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OM in the News: Can You Help TSA Shorten Security Queues?

July 29, 2014
TSA checkpoint in Atlanta

TSA checkpoint in Atlanta

In anticipation that more fliers will be eager to pay for expedited checkpoint screening, the Transportation Security Administration has promised to award $15,000 in cash prizes to whoever can design a faster waiting line system, reports Nextgov (July 18, 2014). The competition is on InnoCentive, a website for crowdsourcing solutions to problems, which enables individuals and teams to submit proposals. “There is a guaranteed award,” the contest overview states. “The total payout will be $15,000, with at least one award being no smaller than $5,000.”

The challenge aims to solve expected problems with TSA PreCheck, a program where passengers who undergo a background check and pay $85 get access to fast lanes that don’t require removing shoes, coats, liquids and laptops. “Current queue layouts at TSA Pre✓ airports will need to adapt to support the increasing population of TSA Pre✓ passengers,” the competition states. “TSA is looking for the Next Generation Checkpoint Queue Design Model to apply a scientific and simulation modeling approach to meet queue design and configuration needs of the dynamic security screening environment with TSA Pre✓.” TSA also is asking for approaches that would help speed standard, “free” waiting lines.

Competitors must supply a proposal that considers physical logistics, peak hours and staffing schedules, among other constraints. The “line” extends from the point where a passenger joins the end of the queue to the metal detector or body scan machine. Wait times cannot be more than 5 minutes for PreCheck and 10 minutes for standard lines. Also, the model should enable TSA to apply a “Computer Aided Design drawing to define the physical space available for queuing.”

Competitors are required to provide an animation of a computer screen that shows passengers flowing through lines. It must display real-time reporting during the animation, and allow a user to pause a simulation run when necessary for analysis or evaluation. What a great example of a complex, real-world queuing problem to ask your students to discuss!

Classroom discussion questions:

1. Why is TSA turning to crowdsourcing?

2. What ideas do you have for speeding the lines?


OM in the News: China’s Latest Export–Manufacturing Jobs

July 28, 2014

ethiopiaHuajian Shoes’ factory outside Addis Ababa is part of the next wave of China’s investment in Africa. It started with infrastructure, especially the kind that helped the Chinese extract African oil, copper, and other raw materials to fuel China’s industrial complex. Now China is getting too expensive to do the low-tech work it’s known for. African nations such as Ethiopia, Kenya, Lesotho, Rwanda, Senegal, and Tanzania want their share of the 80 million manufacturing jobs that China is expected to export, reports BusinessWeek (July 28-Aug. 3, 2014).

At Huajian’s factory,  wages of about $40 a month are less than 10% of what comparable Chinese workers make. But just as companies discovered with China when they began manufacturing there in the 1980s, Ethiopia’s workforce is untrained, its power supply is intermittent, and its roads are so bad that trips can take 6 times as long as they should. “Ethiopia is exactly like China 30 years ago,” says Huajian’s CEO, whose company supplies such well-known brands as Nine West and Guess. Frustrated by “widespread inefficiency” in the local bureaucracy, the company is struggling to raise productivity from a level that is about a 1/3 of China’s. Transportation and logistics that cost 4 times what they do in China are prompting Huajian to set up its own trucking company.

ethiopia 2Manufacturers coming here don’t have to worry about finding new workers. The population of 96 million is Africa’s second-largest after Nigeria’s. Cheap labor and electricity and a government striving to draw foreign investment make Ethiopia more attractive than many other African nations. “It could become the China of Africa,” says a Johns Hopkins prof.

Classroom discussion questions:

1. Why is China exporting manufacturing jobs?

2. What are the advantages and disadvantages of locating in Ethiopia?

OM in the News: Paying Employees to Stay, Not to Go

July 26, 2014
This new In-N-Out Burger in Encinitas, CA, pays well above the state's $9 minimum wage, and the federal $7.25 minimum

This new In-N-Out Burger in Encinitas, CA, pays well above the state’s $9 minimum wage, and the federal $7.25 minimum

In-N-Out Burger, the chain based in California, pays all its employees at least $10.50 an hour, while Shake Shack, the trendy, lines-out-the-door burger emporium, has minimum pay of $9.50. Moo Cluck Moo, a fledgling company with two hamburger joints in Michigan, starts everyone at $15. “The No. 1 reason we pay our team well above the minimum wage is because we believe that if we take care of the team, they will take care of our customers,” said the CEO of Shake Shack.

The nation’s fast-food restaurants, which employ many of the country’s low-wage workers, are at the center of the debate over low pay and raising the federal minimum wage — fueled by protests demanding that fast-food chains establish a $15 wage floor, writes The New York Times (July 5, 2014). McDonald’s was pilloried last year for a hotline that advised employees how to seek food stamps and public assistance for heating and medical expenses.

Fast-food industry officials have long contended that raising the minimum wage would result in fewer jobs and higher prices. Complaining of low profit margins that generally accompany inexpensive menu items, most fast-food restaurants try to keep wages down — the median hourly wage for fast-food workers nationwide is $8.83, compared with $11.50 at Boloco and $10.70 at Shake Shack. In 2002, when the minimum wage was $5.15 an hour, Boloco raised its minimum pay to $8. It also began subsidizing commuting costs, providing English classes to immigrant employees and contributing up to 4% of an employee’s pay toward a 401(k). A major benefit of paying $15, said the owner of Moo Cluck Moo, is “we don’t have any turnover. We don’t have to train people constantly.”

Classroom discussion questions:

1. Why are these wages an operations issue?

2. How does this article relate to the human resource strategy we discuss in Chapter 10 on page 398?

OM in the News: How Operations Management Improves Hospital Procedures

July 24, 2014

hospital nurseSwamped with tasks such as hunting for supplies, tracking down medications, filling out paperwork at the nursing station and looking for missing test results, nurses may spend less than two hours of a 12-hour shift in direct patient care, says The Wall Street Journal (July 22, 2014). But research has also found that the more time nurses spend at the bedside, the less likely patients are to suffer falls, infections and medication errors, and the more likely they will be satisfied with their care.

Now hospitals are changing traditional work practices, shifting more routine tasks to certified nurse assistants and other less highly skilled staffers. They are eliminating inefficient processes that make nurses walk as many as 5 miles around the hospital in a single shift. Some hospitals are aiming to triple the amount of time nurses spend with patients. That means locating supplies inside patient rooms and having pharmacists deliver medications to patient floors. As more hospitals adopt electronic medical records and place computers in patient rooms, they are enabling nurses to access information quickly and fill out medical charts while keeping close to patients.

Presbyterian Medical Center, in Winston-Salem, N.C., found in a 2010 internal audit that nurses were involved in direct patient care at the bedside for only 2.5 hours every 12-hour shift. “Not only was that eye-opening, it was also completely unacceptable,” says its chief clinical officer. With a shift to a team-based model, the hospital hit 6.5 hours per shift at the end of 2013, with a goal to hit 8.5 hours by the end of 2015. Process changes helped save $20 million last year at Presbyterian, and the transfer to electronic records also reduced by 42 minutes the amount of time spent paging doctors, copying and faxing, and tracking down tests.

This is a good article to link to the video case studies on Arnold Palmer Hospital in Chapters 6 (Quality), 7 (Process Analysis), and 9 (Layout).

Classroom discussion questions:

1. What tools of TQM could be used to help improve hospital processes (see pages 218-222)?

2. Why is it important for nurses to spend more time with patients, and less time at their stations?

Good OM Reading: Rethinking Corporate Social Compliance in the Supply Chain

July 22, 2014

 third worldFollowing widely publicized human rights scandals in the early 1990s, corporations, dominated by those in the footwear and apparel industries, invested heavily in social compliance programs to enforce a minimum standard of human rights and employee safety throughout their supply chains. These standards, framed loosely on a U.N. declaration, typically sought to separate the worst human rights abuses from production processes where finished goods were manufactured. In the contract manufacturing sector, such abuses include child labor, forced labor, excessive overtime and unsafe conditions.

One might expect that given the pervasiveness of corporate social compliance programs and the volume of audits being performed that the evidence of abuses in corporate supply chains would be diminishing. If anything, the opposite may be true. The collapse of the Rana Plaza Garment Factory in Bangladesh in 2013 put a spotlight back on the issue of human rights in contract manufacturing. Social compliance programs have presented a dangerous illusion of progress while conditions, egregious even by 19th-century standards, have persisted unaddressed.

In the garment sector, countries such as Bangladesh, Haiti, Lesotho and Cambodia represent large and growing sources of production. The reason these countries have become major players has had little to do with a proximity to raw materials or a uniqueness of expertise, and much more to do with these countries possessing large volumes of impoverished labor.

What needs to change?  In this excellent (12 page) report, titled Human Right and Professional Wrongs, by Ernst & Young (2014),  several recommendations emerge:  (1) Companies need to use 3rd-party certifiers and auditors more strategically; (2)Procurement systems need to be tightened to prevent orders from being placed with factories that have not had their social compliance status assessed; (3) Agents need to be brought in line with the social compliance expectations of retailers; (4) Companies need to maintain longer relationships with a smaller number of suppliers; and (5) Companies need to incorporate human rights before they begin manufacturing.









OM in the News: One Week, 3,000 New Products

July 19, 2014
Quirky's NY office

Quirky’s NY office

Separating winners from flops is the challenge facing Quirky, the 5-year-old New York-based invention-facilitating company. Quirky culls entrepreneurs’ ideas, taking those that seem most promising from development to manufacturing to distribution. In an effort to speed products to market in 120 days or less, it draws on an online community of nearly 900,000 Quirky “community members” for input. Roughly 3,000 ideas for new products arrive in its online inbox each week, reports The Wall Street Journal (July 3, 2014).

And each week Quirky’s staff whittles down this stream of new ideas into a dozen or so top picks that are scrutinized and voted on during a raucous event known as “Eval,” open to employees and the online community. Typically, 3-5 ideas get the green light to move into development. At that point, engineers and designers, working out a vast red brick warehouse in New York, turn sketches into marketable products, tapping the online community for suggestions about design, product names and price points.

Of the more than 206,000 ideas submitted since 2009, just 500, or 0.2%, have made it into development, and 132 to market. Inventors receive 4% of revenue, with an additional 6% split among members of the broader community who suggest product features, vote on tag lines or contribute expertise in areas such as electric engineering, material science and product safety. The product managers weed out the ideas they think could face heavy competition, or major technical challenges as well as those with no ready retail partner, before forwarding their top 10 picks, which are winnowed further for Eval.

Classroom discussion questions:

1. What is Quirky’s product development strategy? (See pages 157-8 in Chapter 5)

2. Does Quirky follow the product development stages in Figure 5.1 on page 161?

OM in the News: The Downside of Increasing Productivity

July 17, 2014

summers article“What has happened in agriculture over the past century is remarkable,” writes Harvard Prof. Larry Summers in The Wall Street Journal (July 8, 2014). The share of American workers employed in agriculture has declined from over 1/3 a century ago to 1-2% today. Why? Because agricultural productivity has risen spectacularly, with mechanization reducing the demand for agricultural workers even as food is more abundant than ever. What has happened in agriculture is happening to much of the rest of the economy.

In Marc Andreessen’s phrase, “Software is eating the world.” Already the number of Americans doing production work in manufacturing and the number on disability are comparable. Despite an expected uptick in the next few years in manufacturing employment, the long-term trend is inexorable and nearly universal. As in agriculture, technology is allowing the production of far more output with far fewer people. No country can aspire to more of an increase in competitiveness than China, yet even it has suffered a decline in manufacturing employment over the past 2 decades. And the robotics and 3-D printing revolutions are still in early stages.

What about services? A generation from now, Summers thinks taxis will not have drivers; checkout from any kind of retail establishment will be automatic; call centers will have been automated with voice-recognition technology; routine news stories will be written by bots; counseling will be delivered by expert systems; financial analysis will be done by software; single teachers will reach hundreds of thousands of students, and software will provide them with homework assignments customized to their strengths and weaknesses.

Those losing jobs due to increased productivity will be freed up to do things in other sectors. But there are many reasons to think the software revolution will be even more profound than the agricultural revolution. This time around, change will come faster and affect a much larger share of the economy. Workers leaving agriculture could move into a wide range of jobs in manufacturing or services. Today, however, there are more sectors losing jobs than creating jobs.

Classroom discussion questions:

1. What are the OM implications of Summers’ article?

2. What do you think American manufacturing will look like in 20 years?


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