Supplement 7 – The OM Blog by Heizer, Render, & Munson

OM in the News: Smarter Hospital Alarms Show How Better Processes Save Lives

Hospitals are some of the most complex operations environments in the world, writes The Wall Street Journal (Sept. 29, 2026). Thousands of interdependent processes—clinical workflows, monitoring systems, documentation, staffing, and technology—must function with precision. When any part of that system becomes noisy, inefficient, or overloaded, the consequences can be serious. A striking example comes from an unlikely OM case study: hospital alarm fatigue.

In modern care units, monitors and pumps generate constant beeps signaling everything from minor fluctuations to life‑threatening deterioration. For patients, the noise disrupts sleep and recovery. For nurses, the sheer volume of alarms creates cognitive overload, making it harder to distinguish true danger from routine variation. In OM terms, this is a quality‑control failure caused by excessive false positives, poor signal design, and misaligned workflow triggers.

Researchers are now applying OM thinking to redesign the alarm ecosystem.

Reducing Non‑Actionable Variation Stanford Medicine introduced time delays and conditional triggers to filter out brief, self‑correcting changes in vital signs. This is classic process‑control logic: eliminate noise so workers can focus on meaningful signals. The results were dramatic—alarm volume dropped by up to 82% without compromising safety. Nurses reported better responsiveness, demonstrating how reducing process clutter improves human performance.

Human‑Centered Design for Quality Another team is redesigning alarms using principles from music cognition. Instead of harsh electronic tones, alarms use recognizable “auditory icons” and musical cues to convey urgency and type of problem. This is OM’s human‑factors engineering at work: improving quality by making information more intuitive, reducing worker stress, and speeding decision‑making.

Predictive Systems to Prevent Failure The most powerful OM innovation may be the machine‑learning tool Concern, which analyzes patterns in nursing documentation to detect deterioration before vital signs trigger alarms. It provides a quiet, color‑coded risk indicator rather than another disruptive alert. In a 60,000‑patient trial, units using Concern saw lower mortality and shorter stays. This is proactive capacity and risk management, shifting from reaction to prevention.

The OM Lesson Alarm fatigue isn’t just a clinical issue—it’s an operations problem. Smarter triggers, better signal design, and predictive analytics show how OM principles can transform safety, reduce waste, and improve outcomes in high‑stakes environments.

Classroom Discussion Questions

How should hospitals balance the need for constant patient monitoring with the risks of alarm fatigue?
What lessons from hospital alarm redesign—such as smarter triggers, better sound design, or early‑warning systems—could be applied to other industries that rely heavily on alerts?

OM in the News: Why America Needs Manufacturing Capability—Not Just More Factories

For decades, operations leaders have been trained to hunt for bottlenecks inside the plant: slow lines, underutilized machines, rework loops, labor gaps. But today’s manufacturing constraints increasingly sit outside the four walls, write Profs. Kenneth O’Connor and Gerry Goldstein in Industry Week (Sept. 18, 2026). As the U.S. confronts rising demand in defense, aerospace, semiconductors, robotics, and advanced materials, one truth is becoming unavoidable: building more factories is not the same as building more manufacturing capability.

Capability comes from ecosystems—dense, coordinated networks of suppliers, logistics partners, research institutions, workforce pipelines, and public‑sector stakeholders. A factory produces products. An ecosystem produces scalable, resilient capacity.

Recent defense production challenges illustrate this clearly. After the U.S. sought to ramp 155mm artillery output from 14,000 to 100,000 rounds per month, progress stalled not because of floor space, but because of ecosystem gaps: propellants, explosives, metal parts, specialized equipment, qualified technicians, and capital investment. These constraints lived between organizations, not inside a single plant.

This pattern repeats across high‑value sectors. A manufacturer may have demand but lack second‑tier suppliers. It may have equipment but not technicians. It may have prototypes but no test stands. It may have engineering talent but no digital‑thread integration across partners. These are ecosystem bottlenecks—and they determine whether plant capacity becomes usable capability.

Regional strength matters even more. Regions with robust suppliers, applied research institutions, logistics networks, and workforce pipelines outperform those with isolated factories. National initiatives show how shared capabilities and coordinated development can lift entire ecosystems, especially small and mid‑sized manufacturers whose hidden expertise often enables surge capacity.

Operations managers need to ask whether suppliers can scale, where external bottlenecks sit, how long workforce development lead times truly are, how connected their production network is, and whether their ecosystem could respond if demand doubled tomorrow.

Lean operations and efficiency still matter—but the next competitive frontier is adaptive capacity: the ability to shift suppliers, redesign products, qualify new processes, train workers, reroute logistics, and integrate new technologies under pressure. That capability cannot be built in a crisis. It must be cultivated through relationships, coordination, and shared investment long before demand spikes.

Classroom Discussion Questions

Where do the most critical bottlenecks exist in today’s manufacturing ecosystems—inside factories or across supplier, workforce, and logistics networks?
How should regions and firms build “adaptive capacity” rather than simply expanding physical capacity?

Guest Post: Rita’s Italian Ice and Seasonality

Prof. Howard Weiss shares his interest in Italian ice with us today, March 20th, the first day of Spring.

Rita’s Ice represents an example of seasonal operations, illustrating both the challenges and opportunities due to demand variability. Founded in 1984 in a Philadelphia suburb, the company has expanded to nearly 600 franchises across 463 cities in 30 states, becoming the largest Italian ice franchise in the U.S. Despite this growth, Rita’s core product offerings—Italian ice and frozen custard—remain strongly associated with warm-weather consumption.

Most Rita’s locations operate as walk-up or drive-through outlets, opening by March 1 and closing no earlier than the third Sunday in September. This operational model results in an important inefficiency: franchisees incur fixed costs, particularly rent, for all 12 months while generating revenue for only about seven. Supplement 7 of your Heizer/Render/Munson textbook suggests developing complementary products with countercyclical demand– such as jet skis and snowmobiles– thereby using the same resources all year long.

However, Rita’s appears to be considering an alternative approach—extending operations year-round. This shift reflects evolving consumer behavior, as frozen desserts such as ice cream increasingly exhibit steady demand even in colder months, particularly in warmer climates or high-traffic retail environments like shopping malls. By remaining open throughout the year, Rita’s could better leverage its fixed assets and enhance brand visibility. But this strategy would require careful demand forecasting and possibly localized adaptation, as consumer preferences in colder regions may still exhibit too much seasonal sensitivity to make it worthwhile to open all year.

From a production standpoint, Rita’s must also manage perishability constraints. Cream, a primary ingredient in frozen custard, necessitates reliance on local distributors to ensure freshness. Additionally, custard is discarded after 36 hours, underscoring the importance of accurate short-term demand forecasting and inventory control. Rita’s maintains a consistent gelato formula across franchises, it offers over 60 flavors, rotating them based on popularity data. This approach balances operational consistency with responsiveness to consumer preferences.

Finally, beginning in 1984, Rita’s has marked the beginning of Spring by offering free Italian Ice. This longstanding tradition on the first day of spring—March 20 this year—serves as an effective promotional tool. The initiative not only marks the seasonal reopening of many locations but also reinforces brand loyalty and drives customer engagement.

Classroom Discussion Questions:

Name two products or services with complementary seasonal demands.
How would you determine if the demand for ice cream is high enough in the winter to warrant staying open all year?

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?

OM in the News: The Pig Supply and Demand Problem

“The American pork industry has a problem: It makes more tenderloin, ham, sausage and bacon than anybody wants to eat,” writes The Wall Street Journal (Feb 10-11, 2024).

If younger Americans don’t start buying more pork, annual consumption will drop by 2.2 pounds per capita over the next 10 years.

From giant processors to the farmers who supply them, they are in a predicament largely of their own making. They made production so efficient that demand can’t keep up with supply. U.S. demand for pork is 9% less than what it was 20 years ago, but farmers produce 25% more.

The rise of industrial-scale hog farms, steadily increasing crop yields and growing overseas demand helped supercharge the U.S. pork industry in the late 20th century, and since the 1980s, pork production in the U.S. has doubled. The industry will produce nearly 28 billion pounds of pork this year, cleaved from roughly 125 million hogs.

Pork contributes $57 billion to the U.S. economy and employs 610,000 people. In Iowa, the top pork-producing state, hogs outnumber people nearly 8 to 1. That zeal for efficiency and expansion are a factor in the current troubles. Practically everything that goes into raising hogs is now significantly more expensive: machinery, services, equipment, repairs, building materials, livestock-feed supplements and labor.

In the 1960s and early ’70s, beef was king among American consumers and pork held second place, but chicken overtook pork in 1986 as poultry production skyrocketed, making it the cheapest of the big three meats. By 1993, chicken became the most-eaten meat in America. Religious prohibitions in Judaism and Islam limit pork’s popularity, along with a sense among some that pigs are too smart to slaughter. On the other hand, some consumers are more passionate about their love for bacon than any other meat.

So American pork producers increasingly bank on consumers in other countries. The industry exports 25% to 30% of product. Sales to China, the world’s top pork-eating nation, surged following a hog-disease outbreak in the country in 2018. Producers in the U.S. responded by expanding capacity even further, with new processing plants in Iowa and Michigan. Chinese pork producers rebuilt their herds, however, and exports to the country have plummeted over the past two years, contributing to U.S. oversupply and pressuring meatpackers’ profits.

Classroom discussion questions:

What options do pork producers have? (Hint: see Supp. 7 in your Heizer/Render/Munson text on page 308)
How has technology played a role in the imbalance?

Guest Post: Hershey’s $1 Billion “Sweet Spot” Supply Chain Investment

Dr. Misty Blessley is Associate Professor of Supply Chain Management at Temple University.

The Hershey Company, a confectionery and salty snacks giant headquartered in Hershey, Pennsylvania, struggled to meet heightened customer demand for Halloween candy last year because of limited production capacity. Due to a new Hershey’s line and three new Reese’s lines, the problems of last season are now behind the manufacturer. As recently reported in Supply Chain Dive, the firm views its $1 billion investment “as a growth enabler rather than an expense to manage.” Hershey considers their “Sweet Spot” as being nimble enough to react to demand growth, while having the capacity needed to meet customers’ needs.

Hershey’s investment is expected to be a multi-year undertaking, which will allow the candy giant to balance existing capacity with future flexibility. Plans include an additional chocolate factory in Hershey, 13 new production lines and upgrades to 11 existing lines. Core brands will be in focus, with 60% of the investment allocated to the Reese’s brand. With flexibility and agility as an objective, Hershey’s is implementing modular advanced technology lines that use robotics and automation. These lines allow for smaller production runs and shorter changeover times.

Reese’s candies funnel through a Hershey production line

In addition to adding capacity, Hershey’s has also found hidden capacity by using advanced analytics and AI. For example, an evaluation of the network of six KitKat production lines resulted in finding $35 million of capacity that could be leveraged without a substantial investment. The company also considered underutilized production lines and what products might be suitable to outsource to a co-manufacturer, rather than being made in-house. As a result, Hershey recently outsourced its production of Zero candy bars, and used that to free up capacity to make PayDay candy bars.

When determining what products to use a co-manufacturer for, Hershey had two considerations. If it’s a core product with intellectual property Hershey wants to protect, production is kept in-house. If it’s a product at the end of its lifecycle or a new product the company doesn’t want to commit a large investment in yet, Hershey will consider shifting production to an outside manufacturer.

Classroom discussion questions:

1. Refer to Supplement 7 of the Heizer/Render/Munson text. Which of the tactics for matching capacity to demand is Hershey applying?
2. How has Hershey benefitted from taking a multi-faceted approach to manufacturing capacity, beyond simply adding capacity?

Guest Post: Airline Loyalty Programs and Operations Management

Prof. Howard Weiss developed the POM and Excel OM software that we provide free with our text

To use one of Delta Airline’s more than 50 Sky Club airport lounges, a client can either purchase access from Delta, or use Delta SkyMiles, or gain access by owning an American Express (Amex) Platinum credit card. One of the Platinum card’s main selling point is its extensive lounge coverage for multiple airlines. During COVID, while there was less travel and thus less miles being accumulated due to travel, customers were charging more than usual to their Amex cards, enabling them to get elite status with Delta. It also allowed SkyMiles to rollover from one year to the next during COVID. This led to Delta’s lounges becoming overcrowded. And it turns out Delta does not have enough capacity on its special phone lines to afford its elite customers a pleasant experience.

100 Person line waiting to enter JFK Sky Club

This capacity issue caused Delta to make changes effective in 2025 that will make it harder to access Sky Clubs, and thus reduce the crowding. Delta has raised the price of club membership for those purchasing access to the lounges, restricted membership to SkyMiles elite members, and placed a limit on how long one can stay in the lounge prior to a flight.

The Forecasting chapter in your Heizer/Render/Munson textbook discusses demand management and notes that Disney limits its “FastPass+” reservations, which is similar to Delta limiting its elite status members. But Disney can impose different limits on a daily or weekly basis based on the demand forecast, whereas Delta’s limits will be implemented over the long term. The Capacity Planning chapter (Supp. 7) notes that demand can be reduced by raising prices, which is identical to Delta’s actions of both raising the number of miles required for elite status benefits and raising prices to belong to SkyClub.

Needless to say this has caused a great deal of backlash from Delta customers. Surveys show that 81% of consumers say loyalty programs are important to their decision on which product or service to purchase. In addition, at the big five U.S. carriers, the share of revenue generated by loyalty programs increased from 12% in 2019 to 16% in 2021. Thus, Delta cannot afford to lose these customers.

Classroom discussion questions:

1. Why doesn’t Delta simply hire more staff for the lounges and the phone lines?
2. What factor besides loyalty programs would drive customers to a certain airline?

Guest Post: The Panama Canal Backlog

Prof. Howard Weiss shares his OM insights with us monthly.

Recently, there has been a bottleneck of ships waiting to go through the Panama Canal with over 120 ships waiting, reports Institute for Supply Chain Management (Aug. 29, 2023). The main cause is that there has been a drought, lowering the canal’s water level which reduces its capacity. (This also happened in 2016 and 2019). Normally, 36 ships would pass through the canal every day. At the moment the limit is 32 ships. The waiting time average is roughly 10 days rather than the 6 days it had previously been. Shipping companies have three options to mitigate the problem.

Reduce ship weight Some companies have reduced the number of containers on a ship. This reduces the ship’s weight which reduces its “draft”. The reduction in containers can take place at the ship’s origin or in Panama by placing the containers on the Panama Canal Railway which runs across the country. As a result of this reduction, shippers have been adding surcharges to their clients. For example, Hapag-Lloyd has added a $500 per container fee on Asia to US east coast routes.

A caravan of cargo ships sits in the Pacific Ocean last week, waiting to enter the Panama Canal

Use a different route There are several alternatives both by sea and land to avoid using the Panama Canal, each with its own advantages and disadvantages. By sea, a ship can go around South America. While the distance is considerably longer, the ship can make stops at major ports in South America such as Brazil, Argentina and Chile. The Suez Canal may be a less expensive option to the Panama Canal as the Asia to U.S. East Coast distances are roughly the same as when using the Panama Canal. Going around South Africa is another option. Land routes include the Panama Canal Railway.

Increase priority at canal In order to use the canal, shippers need to reserve a slot. The fee depends on the type of ship and other factors and ranges from $10,500 (small vessels) to $400,000 (largest vessels fully loaded). A few daily slots are left open and auctioned off through the “Transit Slot Auction” which essentially allows ships to jump the line. This auction fee is paid in addition to the normal fee. The base price for the auction is $100,000 and recently a company paid $2.4 million.

Discussion Questions:
1. Cite a waiting line situation where one can improve his/her place/priority in the line.
2. What other operations decisions require examining time and cost tradeoffs?

OM in the News: Electric Big Rigs Hit the Street, but Chargers are Scarce

Heavy-duty electric trucks are rolling out across the country. But “the electric grid upgrades and equipment needed to plug them in aren’t,” writes The Wall Street Journal (July 17, 2023).

California plans to require new trucks to be zero-emissions by 2036.

As automakers deliver new electric trucks to fleet customers, parking lots that once needed enough power for a few floodlights now might need to draw as much power as a skyscraper. But the necessary grid improvements could take years. In January, California utility PG&E told some large fleet customers they wouldn’t be able to charge trucks for a few years during summer afternoons when California electricity use peaks. Capacity upgrades would take at least until 2026, said PG&E.

Similar issues are popping up across the U.S. as firms place larger EV truck orders. “One or two trucks, everybody’s got. It’s when they try to do their fleets,” said the CEO of Exelon, an eastern U.S. utility company.

The challenge is especially acute in California, where drayage trucks, which carry containerized cargo to and from ports and rail centers, face a looming deadline. The state will require any new drayage trucks to run on electric batteries or hydrogen fuel cells. California also plans to phase out sales of new gasoline-powered passenger cars, pickup trucks and SUVs by 2035 and require all new medium- and heavy-duty truck sales be zero-emissions by 2036.

Electric trucks have the potential to reduce air emissions for communities by eliminating diesel use. Trucks represent 6% of the vehicles on California’s roads, but a quarter of the state’s on-road greenhouse-gas emissions. California forecasts it will have 180,000 medium- and heavy-duty zero-emission vehicles by 2030 that would need 157,000 chargers, many of those at depots operated by the fleet owners. There are fewer than 700 chargers at depots now.

Fleet owners must figure out how to install chargers at their depots, a complex engineering and power management task. Chargers will also be needed on the road but there is no network of electric truck stops yet. California has the most EV fast chargers for regular passenger cars nationally, but those sites aren’t designed to fit industrial vehicles. As fleets add trucks they will need to draw at least 6 to 8 more megawatts of power. That’s about 1,000 homes.

Classroom discussion questions:

As a fleet manager, what is your strategy?
As a power company such as PG&E, what is your capacity strategy?

OM in the News: The Green Transition Challenge

Copper is the new lithium, writes The Wall Street Journal (April 19, 2023). But a lack of new mining activity has added to worries that there won’t be enough of the red metal for the energy transition to electric vehicles.

Sheets of copper cathode at a mine in Chile.

Copper is used in wiring and construction as well as EVs, solar panels and other green technologies. Electrification is expected to increase annual copper demand to over 36 million metric tons by 2031, with supply forecast to be around 30 million tons, creating at least a 6 million ton shortfall at the start of the next decade. In 2021, refined copper demand stood at 25 million tons.

South America currently dominates copper production and Chile is the largest mined producer. Increasing mine output has proved a challenge, warning of a serious supply shortfall over the next decade. Some projects are coming online in Peru and in Chile, which will add incremental supply, but there is little in terms of pipeline for the long run. Copper metal exports from Congo and Zambia, the two other sources, totaled 2.3 million tons in 2022, up slightly from 2021, but less than half of Chile’s output.

“There’s a narrative around resource scarcity and the green transition with EVs and renewables as well as the build-out of electricity grids. On paper it’s quite a substantial supply gap opening up over the next 10 years,” says an industry expert. And there is no slack in the system.

“Green” uses of copper now account for about 4% of consumption, but this is expected to rise to 17% by 2030. A “net-zero emissions” path would mean the world would need an additional 54% of copper by 2030 on top of that forecast. EVs cannot take off before the charging infrastructure is set, and the necessary electrification is very copper intensive. Copper features heavily in energy transition proposals.

Sales of electric cars in 2022 in creased 55% over 2021 to bring the total number of EVs in the world to around 26 million. That means the EV-charging ecosystem will have to be significantly ramped up.

Classroom discussion questions:

Why is this an OM issue?
What might be done to solve the problem?

OM in the News: Pilots and the Airline Capacity Problem

Airlines have complained about a shortage of pilots for several years, but they made it worse during the pandemic by encouraging pilots to take early retirement when air travel collapsed in 2020. About 10,000 pilots have left the field since then, reports the Telegraph Herald (Feb. 10. 2023).

Southwest Airlines has more than 700 planes but parks 40 to 45 of them each day because it lacks pilots to fly them. That amounts to more than 200 flights a day or 8% of Southwest’s flying.

United Airlines’ CEO said the lack of pilots will continue to prevent airlines from expanding as much as they would like to take advantage of strong travel demand. “Pilots are and will remain a significant constraint on capacity,” he said.

The pilot shortage is most severe at smaller carriers that don’t pay as well and serve as stepping stones to the big airlines. Many of them operate regional flights under the names of American Eagle, United Express and Delta Connection. Those carriers have parked more than 400 planes for lack of pilots, and air service is collapsing as a result. Regional airlines are short by 8,000 pilots and a dozen smaller cities have lost all air service — about 50 more have lost half or more of their flights — despite the broad rise in travel demand. (The median annual pay for U.S. airline pilots last year topped $200,000 by the way).

If a pilot calls in sick, often there is no one immediately available to replace him or her, and that is leaving tens of thousands of travelers stranded. The lack of pilots contributed to a 52% increase in flight cancellations last year compared with 2021.

The shortage started even before the pandemic. Over the past decade or two, industry officials warned it was coming as travel boomed and thousands of U.S. pilots approached mandatory retirement age. The Federal Aviation Administration raised that age from 60 to 65 in 2007, which just pushed the problem off for a few years.

Classroom discussion questions:

Supplement 7 (Capacity and Constraint Management) provides what tips for when demand exceeds capacity?
What is the solution for regional carriers? For the major carriers?

OM in the News: Airlines and a Slew of Operations Issues

“Airlines have found that they can’t sustain the higher levels of flying they had hoped to offer to capitalize on rising demand,” writes The Wall Street Journal (July 22, 2022). Staffing shortfalls, training logjams and constraints at overwhelmed European airports in particular are stifling their resurgence and forcing them into more restraint. Airlines are reining in their schedules for at least the rest of this year—not because they can’t fill their planes, but to avoid costly OM stumbles.

American’s travel has surpassed 2019 levels and remains strong. But its third-quarter flying capacity will be 8% to 10% lower than in 2019 as the airline pulls back capacity to build additional buffer into its schedule. The weather in June was challenging, with significant issues on 27 days that overwhelmed the airline. It canceled over 5% of flights that month.

United and Delta have also said they would cap growth in the coming months to run more reliably. Those pullbacks and efforts to avoid delays and cancellations add to the cost pressures. Delta expects to pay $700 million in overtime and premium pay to help avert disruption, and United will stay overstaffed while it gives priority to reliability over growth. “There is weather, and people do call in sick, and and stuff happens. And the system just doesn’t have any buffer to deal with that,” United’s CEO said.

Carriers needed to bring on thousands of workers to replenish their ranks after offering buyouts and early retirement packages to slash costs in 2020. While their staffing levels are once again nearing prepandemic levels after a recent hiring spree, airlines have are finding that is no longer enough as they work through big backlogs of training requirements and adjust to a workforce comprised of less experienced employees to get back up to full force.

Air-traffic control is also short staffed, leading to problems in highly trafficked corridors such as Florida and New York. And acute staffing shortages at major European hub airports have been a big source of the summer’s chaos. London’s Heathrow Airport is capping the number of departing passengers and asked airlines to stop selling new tickets from the airport for the summer season.

Classroom discussion questions:

Outline the operations issues that airlines are currently facing.
In Supp. 7 (Capacity and Constraint Management in your Heizer/Render/Munson text), we we discuss ways to manage capacity and demand. Which can be employed here?

OM in the News: Peleton’s Downhill Ride

In a northwest Ohio industrial park, Peloton Interactive is building a million-square-foot factory that it will never use. The once-hot stationary bike maker is now selling the facility, which cost $100 million and to be completed this fall, as it races to downsize a manufacturing operation expanded by leaders who believed Covid-driven demand would outlive the pandemic.

Their miscalculation about demand and the shift in the market have been so costly that Peloton—a company worth nearly $50 billion about a year ago (and now $5 billion)—has laid off thousands of people, had to borrow $750 million to head off a cash crunch and is exploring a sale. It is a reminder, writes The Wall Street Journal (May 21-22, 2022), that strategic choices—not just pandemic forces—determine how businesses emerge from the crisis.

In late 2020—with homebound consumers clamoring for its bikes—Peloton’s CEO dismissed the idea that the company was growing too much based on a demand spike that could prove temporary. “Overbuilding supply-chain capacity—that’s a term that has never come up in the Peloton senior leadership rooms or boardrooms,” said the CEO in 2020. “We feel like there’s such a massive opportunity that we need to invest heavily in the supply chain for years and years to maintain it.”

But the good times were short-lived. As demand soared throughout the year and a second Covid wave derailed Americans’ hopes of a quick return to normalcy, Peloton became overwhelmed by a crush of orders, which was exacerbated by massive port delays in Asia, where Peloton built its machines.

Many companies faced the same question during the pandemic: How best to handle a surge in demand? P&G decided not to permanently expand toilet-paper factories that would have taken years to come online. Clorox added capacity through contract manufacturers. To fill government orders for masks, Honeywell and 3M added shifts or retrofitted facilities. Most of the leaders of those businesses realized that the sudden demand could be short-lived, or hedged their manufacturing investments.

Peloton’s bikes and treadmills are equipped with a tabletlike screen that connects users to online workout classes. An instructor leading a spin class from a Peloton studio can remotely adjust the resistance on bikes connected to the class. Peloton’s original bike, which initially sold for $2,245, now costs $1,445.

Classroom discussion questions:

What strategies could Peloton have taken to address capacity issues?
Why did the firm decide to build the U.S. factory?

OM in the News: Amazon’s Capacity Issues

Amazon’s growth has skyrocketed throughout the pandemic, doubling the size of its operations and nearly doubling its workforce over a two-year period. While some of Amazon’s fulfillment network hires during the quarter covered employee absences amid the omicron variant surge, the company quickly transitioned from being understaffed to being overstaffed, resulting in lower productivity, reports Supply Chain Dive (April 29, 2022).

“Capacity decisions are made years in advance, and we made conscious decisions in 2020 and early 2021 to not let space be a constraint on our business,” said Amazon’s CFO. “During the pandemic, we were facing not only unprecedented demand, but also extended lead times on new capacity, and we built towards the high end of a very volatile demand outlook. ”

The tide has turned, however, as consumers have slowed their e-commerce spending activity in recent months. Net sales at Amazon’s online stores dropped 3% last quarter, while Amazon’s fulfillment expenses jumped nearly 23%. UPS, which counts Amazon as its largest customer, reported an unexpected drop in home delivery volume as March e-commerce sales saw their weakest gain in more than three years.

Amazon aims to rightsize its massive fulfillment network in response to demand now falling back to pre-pandemic levels. But this process won’t happen overnight. It will take several quarters for Amazon to grow into the current capacity it has built out. In July, the company was focused squarely on adding capacity to meet the current high customer demand. Three months later, labor was the company’s primary capacity constraint, creating $4 billion in added costs. In early February, omicron added to Amazon’s staffing challenges.

“We hired more people and then found ourselves overstaffed when the omicron variant subsided rather quickly, at least from our standpoint in warehouses,” said the CFO. “So, the issue has switched from disruption to productivity losses to overcapacity on labor.”

One issue that has been present throughout the past year is inflation, specifically for transportation costs and wages. The war in Ukraine has amplified inflationary pressures as fuel costs have climbed, and Amazon is looking for ways to offset the higher prices. This year, it hiked the price of its U.S. Prime membership and introduced its first fuel and inflation surcharge for sellers using its fulfillment services.

Classroom discussion questions:

Summarize Amazon’s capacity issues and their genesis.
Which of the 6 tactics for matching capacity to demand listed in Supplement 7 of your Heizer/Render/Munson text might Amazon apply?

Guest Post: Emergency Services and COVID

Professor Howard Weiss, recently retired from Temple University, looks at quality issues arising from COVID.

Several sources have reported that due to COVID there has been a decrease in Emergency Services quality. In Philadelphia, the average police response time, the time between a police dispatcher receiving the call and the arrival of the police, was 20% higher in 2021 than in 2020. In Los Angeles, response times to emergencies increased due to over 200 firefighters missing their shift. In San Diego, response times for its most urgent calls for service rose from 21 minutes in 2018 to 28 minutes in 2020. The problem, of course, is not limited to the U.S. Police response times have also increased in England, and Bermuda has had 48 officers unable to work as opposed to a more normal 16 officers. In addition to delayed response times, no-shows of police, has become more common since the onset of COVID.

The major reasons for the increase in response time are:

Unavailable emergency personnel because they have been stricken with COVID or quarantined because they were with someone who had COVID
Layoffs of emergency personnel who are not vaccinated
Staffing shortages in the 911 call centers
A spike in crime
Technology issues

A major concern, if the slow response times continue, is that if police do not respond in a timely fashion then people will stop calling the police at all.

Chapter 13 of your Heizer/Render/Munson textbook notes that “Police and fire departments have provisions for calling in off-duty personnel for major emergencies. Where the emergency is extended, police or fire personnel may work longer hours and extra shifts.” To increase capacity, some cities have done this and some cities have relaxed quarantine rules so emergency personnel can get back to work more quickly. Others have canceled vacation times for personnel. Some cities have brought in others to increase capacity. Another option is to put a web site in place for minor problems such as losing a driver’s license in order to reduce the demand for emergency services.

Not all increases in response times have been due to COVID. For example, in Montreal, response times are slower due to the merger of two police stations. Ft. Worth, Texas, which has the highest response time goal of Texas’ five major cities, had response times that were deemed too slow prior to COVID.

Classroom discussion questions:

As a manager in your town, how would you address this concern?
What other fields are experiencing the same issues?