OM in the News:WSJ Gives Innovative Products Awards

We all know the importance of new product development (see Ch.5 and Fig.5.2). Companies live or die by the success of their new products…and the strength of the US as an economic power depends on our ability to continually innovate.

Each year the Journal names its Technology Innovation Award winners. This article details this year’s winners, looks at what happened to last year’s , and projects what advances will win in the future. Its an exciting classroom topic.

My two favorite winners in 2010 are: (1) TruFocals, eyeglasses the wearer can adjust manually to give clearer vision for reading, computer work, or gazing into the distance: and (2) a paper-thin, flexible computer screen that can be bent or rolled.

The odds against successfully creating and selling a new product are about 500-to-1. But a gardener friend of mine who worked for 10 years to develop a new garbage can (the world needs a new garbage can?!) just got his 1st royalty check–close to $1 million!

Discussion questions:

1.Check out last year’s WSJ winners. How did they do?

2.Name several recent products that became immediate successes.

3. What firms are the leaders in innovation with new products?

OM in the News: Mass Customization at BMW

BMW at its Spartanburg S.C. plant along with 170 suppliers wants to build a custom  X5 sport utility vehicle for you. The Spartanburg plant thinks they can do it for you as they already export 70% of the vehicles it makes to more than 130 countries; each with its own specifications. And they do it with 18 owner’s manual languages.   The number of custom options includes 500 side-mirrow combinations, 1300 front-bumper combinations, 2,500 possible wiring harnesses, 5,000 seat and 9,000 center-console combinations. 

BMW wants 4 to 6 weeks to make the custom ordered SUV, but orders are locked in with a lead time of only 5 days. Dealer software is closely tied to BMW’s manufacturing and supply chain, with workers getting the word on what car they are building via overhead screens. The frequent changes required by variations in custom orders complicates  every thing from entering the order, to procurement, to moving parts to the line, and balancing the assembly line. Customization is not cheap. But BMW is betting that mass customization for a premium priced car will pay off.

Discussion questions:

Why don’t more auto purchasers request custom-made cars (the car they really want)?

How do we balance an assembly line with many different products coming down the assembly line (the article says the standard time is 106 seconds)?

OM in the News: Location Incentives

As reported in the WSJ (Sept.22, 2010 p.C8)  Navistar International Corp. has just accepted a location incentive package from Illinois. The package equate to over $22,000 per job. The journal reports that about $15,000 for each new job is the national average, but some equate to more than $200,000 per job.

In addition to jobs Navistar is expected to also spend about $205 million including an upgrade of it’s headquarter and a new parts facility.Some research suggests that in the long run a city/county/state is better off investing in honest government, good worker’s comp. practices, education, and other quality of life issues. And as the text notes, some of these incentive deals do not always work out for the company or the state.

Location incentives,  potential job creation, and expense to tax payers vs other uses for tax money, can generate a lively class discussion.

Discussion Question:

1. How do location incentives relate to the location criteria discussed in Chapter 8?

2. Can you identify some ‘not so good’ results from location incentives?

3. Is there any consensus regarding how tax payer should be spent vis-a-vis incentives or quality of life issues that  benefit all taxpayers?

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.

Teaching Tip:Using Software to Solve Homework Problems

 

          When I look back at 35 years of textbook writing, I sometimes think that my biggest contribution to OM pedagogy was writing the early versions of AB:POM.  These were the PC programs that allow students to solve about 95% of the homework problems in the text.  I remember coding them in BASIC, in 1980 on my Apple 2e.  Thank goodness for Professor Howard Weiss at Temple U., who had the skill to bring about the upgrade to POM for Windows (and then to create Excel OM) a decade or so later. 

          I usually spend a half hour demonstrating how to use these programs, free to students, the first week of class.  They pick up on the inputs easily and are very happy to avoid doing regressions, SPC, and inventory modeling by hand.  I know some profs don’t use software in their course, but my view has always been to stress output interpretation, rather than hand calculations.

          Students have called me years later to tell me they still find the software useful in their jobs. 

          Which one to use, POM or Excel OM?  I used to show both and let the students pick their favorite.  But later I decided to focus on Excel OM, the Excel add-in.  Its open coding shows the formula and looks like the spreadsheets they are used to.  Any homework problems with an X next to it can be solved in Excel OM, and any with a P by POM (which is written in C++).

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:

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

Good OM Reading: A Start Up Nation

I just finished a book that is a bit outside my usual OM-oriented reading.  Start-Up Nation (by Dan Senor and Saul Singer, Twelve, 304 pages) is about the entrepreneurial nature of the State of Israel.  I had co-founded the Rollins College Center for Entrepreneurship about a decade ago, so this is a topic of personal and academic interest.

          The authors describe Israel as the world’s “techno-nation”, a tiny state torn by war that attracted as much venture capital in 2008 as Germany and France combined.  In 2009, there were 63 Israeli firms on NASDAQ, more than any foreign country.

          So why did Cisco buy nine Israeli start-ups?  Why did British Telecom put up a $3.5 billion plant to make chips?  And why did Buffet pay $4 billion for part of a high-tech tool maker?  The authors’ answer:  The culture of the military.  “You have minimal guidance from the top,” they write.  “It’s the leadership, teamwork, and mission oriented skills and experience Israelis receive.”  Ever soldier is expected to improvise, even if this means breaking some rules.

          An easy, one day read that can help us be better, more innovative managers

Teaching Tip: Using Guest Lecturers

Sure it can hurt your self-esteem when teaching evaluations are turned in and several students comment that “the most valuable part of the course” was the guest speakers!  Somehow, executives who visit our classes are viewed as having more expertise then we have.  I guess its only human nature; just like elementary school kids who believe what a teacher tells them more than what their parents say.  I can’t tell you how many times my sons have said I was dead wrong when I helped with their math homework (despite my 3 degrees in math related fields).

          But it is true that guest speakers, when carefully selected, checked out, and given a 45 -50 minutes schedule, can enhance a class.  One of my colleagues at Rollins College has said he has no time for guests in his class. “There is just too much material to cover,” he says.  I disagree.

          Over the years I developed a cadre of 6 -8 excellent guest lecturers.  One is the Frito-Lay VP-Operations for Florida (who always brings a huge box of chips – the students devour them as if they have never eaten before).  One is from Darden (who generously gives out $5 gift cards to Red Lobster and/or Olive Garden).  Another is former CEO of Tupperware, who tells the story of a $90 million OM decision that went very bad.  My favorite speaker while teaching at Rollins was the late Philip Crosby, the well-known author and quality guru.  He never missed a semester and lectured to scores of my classes.  It turns out that even famous people are more than honored to come and lecture in a college.

          Get to know your speakers first, ask to see any Power Points they intend to use for your quick review/input, and thank them every semester with a gift that has the college name on it.

MyOMLab: An Author’s View

 

          We are thrilled that over 150 colleges – and over 5,000 students – are using our MyOMLab homework and assessment software this semester.  It certainly changed our lives as teachers for the better – and the students seem to thrive using it.  If you aren’t familiar with the system, just go to www.myomlab.com to take a tour.

          With four years of experience under our belts (first in its predecessor PHGA), Jay and I can share some of our MyOMLab experience with you, and hopefully, make a few useful suggestions.

          Just up front, though, I want to promise that we have created a system that you can count on.  I would say that we invested 1,000s of hours to create the algorithmic and book match versions of the more than 700 problems in MyOMLab.  The coding and testing were tough jobs, but we think the final product makes teaching and learning OM easier on everyone.

          So what is my tip of the week?  I have used MyOMLab successfully for weekly homework assignments and for tests/quizzes.  I have also assigned weekly “pre-quizzes”, selecting 10 or so multiple choice questions from the 2,000 question Text Bank (also part of MyOMLab).  These pre class assignments forced the students to read each chapter before I covered it in class.  Since the assignment is open-book, it’s hard to miss an answer.  I weigh the pre-quizzes at 10% of the course grade and the students are thrilled to wrack-up A’s every week.

            What a pleasure this has been!  For the first time, students are ready for the lecture.  They have read the chapter in advance! Jay has implemented the same system with his students and couldn’t believe the difference in how much more engaged the students were.  Let us know what you think.

Video Tip: Project Management at Hard Rock’s Rockfest

 

          I cover Project Management and MS Project (Chapter 3) early in the semester and always show the video “Managing Hard Rock’s Rockfest” (9-1/2 minutes).    Of all the 30 videos we have filmed, this has been one of the most popular from the students’ perspective… mostly because it shows a lot of heavy rock bands and it is a rather unique and exciting nine month project.

          I would also recommend assigning the case study by the same name.  It is large (33 activities), yet easily handled by POM for Windows or Excel OM. 

          If you also want to include MS Project in your class (full-blown, but time limited copies are available free from Prentice Hall), look at the “Project Crashing using MS Project” exercise in our IRM.  Professor Gary LaPoint, at Syracuse U., has developed this excellent exercise, with data files already prepared at our website.  Thanks, Gary!

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.