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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?

MyOMLab: Updates for Fall, 2014

July 15, 2014

myomlabThe new MyOMLab release was just installed, and includes a number of new features:

Grade Sync Enhancements for Third-Party LMS Integrations Courses in all standard integrations (formerly kiosk integrations) with Canvas, D2L, and Moodle are now automatically send grades and assignments information. These default settings are now also applied when copying courses.

Learning Catalytics™ Instructors and students now have Single-Sign-On to Learning Catalytics™, “bring your own device” student engagement, assessment, and classroom intelligence system. From a pre–built announcement on the Course Home, instructors now have access to Pearson-created content questions or they can create their own questions.

Assignable Dynamic Study Modules Instructors now have the ability to assign Dynamic Study Modules as homework, choosing which modules to assign, how many points they are worth, and when they are due. All student work for the assigned modules is now feed directly to the gradebook.

HTML5 Mobile Player The MyOMLab Exercise Player has a new streamlined mobile friendly design, allowing access from iPads and Android tablets.

Reporting Dashboard A new Reporting Dashboard presents student performance data at the class, section, and program levels. This is designed to give you the information you need to keep your students on track throughout the course, and demonstrate learning outcomes clearly and easily.

Notify Lab Administrators Note that MyOMLab require the use of the Adobe Flash Player version 10.2 or higher. The recommended version is Flash Player 11.9.

If your campus labs are running Windows 8.0 or 8.1, please make sure your computer lab administrator downloads and installs the LockDown Browser executable file before classes begin. (The latest Windows version of the LockDown Browser is, dated March 28, 2014.) The latest Mac version is, also dated March 28, 2014. This version contains the basic and scientific calculators that match Windows 7′s calculator layout.

Our  24/7 site for instructor/students for technical support is: Or you can Phone 888-433-8435   for Instructors or 800-677-6337 for Students. Our Community site has been updated to include ALL of the MyOMLab training videos, new success stories, best practices and more.

OM in the News: Behind The Tour de France

July 14, 2014


This is a sample master schedule which shows every event, staff member, team vehicle

This is a sample master schedule which shows every event, staff member, team vehicle

The large behind-the-scenes operations which support a football World Cup or Formula One racing team are well-known, but a Tour de France team also needs major support, reports BBC News (July 6, 2014). “A Tour de France team is like a large traveling circus,” says the coach of the Belkin team. “The public only sees the riders but they could not function without the unseen support staff.” The base to the team’s cycling pyramid includes everything from osteopaths to mechanics, from logistics staff to PR people. Their task is to ensure that riders are in peak physical, nutritional and psychological condition. This can mean deciding which snack bars to give the cyclists before, during and after race stages, while ensuring there are scientifically-based cooling regimes in place for the riders. The team’s huge truck, coach, 3 vans and 5 cars resemble the sort of traveling convoy more associated with an international music act. Here are just some of the supplies the project management team for Belkin handles:

  • 11 mattresses
  • 36 aero suits, 45 bib shorts, 54 race jerseys, 250 podium caps
  • 63 bikes
  • 140 wheels, 220 tires
  • 250 feeding bags, 3,000 water bottles
  • 2,190 nutrition gels, 3,800 nutrition bars
  • 10 jars of peanut butter, 10 boxes of chocolate sprinkles, 20 bags of wine gums, 20 jars of jamBelkin team
  • 80 kg of nuts, raisins, apricots and figs, plus 50 kg of cereals

The OM behind a world-tour team is complex:  These top teams often compete in 2-3 races simultaneously, in different countries and sometimes on different continents. Each team has 25-35 riders (9 compete in any single race), coming from different parts of the world, going to different races at different times, each with his own physique and strengths.  They have customized bikes, uniforms, and food preferences. The support staff can include another 30 people.

Classroom discussion questions:
1. Why is project management important to a racing team?

2. Why does each team have 9 riders in one race?



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