21/10) where we learned that the firm’s products include iPads, Nokia phones, Dell computers, and HP printers.

The thrust of this WSJ article, though, is wages. Foxconn’s chairman Terry Gou is rapidly moving manufacturing inland, to 2nd tier cities where wages are only 2/3 of the more -developed coastal areas. Gou intends to expand to 1.5 million workers, with the majority inland, in the next 5 years.

And Gou plans to keep plowing billions into China. “I think in the next 20 years China won’t have a competitor” as the world’s manufacturing center, he states.

As the BusinessWeek article detailed, 11 employee suicides have caused Gou to accelerate his plans to move jobs closer to inland towns where he recruits employees.The long hours of overtime in the coastal factories, living in Gou’s dorms, and eating at his cafeterias, may have contributed to the bleak lifestyle.

Gou also raised the minimum pay for assembly line workers to about $295, more than double, starting this month.

Discussion Questions:

1. Will China still dominate the world manufacturing scene in 20 years? Where will the US lie?

2. Why isn’t Gou afraid of Vietnam, India, Brazil, or Russia?

3. How does managing wages by moving inland affect Apple, Nokia, and HP?

Good OM Reading:Lean Hospitals

If there was ever a field in need of our knowledge, consulting, and experience as teachers in OM, it is our hospitals. If you have had the unfortunate experience of spending time in an ER, an OR, or an overnight stay, you will really appreciate this book.

Or if you are just  looking for great examples of OM and TQM in the health care field, I highly recommend it. Lean Hospitals, by Mark Graban (Productivity Press, 2009, 252 pages) is simply excellent. Each chapter is full of stories and data you can use in class. Graban describes, in real hospitals, how lean improves patient outcomes, increases employee and physician satisfaction, all while saving money.

Lean is not new in hospitals, as Graban traces auto production methods back to a Michigan hospital in 1922.

Chapters 1 and 2 are introductory, Chapter 3 deals with Value and Waste, Chapter 4 with Value Streams , Chapter 5 with Standardized Work, Chapter 6 with Visual Management, 5S and Kanban, Chapter 7 with Root Causes, Chapter 8 with Error Proofing, Chapter 9 with Improving Flows, and Chapter 10 with Engaging Employees.

I found myself taking notes in every chapter. Graban’s writing style makes this a very readable book. Mark also keeps a  useful web site  that is worth visiting.

OM in the News:WSJ Gives Innovative Products Awards

We all know the importance of new product development (see Ch.5 and Fig.5.2). Companies live or die by the success of their new products…and the strength of the US as an economic power depends on our ability to continually innovate.

Each year the Journal names its Technology Innovation Award winners. This article details this year’s winners, looks at what happened to last year’s , and projects what advances will win in the future. Its an exciting classroom topic.

My two favorite winners in 2010 are: (1) TruFocals, eyeglasses the wearer can adjust manually to give clearer vision for reading, computer work, or gazing into the distance: and (2) a paper-thin, flexible computer screen that can be bent or rolled.

The odds against successfully creating and selling a new product are about 500-to-1. But a gardener friend of mine who worked for 10 years to develop a new garbage can (the world needs a new garbage can?!) just got his 1st royalty check–close to $1 million!

Discussion questions:

1.Check out last year’s WSJ winners. How did they do?

2.Name several recent products that became immediate successes.

3. What firms are the leaders in innovation with new products?

Teaching Tip: Baseball and Correlation Analysis

When you are covering the subject of correlation analysis (Chapter 4) and want to provide an example that may interest your students (especially the sports-oriented ones), here is a 2 paragraph quote from a recent WSJ article (Sept.17, 2010,p.W-8). The article suggests that more than any major league baseball season in recent memory, the size of a team’s payroll isn’t tied to winning.

“According to estimated figures updated throughout the season, the correlation between a team’s player payroll and its winning percentage is 0.14, a number that makes the relationship almost statistically irrelevant.  That figure is 67% below last year’s mark and is easily the lowest since the strike.” 

“This outcome represents a stark reversal from the state of affairs a decade ago.  In 1998, the correlation between payrolls and wins was 0.71, a figure that suggests a strong and significant tie.  And in the 1999 season, when the correlation was 0.5, all eight teams that reached baseball’s playoffs were among the top ten spenders.”

This can make for a nice class discussion. First, it shows that terms from the text show up even on the sports page. But let the students compute the R squares for these correlations and interpret the relationships for those values. If the R-square was 0.504 in 1998, and 0.25 in 1999,what explains the rest of the variation?

I love the Journal’s sports section and hope you also find some of the statistics on that page interesting.

Teaching Tip:Using Software to Solve Homework Problems

 

          When I look back at 35 years of textbook writing, I sometimes think that my biggest contribution to OM pedagogy was writing the early versions of AB:POM.  These were the PC programs that allow students to solve about 95% of the homework problems in the text.  I remember coding them in BASIC, in 1980 on my Apple 2e.  Thank goodness for Professor Howard Weiss at Temple U., who had the skill to bring about the upgrade to POM for Windows (and then to create Excel OM) a decade or so later. 

          I usually spend a half hour demonstrating how to use these programs, free to students, the first week of class.  They pick up on the inputs easily and are very happy to avoid doing regressions, SPC, and inventory modeling by hand.  I know some profs don’t use software in their course, but my view has always been to stress output interpretation, rather than hand calculations.

          Students have called me years later to tell me they still find the software useful in their jobs. 

          Which one to use, POM or Excel OM?  I used to show both and let the students pick their favorite.  But later I decided to focus on Excel OM, the Excel add-in.  Its open coding shows the formula and looks like the spreadsheets they are used to.  Any homework problems with an X next to it can be solved in Excel OM, and any with a P by POM (which is written in C++).

OM in the News: BW Cover Article on Foxconn

          Business Week’s cover story on September 9, 2010, provides a detailed look at one of the largest manufacturing companies in the world, that few students have heard of.  But they will know the products it produces under contract – iPhones, Sony Playstations, and Dell computers.  With 920,000 workers at its 20 Chinese factories, Chairmen Terry Gou was thrown into the spotlight after eleven Foxconn employees committed suicide last year.  Although Apple pressured Foxconn to eliminate its triple-decker bunk beds and excessive overtime, Steve Jobs was not about to sever ties with the iPhone being produced at the rate of 137,000 per day. 

Possible class discussion questions:

  1. How diversified is the Foxconn supply chain? 
  2. How did Gou get into the business of making the chassis of Compaq computers? 
  3. What was Flextronics reaction to the Gou supply chain?
  4. Why do workers stay at a company known for it “suicide cluster”?

Good OM Reading: A Start Up Nation

I just finished a book that is a bit outside my usual OM-oriented reading.  Start-Up Nation (by Dan Senor and Saul Singer, Twelve, 304 pages) is about the entrepreneurial nature of the State of Israel.  I had co-founded the Rollins College Center for Entrepreneurship about a decade ago, so this is a topic of personal and academic interest.

          The authors describe Israel as the world’s “techno-nation”, a tiny state torn by war that attracted as much venture capital in 2008 as Germany and France combined.  In 2009, there were 63 Israeli firms on NASDAQ, more than any foreign country.

          So why did Cisco buy nine Israeli start-ups?  Why did British Telecom put up a $3.5 billion plant to make chips?  And why did Buffet pay $4 billion for part of a high-tech tool maker?  The authors’ answer:  The culture of the military.  “You have minimal guidance from the top,” they write.  “It’s the leadership, teamwork, and mission oriented skills and experience Israelis receive.”  Ever soldier is expected to improvise, even if this means breaking some rules.

          An easy, one day read that can help us be better, more innovative managers

Teaching Tip: Using Guest Lecturers

Sure it can hurt your self-esteem when teaching evaluations are turned in and several students comment that “the most valuable part of the course” was the guest speakers!  Somehow, executives who visit our classes are viewed as having more expertise then we have.  I guess its only human nature; just like elementary school kids who believe what a teacher tells them more than what their parents say.  I can’t tell you how many times my sons have said I was dead wrong when I helped with their math homework (despite my 3 degrees in math related fields).

          But it is true that guest speakers, when carefully selected, checked out, and given a 45 -50 minutes schedule, can enhance a class.  One of my colleagues at Rollins College has said he has no time for guests in his class. “There is just too much material to cover,” he says.  I disagree.

          Over the years I developed a cadre of 6 -8 excellent guest lecturers.  One is the Frito-Lay VP-Operations for Florida (who always brings a huge box of chips – the students devour them as if they have never eaten before).  One is from Darden (who generously gives out $5 gift cards to Red Lobster and/or Olive Garden).  Another is former CEO of Tupperware, who tells the story of a $90 million OM decision that went very bad.  My favorite speaker while teaching at Rollins was the late Philip Crosby, the well-known author and quality guru.  He never missed a semester and lectured to scores of my classes.  It turns out that even famous people are more than honored to come and lecture in a college.

          Get to know your speakers first, ask to see any Power Points they intend to use for your quick review/input, and thank them every semester with a gift that has the college name on it.

MyOMLab: An Author’s View

 

          We are thrilled that over 150 colleges – and over 5,000 students – are using our MyOMLab homework and assessment software this semester.  It certainly changed our lives as teachers for the better – and the students seem to thrive using it.  If you aren’t familiar with the system, just go to www.myomlab.com to take a tour.

          With four years of experience under our belts (first in its predecessor PHGA), Jay and I can share some of our MyOMLab experience with you, and hopefully, make a few useful suggestions.

          Just up front, though, I want to promise that we have created a system that you can count on.  I would say that we invested 1,000s of hours to create the algorithmic and book match versions of the more than 700 problems in MyOMLab.  The coding and testing were tough jobs, but we think the final product makes teaching and learning OM easier on everyone.

          So what is my tip of the week?  I have used MyOMLab successfully for weekly homework assignments and for tests/quizzes.  I have also assigned weekly “pre-quizzes”, selecting 10 or so multiple choice questions from the 2,000 question Text Bank (also part of MyOMLab).  These pre class assignments forced the students to read each chapter before I covered it in class.  Since the assignment is open-book, it’s hard to miss an answer.  I weigh the pre-quizzes at 10% of the course grade and the students are thrilled to wrack-up A’s every week.

            What a pleasure this has been!  For the first time, students are ready for the lecture.  They have read the chapter in advance! Jay has implemented the same system with his students and couldn’t believe the difference in how much more engaged the students were.  Let us know what you think.