OM in the News – Page 116 – The OM Blog by Heizer, Render, & Munson

Teaching Tip: Baseball and Correlation Analysis

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

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

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

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

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

OM in the News: BW Cover Article on Foxconn

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

Possible class discussion questions:

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

OM in the News: Whirlpool Domestic Expansion

Ref: WSJ, Wednesday, Sept. 1, 2010

Wednesday’s WSJ reports on Whirlpool’s $300 million upgrade of domestic manufacturing. Both the Cleveland Tennessee plant and the Clyde Ohio plant are seeing major upgrades. Whirlpool is aggressively restructuring their North American plants… which includes closing plants in Evansville, Ind., Oxford, Miss. and a Michigan plant. The Clyde plant is to reduce time to build a washer by 10% and boost output by more than 10%.

Also while great concern is continually exhibited in the press about the fact that manufacturing employment continues to decline… as OM profs we need to explain (apparently again and again) that manufacturing production and productivity continues to expand. Manufacturing employment does continue to drop ….

But the US is still the largest manufacturing country in the world with annual productivity increases on the order of 3.4% since 1950.

This article open a great discussion:

(1) about Whirlpools 2006 purchase of Maytag (industry consolidations… economies of scale) and

(2) the fact that while a plant in Mexico was considered, Whirlpool is making these expansion in the US.

(3) You can also ask students by how much manufacturing employment drops each year (the article says .1%) or what percent of the work force is employed in mfg. (the text says 11.2%, but perhaps lower this year).

(4) What are the implications if manufacturing employment was not dropping … what if employment had never dropped in agriculture or the number of telephone operators.