Israel – The OM Blog by Heizer, Render, & Munson

OM in the News: Israel, Terrorists, and Global Supply Chains

“Let’s call it Operation Chutzpah,” writes The Wall Street Journal (Sept. 23, 2024). If, as is widely believed, the Mossad detonated pagers and walkie-talkies used by Lebanese Hezbollah terrorists, killing dozens and wounding thousands, it will go down as an intelligence operation for the history books. This strike is the latest in a string of daring operations from the tunnels beneath Gaza to the heart of Tehran by The Startup Nation, as Israel is known in tech circles.

The Hezbollah terrorist group is funded by Iran

The attacks on Hezbollah this week using explosives planted inside electronics highlight the risks and vulnerabilities of technology supply chains. “Every board, every CEO, government, has now woken up today to the fact that products that we buy could be compromised,” said one CEO. “This is weaponizing of the supply chain.”

Many electronics manufacturers outsource production of relatively low-cost items such as pagers, which makes it difficult to track and verify the source of each piece within the final product. Companies often ship their designs for devices off to contract manufacturers who handle sourcing the components and assembly of the final goods.

“There’s multiple distributors, there’s multiple contract manufacturers, there’s multiple boards, there’s multiple locations. It’s just a really confusing array of people” in electronics supply chains, said a UNC prof in The Wall Street Journal (Sept 22, 2024). The complicated, multistep manufacturing process involving often far-flung suppliers introduces risk that parts inside finished products may be counterfeit or manipulated. The added tiers in outsourced manufacturing make it harder for buyers to know where the goods and their components are coming from.

Supply lines for everything from food and medicines to military material are perpetually targeted in armed conflicts, but this week’s attacks mark an audacious effort to embed itself within Hezbollah’s supply chain. Thousands of pagers carried by members of the terrorist group exploded. Then, the next day, walkie-talkies used by the group blew up in terrorists’ hands across Lebanon. The attack not only damaged communications, but exposed to family and friends that the targeted individuals belonged to Hezbollah.

Western governments have also been cracking down on foreign-made equipment due to national security concerns about spying and cyberattacks. The U.S. just found Chinese cargo cranes used at seaports around the country had embedded technology that could allow Beijing to covertly gain access to the machines.

Classroom discussion questions:

What can be done by the U.S. and other nations to prevent malware or other tools from damaging critical infrastructure?
How was Israel able to manage this feat?

OM in the News: Gary, The Hospital Robot

Gary works in a hospital. He does a lot of fetching and carrying. He cleans and sanitizes. He also chats to patients, acts as a translator and records and transcribes doctors’ consultations. He works every shift available, he never calls in sick, and he doesn’t stop for a coffee, a cigarette or a bathroom break. But he does need time to recharge his batteries – literally.

Gary is even being trained to clean toilets.

Gary is a robot, designed and built by Israel-based Unlimited Robotics. Since the start of this year a dozen Garys have been working at two of Israel’s largest hospitals. And 10 Garys just began working at a hospital in Philadelphia. The US is a huge target market for the company.

Gary is one answer to a global recruitment crisis in healthcare facilities. There simply aren’t enough people willing to work in a hospital when they can get a job in Starbucks, Dunkin Donuts or McDonald’s for the same money. By 2030, writes Israel21c (July 25, 2024), the problem will be so acute that there will be a shortfall of 18 million health workers globally.

Gary costs around $30,000, which is less than a year’s salary for a typical US hospital worker. Except that Gary works a 140-hour week with no vacations.

There are many opportunities for Gary, but Unlimited Robotics decided concentrate on the huge demand from hospitals both in Israel and the US.

Gary is autonomous, which means he takes “initiative” rather than relying on minute-by-minute instructions. He also has two arms, whereas most robots have just one because coordination of two simultaneously is exceptionally complicated. And he’s adaptable. Most robots are designed for a single task, but Gary can quickly pick up new skills thanks to an open-source platform that allows software developers with no prior experience of robotics to build applications.

Gary provides a range of services in healthcare facilities, for example meeting the constant demand for bed linens, water, medical devices and other items so that medical personnel can spend more time treating patients. Gary also engages selected geriatric patients in conversation, to maintain or improve their cognitive capabilities. He recognizes them and (using AI) personalizes every conversation. Eight out of 10 patients say they are happy to chat to a robot. (Clicking on the article link allows you to watch a video of Gary in action).

Classroom discussion questions:

What other tasks can Gary be eventually trained to do?
What non-hospital opportunities exist for Gary?

OM in the News: More AI From the Start Up Nation

This past week, The Wall Street Journal ran three separate articles on more high-tech research coming out of Israel. These complement the blogs we have earlier done on Israeli firms producing 3-D printed hearts (April 23, 2019), warehouse robotics (Nov. 12, 2020), computer vision systems (Nov. 21, 2018), and 3-D printed steaks (Feb. 2, 2019). Here are the latest:

First, about 7.5 million people in the U.S. have trouble using their voices. So Amazon other AI tech providers is working on tools to enable voice-activated digital assistants to understand users with a stutter and other speech impairments. Amazon’s Alexa integration, with software developed by Israeli startup Voiceitt, lets people with speech impairments train an algorithm to recognize their own unique vocal patterns (WSJ, Feb, 24, 2021). Training voice assistants to respond to people with speech disabilities could improve the experience of voice-recognition tools for a growing group of potential users, such as seniors, who are more prone to degenerative diseases.

Second, Israel’s ALYN Hospital is developing a wheelchair-mounted robot arm powered by AI chips designed to mimic the way the human brain works, a technology known as neuromorphic computing. (WSJ, Feb. 24, 2021). Neuromorphic software is programmed to learn about the surrounding environment and adapt to it in real time, enabling the system to automatically adjust the arm’s trajectory and force for precise tasks, such as delicately bringing a cup of water to a user’s mouth. The models learn similarly to the way human babies learn, by seeing an image or toy once and being able to recognize it forever. The focus is on helping patients with spinal injuries, MS and cerebral palsy.

Finally, we earlier reported that McDonald’s paid $300 million for the Israeli firm Dynamic Yield, in a bid to boost sales at drive-thrus and digital kiosks. With Dynamic Yield’s technology, restaurants can vary their electronic menu boards’ display of items, depending on factors such as the weather—more coffee on cold days and McFlurries on hot days—and the time of day or regional preferences. (WSJ, Feb. 27, 2021). For McDonald’s, it provides personalized offers for customers of its stores.

Classroom discussion questions:

Why does Israel have more high-tech startups than any nation beside the U.S?
Why is AI such an important operations management tool?

OM in the News: ZIM Shipping’s Competitive Advantage

Israeli container ship operator ZIM Shipping is turning its small size into an advantage in a business dominated by outsize carriers running megaships in global supply chains, writes The Wall Street Journal (Jan. 7, 2021). The company is touting its “flexibility and agility” to capitalize on the surging demand from retailers looking to circumvent shipping logjams by using premium-priced, point-to-point services.

ZIM controls just 1.5% of global container capacity. The company competes against ship operators 10 times its size and that have grouped into 3 global operating alliances. Those 3 groups, including giants such as A.P. Moller-Maersk of Denmark, CMA CGM of France and China’s Cosco, collectively handled 83% of all seaborne imports into the U.S. last year.

“Our small size is now an advantage,” said ZIM’s CEO. “Our competitors use big vessels and operate on volumes and quantities. We are offering custom services to loyal customers that are willing to pay a premium for speed and reliability.”

ZIM’s biggest ships can move a maximum of 12,000 containers, roughly half of what is stacked on the ultralarge vessels operated by the sector’s leaders. Backups at ports have been keeping many of those behemoths waiting for days outside major ports, pushing back deliveries and saddling cargo owners with delay charges on top of record-high freight rates. ZIM’s smaller ships present higher charter-market flexibility and agility to redeploy across different routes, a significant benefit in times of volatile or uncertain market dynamics.

Airfreight services typically cost far more than ocean freight but offer rapid transport in exchange. The gap in delivery times, which can amount to several weeks in normal times, has narrowed because the grounding of passenger jets has left shippers waiting for space in capacity-strained aviation markets. “The regular air service is 5-6 days,” ZIM’s CEO said. “A number of clients wait for 5 more days and use our ships. They save 80% of the airfreight cost.”

Classroom discussion questions:

What are the 3 ways firms can gain competitive advantage? (Hint: see Ch. 2 in your Heizer/Render/Munson OM text).
What is ZIM’s strategy and why is it working?

OM in the News: Israeli Startup Races to Roll Out 3D Printed Steaks

The walls of Redefine Meat Ltd.’s lab in Rehovot, Israel, are plastered with posters of cuts of beef, including sirloins, T-bones, and rib-eyes. But the startup isn’t looking to sell the perfect cut of beef. Instead, it wants to create a plant-based facsimile. The company is building a 3D printer that it says will produce a meatless steak that’s so fatty, juicy, and perfectly meaty that even the most dedicated carnivore won’t know the difference. “All meat alternatives today are basically a meat-homogeneous mass,” says Redefine Meat’s CEO. “If you 3D-print it, you can control what’s happening inside the mass to improve the texture and to improve the flavor.”

Redefine Meat says that 3D printing promises to give diners the same sensory experience as eating a real T-bone or rump roast, writes BusinessWeek (Nov. 25, 2019). The technology involves developing a design that can then be printed countless times. First, proprietary computer software creates a detailed model of a steak, including the muscle, fat, and blood, based on whichever cut it’s emulating. That blueprint is then transmitted to a printer loaded with plant-based “inks.” Hit the start button and out comes a “steak.”

While ground-meat replacements are widely available, mimicking an actual cut of meat has proved far more challenging. That’s because replicating the mouthfeel and visual appeal of a juicy sirloin is a lot tougher than cranking out something that’s going to be slapped between a bun. “A beefsteak is the holy grail of plant-based meat,“ says one exec.

The faux-meat category has already reached an estimated $14 billion in annual sales worldwide, and will grow to $140 billion in 2029. Redefine Meat plans to introduce its plant-based steaks to the public in the first quarter of 2020. It will supply customers, including restaurants, meat distributors, and retailers, with both the printers and cartridges. Redefine Meat’s printer can now deliver five 7-ounce steaks in an hour. The company hopes to speed that up to 22 pounds by the end of 2020. That will mean 50 servings an hour, or the equivalent of a cow’s worth of steak a day.

Classroom discussion questions:

What are the OM issues involved in “printing” a steak?
Will this new product be as successful as an Impossible Burger?

OM in the News: The McDonald’s Menu Goes Digital

McDonald’s, in its largest acquisition in 20 years, is buying an Israeli decision-logic technology company to better personalize menus in its digital push, spending more than $300 million on Dynamic Yield Ltd., reports Fortune (March 26, 2019). With the new technology, McDonald’s restaurants can vary their electronic menu boards’ display of items, depending on factors such as the weather—more coffee on cold days and McFlurries on hot days, for example—and the time of day or regional preferences. The menus will also suggest add-on items to customers.

Since 2015 the 38,000 store burger chain has pushed technology—including self-order kiosks, digital menus boards and delivery— to boost sales and help McDonald’s stand out among rivals. Since the firm seldom carries out acquisitions, the purchase of Dynamic Yield shows the company’s desire to leverage technology to speed growth in the fiercely competitive restaurant industry. The move will make McDonald’s one of the first companies to integrate decision technology into the customer point of sale at a brick and mortar location.

“Technology is a critical element of our velocity growth plan,” says the McDonald’s CEO. “We are expanding the role that technology will play in McDonald’s future and the speed with which we’ll be able to implement our vision of creating more personalized experiences for our customers.” The company said it would roll out the technology at restaurants in the U.S. in 2019 and then expand the use to other top international markets.

Classroom discussion questions:

What was McDonald’s largest acquisition before Dynamic Yield?
What other technologies have entered the restaurant industry?

OM in the News: Computer Vision Systems and the Start Up Nation

A Mobileye autonomous driving vehicle at the company’s HQ in Jerusalem

Israel (famously known as the Start Up Nation after the best-selling book by that title) has become a leader in one of the most promising frontiers in the technology world: computer vision. An area that has come of age this decade, it covers applications across dozens of industries that have one thing in common: the need for computers to figure out what their cameras are seeing, and the need for those computers to tell them what to do next.

Israel’s biggest success story is Mobileye, which uses a dozen cheap cameras to see the traffic around autonomous cars and then guides them through traffic. In 2017, Intel paid $15.3 billion to acquire the technology.

“Computer vision is the connecting thread between some of Israel’s most valuable and promising tech companies,” writes The Financial Times (Nov. 20, 2018). And unlike Israel’s traditional strengths— cyber security and mapping (Waze is another Israeli invention) — computer vision slides into a broad range of different civilian industries, spawning companies in agriculture, medicine, sports, self-driving cars, the diamond industry and even shopping. This lucrative field has benefited from a large pool of engineers and entrepreneurs trained for that very task in the Israeli military, where they fine-tuned computer algorithms to digest millions of pieces of surveillance.

Having built massive databases — from close-ups of farm insects to medical scans to traffic data — has given Israeli companies a valuable head start over other nations. And in an industry where every new image teaches the algorithm something useful, that has made catching up difficult. It has also created opportunities in unexpected sectors. Physimax uses a bank of cameras to analyze the posture of athletes, then suggests changes to their exercise routines and techniques. It is already being used by the US military and professional basketball and football teams. Zebra Medical uses AI to scan millions of MRIs from around the world, guiding radiologists to the slightest sign of disease. Trigo automates the checkout in grocery stores. Nexar analyses traffic and collision data from driver’s smartphones.

Classroom discussion questions:

Why are computer vision systems important to OM?

2. Provide an example not discussed in the article of how the systems can be used in business.

OM in the News: What’s Next–A Robot That Folds Your Laundry?

Why am I not surprised that the Start Up Nation (title of a great book about Israel’s inventions), which brought us Mobileye, the Pill Cam, the Intel 8088, Waze, USB flash drives, Viber, drip irrigation, and the cherry tomato, now brings FoldiMate. After all, cars can now drive themselves. Cellphones talk to us. How long will it be until the dreams of every college student and overworked parent come true — and laundry can fold itself?

FoldiMate is about two-thirds the size of a washer or dryer. The user simply hangs or clips the shoulder area of the shirt on 2 hooks and steps back. The device pulls the shirt in. A series of rollers and arms that also move up-down-sideways straighten and fold the item of clothing. A typical laundry hamper of clothes can be folded in about 3 minutes. Laundry is deposited in a tray at the base of the machine.

FoldiMate works by analyzing each garment it takes in, figuring out its ideal folding shape and delivering a drawer-ready stack of smoothly folded clothes. It look like a mash-up of a clothesline and a plastic oven, writes The New York Times (May 25, 2017).

“The whole idea is to have the experience of handing items over to a friend, who will do that hard labor for you,” says Gal Rozov, the inventor. “My wife claims I’m one of the worst laundry folders in the world, and she’s right. I hate it. We have 3 kids, and laundry folding is tedious, and I wanted some way to help out.”

Via a crowdfunding campaign on its website, FoldiMate has taken in about 8,000 deposits of $85. The company aims to start deliveries of the $850 product next year.

Classroom discussion questions:

What other famous inventions have come out of Israel?
Will this product eventually be like the bread machine–an off gifted but rarely used appliance?

OM in the News: Intel, Mobileye, and Autonomous Cars

In the world of driverless cars, household names like Google and Uber have raced ahead of rivals, building test vehicles and starting trials on city streets. “But when it comes to what is under the hood, an array of lesser-known companies will most likely supply the technology required to bring driverless cars to the masses,” writes The New York Times (March 14, 2017). And in a $15.3 billion deal to acquire the Israeli firm Mobileye, Intel just moved to corner the market on how much of that technology is developed. Jerusalem-based Mobileye makes sensors and cameras for these vehicles.

Intel estimates the market for autonomous-driving systems, services and data will reach $70 billion by 2030. “You can think of the car as a server on wheels,” says Intel’s CEO. “The average autonomous car will throw out 4 terabytes of data a day, so this is one of the most important markets and one of the fastest-growing markets. The deal with Mobileye merges the intelligent eyes of the autonomous car with the intelligent brain that actually drives the car.”

Mobileye’s technology helps a car see and understand the space around it, providing functions such as automatically keeping a car in its lane. It includes 360-degree vision and mapping, and integrates various sensor elements such as cameras, radar, sonar and the laser-sensing technology known as LiDAR.

Intel has struggled lately with the persistent decline of PC sales, which show little sign of reversing. To drive growth, the company is focusing on artificial intelligence, and self-driving cars are among the more promising applications of AI.

Classroom discussion questions:

Why is Intel leaving its core business? Advantages? Disadvantages?
What is Mobileye’s strength?

OM in the News: Sustainability Technology Defeats an Old Foe–Drought

Desalination plants in Israel are marked in red

As California and other western areas of the U.S. grapple with an extreme drought, a revolution has taken place in Israel, reports The New York Times (May 30, 2015). A major national effort to desalinate Mediterranean seawater and to recycle wastewater has provided the desert nation with enough water for all its needs, even during severe droughts. More than 50% of the water for Israeli households, agriculture and industry is now artificially produced. Six years ago, Israelis were told to cut their shower time by 2 minutes. Washing cars with hoses was outlawed and those few wealthy enough to absorb the cost of maintaining a lawn were permitted to water it only at night. “We were in a situation where we were very, very close to someone opening a tap somewhere in the country and no water would come out,” said a Water Authority spokesman.

The turnaround came with a 7-year drought, one of the most severe to hit modern Israel, that began in 2005 and peaked in 2009. The country’s main natural water sources — the Sea of Galilee and the mountain and coastal aquifers — were severely depleted, threatening a potentially irreversible deterioration of the water quality. Desalination emerged as one focus of the government’s efforts, with 5 major plants going into operation or opening soon. Together, they will produce a total of more than 130 billion gallons of potable water a year, with a goal of 200 billion gallons by 2020.

Israel has, in the meantime, become the world leader in recycling and reusing wastewater for agriculture. It treats 86% of its domestic wastewater and recycles it for agricultural use — about 55% of the total water used for agriculture. Spain is second to Israel, recycling 17% of its effluent, while the United States recycles just 1%. Wiser use of water has also helped, and led to a reduction in household consumption of 18%. Water Authority representatives actually went house to house offering to fit free devices on shower heads and taps that inject air into the water stream, saving 1/3 of the water used while still giving the impression of a strong flow.

Classroom discussion questions:

1. In what other nations is resource sustainability a major issue?

2. What can manufacturing firms do to conserve water?

OM in the News: Move Over, Silicon Valley

In Chapter 8, Location Analysis, we discuss the interesting topic of clustering (see Table 8.3). Clustering is basically locating near competitors so as to take advantage of major resources found in that area. The perfect example is how software and high-tech firms head to Silicon Valley, Boston’s Route 123, and Bangalore (India). Our colleague, David Greenberg, just emailed from India that Tel Aviv belongs near the top of the list and sent the adjacent graphic. He adds: “Aside from Israel as No 2, what I found interesting is that Waterloo, Ontario is on the list. There’s an implication here that a single successful startup (Blackberry, Microsoft) is enough to build a cluster (Waterloo, Seattle)”.

Like the U.S., Israel puts entrepreneurs, successful or not, on pedestals, which allows them to attract the best minds to work with. Some Israeli high-tech innovations: voice mail (1984), multislice CD scanners and cardiac stents (1992), ICQ instant messaging and VoIP “voice over internet” (1995), USB flash drives and computer vision software for road navigation (1999), the pillcam (2001), and Intel mobile technology (2003). More than 90 Israeli firms are listed on NASDAQ–2nd only to the U.S.

Classroom discussion questions:
1. What ecosystem is needed for success in high-tech?

2. Name several other clusters that are not high-tech.

OM in the News: The High-Tech Clusters– Silicon Valley, Boston, Bangalore, and Israel

In our discussion of how companies select a site in which to locate (in Chapter 8), we bring up clustering, which is basically locating near competitors so as to take advantage of major resources found in that area. The perfect example is how software and high-tech firms head to Silicon Valley, Boston’s Route 123, and Bangalore (India). Here the talents of bright graduates in scientific and technical areas and plenty of venture capital are keys to success. Today’s Wall Street Journal (Sept.10, 2012, pp. C5-C8) compellingly adds Israel to this list. Israel’s Minister of Finance ascribes much of its success to “government support of the robust venture capital industry, which is the accelerating spirit behind many start-up companies.”

Indeed the World Economic Forum’s Global Competitive Index just ranked Israel’s “availability of venture capital” 2nd in the world, “world-class capacity for innovation” 6th, and “high number of patents” 4th in world rank. The IMD World Competitiveness Yearbook lists Israel 1st for R&D expenditure (as % of GDP), 2nd for qualified engineers, 2nd for IT skills, 2nd for scientific research, 2nd for entrepreneurship, and 2nd for innovative capacity. The society, like the U.S., “puts entrepreneurs, successful or not, on pedestals, which allows them to attract the best minds to work with,” says one professor in Jerusalem. Included among the active sectors for innovators have been cleantech, agrotech, life sciences, communications technology, and security.

Here is the list of just some Israeli innovations: drip irrigation (1965), the Rummikub game (1977), voice mail (1984), multislice CD scanners and cardiac stents (1992), ICQ instant messaging, voice over internet VoIP), and the MS drug copaxone (all in 1995), USB flash drives and computer vision software for road navigation (1999), the pillcam (2001), and Intel mobile technology (2003). It follows that more than 50 Israeli firms are listed on NASDAQ–2nd only to the U.S.

Discussion questions:

1. Why do some countries have a much higher percent of scientists and engineers than other nations?

2. How does OM play a role in startup companies?

OM in the News: Terrorism Spurs New Product Development

One of the biggest generators of new product development (Ch.5) has been global terrorism. And one of the biggest exporters of domestic security technology has been Israel. The Orlando Sentinel just reported (Dec.5,2010) that more than 400 Israeli companies export $1.5 billion annually ( a number predicted to grow exponentially), with such products as biometric devices, anti-intrusion systems, airport screening machines, explosive detectors, and remote-controlled vehicles.

Israel is focusing on Brazil, which plans to spend $3 billion on security for the 2014 World Cup and 2016 Summer Olympics, and on India whose internal security budget tops $1 billion a year.

Here are just a few of the products you may not have heard of:

Magal Security Systems’ perimeter-intrusion systems at 11 airports in China.

Nice Systems’ data analysis and surveillance systems at the Eiffel Tower, Statue of Liberty, Bank of America, and NYC Police Dept.

MagShoe, a machine operated in airports in Europe and Australia to detect weapons in shoes without passengers having to remove their footware.

IntuView’s document-scanning software that not only translates Arabic text, but searches for key words, including names, dates and Quranic verses commonly cited by extremists. One customer is the US Army.

WeCU Technologies’ camera-monitored airport kiosks, which are designed to detect “malicious intent” of users by tracking facial expressions, stress levels, breath/heart rate, and sweating.

As I mentioned in my blog on Sept. 21st about the book A Start Up Nation, Israel cannot compete with mass-production countries such as the US and China, so Israeli firms need to be creative in new product development.

Discussion questions:

1. Why is new product development so important to every company?

2. Why does Israel have more high-tech firms listed on Nasdaq than any other country?

3. How will terrorism continue to provide the need for OM solutions?