Chapter 11 – The OM Blog by Heizer, Render, & Munson

OM in the News: Beyond Outsourcing–Why Best-Shore Is Reshaping the Future of OM

For more than three decades, outsourcing followed a simple logic, moving work to lower-cost locations to reduce expenses and gain efficiency, writes Material Handling & Logistics (July 24, 2026). That model delivered real benefits, but the business environment has changed. Organizations now face pressure to innovate faster, strengthen resilience, protect worker safety, and meet increasingly complex regulations.

Instead of focusing solely on low-cost offshore outsourcing, organizations are adopting to a best-shore strategy, an approach that evaluates the nature of the work and places it in the location that delivers the greatest overall business value. The best-shore model recognizes that cost matters, but so do collaboration, speed, resilience, compliance, talent availability, and operational continuity.

Supply chain disruption, cybersecurity threats, geopolitical uncertainty, workforce shortages, regulatory change, and rising customer expectations have created new challenges that traditional outsourcing models were not designed to address. The lowest-cost location is now not always the lowest-cost solution.

A manufacturing plant cannot afford prolonged downtime because a critical engineering issue must wait until another region wakes up. A logistics operation cannot delay responding to a cybersecurity incident due to communication barriers.

Under the best-shore approach, organizations leverage a combination of offshore, nearshore, and onshore resources, assigning responsibilities based on business requirements rather than geography alone. Best-shore models incorporate three complementary delivery layers.

Offshore: Scale and Cost Efficiency Offshore delivery remains an essential component of global operations. Countries with large technical talent pools offer access to skilled professionals at competitive costs. Offshore teams often provide the scale necessary to support large transformation programs, application development initiatives, engineering projects, testing activities, data management, and managed services.

Nearshore: Speed and Collaboration Nearshore delivery helps bridge the gap between cost efficiency and operational responsiveness by locating teams in similar time zones and cultural environments. Teams can collaborate during the same business day, participate in real-time meetings, respond quickly to changing priorities, and engage more directly with business stakeholders.

Onshore: Governance and Business Alignment Certain activities benefit from being located close to the business itself. Executive engagement, regulatory compliance, stakeholder management, strategic planning, safety oversight, and customer relationships often require local presence and a deep understanding of business context.

Recent years have demonstrated how vulnerable organizations can become when they depend too heavily on a single geography, supplier, or operating model. A diversified best-shore model helps reduce concentration risk.

Classroom discussion questions:

Summarize the differences between best-shoring and off-shoring.
Provide an example of a firm that has best-shored.

Guest Post: Defense Supply Chains at the Heart of National Security are Under the Microscope

Prof. Misty Blessley, Associate Professor of Supply Chain Management at West Virginia University, brings up a timely topic.

A major shift is underway in U.S. defense procurement policy, according to Reuters.com (July 20, 2026). President Trump recently signed an executive order making it harder for defense contractors to obtain waivers that allow them to purchase critical minerals and materials from China and other prohibited foreign suppliers. Contractors must now demonstrate that they searched for alternative sources, disclose where materials originate, and provide a plan to reduce dependence on those suppliers.

This policy aligns closely with the goals of the Buy American Act of 1933, which requires federal agencies to give preference to domestically produced goods when purchasing supplies. The law was designed to support American manufacturing, strengthen the nation’s industrial base, and reduce dependence on foreign suppliers. While waivers have long been available when products were unavailable domestically or significantly more expensive, the new executive order signals a tougher approach to those exceptions in defense contracting.

Why have defense contractors relied on foreign suppliers? In many cases, the answer involves availability. Critical minerals and specialized components are often sourced through global supply chains, with some materials heavily available from prohibited foreign suppliers. Cost can also play a role. Foreign suppliers may offer lower prices, allowing contractors to control expenses.

At the heart is the urgent need to keep weapons flowing to U.S. forces and allies. According to Peter Navarro, White House senior counselor for trade and manufacturing, “This is not paperwork. It is battlefield preparation.”

From a supply chain perspective, the most important aspect of the executive order is its focus on visibility and resilience. The Pentagon has been directed to map lower-tier suppliers and identify vulnerabilities hidden deep within defense supply networks, to give a clearer view whether foreign-controlled suppliers could threaten weapons production during a conflict. Contractors must also evaluate suppliers for foreign ownership, financial stability, and manufacturing risks.

The U.S. government is not leaving contractors high and dry. Recent investments in companies such as MP Materials, a domestic producer of rare earth materials, demonstrate efforts to make buying American easier.

Classroom Discussion Questions:

What opportunities do you see resulting from this executive order?
Do the benefits of increased supply chain security outweigh the likely increase in costs? Why or why not?

OM in the News: Agentic AI Revolutionizes the Factory

It’s 4 a.m. at a large automotive parts plant. The night-shift supervisor freezes as the dashboard flashes an alert: a critical spindle is vibrating out of tolerance. In the old world, he’d wait for maintenance to evaluate and decide. But today, an AI agent has already paused the line, checked service records and called the right technician—before he even takes a step toward the control room.

That’s the new reality for many manufacturers facing a stubborn obstacle: the ever-widening gap between data and decisive action. Now, a new class of digital entities is changing that equation. AI agents powered by decision intelligence are beginning to sense, reason and act across the manufacturing ecosystem, cutting decision latency from minutes to milliseconds.

Think of AI agents as the digital nervous system of a modern factory. They continuously sense what’s happening across machines, people and systems, then respond intelligently without losing context. Across the manufacturing stack, they’re quietly reshaping work for every role:

On the shop floor: Agents merge operations and information technology (IT) data to give operators real-time context. They can recommend optimal machine parameters, trigger tool-change schedules, balance workloads across lines or alert technicians before deviations escalate. Maintenance teams can use agents to predict component wear and plan interventions that don’t interrupt production– a topic in Chapter 17.

In production and quality operations: Agents help supervisors and quality staff detect process drift early. They analyze sensor data, images and process variables, suggesting immediate corrections or automated parameter tuning. In continuous manufacturing, this can mean fewer rejects and less rework, which we discuss in Chapter 6.

In ERP and planning: Agents connect production, procurement and finance systems. A planning agent (see Chapter 14) can run simulations of “what if” scenarios, what happens if a supplier shipment is delayed or if energy costs spike and recommend production adjustments.

Across the supply chain: Agents can constantly monitor inventory, supplier performance and logistics signals. When a potential shortage or delay is detected, they are able to trigger contingency workflows such as redistributing available stock, recommending alternate suppliers or rescheduling deliveries–see Chapters 11 and 12.

To sum it up: “Tomorrow’s factories won’t just inform — they’ll decide,” writes Industry Week (June 12, 2026).

Classroom discussion questions:

Summarize what AI agents can do in a factory setting.
How does agentic AI have the potential to change the manufacturing operation?

OM in the News: Patriot Missiles and Second Tier Suppliers

The newest Patriot surface-to-air missiles can be fired in seconds, but take more than two years to build and cost around $4 million each. Despite that math, the U.S. and its allies can’t get enough of them, reports The Wall Street Journal (June 10, 2026).

Pentagon officials just reached an agreement with Lockheed Martin to more than triple production of the latest Patriot, the PAC-3, to 2,000 a year. But the weapons maker isn’t expecting to hit that target until the end of 2030. Why is that?

Lockheed is facing a litany of challenges to hit its target. It counts more than 400 companies that provide parts for its missile. More than 80% are at the second tier—the PAC-3 suppliers’ suppliers. But these firms provide components to more than one missile program. That makes it harder to increase production of one type of missile without disrupting the supply chain for another in-demand weapon.

And some missile circuitry is considered commercially obsolete, forcing the U.S. to rely on expensive equipment from foreign suppliers. The “seeker” in the missile’s nose—a vital part that allows the interceptor to lock onto incoming missiles and aircraft—comes from a single Boeing factory.

Boeing said the company has sped up “seeker” production by adding robotic equipment and finding new suppliers to provide parts like circuit cards. L3Harris plans to boost its rocket-motor production capacity as it brings more manufacturers into its supply chain. “You need the whole ecosystem to line up,” L3Harris’ CEO. “If we quadruple a missile, we’ve got to quadruple the cases. We’ve got to quadruple the igniters, valves, the throttles.”

For decades, the military favored lean supply chains and peacetime efficiency. That approach saved money, but under the pressure of conflict its weakness is revealed. Depending on one qualified source for a key missile component is not the answer. Selective redundancy and second-sources for critical components may be.

Classroom discussion questions:

Why are tier 2 suppliers a problem in many supply chains?
Summarize all the issues slowing the production of Patriot missles.

Guest Post: Amazon’s Next Act–Supply Chain as a Service

Dr. Jon Jackson is Associate Professor of Operations Management at the Providence College School of Business. He has created a series of AI exercises for each chapter in our text.

The term “software as a service” (SaaS) has become ubiquitous over the last few decades, covering everything from CRM systems (e.g., Salesforce) to file storage (e.g., Dropbox) and e-commerce platforms (e.g., Shopify). Amazon entered this arena in 2006 with Amazon Web Services (AWS), offering “infrastructure as a service.”

Fast forward to 2026, and Amazon is applying a similar playbook to logistics with its new “supply chain as a service” platform, Amazon Supply Chain Services (ASCS), according to an Amazon press release (May 4, 2026).

ASCS opens Amazon’s vast global logistics network not just to its own marketplace sellers, but to businesses operating across competing marketplaces and in B2B channels. As Peter Larsen, vice president of Amazon Supply Chain Services, puts it, the platform is “available to any business of any shape or size.”

This marks a significant shift. For years, companies have relied on third-party logistics providers (3PLs), with an estimated 94% of Fortune 500 companies using at least one. Now, Amazon is positioning itself as a full-stack alternative, offering freight, warehousing, fulfillment, and last-mile delivery in a single integrated system. In 2025, Amazon’s logistics revenue was estimated at $172 billion, far surpassing competitors like DSV ($37 billion) and DHL Supply Chain ($35 billion), reported by The Wall Street Journal (May 4, 2026).

Early adopters of ASCS include major brands such as Procter & Gamble, 3M, Lands’ End, and American Eagle Outfitters.

If AWS transformed how companies build and scale software, ASCS could do the same for physical commerce by reshaping supply chains and the competitive dynamics of global logistics.

Classroom Discussion Questions

1.How does ASCS impact traditional 3PLs (e.g., FedEx, UPS, DHL)? What can they do to differentiate and defend their market share?

2. As a business owner, what concerns would you have about outsourcing your entire logistics operation to Amazon?

3. Could Amazon’s “supply chain as a service” model become as dominant as AWS? What would that mean for competition in retail and logistics?

OM Podcast #49: An Interview with the CEO of the Florida Semiconductor Engine About Reshoring

In this episode of the Heizer Render Munson OM Podcast, Barry Render talks with Dr. Ron Piccolo, CEO of the Florida Semiconductor Engine, about why semiconductors have become such a critical issue for the U.S. economy. From phones and cars to medical devices and defense systems, semiconductors power everyday life—but much of the manufacturing and packaging happens overseas, creating supply‑chain and security risks.

A key focus of the conversation is advanced packaging, which refers to newer ways of assembling semiconductor chips to improve performance, reduce heat, and increase reliability. Piccolo explains that while high‑volume manufacturing will likely remain global, the U.S. has a strong opportunity to bring specialized, high‑reliability packaging back home—especially for industries like space, healthcare, and defense.

The episode also explores how universities, government, and industry can work together to build regional innovation ecosystems. Supported by a National Science Foundation grant, the Florida Semiconductor Engine aims to create a one‑stop shop for design, prototyping, and testing—strengthening U.S. competitiveness while supporting high‑skill jobs and regional growth.

Heizer Render Munson OM Podcast · OM Podcast #49: Reshoring Semiconductors

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Instructors: assignable auto‑graded exercises using this podcast are available in MyLab OM. To learn more, view our earlier blog post featuring Chuck Munson or contact your Pearson representative: Find your rep

OM in the News: Rise in Cargo Theft as Criminal Tactics Evolve

There is a deepening and increasingly complex global cargo theft crisis, driven by organized criminal networks deploying ever more sophisticated tactics across road, rail, sea, and digital channels, according to Material Handling & Logistics (April 28, 2026).

Food and beverage products led all stolen commodity categories, followed by agriculture, electronics, automotive parts, construction materials, and metals.

Trucks remain the dominant target, accounting for 70% of all incidents globally, and more than a fifth of global cargo theft incidents involved the cooperation of insiders. Brazil, Mexico, India, the U.S., Indonesia, Chile, China, Germany, and South Africa ranked as the world’s top countries for recorded cargo theft incidents.

Rail cargo theft in the U.S. rose to 10% in 2025. Organized criminal groups – including cartels operating out of Sinaloa, Mexico – carried out coordinated attacks on freight trains across rural areas of Arizona and California, employing deliberate system sabotage, detailed advance planning, and armed encounters with law enforcement.

Technology-enabled theft also grew more sophisticated, with criminals exploiting cybersecurity weaknesses, fraudulent documents, and impersonation tactics to carry out fictitious pickups, double and triple brokering, and product hostage schemes.

In Europe, Germany, Italy, the U.K., France, and Spain reported the greatest number of thefts. Facility thefts rose notably – particularly in Italy, Germany, Romania, and Bulgaria. In the U.K., cargo theft losses reached $149 million in 2024. A $9 million smartphone heist at Heathrow airport ranked among the highest-value incidents.

In Asia, India, Indonesia, China, Bangladesh, and Vietnam were the region’s most affected countries. Half of all incidents occurred at warehouses and production sites. A notable emerging trend was the theft of rare earth minerals in China. Maritime risks also escalated sharply, with sea piracy incidents rising 85% in the first half of 2025 – reaching their highest levels in nearly a decade.

Criminal groups are targeting every link in the chain – from unsecured parking spaces and rest stops to exploitable digital freight platforms.

Enhanced GPS tracking and tamper-evident sealing, tighter governance around load board usage, increased investment in scanning technology and cross-agency intelligence sharing, as well as heightened scrutiny of subcontracted transport providers, are all needed.

Classroom discussion questions:

What can operations managers do to quell this threat?
What is the main source of the thefts documented?

Guest Post: Why the Union Pacific – Norfolk Southern Merger Could Reshape U.S. Rail

Temple U. Professor Misty Blessley looks at an important logistics issue.

Union Pacific (UP) and Norfolk Southern (NS) are seeking Surface Transportation Board (STB) approval to merge into what would become the first true coast- to-coast Class I railroad in the United States. A Class I railroad is a freight carrier generating more than $1 billion in annual revenue.

A unified UP–NS network could eliminate thousands of daily railcar and container handlings, reduce chokepoints, and create a more fluid national network. For shippers, that means fewer delays, lower inventory carrying costs, and more predictable inland flows from ports.

The UP–NS merger would follow the 2025 Canadian Pacific–Kansas City Southern (CPKC) merger, which created the first single-line railroad connecting Canada, the U.S., and Mexico. But CPKC is significantly smaller than either UP or NS. CPKC has 51,065 cars online, compared to 304,481 for Union Pacific and 162,339 for Norfolk Southern.

The combined railroad would reshape east–west freight flows. However, the massive scale underscores why the UP–NS proposal is drawing scrutiny.
A major part of the railroads’ argument is competitive pressure from long haul trucking. Motor carriers win when shippers need speed, flexibility, and door-to-door simplicity. If the merged railroad can reliably cut one to two days from cross country moves, rail becomes a more credible alternative to truckload.

The STB has ordered Union Pacific and Norfolk Southern to submit full internal documents so regulators can verify the merger’s promised benefits. While the Board is not an antitrust agency in the traditional Department of Justice sense, it is responsible for evaluating whether a merger would reduce competition, create market dominance, or harm shippers. The STB is “getting all the facts and elevating transparency in agency decision making.” For now, only time will tell.

Classroom Discussion Questions:
1. Would you allow the merger given its potential benefits and its potential risks to competition? Why?

2. In Example S4 of Chapter 11 in your Heizer/Render/Munson textbook, Transportation Mode Analysis, Daily Cost of Holding shows how time is money. How does a shipper benefit financially when transit times improve?

OM in the News: Delta’s Vertical Integration Risk Pays Off

Vertical integration is an interesting topic in Chapter 11 of your Heizer/Render/Munson text. There are plusses and minuses, and we warn: “Most organizations are better served by concentrating on their own specialty and leveraging suppliers’ contributions.”

But Delta Air Lines, facing billions of dollars of pain at the fuel pump (because of Iran’s blockage of the Straits of Hormuz) along with all the other carriers, is unique. It happens to own its own gas station, writes The Wall Street Journal (April 10, 2026).

Jet-fuel prices have roughly doubled since late February, pushing up airlines’ costs.

Since 2012, Delta has been the owner of a Pennsylvania refinery that processes crude into fuel. Over the years, the investment has looked like either a stroke of genius or a boondoggle, generally depending on the price of oil. Since the U.S. and Israel began carrying out strikes on Iran, the refinery is set to pay off again for Delta. With it, Delta has an asset that can help it offset some of the recent surge in fuel prices.

Energy experts rolled their eyes when Delta plunked down $150 million for the refinery. If the plant was such a good investment, why was ConocoPhillips, its previous owner, shutting it down? Rival airline executives scoffed that they would benefit from increased jet-fuel output on the East Coast without the headaches of refinery ownership.

Now even United, one of Delta’s top rivals, has acknowledged that the refinery benefits Delta. Its CEO Scott Kirby states: “Right now the crack spread (the gap between the price of jet fuel and the price of crude oil) is much higher…and so they’ll get real benefit from the higher crack spread that will be unique to them.”

Delta has said that the refinery makes an operating profit most years. The airline has said owning the refinery insulates it from supply disruptions in the Northeast and helps mitigate risk from volatile prices—effectively lowering its jet-fuel costs, often by several cents a gallon. In 2022, when fuel prices surged after Russia began its invasion of Ukraine, the refinery helped it save $785 million.

But the airline has had to pour money into the plant, which is more than a century old, to keep it running smoothly, investing $1.6 billion in capital expenditures over the years.

Classroom discussion questions:

Did the purchase make sense for Delta?
Many economists think the refinery was a costly mistake. Why?

OM in the News: America Now Has an EV Rust Belt

At first, North America’s biggest auto-parts supplier was thrilled to snag the job of making enclosures for the batteries in GM’ new electric pickup. The contract was so big—and promised to be for years to come—that Magna International built a new $575 million factory in a Michigan cornfield. And Michigan even offered a $44 million incentive package to draw the promise of new jobs–a topic in Chapter 8.

Five years later, that million-square-foot plant is mostly empty and losing money, a casualty of America’s messy breakup with EVs, reports The Wall Street Journal (April 1, 2026). It is one of dozens of now desolate EV parts plants across the country. It can take years to pivot a factory and supply chain from one type of vehicle to another. And it would take 4-6 months of higher gas prices for most Americans to reconsider more fuel-efficient vehicles– an unlikely prospect. Detroit automakers have scrapped their boldest EV dreams—and are looking beyond $50 billion in charges tied to broken supplier contracts and wasted investments.

The deserted Magna factory in St. Clair was expected to stay busy for years.

Magna, which has more than 300 factories around the globe and parts in nearly every car on the road today, has been left holding the keys to the St. Clair, Michigan building that is bigger than 20 football fields. The Canadian company needs to find a second life for the factory and the hulking rows of assembly-line robots. A few years ago, Magna had plans to build an entirely new business unit around EV battery enclosures.

The EV slide is reverberating through the automotive industry’s sprawling supply chain. Multinational companies such as Magna, Dana and BorgWarner slashed jobs and closed plants due to the EV pullback, while a string of smaller manufacturers shut down altogether. Last year, more than $20 billion in previously announced investments in EV and battery facilities were wiped out.

Smaller suppliers have little recourse to recoup costs when automakers cancel a vehicle program and stop buying parts. They typically absorb the upfront cost of setting up an assembly line with the expectation of recouping it over time as parts are shipped. GM’s supplier contracts were struck with the expectation that GM would be building one million EVs a year. By December, 2025 the company was selling around 8,000 a month.

Classroom discussion questions:

Discuss the typical incentives offered to attract a new plant.
Why has the EV trucking business been especially hard hit?

Guest Post: The Two Stories of Tesla’s Solar Panels

Temple U. Professor Misty Blessley provides interesting blog topics monthly.

In our 2023 OM blog, New York State Built Elon Musk a $1 Billion Factory, we learned that building a solar panel facility was “a bad deal” for NY. The state built a massive plant and provided solar-panel manufacturing equipment. Tesla’s end of the deal was to churn out enough solar-panel shingles by 2020 to cover 1,000 roofs on a weekly basis.

These solar panels are finally on the verge of materializing, and with this are two stories. One connects Tesla’s long game in vertical integration and the other is New York’s long-delayed economic vision.

Tesla’s Long Game in Vertical Integration
Tesla’s new residential solar panels fill the company’s missing piece. The firm was missing the energy generator (aka solar panel). Despite the solar factory in New York, Tesla spent years relying on third-party suppliers for its solar panels. Now, it can fully optimize performance across the entire home energy stack. Tesla can vertically integrate the full chain from generation (solar panels), to conversion (inverter), to storage (Powerwall), and to consumption (EV charging).

New York’s Long-Delayed Economic Vision
This pivot finally gives New York its payout. By bringing solar panel manufacturing in-house, Tesla is delivering the kind of industry and employment the state originally hoped for. The region, once defined by its industrial decline, gains a foothold in the clean energy manufacturing economy. The move aligns with federal and state incentives that reward U.S.-made components, strengthening the economic logic behind NY’s investment. Tesla’s shift toward a unified home energy ecosystem mirrors the vision that justified the state’s $1 billion bet. The factory, once criticized as a stranded asset, now becomes the manufacturing backbone of Tesla’s residential energy strategy.

Tesla didn’t just release new solar panels. It connected the car in the driveway to the sun, and in doing so may have finally delivered the manufacturing story NY was waiting for.

Classroom Discussion Questions:
1. How is vertical integration good for Tesla? For Tesla owners? To compare this to an internal combustion engine, it is somewhat like having petroleum, a refinery and a gas pump in the garage or driveway.

2. Knowing that Tesla’s occupation of the Buffalo facility is long overdue, what stipulations should a city or state impose on a firm when incentivizing a location decision to the tune of $1 billion?

OM in the News: Amazon Goes Rural

In dozens of thinly populated regions across the country, Amazon is building new delivery hubs to deliver packages in around 2 days. That might not seem especially rapid at a time when the e-commerce giant is introducing one-hour delivery in some areas, but residents of some far-flung Montana hamlets were used to waiting up to a week for their orders. It is part of a $4 billion investment by Amazon to push its signature speedy delivery further into the rural recesses of the U.S., writes The Wall Street Journal (March 22, 2026)

An Amazon driver taking a photo after dropping off a package in Connor Montana

The effort helps Amazon reduce its reliance on the U.S. Postal Service, a relationship that has become rocky following a dispute over contract terms. Amazon says it aims ultimately to have 200 rural delivery hubs serving around 13,000 ZIP Codes covering around 1.2 million square miles of America—an area the size of Texas, California and Alaska combined.

Delivering packages within Amazon’s signature 2-day frame means drivers contend with backcountry challenges such as bighorn sheep on the road, dangerously high winds in mountain passes and roads that are impassable during parts of the year.

Over the past decade, Amazon has expanded from major cities to regional urban centers by drawing ever larger circles of coverage. That is now allowing the company to lean on those urban hubs to speed up deliveries in ranch country. There are signs that Amazon customers in remote areas are just as likely to get hooked on speedy delivery as city slickers.

Amazon is experimenting with speedier delivery across its network as it competes with longtime rival Walmart and delivery upstarts such as Uber and DoorDash. In urban areas, the company has started offering 1-hour and 3-hour delivery as premium options. Amazon recently acquired a Swiss startup called Rivr, which is building 4-legged robots that could drop packages off on doorsteps. The e-commerce giant is also dipping its toe in the big-box retail business, with plans for a 230,000-square-foot megastore outside Chicago.

Classroom discussion questions:

What are the complications in trying to serve remote locations with 2-day delivery?
Why does the firm think the extra expenses will pay off?

OM in the News: The Robotics Supply Chain

The next 20 years are not just about making robots better, but also about how they will be used in all sorts of industries, from small tests to big factories. The real challenge is having specialized engineering skills, great manufacturing, and dominating software, reports Industry Week (March 11, 2026).

There are 6 key areas that make all the difference in this industry. Here is a breakdown of the cost of the parts that go into a robot:

1. Actuators & Gearboxes (35-40%): The physical muscle.

2. Robot Structure / Manipulators (15-20%): The physical frame and integration.

3. Sensors & Perception (10-15%): The eyes and ears.

4. AI Compute / Control (10-15%): The operational brain.

5. Battery / Power Systems (10-15%): The energy storage for mobile units.

6. Precision Motion Components (5-10%): The components required for fine movements.

This list shows that a robotics breakthrough isn’t just software advances; it depends on physical components and the supply chains that produce them. But there are 3 chokepoints (bottlenecks).

#1: Precision Reducers, controlled by Japan. Robots can’t move with a lot of power and precision without special parts (harmonic and cycloidal reducers). Two companies in Japan make 70% of these parts used all over the world. Spending more money won’t allow other companies to make these parts, because they need special knowledge about metals and years of experience making precise parts.

#2: AI Compute (The Intelligence Standard), controlled by the U.S. Today’s robots, especially those that use reinforcement learning, need powerful computers to work properly. NVIDIA’s CUDA system has become the leading platform used by robots that learn and think. Making a better chip is not enough if you can’t replace the software that all robotics engineers already use.

#3: Battery Supply Chain, controlled by China. Robots are changing from big, stationary machines to mobile ones. This means batteries are now a crucial part of making them work. One company in China, CATL, controls 1/3 of the world’s battery market. China has a very strong grip on this supply chain.

The global map of robotics is specialized. There is a multi-polar supply chain that is difficult to disrupt:

USA: “The “Brain.” (software, autonomy, AI compute).

Japan: The “Hardware King.” (motors, gearboxes, precision engineering).

Germany: The “Precision Engineer.” ( mechanical systems, high-end production).

China: The “Scale & Power.” (manufacturing speed, massive infrastructure, battery supremacy).

Taiwan: The “Linear Specialist.” ( The linear guides and ball screws essential for motion).

Classroom discussion questions:

Why must operations managers understand these costs and bottlenecks?
What are the supply chain implications?

Guest Post: Fast or Free? The New Tradeoff in E-Commerce Shipping

Dr. Jon Jackson is Associate Professor – Operations Management at Providence College

For years, e-commerce conditioned shoppers to expect near-instant gratification. Fast shipping became the industry standard as retailers tried to keep pace with Amazon. First, it was 2-day shipping, then next day shipping, and ultimately same day shipping. But the economics behind those fast-shipping promises are starting to crack, and retailers are quietly resetting expectations, according to a recent report in The Wall Street Journal (Mar. 6, 2026).

Shipping costs have risen sharply in recent years. Major carriers such as FedEx and UPS have increased base rates annually while adding fuel surcharges, residential delivery fees, and dimensional pricing rules. As a result, retailers are increasingly shifting their focus from “fastest delivery” to “lowest cost delivery.”

Amazon now offers customers a small discount if they choose a slower delivery date. Many other retailers have followed suit by introducing “no-rush” shipping that may take a week or longer.

Interestingly, customers appear willing to wait. McKinsey surveyed over 1,000 people in 2024, and speed of delivery dropped from the #1 priority in 2022 to the #5 priority in 2024. Meanwhile, the cost of delivery maintained its high priority, with more than 95% of surveyed shoppers saying that they prefer free standard shipping instead of paying for faster shipping.

Longer delivery windows help logistics networks operate more efficiently. When retailers promise delivery in 5-7 days instead of two, carriers can consolidate shipments onto fuller trucks, lowering the cost per package. Some retailers even encourage customers to choose delivery days later in the week when shipping networks are less congested.

Another unexpected benefit: fewer returns. Retailers report that extending delivery times leads to more intentional purchases and significantly lower return rates. The era of “fastest possible shipping” may not be ending, but it is becoming just one option among many.

Classroom Discussion Questions

If customers say they prioritize low shipping costs over speed, how should retailers redesign their fulfillment and delivery strategies?
Do you think slower shipping could become the new norm in e-commerce, or will competition eventually push retailers back toward faster delivery times? Why?

Guest Post: Martin Guitars and Operations

Prof. Howard Weiss, retired from Temple U., illustrates his wide range of interests.

Martin is a guitar manufacturer that began operations in 1833. Martin specializes in acoustic guitars which account for about half as many guitars as electric guitars in the global guitar market. It is one of the most popular brands along with Fender, Gibson, Yamaha, Ibanez and Taylor.

Location: Martin began its operation in Manhattan. In 1839 Martin opened a plant in Nazareth PA, 90 miles due west of its NYC plant. In 1989 Martin opened a plant in Sonora, Mexico in order to make guitars that were more affordable. It is worth noting that two of Martin’s competitors, Fender and Taylor guitars also have plants in Mexico. These guitars are commonly referred to as MIM (Made in Mexico). See Ch.8.

Capacity: Martin has made over 3 million guitars since its inception, including one million since 2016. It currently produces a total of 500 guitars per day, 6 days per week, at the two plants. (See Supp. 7)

Forecasting: Clearly demand has been increasing. Martin’s forecasting needs to consider historical and causal analysis (see Ch. 4) since certain events can spike or drop the sales. For example, sales increased more than usual during the folk music craze and also when MTV was running its Unplugged series (featuring acoustic guitars). At first, COVID caused a decline in sales due to cancelled concerts and closed stores. But then there was an increase in demand, especially for beginner guitars since people were looking for activities while at home and could order guitars online.

Supply Chain: The supply chain (Ch. 11) begins in the forest and at the lumber facilities both in the U.S. and India.

Layout: Martin uses process layout–see Ch.7. Most of the work is done by hand but there are robots in the factory.

Safety: With all of the woodwork that is being performed the major safety concern is that of sawdust.

Quality Control: The incoming wood is inspected by humans because machines cannot pick up defects in the wood. Each guitar is checked for tone. The guitar gets put in a case, but then sits for 4 days and then undergoes rigorous testing to make certain the guitar parts, e.g. neck, bridge, tuning pegs, still work. (See Ch. 6).

Classroom Discussion Questions

How could Martin use the Quality Control techniques discussed in Ch. 6 of your text book?
What are some possible reasons Martin relocated from Manhattan to Nazareth, PA?