Chapter 6 – Page 2 – The OM Blog by Heizer, Render, & Munson

OM in the News: Dealing with Manufacturing Quality Issues

“Imagine a world in which every product that leaves a factory is flawless, every time,” writes The Wall Street Journal (March 18, 2024). What sounds like a plant manager’s dream is the end goal of zero-defect manufacturing, a term coined by Philip Crosby (and noted in Table 6.1 on page 217). Surging recalls have cast a harsh light on the quality of American manufacturing. But some companies say a combination of technology, training and focus can eliminate errors.

At Schneider Electric, employees are encouraged to speak up about product quality, anonymously if desired.

Ford’s CEO has said the automaker must reach “a zero defect destination,” and that the company has used assembly-line AI and extensive test drives to catch problems in its trucks. Stellantis, which is similarly targeting zero defects, said more than 100 new quality standards have led to a double-digit percentage drop in auto warranty claims. Companies in industries as varied as pharmaceuticals and snack foods have also announced zero-defect goals.

More manufacturers say they are aiming for perfection as quality-control problems have mounted. In 2022, auto makers spent record amounts on warranty claims. Recalls hit a six-year high in 2023, and jumped last year among pharmaceutical and food manufacturers. Undertrained workers, the increasing complexity of products and more sprawling supply chains were contributing to quality problems.

The zero-defects philosophy took shape in the early 1960s when defense contractor Martin-Marietta sought to eliminate errors from Pershing missiles. It had relied on inspections to find problems as small as a loose valve but refocused on prevention, exhorting workers with posters and rallies to do their jobs right the first time—followed by extensive audits. Errors at Martin plunged as hundreds of employees racked up long streaks of perfection. One worker made 500,000 solder connections without a mistake, while another put together 50,000 defect-free assemblies.

While quality programs helped U.S. companies improve their products considerably in the 1980s and 1990s, the effort stalled when businesses began outsourcing much of their work to low-cost regions.

This cost of poor quality can equate to at least 10% of sales once all factors, including the time spent dealing with problems, are taken into account. Human error is a perennial cause of defects, but it can be taken out of manufacturing systems. A machine can be built so it is impossible to load a tool backward, or an adhesive dispenser designed so it shuts off when it runs dry.

Classroom discussion questions:

Why do we write in Chapter 6 that “quality cannot be inspected” into a product?
How do “zero defects” and “six-sigma ” compare?

OM in the News: Behind Boeing’s Alaska Blowout

Just last week, we posted the story of Boeing’s intended takeover of its troubled fuselage provider, Spirit AeroSystems. Today’s post is a story of quality control at Boeing. You will recall that a door blew off an Alaska Airlines flight in January because a few bolts were not properly installed. Months before the 737 piece blew out midflight, the plane spent nearly three weeks shuffling down an assembly line with faulty rivets.

*Traveled work*—when work is completed out of the production line’s ordinary sequence—is a problem of Boeing’s safety culture.

In turns out that workers had spotted the bad parts almost immediately after the plane’s fuselage arrived at the factory from Spirit, reports The Wall Street Journal (March 12, 2024) . But they didn’t make the fix right away and the 737 continued on to the next workstation. (See the Chapter 9 photo on page 383 illustrating the assembly line process). When crews completed the repair 19 days later, they failed to replace four critical bolts on a plug door they had opened to do the job, leading to the accident.

At Boeing, there is a term for situations when work is completed out of the production line’s ordinary sequence: traveled work. This practice of completing work out of sequence is a liability when it comes to airplane quality. “The folks on the line, they know what it is,” Boeing CEO said. “It creates opportunities for failure.” Yet, four years ago, Boeing laid out 5 values central to improving safety. Number 3 on the list: eliminate traveled work.

Doing work out of order complicates the intricate, taxing process of putting together an airplane. In the 737 factory, each plane moves its way through a series of stations, where crews are tasked with completing certain tasks. Those stations are equipped with tooling, platforms and crews trained to do the jobs designated for the site. Planes advance to the next station every 24 hours. Keeping production lines moving even when certain parts aren’t available for a given job helps avoid costly slowdowns.

When a missing part prevents workers from finishing, the plane still moves ahead and the part gets added or repair is completed somewhere down the line. Sometimes, the work isn’t done until the plane leaves the factory. But the proper tooling may not be on hand there, leaving workers moving back and forth to get the necessary equipment.

Classroom discussion questions:

As the new OM head of the 737 line, what is your recommendation?
Can an assembly line like this be stopped?

OM in the News: AI in Manufacturing

Manufacturers are increasingly evaluating and adopting AI solutions to leverage their data, writes Industry Week (Feb. 13, 2024). Here are some key areas that stood out in how manufacturers are adopting the technology:

Quality control enhancement: AI can improve manufacturing quality control through vision systems trained on images and videos, accurately detecting complex product defects. Real-time monitoring identifies issues promptly to prevent future defects, and AI’s continuous learning enhances defect detection. (See Ch. 6)

Supply chain visibility: Manufacturers deal with enormous amounts of data in their operations, and the integration of AI technology allows real-time observation, quicker trend identification and more accurate forecasting to meet demand effectively. AI algorithms analyze historical sales data, market trends and external factors, enabling more precise demand forecasts and aligning production and inventory levels. In logistics, AI optimizes routes by analyzing transportation costs, delivery times and traffic patterns, enhancing efficiency and cost-effectiveness. The strategic use of AI in the supply chain offers benefits like improved visibility, increased agility and better planning, enhancing overall resiliency and responsiveness. (See Ch. 11)

Energy efficiency and resource utilization: Companies are using AI to optimize energy consumption and resource utilization in manufacturing processes. These capabilities analyze real-time data from sensors, production equipment and other sources to identify patterns and trends in energy usage. This can inform predictive recommendations to optimize energy consumption, reduce waste and enhance overall resource efficiency. (See Supp. 5)

Predictive maintenance improvement: The use of AI in predictive maintenance enables a shift from reactive to proactive strategies, leveraging data-driven approaches. AI algorithms analyze real-time data to predict maintenance needs and failures. AI identifies patterns on the factory floor, detecting anomalies and potential malfunctions. This proactive approach minimizes unplanned downtime, extends equipment lifespan and allows manufacturers to optimize resource allocation through scheduled service activities during planned downtime, enhancing overall productivity and reducing costs. (See Ch. 17)

The use of AI in manufacturing operations in coming years is expected to accelerate. Investment in AI technologies is forecast to rise among 96% of companies by 2030.

Classroom discussion questions:

How will AI become a common tool for operations managers?
Using a search engine, describe a real company example for these applications.

OM in the News: Is Allegiant Really One of America’s Best Airlines?

Perhaps surprising to students and professors who fly a lot, Allegiant Air took 3rd in The Wall Street Journal’s (Feb. 8. 2024) annual airline scorecard, which ranks nine major carriers on their operational performance.

It’s the highest finish for the Las Vegas-based no-frills airline. The smallest carrier in the rankings scored well in the categories of (1) fewest mishandled bags, (2) fewest cancellations and (3) fewest passengers involuntarily denied boarding.

Flying Allegiant does mean accepting limitations. Some routes are only available twice a week. If there is a cancellation, travelers could be stuck for days. It charges a host of fees for add-ons—picking a seat assignment, bringing a carry-on bag or even ordering a premium beverage. But Allegiant only flies nonstop, meaning fliers can avoid annoying layovers that increase the chances of a trip gone wrong.

Allegiant has grown more reliable. In 2022, it canceled 4.25% of its flights, the most of any airline in the WSJ rankings, and fewer than 2/3 of its flights arrived on time. It finished 5th overall in that 2022 rankings. In 2023, the airline canceled less than 1% of its flights and improved its on-time arrival percentage to 72.8%—10 points up from the year before. (Allegiant still finished 6th of 9 carriers for on-time arrivals.)

So what are its operation management advantages? First, Allegiant flew its planes for about 7.5 hours per day in 2023, hours less than Spirit and Frontier, which are its low-budget competitors. That relative infrequency gives Allegiant more time to recover if things do go wrong. Second, Allegiant flies less than Frontier and Spirit. It had 115,500 flights scheduled in 2023—60% of Frontier’s total and 38% of Spirit’s. Third, unlike Spirit and Frontier, Allegiant doesn’t oversell its flights, so it didn’t bump a single passenger last year. It also placed first in baggage.

Allegiant placed 5th in complaints in the rankings. It says it plans to add more self-service tools so customers can make changes on their own, as well as add more precise callback features. Allegiant had a higher rate of delayed flights than the larger airlines because of the infrequency of its routes and the fact that it frequents smaller airports. The airline says it would rather delay flights than cancel them.

Classroom discussion questions:

From an OM perspective, what is Allegiant doing well? Why?
How can it improve its perceived quality?

OM in the News: Have a Fear of Flying? Don’t Read Today’s Post

Airlines’ hiring binge has suddenly thrust many pilots behind the controls of different, bigger planes than they are used to flying, reports The Wall Street Journal (Nov. 8, 2023). That rapid advancement is fueling anxieties over whether pilots’ newness to certain aircraft could lead to serious incidents and accidents.

The union for Southwest’s pilots believes the airline’s initial training program needs a bigger revamp. Major carriers have added nearly 10,000 pilots to their ranks this year.

Pilot newness to airplanes’ make and model is among the factors officials have looked at since air travel’s fast, and often strained bounce back from the pandemic. This aspect of “juniority” has emerged in the aftermath of some serious problems over the last two years, leading pilots, airline officials and safety experts to scrutinize the experience level of the people in the cockpit.

With travel demand soaring, pilots are moving up through the ranks faster than before. Major carriers are pulling pilots from regional carriers more quickly, with pilots used to smaller airliners advancing to bigger planes, needing to learn new procedures, controls and quirks. Airlines that hurried pilots out the door during the height of the pandemic had to quickly pivot when demand surged back. Carriers have added 23,000 pilots to their ranks the past two years, dramatically higher than decade long averages.

There is precedent for concern. The U.S. Transportation Department found a correlation between accidents and pilot experience with aircraft type. Analyzing 322 airline accidents, the office found fewer accidents involving pilots who had more time flying the aircraft make and model.

The industrywide battle for pilots has jolted the methodical pilot career progress. Regional carriers are struggling to hold on to pilots for more than a few years. About 8,000 regional pilots are expected to move on to bigger airlines this year—44% of that workforce. Before the pandemic, regional pilot turnover was 10% to 20%.

“The pace of hiring and the resulting turnover is unprecedented. I do have a concern over the experience in seat,” said the CEO of one carrier. Some pilots are able to move from smaller planes to bigger ones or to upgrade from first officer to captain years faster than the decade-long waits they sometimes faced in the past. The chairman of the United pilots’ union said the airline’s internal monitoring systems have turned up issues that appear to be correlated with the amount of time pilots have spent in their seats.

Classroom discussion questions:

What tools in Chapter 6 of your Heizer/Render/Munson text could be used to analyze this potential problem?
What would quality guru Philip Crosby say about the issue? (see page 217)

OM in the News: 2022 Was Not a Quality Year for the Airlines

Chaos. Bedlam. A nightmare. Frustrated fliers spared no superlatives when describing the mess that unfolded in 2022 as travelers returned in full force.

Delta had the lowest cancellation rate among major carriers included in WSJ’s rankings.

Delta Air Lines’ CEO described 2022 as “the most difficult operational year in our history.” This from the airline that The Wall Street Journal (Jan. 19, 2023) ranked first among nine U.S. carriers in its 15th annual airline scorecard. Alaska Airlines, featured in the Global Company Profile in Chapter 15 of your Heizer/Render/Munson text was a repeat runner-up, followed by Southwest, United, Allegiant, American, Spirit, and Frontier. JetBlue finished last for the second consecutive year.

Airlines are ranked by seven equally weighted metrics covering flight cancellations, on-time arrivals, delays, involuntary bumping, baggage handling and complaints.

The reasons for the industry’s problems are well documented, if little comfort to travelers. Fuller flight schedules to meet a surge in travel demand collided with staffing shortages and training backlogs. Air-traffic control issues multiplied. Extreme weather spread throughout the country. The year was bookended by holiday travel woes, with a messy summer-vacation season and hurricane headwinds in between.

Delta retained its crown by navigating the hurdles better than peers, but was far from perfect. The airline took the top spot in 3 of the 7 categories, down from five in 2021. Its on-time arrival rate of 82% beat all competitors, but was still down from 88% in 2021. The airline that for years has pledged to “cancel cancellations” canceled nearly 31,000 flights, more than three times the number it called off in 2021. Seattle-based Alaska would have edged Delta in this category were it not for the storms that socked the Pacific Northwest in December.

Allegiant Air, the carrier that shuttles vacationers from smaller cities to holiday spots like Las Vegas, Florida and Arizona, was ranked 5th and canceled 4% of its flights, the most of any airline. It also had the lowest on-time arrival rate, at 63%. But the airline was helped by its top showing in baggage handling and involuntary bumping.

JetBlue earned the title no airline wants—worst performing U.S. carrier—because it posted relatively poor numbers in nearly every category. It blames continuing operational issues on its heavy concentration of flights in NYC and the congested surrounding states.

Classroom discussion questions:

How do your students rank these carriers?
What would be your strategy if you were Jet Blue’s operations manager?

Guest Post: The Plan, Do, Check, Act (PDCA) Cycle

Our Guest Post today comes from Prof. Phillip S. Coles at Lehigh U.’s Dept. of Decision and Technology Analytics.

The Plan, Do, Check, Act (PDCA) Cycle, also known as the Deming Wheel, is an important tool in Kaizen, or continuous improvement. (It is discussed in Ch. 6 of your Heizer/Render/Munson text). In Plan we search for process problems and/or possible improvements and establish objectives. In Do we execute the improvement on a small scale and collect performance data. The results are assessed in Check, and finally we Act by adopting the change, if approved, or if it fails, abandon it and analyze the failure. We start over by returning to Plan to again improve the process. We continue turning the wheel in an endless cycle of continuous improvement.

The PDCA cycle is enhanced when used in conjunction with the Standardize, Do, Check, Act (SDCA) Cycle because a process cannot be improved without a thorough understanding of the process. Without standardization, if there are 100 people doing a particular job, there are most likely 100 ways the job is being done. Standardization establishes a baseline and ensures everyone is doing the job in the best way possible – the present state of the art.

Standardize the best way the process is currently being done. Do implement the standard operating procedure. Check to make sure everyone is doing the same thing and finally Act by correcting any deviations from the standard. Standardization removes variability, the enemy of quality, and the process can more easily be improved. Hence, why standardization is the base of the Toyota Production System, the topic of Ch. 16 of your text.

Once we have gone through the SDCA Cycle, we can move to the PDCA Cycle and improve the process. However, even though the process has been improved, because people are not accustomed to the new standard operating procedure, variability is increased. Therefore, we return to the SDCA Cycle to wring out variation through standardization and return stability to the process – then alternate the SDCA and PDCA Cycles in perpetuity.

If the PDCA Cycle is used exclusively, there will be increased variation between each turn of the Deming Wheel from the inevitable process drift. In this case the process would be improved, but between turns, as the process degrades, each successive improvement would be from a lower base. Standardization prevents process degradation. By using the SDCA and PDCA in combination, there is both stability and improvement, and progress is optimized.

OM in the News: At Ford, Quality Is Now Problem 1

In May, Ford recalled some Ford Expeditions and Lincoln Navigators after reports of fires while vehicles were parked. In June, it recalled 49,000 Mustang electric SUVs over concerns that the battery contactors could overheat. In the first 7 months of the year, Ford had 46 separate safety recalls on 6.8 million vehicles, more than any other U.S. auto maker.

Once touted for its quality record—“Quality is Job 1” was its slogan for much of the 1980s and 1990s—last year Ford set aside more than $4 billion for warranty costs, up 76% from 5 years earlier. Those billions that Ford spends yearly on warranty repairs and recalls could instead have gone towards spending for new EV models, and battery and manufacturing plants, writes The Wall Street Journal (Aug. 6-7, 2022).

Ford recalled Mustang Mach-E electric SUVs.

In 2021, Ford allocated $1,041 per vehicle for covering warranty claims compared with $713 per vehicle for rival GM. This year, in addition to the recalls, auto-safety regulators also opened a defect investigation into 2021 Ford Broncos after receiving reports of “catastrophic engine failures” at highway speeds.

One of the challenges at Ford was that it tried to make too many last-minute design and engineering changes ahead of a new-vehicle launch, increasing the risk of problems down the line. Workers rallied to fix problems when they blew up, but weren’t empowered to flag them early in the process when there was still time to head them off. Consumer Reports says Ford has too many new-model launches bunched together and often makes more substantive changes in its redesigns, while other car companies use more carry-over parts.

Ford recently installed video cameras to monitor the early build of vehicles—before production—to target any steps they can eliminate or simplify. Higher tech cameras are now used to inspect the vehicles for quality, too, allowing workers to scour for an incorrectly placed hose or a paint blemish. “We are placing more time and emphasis on ensuring everything is done right upfront to prevent quality issues from manifesting later in the development process,” says Ford’s new quality czar.

How Ford compares itself to rivals in quality has changed, too. It now sets its quality targets against the benchmarks of its competitors. One example is the quality of Ford’s Bronco SUV as compared with the Jeep Wrangler.

Classroom discussion questions:

Select one of the 7 tools of TQM found in your Heizer/Render/Munson text in Figure 6.5 and describe how Ford might use it.
When and where should Ford inspect according to Chapter 6?

Guest Post: There’s a Reason it’s Called Pareto’s Law

Our guest post’s teaching tip today comes from Dr. Jeff Heyl, who is Associate Dean at Lincoln University in Christchurch, New Zealand.

Apple has recently been involved in a court case with Epic Games. If you’re not aware, Epic Games is one of the largest players in the $100 billion mobile gaming industry. They have created popular games like ZZT, Fortnite, Gears of War, Blade, and Unreal. A major part of their revenue comes from in-game sales where players can purchase upgrades or options. But the app stores which distribute these games control the in-app purchases as well as the basic game. Epic was not happy about paying Apple and Google a percentage of these purchases and sued them both. A California court has recently issued a verdict that will force Apple to allow other payment methods.

Here’s where it gets interesting, and reveals the universality of Pareto’s law. It turns out the sale of the mobile games is the major source of revenue for the app stores. Essentially 70% of an app store’s revenue comes from gaming apps, but gaming customers account for less than 10% of all app store customers. Compare this to the 80% of app store customers who generate virtually no revenue, 80% of the apps on the store are free.

Within this one situation, there are two clear examples of Pareto’s Law at work, the 70/10 apparent in the purchasing behavior of gaming customers and the 20/80 ratio relating to free apps. If we relate those to the classic ABC prioritization model presented in Chapter 12, the app sales would be A’s, the free apps the C’s. This further illustrates that the old 80/20 ratio is very flexible. Neither of these match directly to that ratio, but both illustrate the concept.

As a classroom example, it might be enlightening to ask the students to come up with other examples of Pareto’s Law at work. It’s very common once you start to look for it. This can lead to some interesting discissions about how one could use the analysis in a decision-making perspective to prioritize effort and resources in areas other than inventory management.

OM in the News: Hospitals Learn About Safety From Airlines?

Major U.S. passenger airlines have forged a phenomenal safety record largely by relying on pilots, controllers and mechanics to voluntarily report incipient hazards. Analyzing such incident data and then disseminating lessons from it has meant more than a decade without a fatal crash.

Over the same period, the country’s healthcare system has tried to mimic some of these air-safety principles, but it has made scant progress in eliminating deadly treatment errors. Mistakes in hospitals are estimated to cause at least 250,000 unnecessary patient deaths annually in the U.S., reports The Wall Street Journal (Sept. 4-5, 2021).This makes it the fourth leading cause of medical fatalities after cancer, heart disease and Covid-19. Determined to do better, healthcare leaders are now doubling down on aviation’s lead.

The heart of the idea is prodding doctors and hospitals to share more digital data and wholeheartedly embrace self-reporting of their potentially deadly “near misses,” the way that pilots already do without fear of punishment. But as long as hospital equipment isn’t designed to guard against human slip-ups, as jetliner cockpits are, “it will be far too easy to crash the plane in healthcare,” says one hospital Chief Quality Officer.

One obstacle is that financial incentives for hospitals are still not aligned around quality and safety. Typical billing practices track the number and complexity of procedures instead of the outcomes. Information sharing in healthcare is pitiful compared to aviation. When medical errors are reported, it’s usually well after the fact, and information usually stays within the organization.

One element of air safety that has already made big inroads in medicine is reliance on checklists, in large part thanks to Dr. Atul Gawande’s 2009 bestselling book “The Checklist Manifesto.” which we previously noted in this blog.

Classroom discussion questions:

Compare this article to the OM in Action box called “A Hospital Benchmarks Against the Ferrari Racing Team” on page 223 of your Heizer/Render/Munson text.
Now discuss this article in light of the OM box called “Safe Patients, Safe Hospitals” on page 231.

OM in the News: Boeing’s Operations Management Problems

Some 787s are even being stored in the desert.

How would you like to be in charge of operations at Boeing? There are forecasting problems, capacity issues, quality failures, and supply chain snarls. The result: Boeing’s commercial airplanes unit delivered an operating loss of $472 million in the quarter, says The Wall Street Journal (July 28, 2021).

This follows two all-consuming crises. Its MAX jets had been grounded for nearly two years after two fatal crashes that took 346 lives, and the pandemic had sapped demand for new airplanes as passengers stayed home and airlines retrenched. The company has also grappled with production-quality problems on its 787 Dreamliner. Global airline capacity remains 30% below pre-pandemic levels and industry executives expect it to take until 2024 to catch up.

U.S. aerospace companies last year announced plans to shed more than 100,000 jobs, including many at Boeing’s 12,000 suppliers. Boeing itself has plans to cut its own workforce by almost 1/5 to around 140,000 by the end of this year. While the return of the 737 MAX has bolstered sales and cash, Boeing has recently slowed Dreamliner production while it addresses new issues with the planes. The company has delayed deliveries to fix defects that emerged about a year ago and is awaiting regulatory approval for a plan to inspect aircraft. With customers unwilling or unable to receive deliveries of their new 787s, Boeing has 50 undelivered widebodies scattered around its facilities and is running out of space to park them.

The new 787 problem surfaced on the forward pressure bulkhead at the front of the plane. It involves the skin of the aircraft and is similar to a previously disclosed Dreamliner issue found elsewhere on the planes. Engineers at Boeing and the FAA are trying to understand the defect’s potential to cause premature fatigue on a key part of the aircraft’s structure.

Further, the firm needs orders from China to participate fully in a stronger-than-expected recovery in air travel. Boeing hasn’t secured a direct new jetliner order from China in almost 4 years, and has been pushing for improved trade relations with the U.S. Boeing’s payroll depends on U.S.-China trade relations, says its CEO.

Classroom discussion questions:

How can Boeing forecast jet sales in the coming years? What techniques in Chapter 4 of your Heizer/Render/Munson text are applicable?
Why is Boeing facing continuing quality problems?

OM in the News: Making Vaccine Bottles

Combating the Covid-19 pandemic is at the top of the global agenda. Providing vaccines to populations around the globe means providing 8 billion doses—with only one for every person in the world. In addition to the availability of the vaccine, a decisive factor in the race against time is the accessibility of the glass vials. Producers of the vials are massively ramping up their production so as not to become the proverbial bottleneck in the supply chain, reports New Equipment Digest (April 6, 2021).

vaccine

However, medical-grade vaccine vials are not standard glass tubes. They are all made of the special glass borosilicate and require customized production lines. For example, the glass must be resistant to a wide range of chemicals and temperature changes and must not contaminate medicines. Any interaction between the container and the liquid inside must be prevented, as any chemical interference could affect the vaccine. Even the smallest scratch, crack or fissure can render an entire batch unusable, contaminate the line during the filling process or even lead to a machine standstill.

The demands on manufacturers are enormous: it is not only a matter of producing large quantities quickly but also of maintaining particularly high-quality standards. So what is needed is very fast quality control with high reliability in defect detection. One solution is vision systems, our topic on page 296 in Chapter 7. Powerful cameras can capture images of 120 vials per minute to be inspected for dimensional accuracy or surface condition with very high precision. Defects such as cracks, scratches, chips, inclusions or stains are detected with an accuracy of 0.1 square millimeters. Intelligent software enables accurate fault description analysis and classification. Testing takes place at various points in the manufacturing process, such as directly after the bottles have been formed or shortly before packaging.

Classroom discussion questions:

What are vision systems and why are they a useful OM tool?
Which of the quality control tools in Chapter 6 (Figure 6.6) of your Heizer/Render/Munson text could vial producers employ?

Guest Post: The Tesla Recall

Prof. Howard Weiss, recently retired from Temple U., shares his stimulating insights monthly on our blog.

Tesla is about to recall 135,000 automobiles, reports The Wall Street Journal (Feb. 2, 2021). Recalls occur after delivery of an item to a customer and as noted in Chapter 6’s “Cost of Quality” section in your textbook, their external failure costs can be extremely expensive. In particular, this recall means that the direct costs to Tesla will include the “cumbersome physical repair” (according to Tesla); the cost of the computer chip that needs to be replaced; the cost of reimbursement for the 23,000 owners who paid out of pocket for the repair prior to the recall; and the cost of informing Tesla’s service centers and owners about the recall. Your text also notes that there may also be a loss of goodwill or possibly liability costs.

The Tesla recall has to do with the touch screen control. Its failure can impact many different features, including backup cameras, defog and defrost controls, turn signals, heat and air-conditioning. Tesla claims that the touch screen should last 5-6 years. This is analogous to the Mean Time Between Failures (MTBF) in Chapter 17’s discussion of Reliability. But the National Highway Traffic Safety Administration (NHTSA) expects the touchscreen to last “at least the useful life of the vehicle.”

Tesla, of course, is not the only automobile manufacturer to experience recalls. According to NHTSA, from 2000 to 2019 there have been 14,791 vehicle recalls in the U.S. affecting roughly 680,000,000 vehicles. Over 90% of the recalls were for safety reasons whereas the other recalls were for non-compliance with federal standards. Manufacturers voluntarily initiated 80% of these recalls, while the remainder were instigated by the NHTSA.

Classroom discussion questions:

Have you been affected by the recall of any product?
What will be the major cost to Tesla for this recall?

Good OM Reading: Quality is Free

This Thanksgiving, 2020, is unlike any in our living past. Yet we are still healthy, continue to teach (albeit differently), and have much to be grateful for. So I thought I would share with you and your students my memories of a friend and mentor, Philip Crosby, who died almost 20 years years ago. Crosby is famous for his dozen books on management and quality, starting with his classic 1979, Quality is Free, published by McGraw Hill.

Crosby guest-lectured in my MBA classes every semester for a decade and I required my students to select any of his books and write a 1-page report on how they personally benefitted from his insights. To this day, if you visit management offices of quality-conscious manufacturers worldwide, you are likely to hear the words “zero defects” and “do it right the first time,” with Crosby’s 4 absolutes of quality as their cornerstones.

Here are his words about that 1979 book: It goes back to how people think about quality. Conventionally, quality is always looked at as goodness, as gold-plating. Quality is viewed as an expense, a trade-off, something that you have to spend money on. But you can’t manage with goodness as your definition of quality. Quality is conformance to carefully thought-out requirements. So quality is free because it is already built-in. The expense of quality is nonconformance.

Crosby believed that workers are not the problem with quality–that they pretty much do what management tells them to do. He wrote: “People think that quality is some undefinable thing that you only know when you see it. Yet quality requirements are clear. They talk about vague things like delighting the customer, but you can’t tell people what that really means, so you can’t manage that way.”

His 4 absolutes are: 1. quality is conformance to requirements, not goodness.; 2. the basic aim of quality management is prevention, not appraisal; 3. that zero defects is the performance standard, not some acceptable level of defects like 6-sigma; and 4. the measurement of quality is the price of nonconformance.

Time flies by, but Crosby’s books are always worth a second read.

OM in the News: Why New Yorkers Are Dying

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

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

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

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

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

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

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

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

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

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

Classroom discussion questions:

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