Tag: benchmarking

Teaching Tip: Is Amazon Benchmarking–or Cheating?

At the end of each chapter of our text, we present an Ethical Dilemma for class discussion. The Wall Street Journal‘s expose on Amazon (April 19, 2024), called “Inside Amazon’s Secret Operation,” provides one such issue. Here is a summary:

For nearly a decade, workers in a warehouse in Seattle have shipped boxes of shoes, beach chairs, Marvel T-shirts and other items to online retail customers across the U.S.  The operation, called Big River Services, sells around $1 million a year of goods through e-commerce marketplaces including eBay, Shopify, Walmart and Amazon under made up brand names. “We are entrepreneurs, thinkers, marketers and creators,” Big River says on its website.

Big River’s website says it sells on Amazon’s marketplace but doesn’t mention anywhere that it is part of Amazon. It also misspells Seattle.

What the website doesn’t say is that Big River is an arm of Amazon that secretly gathers intelligence on its competitors.  Amazon publicly says that it pays little attention to competitors, instead focusing all its energies on being “customer obsessed.”

But Big River team members attended their rivals’ seller conferences and met with competitors, identifying themselves only as employees of Big River, instead of disclosing that they worked for Amazon.  They were given non-Amazon email addresses to use externally, but internally they used Amazon email addresses. They took extraordinary measures to keep the project secret, disseminating their reports to Amazon execs using printed, numbered copies rather than email. In the event of a leak they were told to say they were formed to improve the seller experience on Amazon, and that such research is normal.

“Amazon, like many other retailers, has benchmarking and customer experience teams that conduct research into the experiences of customers, including our selling partners,” says the firm. This benchmarking team got top corporate approval to buy inventory, use a shell company and find warehouses in the U.S., Germany, England, India and Japan so they could pose as sellers on competitors’ websites. To get information about rival logistics services, Big River stored inventory with companies including FedEx, UPS, and DHL.

Virtually all companies research their competitors, reading public documents for information, buying their products or shopping their stores. But lawyers say there is a difference between such corporate intelligence gathering of publicly available information, and what is known as corporate or industrial espionage. Companies that misrepresent themselves to competitors to gain proprietary information are open to suits on trade secret misappropriation.

Classroom discussion questions:

  1. What are the ethical implications of Amazon’s actions?
  2. How would such benchmarking be legal?

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:

  1. 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.
  2. When and where should Ford inspect according to Chapter 6?