Chapter 2 – The OM Blog by Heizer, Render, & Munson

OM in the News: Robots Are Remaking Chinese Industry

Sam Altman wants AI to cure cancer. Elon Musk says AI robots will eliminate poverty. China is focused on something more prosaic: making better washing machines. While China’s long-term AI goals are no less ambitious than ours, its near-term priority is to shore up its role as the world’s factory floor for decades to come, reports The Wall Street Journal (Nov. 25, 2025).

Midea, an appliance maker, deploys robots to work under an AI ‘factory brain’ that acts as a central nervous system for its plant in Jingzhou.

The Chinese push is fueled by billions of dollars in government and private development– transforming every step of making and exporting goods. A clothing designer reports slashing the time it takes to make a sample by more than 70% with AI. Washing machines in China’s hinterland are being churned out under the command of an AI “factory brain.”

Port shipping containers whiz about on self-driving trucks with virtually no workers in sight, while the port’s scheduling is run by AI.

Chinese executives liken the future of factories to living organisms that can increasingly think and act for themselves, moving beyond the preprogrammed tasks at traditionally-automated factories. This could further enable the spread of “dark factories,” with operations so automated that work happens around the clock with the lights dimmed.

The advances can’t come quickly enough for China as its population is shrinking, young people are avoiding factory jobs, and pushback against Chinese exports has intensified.

AI offers a lifeline to head off those risks, by helping China make and ship more stuff faster, cheaper and with fewer workers. China wants to deploy what is available today quicker than the U.S. can, locking in any advantages. It installed 295,000 industrial robots last year, 9 times as many as the U.S. and more than the rest of the world combined. Its stock of operational robots surpassed 2 million in 2024

Today, China’s average factory wages are far higher than in countries such as India. Many young Chinese are unwilling to work in factories. The shortage of skilled labor in key manufacturing sectors could reach 30 million this year. Since most Chinese are optimistic about AI, this allows the government to deploy the technology quickly. About 83% of Chinese believe AI-powered products and services are more beneficial than harmful, double the level in the U.S.

Classroom discussion questions:

Why the push for robotics and AI in China?
What can the U.S. and Europe do to remain competitive?

OM in the News: Europe’s Move Towards Rare-Earths

Europe is trying to get itself on the global rare-earths map. Estonia, once a textiles hub for the Russian Empire, is now host to Europe’s biggest production plant for the kinds of rare-earth magnets needed in electric cars and wind turbines. It is part of Europe’s push to secure a foothold in a global supply chain dominated at every step by China, reports The Wall Street Journal (Nov. 16, 2025). Financed in part by the EU, the factory is expected to begin deliveries to companies in 2026.

Production of rare-earth magnets is expected to increase at the factory in Estonia, but it still isn’t expected to meet Europe’s projected demand.

The problem: Even at the new factory’s initial planned capacity of 2,000 tons of permanent magnet material, the plant will produce a fraction of what European manufacturers need. There are plans to scale up production to 5,000 tons, but that is still a long way from being enough to break Europe’s dependence on China. Total European demand is forecast to reach about 45,000 tons by 2030. (Companies in the U.S. are planning to build more than 40,000 tons of capacity by 2030).

After China imposed new export restrictions for rare earths this year, the U.S. stepped up subsidies and other measures to support the industry, spurring a race to build out American mining, processing and manufacturing capacity. Rare earths are also essential to manufacturing many defense systems. European auto suppliers were already eager to diversify their permanent magnet sources before China’s move.

Rare-earth magnets are widely used in products such as electric cars and wind turbines

Europe prospered over recent decades in a global trading system that allowed it to import cheap gas from Russia and rare earths from China, powering its industrial base. But Russia’s invasion of Ukraine and China’s move to restrict rare-earth exports showed how dependent the continent had become on those countries. Europe has some rare-earth processing and recycling facilities but no active rare-earth mining. For now, EU producers are relying on customers being willing to pay a premium to avoid dealing with China’s restrictions.

Classroom discussion questions:

Why does China exert such power over the rare earth supply chain and why is that supply chain so important?
What else can the U.S. and EU do?

OM in the News: The Electric F-150’s Short Life Cycle

The first Boeing 737 jet rolled off the assembly line 58 years ago, on April 9, 1967. That is a long life cycle, given it has still not reached the “decline” phase in Figure 2.5 in your text. But the life cycle certainly looks a lot shorter for electric pickup trucks.

Ford is planning to scrap the electric version of its F-150 pickup, according to The Wall Street Journal (Nov. 7, 2025) which would make the money-losing truck America’s first major EV casualty. “The demand is just not there” for the F-150 Lightning and other electric trucks, said one dealer. Stellantis earlier this year called off plans to make an electric version of its Ram pickup. GM plans to discontinue some electric trucks and sales of Tesla’s Cybertruck tanked this year. The trucks seemed a good bet amid booming EV demand and clean-air mandates that required automakers to sell fewer gas-guzzlers.

Ford halts production of the F-150 Lightning

The Lightning fell far short of expectations as American truck buyers skipped the electric version of the top-selling truck. Overall EV sales are plummeting in the absence of government subsidies. Ford dealers sold 66,000 gas-powered F-Series pickups, and just 1,500 Lightnings, the fewest of any model. (Ford has racked up $13 billion in EV losses since 2023).

When Ford launched the Lightning 5 years ago it promised a pickup as fast as a sports car and as affordable as a conventional truck. It would drive hundreds of miles on a single charge, and carry enough voltage to power a home for days. “It’s like a smartphone that can tow 10,000 pounds,” said the CEO at the launch.

But truck buyers worried the pickups would run out of juice in the middle of a job or a long haul as their range is dramatically reduced when towing big loads or operating in cold weather.

GM has also lost billions on electric trucks after rolling out a string of them, including an electric version of the popular Chevrolet Silverado. GM has three electric pickups, and it sold about 1,800 of them last month.

Ford built up the capacity to make as many as 150,000 Lightnings a year. But the EVs cost billions to develop and manufacture, and are only profitable if they sell in large enough volumes, which they did not.

Classroom discussion questions:

Where do you think all EVs are on the life cycle curve?
Why did so many auto manufacturers misread the demand for electric pickups?

Guest Post: Postal Service Life Cycle Decline

Prof. Howard Weiss shares his insights with our readers monthly.

As discussed in Chapter 2, when a product or service is in the decline stage of its life cycle, cost control is critical. Currently, demand for postal services is in the decline stage in many, if not most, countries. The decline is due to two main factors.

 Digital communication has greatly reduced the number of letters being sent. In the U.S., first class mail volume has dropped to 20% of what it was in 1997. Similarly, Canada Post reported a decline from 5.5 billion letters delivered annually 2 decades ago to only 2 billion today.
 Parcel delivery—once a potential growth area—has increasingly been dominated by private competitors such as UPS, FedEx, and Amazon, which can operate flexibly without the regulatory obligations imposed on government-run postal services.

As a result, national postal authorities are incurring substantial financial losses: $9.5 billion in the U.S., $1 billion in Canada, and $427 million in the UK. There are several ways to cut costs, and different countries are taking different approaches:

Job cuts The most obvious way to reduce costs is to reduce the number of employees. The U.S.P.S. has announced plans to eliminate 10,000 positions, largely through voluntary retirement incentives, while Deutsche Post in Germany anticipates cutting 8,000 jobs.

Close facilities The U.S. is considering closing some of its 31,000 post offices when their leases expire. Canada is going to close some mostly rural post offices. On the other hand, a new law in Germany requires the postal service to not close any of its current facilities.

Rural delivery
In the U.S., Canada and England the postal authorities are required to provide universal service to all addresses and for facilities to be open 6 days a week. In Germany the expectation is 5 days per week. Universal service is costly as it requires more time to deliver mail to rural areas than to urban areas.

Door to door delivery Canada has transitioned many households from door-to-door delivery to centralized community mailboxes, a shift projected to save $300 million annually. A majority of Canadians already receive their mail through community, apartment or rural mailboxes.

Extended delivery times In some countries the required time to deliver mail may be increased. In Germany the expected time is now 3 days rather than the former 2 days. In all countries delivery of mail could be delayed by a day or more.

Classroom discussion questions:
1. What else can you suggest to save money?
2. Is it reasonable to expect the post office to deliver to very rural addresses?

OM in the News: China’s Rare-Earth Escalation Threatens the Global Economy

China’s newest restrictions on rare-earth materials would mark a nearly unprecedented export control that stands to disrupt the global economy and threaten the supply chain for semiconductors, writes The Wall Street Journal (Oct. 10, 2025). Chips are the lifeblood of the economy, powering phones, computers and data centers needed to train artificial-intelligence models. The rule also would affect cars, solar panels and the equipment for making chips and other products, limiting the ability of other countries to support their own industries. China produces roughly 90% of the world’s rare-earth materials.

Global companies that sell goods with certain rare-earth materials sourced from China accounting for 0.1% or more of the product’s value would need permission from Beijing, under the new rule. Tech companies will probably find it extremely difficult to show that their chips, the equipment needed to make them and other components fall below the 0.1% threshold.

“These rare-earth minerals and the ability to refine them are just the basis of modern civilization,” said one industry expert. “It’s an economic equivalent of nuclear war—an intent to destroy the American AI industry,” added a second. The U.S. and other countries are pouring hundreds of billions of dollars into data centers, making AI a key economic engine. China gaining control of the technology would potentially let it catch up in the AI race and upend the world order.

The semiconductor supply chain is vulnerable to actions like China’s because large chip plants require big capital investments from an ecosystem of companies providing specialized equipment, intricate technical processes and final packaging. Companies in the U.S., Taiwan, Japan and the Netherlands all collaborate with one another.

The Trump and Biden administrations have offered subsidies and other policies to aid the process, but domestic capacity generally remains in its infancy. Some analysts said the new rules will fuel new urgency for big tech companies to invest more in these areas.

Classroom discussion questions:

Why are rare earths so important?
Why doesn’t the U.S. produce and process the minerals needed?

Guest Post: Sharpie’s U.S. Comeback– A Masterclass in OM

Prof. Jon Jackson is Associate Professor of OM at Providence College. He created AI classroom exercises–appearing in our Instructors Resource Manual– for every chapter of the text.

Newell Brands (the parent company for Sharpie markers) just revealed how it revitalized one of America’s most iconic writing tools through strategic operations management. The company invested $2 billion to bring production of Sharpie pens back to its Tennessee plant, leveraging automation, workforce empowerment, and supply chain redesign to lower costs while keeping prices stable. It serves as a powerful illustration of how operational excellence can become a source of strategic advantage.

For decades, manufacturing strategy centered on offshoring—moving production to lower-cost countries to chase labor savings. Newell flipped that logic. By reshoring Sharpie production, it bet on process innovation through automation, reports The Wall Street Journal (Oct. 6, 2025). The Tennessee plant now produces pens up to 4 times faster than before, thanks to robots and computer-vision systems that detect defects in real time. (The factory operates around the clock, making 1.8 million fine-tip Sharpies a day). Newell also reengineered workflows, balanced production lines, and embedded quality control directly into the process.

A common fear associated with automation is job loss. Sharpie’s story shows an alternative path. Rather than cutting staff, Newell retrained workers for higher-skill roles such as robotics support, maintenance, and technical troubleshooting. These new roles led to average wages increasing by nearly 50%.

Bringing production back to the U.S. also reshaped Newell’s supply chain. Domestic production reduced lead times, transportation costs, and exposure to global disruptions and geopolitical risks. In doing so, Newell gained not only cost efficient but also greater agility and control over its operations.

While not every company can afford a $2 billion operational overhaul, Sharpie’s success underscores a broader lesson: sustainable cost advantage often comes from process innovation and continuous improvement, not from chasing the lowest labor costs.

Classroom Discussion Questions:

Why did Newell’s decision to reshore Sharpie production make sense strategically, even though U.S. labor costs are higher?
What other “simple” products could benefit from following Newell’s operational strategy to reshore?

OM in the News: Can Apple Change Its Supply Chain?

President Trump recently demanded Apple and other smartphone makers like Samsung make their phones in the U.S. or face a 25% tariff, reports CNN Business (May 23, 2025). But Apple’s CEO, Tim Cook, says its plan is to manufacture iPhones set to be sold here at newly built plants in India, stating “the majority of iPhones sold in the U.S. will have India as their country of origin.”

Unlike Apple, Samsung doesn’t rely on China for smartphone production. The South Korean giant closed its last phone factory in China in 2019. The vast majority of its smartphone manufacturing takes place in South Korea, Vietnam, India and Brazil.

Treasury Secretary Scott Bessent stated: “I think that one of our greatest vulnerabilities are external production, especially in semiconductors, and a large part of Apple’s components are in semiconductors. So we would like to have Apple help us make the semiconductor supply chain more secure.”

The world’s most valuable publicly traded company is flush with cash and rakes in tremendous profit — more than any company in history. But Apple has long contended that it cannot manufacture iPhones here. It has instead invested billions of dollars training millions of skilled engineers abroad, claiming China and India simply have more skilled engineers–and that they cost significantly less.

In 2010, Steve Jobs, Apple’s late CEO, called America’s education system an obstacle for Apple, which needed 30,000 industrial engineers to support its on-site factory workers. “If you could educate these engineers, we could move more manufacturing plants here,” he told then-President Obama.

So, can Apple reshore iPhone production? The notion is a “fictional tale,” says tech exec Dan Ives at Wedbush Securities. “U.S.-made iPhones could cost more than 3 times their current price of $1,000, because it would be necessary to replicate the highly complex production ecosystem that currently exists in Asia. You build that supply chain in the U.S. with a fab in West Virgina and New Jersey, they’ll be $3,500 iPhones. And even then, it would cost Apple about $30 billion and three years to move just 10% of its supply chain to the US to begin with.”

While moving iPhone production to the U.S. may not be possible, Apple did announce a $500 billion investment to expand its U.S. facilities earlier this year, in an effort to appease the President.

Classroom discussion questions:

Is it true that China and India have more engineering talent than the U.S.?
Discuss the pros and cons of reshoring iPhone production from an OM perspective.

OM Podcast #34: An Inside Look at Tariffs

In our latest podcast Barry Render interviews Bob O’Donnell, Vice President of Business Development of Life Sciences at East Coast Warehouse, who previously spent 13 years with Maersk Logistics and Services. Barry and Bob discuss tariffs and their potential impacts.

Heizer Render Munson OM Podcast · OM Podcast #34: An Inside Look at Tariffs

Transcript

A Word document of this podcast will download by clicking the word Transcript above.

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Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM. See our earlier blog post with a recording of author and user Chuck Munson to learn how to find these, or contact your Pearson rep to learn more! https://www.pearson.com/en-us/help-and-support/contact-us/find-a-rep.html

OM in the News: A Brief History of How the U.S. Lost Its Manufacturing Edge

In the 1950s, 35% of private-sector jobs in the U.S. were in manufacturing. Today, there are 12.8 million manufacturing jobs in the U.S., about 9% of private-sector jobs. To understand whether restoring manufacturing to the U.S. is possible, it helps to first understand how the U.S. lost its place as the world’s manufacturing powerhouse.

In the early 1900s, the U.S. pioneered the use of interchangeable parts and organizing factors for mass production. World War II prompted a massive increase in manufacturing capacity. In the postwar years, more Americans joined the middle class, driving jumps in spending on the cars and appliances for their newly purchased homes. America was America’s best customer for manufactured goods.

A North Carolina textile mill in 1960, when U.S. manufacturing was still dominant

Many of these goods were high tech for the time, such as dishwashers, TVs and jets, brought about by wartime innovations. Making them in America, as opposed to some other country, made sense because staying on the leading edge required R&D teams working closely with the factory floor. It helped, too, that the U.S. had the most educated workforce in the world.

After the 1950s, manufacturing’s role in the U.S. economy began to slip, writes The Wall Street Journal (April 14, 2025). More people were going to work for service-sector employers such as hotels, banks, law firms and hospitals. Manufacturing employment leveled off, as services jobs grew. Around this time, less developed parts of the world, where labor costs were much lower, began dialing up manufacturing of nondurable goods in Latin America and Asia. The U.S. started importing more and more of those items. Over time, the same thing happened with light durable items, such as blenders.

In the 1980s, things began to change. American manufacturers of nondurable goods had an increasingly difficult time competing with countries where labor costs were lower. That intensified in the 1990s, in part as a result of NAFTA lowering duties on Mexican goods.

There were also job losses at steel producers after developing countries such as South Korea built up their steel industries and left the world awash in excess capacity. But what happened in the 1980s and 1990s pales in comparison to what happened after China joined the World Trade Organization in 2001, opening its country to foreign investment and gaining access to global markets. Manufacturers of low-tech items such as furniture and small household appliances, in particular, suffered. It was called the China Shock.

The U.S. now exports in excess of $1 trillion-worth of services—far more than any other country.

Classroom discussion questions:

1. How can the U.S. best restore its manufacturing leadership?

2.What makes the U.S. the leader in exporting of services?

OM in the News: Tariffs and a Strategic Move to Reshore Manufacturing

“President Trump has certainly employed tariffs as a strategic tool to reshape the American manufacturing landscape,” writes UCLA Prof. Chris Tang in Industry Week (March 10, 2025). The vision driving these initiatives, at its core, aims to bring manufacturing back to the U.S., reduce trade deficits, and protect national security.

Reshoring The central pillar of the strategy is to incentivize both American and foreign companies to establish manufacturing operations here. Imposing tariffs on imported goods provides a financial rationale for companies to rethink their offshoring strategies. The goal is to rebuild a robust industrial ecosystem that produces goods domestically for world markets.

Trade deficits Most countries impose higher tariffs on American goods than the U.S. imposes on theirs. For example, the U.S. has relatively low tariffs on dairy products, around 25%, whereas Canada imposes tariffs of over 200% on certain dairy imports from the U.S. With reciprocal tariffs and higher import tariffs, the U.S. seeks to make it less attractive for companies to rely on cheap foreign labor –and more feasible to invest in America. This shift is expected to reduce the trade deficit and boost domestic economic growth.

National Security Implications Dependency on foreign manufacturing in critical sectors like technology and pharmaceuticals poses risks. By encouraging companies to produce these goods domestically, the U.S. can ensure a more secure and reliable supply chain (critical during crises such as the pandemic).

Many firms have shifted operations from China to other countries to avoid paying higher tariffs associated with Chinese imports. For example, Apple shifted some operations from China to friend-shoring countries such as India. Likewise, toy manufacturer Mattel and tech manufacturer HP expanded operations to Mexico as a near-shoring strategy.

A significant outcome on the new tariffs is the renewed focus on building domestic manufacturing capabilities and its significant infrastructure. Apple plans to invest more than $500 billion in the U.S., Eli Lilly $27 billion, and Taiwan’s TSMC over a $100 billion (for 3 new semiconductor plants).

Rebuilding an industrial ecosystem that was hollowed out over decades requires substantial investment, skilled labor and modern infrastructure. There are many long term benefits, including growing the U.S. economy through economic revitalization.

Classroom discussion questions:

What is the difference between near-shoring, reshoring, and friend-shoring?
Summarize the advantages of tariffs as a tool, according to Prof. Tang.

OM in the News: Delivery Wars!

A decade ago, Walmart’s thousands of stores across the country made it look like a dinosaur in the online-shopping era, writes The Wall Street Journal (March 8-9, 2025). Now the retail giant is mounting one of the few serious challenges to Amazon’s dominance in e-commerce, and those very stores are central to its strategy.

Samantha Atkinson became a Spark driver last year to supplement her income. When Walmart workers load the car of a delivery driver, one order generally goes in the trunk, the second in the back seat and the third in the front passenger seat to prevent delivery errors.

Walmart delivered 5 billion items on the same day they were ordered last year, double the number delivered in 2023. It can now deliver most of the 120,000 products in its supercenters, including meat, eggs and milk, to 93% of U.S. households the same day, sometimes in hours. “I am very, very grateful that we have 4,700 stores,” which now double as fast-delivery hubs, says Walmart’s CEO. To make most of those speedy deliveries, the retailer relies on thousands of freelance drivers using a system called Spark, created by Walmart, which uses an app to coordinate online orders. Tens of thousands of Spark drivers, who aren’t Walmart employees, make the majority of same-day deliveries.

About 41% of U.S. e-commerce sales go through Amazon, a much bigger share than Walmart’s 9%. But Walmart had $681 billion revenue in 2024 versus Amazon’s $638 billion. Over years of attempts, tests and failures, Walmart has carved out a niche that has Amazon working to catch up—fast delivery of online orders that often include inexpensive groceries, and increasingly other items it sells in its stores, such as clothing, batteries and prescription medicines. Walmart gets more than 50% of its revenue from meat, eggs, lettuce and other groceries. It has used its scale to drive down prices for those items, which draw shoppers for regular trips.

Walmart’s same-day delivery coverage has stretched from 76% of U.S. households 2 years ago to 93% today.

Amazon also continues to expand rapidly. It has over 1,000 shipping facilities around the U.S., and more than 200 million people globally subscribe to its Prime membership. The similar Walmart+ offers free delivery for orders over $35.

But Amazon has struggled to dominate the fresh-food delivery business. It’s tried several models for delivery through Whole Foods and Amazon Fresh.

Classroom discussion questions:

How does Walmart’s delivery service compare to Amazon’s?
What is Walmart’s strategic advantage? Amazon’s?

OM in the News: Is Apple Really Reshoring?

With great fanfare, Apple just announced plans to spend $500 billion (yes–that’s a half a trillion dollars!) in the U.S. and add 20,000 jobs over the next 4 years. Apple, like many of the most valuable U.S. companies, isn’t a major manufacturer. It designs products, writes software and creates chip blueprints, but outsources much of its production and markets the results.

But early in the Trump administration, Apple and other companies are trying to quickly answer the president’s call to rouse American manufacturing, reports The Wall Street Journal (Feb, 25, 2025). To do that, they are turning to investments and job growth. Apple’s new jobs promises are slightly ahead of the company’s recent 4-year pace, and the spending pledge is roughly on track with its recent investments that include previously planned spending or developments already under way.

The company has yet to spell out how many people it will continuously employ beyond saying it will create thousands of jobs. If Apple adds 20,000 jobs, it would mark only a modest increase in hiring over the 19,000 U.S. workers every 4 years since 2013.

Unclear is how much of the planned spending is actually new. Apple has spent about $1.1 trillion over the past 4 years on total operating expenses and capital expenditures, of which about $500 billion was in the U.S. In short, Apple’s announced figure is in line with what one might expect the company to be spending anyway.

While it is still largely dependent on East Asia, and China in particular, Apple has been using more suppliers that manufacture in the U.S. since the pandemic. Its expansion includes a multibillion-dollar commitment to produce advanced silicon in a fabrication facility in Arizona, and a new 250,000-square-foot factory in Houston is slated to open in 2026 and produce servers for AI systems.

Big investment plans don’t always pan out. In 2018, electronics-maker Foxconn—one of Apple’s big suppliers—said it would invest $10 billion and create 13,000 jobs at a liquid-crystal-display plant in Wisconsin. Foxconn later cut investment to under $700 million and 1,450 jobs.

Classroom discussion questions:

Why do such announcements often not result in the advertised plans?
Why is Apple moving some its manufacturing to the U.S. from China?

OM in the News: The Challenge for Made-in-America Bikes? Made-in-China Parts

In 2022, Brian Riley (shown in photo) opened a bicycle factory in Seymour, Ind., shifting production of his Guardian Bikes brand to the U.S. from China. The problem for him now: Nearly all the parts still come from China.

Almost all of the bicycles sold in the U.S. are imported, and most of those are made in China or assembled from Chinese parts, writes The Wall Street Journal (Jan. 7, 2025). A typical bicycle is made of 30 to 40 parts, most of them from different Chinese manufacturers.

For now, components from China represent about 90% of the total cost of Guardian’s parts. By the end of next year, Riley hopes that figure will be about 20%. Guardian is starting production of its own bike frames and is working to source parts such as grips and reflectors stateside. As a result of Guardian’s new manufacturing, American-made parts could represent about 60% of the cost.

Riley decided to locate his factory in Indiana because it was close enough to most places in the U.S. for 2-day shipping and because it was near steel mills where the company could source material when it eventually made its own frames.

Opening a factory in the U.S. wasn’t easy. Riley was able to hire a group of skilled workers because a local manufacturer went out of business. At first, workers were slow to build the bikes, putting together 100 a day. It took time and constant tweaking of the assembly line to improve their speed and efficiency. Guardian’s labor costs shot up, though they were partially offset by the lower freight costs of shipping individual components from China rather than mostly assembled bikes.

The factory’s 250 staff can churn out up to 2,700 bikes a day, and Guardian has the scale to begin contracting with U.S. parts manufacturers. Guardian plans to begin making bike frames at the factory this year, using American steel. It has asked its Brazilian rim supplier to consider a facility in Indiana, and is also considering making rims itself. Guardian has approached U.S. suppliers that could provide grips and reflectors. Other labor-intensive parts such as hubs or cranks may be harder to source in the U.S.

Classroom discussion questions:

How did the U.S. lose the bicycle industry years ago?
What will it take for the U.S. to reclaim leadership in this industry?

OM in the News: A Christmas Tree Shortage?

The plant disease phytophthora has presented another setback for some Christmas tree growers.

Millions of Americans will venture out to buy a live Christmas tree this weekend—though growers are having to overcome historic challenges to get them to the lots. Root rot. Scant labor. Foreign competition. Inflation on everything from seeds to tractors. And that was before Hurricane Helene wreaked havoc on the western part of North Carolina, which produces more Christmas trees than any state except Oregon.

Helene’s impact will affect the Christmas tree industry for years to come, writes The Wall Street Journal (Dec. 3, 2024). It takes 10 years to grow a full-size Fraser fir, which grows about a foot a year. Many of the trees that were damaged were several years from maturity, pressuring supply in 5-6 years. Others were seedlings being closely tended to in a nursery for several years before being planted on a mountainside.

The storm made a difficult business even harder. The Fraser fir thrives on the high peaks of the Appalachians, with their cool temperatures and plentiful rainfall. But rain has been unpredictable, not only from the 10 inches of rain dumped by Helene but also by the frequent lack of it. A drought several years ago knocked out much of that year’s crop.

Scant labor is also a problem. North Carolina is one of the biggest users of the H-2A visa program for agricultural workers. The regulations around hiring foreign workers have become increasingly cumbersome. Industry challenges are both external and from within, particularly with the proliferation of phytophthora, a root rot related that is difficult to eradicate.

The industry is also up against shifting consumer habits, such as some aging baby boomers’ preference to stop putting up live trees. There is increasingly stiff competition from China-made artificial trees, which have become easier to assemble and more lifelike, sometimes boasting scents like “white winter fir.” Such challenges have buffeted market size: The number of trees harvested in the U.S. has declined 30% since 2002, even as the American population has grown 16% over the same period. (About 21.6 million real Christmas trees were purchased in the U.S. last year at a median price of $75).

Classroom discussion questions:

Provide a SWOT analysis for a N.C tree farmer. (See page 41 of your Heizer/Render/Munson text).
What percent of your classmates’ families are buying a fresh tree this year? Is it different from 5 years ago?

OM in the News: Taking Nerf Guns Away From China

Nerf guns. Monopoly board games. G.I. Joes. Some of Hasbro’s bestselling toys are getting pricier as the U.S. implements stiff tariffs on Chinese imports. So Hasbro, and others like Barbie maker Mattel, are negotiating with suppliers and considering design changes. The threat of new taxes on toy imports comes amid a long-term shift in the industry away from China, spurred by rising labor costs in that country. Manufacturers have spent years trying to make fewer toys and games in China by relocating to factories in other countries, including Vietnam and India.

Across industries, U.S. companies have been diversifying their supply chains, prodded in part by tariffs implemented during both the Trump and Biden administrations, writes The Wall Street Journal (Nov. 18, 2024). Makers of everything from steel and semiconductors to auto parts are rejiggering supply lines to source components from other countries. Sharpie and Yankee Candle maker Newell Brands, for example, is moving more factory work to the U.S.—the desired result of the tariffs.

Hasbro’s current target is for roughly 20% of its U.S. sales to come from China-made products within four years, down from about 40% today. The challenges the company has faced in achieving a long-held goal underline the pressure facing toy makers. While lower-cost locations are easy to find, switching to a new factory with similar product-quality and safety standards can be a challenge in the toy industry.

Unlike in some industries, automation has yet to make major strides in parts of the toy-making process. Assembly for many toys still relies on skilled workers to put together the latest action figure or hand-paint details. Shifting to a different country requires training a new generation of craftspeople. Smaller factories in South and Southeast Asian countries also might not produce enough units to easily replace Chinese facilities.

Hasbro’s shift away from China is part of a $750 million cost-cutting push that includes negotiating lower prices from suppliers or changing designs to make them cheaper to build, such as Jenga blocks that now use a single type of wood. The change lowered costs and had the added benefit of making the pieces slide more smoothly out of a Jenga tower. Meanwhile, the Chinese government has been pushing for the country to graduate from being a hub for lower-cost work, such as toy making.

Classroom discussion questions:

What other products have been moving away from China?
Have the tariffs been successful?