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Good OM Reading: What Successful Project Managers Do

March 27, 2015

mit coverIn today’s dynamic and competitive world, a project manager’s key challenge is coping with frequent unexpected events. Despite meticulous planning, the manager may daily encounter such events as the failure of workers to show up at a site, the bankruptcy of a key vendor, a contradiction in engineering guidelines, or changes in customers’ requirements. Some of these events were anticipated but whose impacts were much stronger than expected, some could not have been predicted, and others could have been predicted but were not. All three types of events can become problems. A new research article in MIT Sloan Management Review (Spring, 2015) describes how successful project managers cope with these challenges with 4 approaches.

1. Since project progress depends on individuals who represent different disciplines and parties, collaboration is crucial for the early detection of problems as well as the quick implementation of solutions. But the various parties to the project are loosely coupled, whereas the tasks themselves are tightly coupled. When unexpected events affect one task, many other interdependent tasks are quickly affected. Thus, project success requires both interdependence and trust among the various parties.

2. Project managers faced with unexpected events employ a “rolling wave” approach to integrate planning/reviewing with learning. Recognizing that firm commitments cannot be made on the basis of volatile information, they develop plans in waves as the project unfolds and information becomes more reliable. They develop detailed short-term plans with firm commitments, while also preparing tentative long-term plans (that include redundancies, such as backup systems or human resources).

3. Successful project managers never stop expecting surprises, even though they may effect major remedial changes only a few times during a project. They’re constantly anticipating disruptions and maintaining the flexibility to respond proactively. The book Great by Choice describes one of the core behaviors of great leaders as “productive paranoia.” 

4. When unexpected events affect one task, many other interdependent tasks may also be quickly impacted. Thus, solving problems as soon as they emerge is vital. Corrective action is possible only during a brief window. One study of construction project managers found that they addressed 95% of the problems during the first 7 minutes following problem detection.

Teaching Tip: Cumulative Exams in Your OM Course

March 26, 2015

test“The evidence that students retain content longer and can apply it better when exams and finals are cumulative is compelling,” reports Faculty Focus (March 18, 2015). Will your students yell and scream? Yes, but for the very reason we should be using them: they force regular, repeated encounters with the content. It’s those multiple interactions with the material that move learning from memorization to understanding. Students object because they don’t know how to study for long-term retention. Here are 3 suggestions:

1. Use previous or potential test questions.

Display a question at the beginning of the session. “Here’s a test question I’ve asked previously about TQM. How would you answer it?” Give them time to talk with each other. Have them look in their notes.

Have students create a possible test question. “This material on project crashing is fair game for the exam. What might a test question about it be?” Identify those that are good. If one those student questions ends up on the test, that pretty much guarantees that students will take this activity seriously.

2. Make a habit of asking questions about previous material. A few guidelines:

Do not answer the questions yourself. Give a hint if needed.

Ignore their looks of confusion and claims that they don’t have a clue.

No response? Tell them, “that’s the question we’ll start with in our next class and if you don’t have an answer then, it’s a potential exam question for sure.”

3. Have students do short reviews of previous material.

In class today, say, “Let’s all look at our notes from last week. Take 2 minutes to underline 3 things in your notes that you’re going to need to review for the exam.”

Late in the semester, say, “Take 3 minutes to review your notes from a month ago. Do you have anything in those notes that doesn’t make sense to you now?” Encourage them to write more in their notes if they need to.

Students who regularly encounter previous content in your OM course, find studying for cumulative exams easier


OM in the News: Mexico’s Auto Assembly Lines Surge Ahead

March 24, 2015

assembly linesWhen Audi decided to move global production of its Q5 SUV to North America, the prize went to Mexico. Audi now is finishing a $1.3 billion factory in a small town called San Jose Chiapa. Mexico’s low wages and improved logistics were part of the draw. But for Audi, which plans to ship the factory’s output all over the world, what tipped the scales was Mexico’s unrivaled trade relationships. The Audi deal shows that Mexico’s 40 different free-trade pacts give it allure in the global car market, threatening the American South’s industrial renewal.

Seven Asian and European auto makers have just opened, or will open shortly, new Mexican assembly plants, reports The Wall Street Journal (March 18, 2015). Others have made significant expansions in Mexico, among them Nissan, GM, Ford and Fiat Chrysler. This month, VW said it would spend $1 billion expanding a Mexican plant to build a small SUV for the U.S. and foreign markets. All told, auto makers and parts suppliers have earmarked more than $20 billion of new investments. The wave of investment has turned Mexico into the world’s 7th-largest producer of cars—it passed Brazil last year—and the 4th-largest exporter after Germany, Japan and South Korea. Mexico’s current production of 3.2 million cars and trucks will rise more than 50% to 5 million by 2018. It has been more than six years since an auto maker picked the U.S. South for a “greenfield” plant, meaning one where the company didn’t already have facilities. Such projects have all gone to Mexico lately.

Audi is taking some unusual steps to control its risk. First, to ensure quality, the company created a consultancy that fanned out to 160 parts suppliers in Mexico, encouraging some to change plant design or improve weak production processes. The company created an inventory of local sources for every part and for all raw materials used in the Q5, and has required suppliers to source from its list. And Audi now is training 600 people from Mexico at its headquarters in Germany. Visiting on 18-month stints, the Mexicans train on Audi systems and are indoctrinated with the company’s intense focus on quality.

There is an excellent 3 minute video linked to the WSJ article.

Classroom discussion questions:

1. Why are automakers heading to Mexico?

2. What can the U.S. do to entice manufacturers?

OM in the News: Why China Still Thrives as a Global Manufacturer

March 22, 2015

china outputA small factory near Shanghai, churning out widgets you never see but probably use, provides a perfect snapshot of the state of global manufacturing today. Some workers at the Integrated Micro-Electronics (IMI) facility affix pieces by hand to circuit boards bound for digital displays on European stoves. Others stand at computers, guiding machines that press together components for cars’ steering systems. But IMI is important less for what it makes than for what it represents. A cog in long supply chains, it produces parts for brand-name consumer goods.

Cheap Chinese labor has been crucial to the building of “Factory Asia”, the name given to the region’s complex of cross-border supply chains, writes The Economist (March 14, 2015). Asia first emerged as a manufacturing power in the 1960s, when Japan began exporting electronics and consumer goods. China’s opening up was the gamechanger. The region’s share of the global trade in parts rose from 14% in 2000 to 50% in 2012, 1/2 of which comes from China.  By hosting more of the supply chain, China boosts its manufacturing competitiveness and attracts more investment. IMI, for instance, is headquartered in the Philippines and would have preferred to scale up its manufacturing there, where wages and worker turnover are lower.

Yet China’s factories are still far cheaper than western rivals (despite wages rising 12% a year for a decade). Many pay their employees just above the minimum wage, which at $270 a month in China is less than a 1/4 that in the U.S. And they are more efficient than many rivals. With Chinese factories just starting to pour money into automation, there is scope to improve productivity further. China became the biggest market for robots in 2013. Foxconn, which has more than a million employees in China, says that it wants robots to complete 70% of its assembly-line work within 3 years.

Our discussion of the theory of comparative advantage (Chapter 2) says that countries with lots of cheap workers should produce labor-intensive goods; rich countries should focus on those requiring plenty of capital. But as supply chains spread across borders, regional comparative advantage matters even more. With its bounty of both labor and capital, Asia has built up a huge lead in manufacturing.

Classroom discussion questions:

1. Why is China still the global manufacturing leader?

2. Why is it introducing robots at an accelerated pace?

Teaching Tip: On-Line Courses in Operations–Some Basic Questions

March 20, 2015

online studentThe debate about whether online courses are a good idea continues,” writes Faculty Focus (March 15, 2015). Who’s right or wrong is overshadowed by what the flexibility and convenience of online education has offered institutions and students. Those features opened the door, and online learning has come inside and is making itself at home in most of our colleges. Online learning and face-to-face instruction are routinely compared. Face-to-face instruction has features that online learning can’t have, but then online learning has advantages not possible in face-to-face instruction. Here are 3 basic questions worth considering:

What courses should be offered in the online format? Whatever the students want and will take online has become the default answer. Operations Management does seem to be working well at many large (and small) colleges. MyOMLab is perfectly suited to on-line study as it has numerous self-help ways of tackling homework problems. Videos and readings are built into the software, as well as assessment tools that let students advance when they are prepared.

Who should be teaching online courses? What instructional strengths and weaknesses make a faculty a good choice for online courses? First, faculty who realize the importance of instructional design, or who have access to professionals who do. Online courses need strong coherent structures. They must stand on their own more than face-to-face courses. Course materials matter more in an online environment. Online teachers should have the ability to convey their presence and create a sense of community without being physically present. And good written communication skills are more important than oral ones in online environments.

Who should be taking online courses? The most successful online learners are typically adults who are self-directed learners. That makes online courses a much riskier proposition for beginning students who don’t have clear educational goals and possess marginal abilities as learners. We can’t prevent students from taking online courses, but we need to tell them what skills they need to succeed in those courses.

OM in the News: Are Location Incentives Worth the Cost?

March 17, 2015

incentivesJay and I were just discussing the OM in Action box in Chapter 8 (Location Strategies) called “How Alabama Won the Auto Industry.” We are working on the 12th edition (due out Jan.1, 2016) and debating the value of the $253 million in incentives that brought Mercedes to Alabama. The recent article in The Wall Street Journal (March 13, 2015), called “Corporate Giveaways Are Not a Good Deal for North Carolina” helped enlighten our debate. For years, N.C., like many states, has had a system under which the governor can dangle tax breaks and grants to companies considering relocating to the state. As the pot of money available for these corporate incentives is about to run dry, the governor is urging state legislators to sign a bill for more funding.

The bill would increase the amount available to award this year by $15 million. If that sum sounds relatively modest, consider 2 points. First, each new grant can last up to 12 years, meaning the extra $15 million could increase the program’s payout by $180 million. Second, N.C. has already issued more than 200 grants since 2002 that will deprive state coffers of an estimated $157 million in the next 2 budget years alone. Outstanding liabilities for corporate incentives–$1 billion!

Proponents argue that other states are playing the incentives game, and businesses expect to trade tax cuts for jobs. That claim deserves a closer look. A recent report summarized the results of 55 peer-reviewed articles on the impact of targeted tax incentives, and the results are not encouraging. More than 70% of the studies found that incentives either did not substantially contribute to economic performance or produced mixed results. As an example, in 2011, $20 million of state money helped lure Chiquita Brands from Cincinnati to Charlotte. But after a recent buyout, Chiquita plans to close the headquarters, and community leaders are now working to recover as much money as possible.

There are other steps lawmakers can take that are much more likely to boost the economy: Ensure the delivery of high-quality services such as schools and roads while lowering costs, flattening taxes and repealing unnecessary regulations.

Classroom discussion questions:

1. Argue the pros and cons of such incentives.

2. Discuss the OM in Action box on Mercedes on page 331.

OM in the News: Reengineering Apparel Production in the U.S.

March 16, 2015
180 miles: Most of American Giant’s production process—harvesting the cotton, then knitting, dyeing, napping, rolling, cutting, and sewing it—takes place within a few hours’ drive in North and South Carolina.

180 miles: Most of American Giant’s production process—harvesting the cotton, then knitting, dyeing, napping, rolling, cutting, and sewing it—takes place within a few hours’ drive in North and South Carolina.

American Giant is not yet a household name in the apparel market, like Levi’s or Gap, but it is proving that American manufacturing can be profitable again, reversing a devastating economic trend. No U.S. manufacturing industry has suffered more from outsourcing than textiles and apparel: The domestic workforce has shrunk by 3/4 since the 1990s.

American Giant is an e-commerce phenomenon: its clothes, sold only via the web, are comfortable, flattering, durable, and popular with a fanatical fan base. The company’s products routinely sell out and can be back-ordered for weeks. Located in the Carolinas, American Giant is also reengineering apparel production. Fast Company (March, 2015) rates the firm as one of the 50 most innovative in the U.S.

Traditional garment manufacturing works like this: A worker sits at a sewing machine all day long, making the same seam over and over. When she fills up a bin, someone comes along and moves the batch to the next seamstress, who adds on her piece, a process that continues until the garments are complete. Because some operations take more time than others—and people work at different paces—garments naturally tend to pile up. Seamstresses spend roughly 80% of their time performing tasks other than stitching.

In American Giant’s “Team Sew” approach, adapted from Toyota’s manufacturing process, the seamstresses work on their feet, performing multiple operations and collaborating on the fly.  They move along a horseshoe-shaped bank of workstations, seemingly in constant motion. When one falls behind on an operation, a teammate comes over to help her catch up. Above the team, a scoreboard displays how many items they complete and how that compares to efficiency targets. They are paid just over $13 an hour, almost twice North Carolina’s minimum wage of $7.25.

Classroom discussion questions:

1. What are the advantages and disadvantages of the “Team Sew” approach?

2. Why is it so hard for companies to manufacturing clothing in the U.S.?

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