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OM in the News: Amazon Revs Up Its Warehouses

December 2, 2016
An employee at Amazon's center in Schertz, Texas

An employee at Amazon’s center in Schertz, Texas

“This year alone, Amazon has built 26 new warehouses, bringing its world-wide total to 149,” reports The Wall Street Journal (Nov. 29, 2016). And it wants its new warehouse employees to get to work—fast. To prepare for the flood of holiday orders already under way, Amazon has been using technology ranging from touch screens to scanners to robots to shrink the time it takes to train new hires to as little as 2 days, compared with up to 6 weeks for a conventional warehouse job. The shorter training period saves Amazon money as it expands its workforce by 40%, adding 120,000 U.S. temporary workers for the peak holiday sales season. These types of workers can stay on from 6 weeks to 3 months to drive forklifts or pick orders.

Amazon trainees get hands-on training as early as their first day on the job. On the warehouse floor, they learn how to pack up shipments, coached by a screen that tells them which box size to use and automatically spits out a piece of tape to fit it. In conventional warehouses, by contrast, new employees typically spend their first days in classroom training.

A typical Amazon warehouse has loading docks for trucks to pull up to on either side to keep merchandise moving through. Two shifts keep operations running nearly 24 hours a day as the holidays approach, with groups of employees keeping goods moving along an 8-mile maze of conveyor belts. Orange robots that move faster than humans carry shelves full of merchandise to stations where workers can reach them. Screens show the workers what the desired item looks like and where it is placed so they can pluck it off the shelf quickly and accurately. That’s a far cry from a conventional warehouse, where workers have to memorize—often by location number—where items are stored, and then go looking for them when needed.

Classroom discussion questions:

  1. Is it difficult to recruit workers for these short seasonal jobs?
  2. Who are the typical recruits?

OM in the News and Video Tip: The Pros and Cons of Slotting Fees

November 30, 2016
Ice cream can be one of the most expensive slotting fees areas because of the expense of freezer dispays

Ice cream can be one of the most costly slotting fees areas because of expensive freezer displays

When considering a late-night carton of ice cream, most people aren’t thinking about how it got on the shelf. But behind each freezer door is a secondary market that determines what you have the option to buy. “Slotting fees” (see Chapter 9) are fees that manufacturers pay retailers to appear on their scarce shelves. It can cost millions of dollars to launch a product in the nation’s groceries, and through that cost, these fees shape our supermarkets and diets.

OM in the News: America’s Electronics Trash–and Mexico

November 28, 2016
Life and business revolve around electronic waste in this Mexico City neighborhood, much of it from the U.S.

Life and business revolve around E-waste in this Mexico City neighborhood, much of it from the U.S.

On the street here, in Renovación, a neighborhood in Mexico City, Jesus Gómez watches as 8 men and a woman sit in a circle under an intense sun, breaking two huge sacks of spent Motorola cable-TV boxes apart with hammers and chisels. They wrench out bits of copper, metal, and circuitry, with shards of metal and plastic flying everywhere. Gómez will find buyers for all of it.

Outside the workshop are more piles, and there are yet more in the street; the junk seems to pour in constantly, some of it from around Mexico City and a lot from much farther. Heaps are from Texas. “The gringos throw it out,” says Gomez’ partner. “We do the dirty work of breaking it apart.”

That’s the essence of Renovación. At one unlicensed workshop after another, adults and teenagers disassemble printers, monitors, and PCs. It’s hazardous work: Smash an old TV, and you risk spewing lead into the air. Crack open an LCD flatscreen, and you can release mercury vapor. Mobile phones and computers can contain dangerous heavy metals such as cadmium and toxic flame retardants. Mexican workplace regulations, like those in the U.S., require e-waste shops to provide such safety equipment as goggles, hard hats, and masks. There’s little of that in Renovación.

In much of the world, Renovacion couldn’t exist, writes Businessweek (Nov. 14-20, 2016). Business owners wouldn’t be allowed to employ people in those conditions. Twenty-five U.S. states have laws establishing what’s known as extended producer responsibility, or EPR. That means electronics makers must collect, recycle, and dispose of discarded equipment rather than allow it to enter the waste stream. But the lack of a formal, regulated recycling industry is one of many reasons Mexico has become a magnet for spent electronics. E-waste is a poorly tracked trade, but Mexico is the No. 1 importer of used and junked electronics from the U.S., taking in almost 129,000 tons a year.

Classroom discussion questions:

  1. After reading the linked article, what has Dell done for EPR?
  2. What are the ethical issues that arise in this situation?

OM in the News: McDonald’s New Dining Experience

November 25, 2016
Steve Easterbrook, McDonald’s chief executive, demonstrating how ordering is done at a self-service kiosk in NY

Steve Easterbrook, McDonald’s CEO, demonstrating a self-service kiosk in NY

McDonald’s just announced changes that could reshape the diner’s experience, saying that it would expand its digital self-serve ordering stations and table service to all of its 14,000 American restaurants. The company said once people order at one of the stations — sleek, vertical touchscreens — they will get a digital location device and can take a seat. When their burgers and fries are ready, the technology will guide a server to the table to deliver the food with a big smile and a thank you.

Customers will still be able to order food the old-fashioned way, at the counter. But the move to self-order systems and table service is one way to address one of the biggest problems the company’s restaurants have faced in recent years: slower food delivery to customers, caused by more items on the menu. The thinking is that customers will be more willing to wait if they are sitting at a table instead of waiting at a counter.

“McDonald’s has tested the order system in 500 revamped restaurants,” writes The New York Times (Nov. 18, 2016), and is now introducing it around the globe. Some 44,000 customers have been served at tables using the new system, with families and groups being the biggest users so far. The self-serve stations seem to make it easier to customize an order. Many of the company’s customers, though, do not enter the restaurant. About 60-70% of sales come from its drive-through lanes.

The vast majority of McDonald’s locations are owned by franchisees, and they will be responsible for paying for the changes. Equipment and installation of the 8 order screens cost upward of $56,000, and franchisees are often loath to make such investments at a time when sales are stagnant.

Classroom discussion questions:

  1. Draw a process chain network (see Ch.5) for this system.
  2. How has the company added “service efficiency”?

OM in the News: Industrial Firms Embrace 3-D

November 23, 2016
GE's Additive Development Center in Cincinnati

GE’s Additive Development Center in Cincinnati

A typical reaction a few years ago—when a wave of hype about 3-D printing’s promise had yielded little but a niche market of prototypes, toys and novelty items mostly for consumers– is no longer the case in industrial manufacturing. “The application of the technology to industrial parts has shifted 3-D printing from the theoretical into the practical in high-tech fields like aerospace,” writes The Wall Street Journal (Nov. 12-13, 2016).

General Electric recently agreed to buy two European 3-D printing-machine manufacturers, Sweden’s Arcam and Germany’s SLM Solutions Group, for more than $1 billion. GE sees 3-D printing with metal alloys, which it calls “additive manufacturing,” as an important part of its future, especially for its $25 billion jet-engine business.

The interior of the GE engine’s fuel nozzle is being made entirely through printing, and the company built a $50 million 3-D printing factory in Auburn, Ala., to make the parts in bulk for the new engines. GE has 28 of the machines in use at the Auburn facility and plans to have more than 50. It will produce 6,000 fuel nozzle injectors at the facility this year, and double output next year. GE says it can make a set of 9 of the fuel nozzle interiors in 5 days, rather than the weeks it takes using conventional techniques.

GE says 35% of the company’s new advanced turboprop engine will be made using 3-D printing, a technique that has allowed the company to eliminate more than 800 parts from the engine, cutting 5% of the engine’s weight. Printing metal parts makes it easier to build complex structures inside the walls of a part and eliminates multiple stages of casting and welding.

Classroom discussion questions:

  1. What is additive manufacturing?
  2. What are the advantages and disadvantages of industrial 3-D printing?

OM in the News: TSA, Thanksgiving, and OM Come Together

November 21, 2016
TSA’s airport operations center in Arlington, Va., opened this summer and coordinates checkpoint operations at the 30 largest airports. Here, screens show projected and actual passenger volume by hour, plus projected wait times, staffing levels and number of lanes open for terminals at Chicago’s O’Hare and New York’s LaGuardia airports

TSA’s airport operations center coordinates checkpoint operations at the 30 largest airports.

With the busiest travel day of the year approaching the Sunday after Thanksgiving (2.8 million people will pass through U.S. airports that day), the Transportation Security Administration says it’s better prepared to handle record numbers of travelers and should make it through Christmas without gridlock.

“This marks the first winter test of a new command center in Virginia, built to react more quickly to trouble spots at airports,” reports The Wall Street Journal (Nov. 18, 2016). The command center has screens on 3 walls displaying data from the 30 largest airports. They monitor wait times, equipment failures, number of lanes open, and projected and actual passenger volume hour-by-hour at security checkpoints. Airports with waits of under 30 minutes for standard screening and 10 minutes for trusted-traveler PreCheck lines are green, but turn yellow if waits jump higher in either category. A morning conference call with airports and airlines takes place 7 days a week. From there, TSA has shifted screeners and canine teams and used overtime to nip major delays.

On a recent day, a checkpoint here in Orlando, showed a 38-minute wait around noon, grabbing TSA’s attention. Extra officers were added, and by 2 p.m. the wait dropped to 5 minutes. TSA staffing is also up, with 44,800 uniformed officers. TSA says it will have enough officers and overtime dollars to keep all lanes open at peak holiday periods.

And automated lanes, commonly used in Europe and  Canada, have just opened at Chicago’s O’Hare Airport and are in the works at other big hubs. They have multiple places for travelers to load trays for X-ray screening, so one slow passenger doesn’t delay everyone. If a suspicious item is detected, bins are automatically diverted to secondary screening instead of stopping the X-ray belt and waiting for an officer. The approach shows a 20-30% boost in throughput.

Classroom discussion questions:

1. What OM approaches is TSA employing?

2. What other ideas do students have to streamline the screening process?

Good OM Reading: What Makes a Supply Chain Sustainable?

November 20, 2016

A growing number of companies are looking to build sustainability into their supply chains. This is due, in part, to mounting pressures to disclose supply chain information. The growing emphasis on supply chain sustainability is commendable, but there is a problem: Most sustainable supply chain initiatives do not actually address sustainability at all. This new article in MIT/Sloan Management Review (Nov. 15, 2016) proposes 4 broad and hierarchical strategies for supply chain management: legal, ethical, responsible, and sustainable.

A responsible supply chain, for example, must also be legal and ethical. However, a responsible supply chain is not necessarily sustainable. First, there are supply chains that operate within legal limits and comply with agreed-upon contractual requirements. All partners in these supply chains must follow, for example, established legal, building, and environmental standards.

Third, there are supply chains that operate responsibly. Partners in these supply chains are committed to continual improvement, considering stakeholder interests, and making positive contributions in their communities. Responsible supply chains focus on making things better.
Last are sustainable supply chains. These require that all partners behave legally, ethically, and responsibly. However, they must also consider how their actions are situated in the broader sustainability context. A supply chain is sustainable only if its activities can be supported by nature and society over the long term. This is what the other strategies miss.
What makes a supply chain sustainable? Sustainable SCM requires setting science-based targets, developing metrics that take sustainability context into account, and building relationships with players across the chain.
Supply Chain Management Research

Andreas Wieland’s supply chain management blog for academics and managers

better operations

Thoughts on continuous improvement: from TPS to XPS