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OM in the News: Cobalt Mines, Supply Chains, and Ethics

September 24, 2018

Mine workers, move rocks containing cobalt in Kolwezi, Congo

Dozens of global manufacturers found themselves on the defense when Amnesty International reported that the cobalt in some of their batteries was dug up by Congolese miners and children under inhumane conditions, reports The Wall Street Journal (Sept. 13, 2018). Many of the companies said they would audit their suppliers and send teams to Congo to fix the problem. But at a Chemaf-owned cobalt mine in Kolwezi, Congolese workers could be seen descending underground without helmets, shoes or safety equipment. The mine’s owner is part of the global cobalt supply chain for companies including Apple and VW.

Miners there were using picks, shovels and bare hands to unearth rocks rich with the metal. Water sometimes rushes into holes and drowns miners, and an earth mover buried one alive last year. “Of course, people die,” said the mine’s owner’s CEO. “This is really shitty work.” He called the miners “barbarians” and said Chemaf had resisted giving them safety equipment because they would sell it. “I don’t care about supply-chain problems,” he added. “That’s a problem for Apple and Samsung.”

Global demand is soaring for cobalt, which is used to conduct heat in lithium-ion batteries in products from smartphones to electric vehicles. Cobalt prices have more than doubled since 2016, putting Congo in the spotlight. It isn’t easy for global manufacturers to trace cobalt’s source in Congo, because it passes through multiple companies and countries. Some mining operations mix industrially produced and hand-dug cobalt. Samsung says it is aware some of the cobalt it gets from Chemaf is produced by the miners. If companies stopped buying it, said Samsung, it would put people out of work.

Amnesty recently applauded Apple’s moves to weed out child labor from its supply chain, saying it is “the industry leader when it comes to responsible cobalt sourcing.” Amnesty said VW hadn’t addressed whether certain companies in its supply chain received cobalt from Congo. Its report added: “Some of the richest and most powerful companies are still making excuses for not investigating their supply chains.”

Classroom discussion questions:

  1. Why is this a complex OM issue?
  2. Why is cobalt so important to supply chains?

OM in the News: The Beetle’s Life Cycle

September 21, 2018

All products are born, grow, mature, and eventually decline (see Figure 2.5 on product life cycle). So it should come as no shock that even the venerable Volkswagen Beetle is set to become a thing of the past. VW just announced that it will end production of the vehicle in 2019, reports The New York Times (Sept. 15, 2018). Sales of the model by the German carmaker’s U.S. unit, the only division still turning out Beetles, had declined sharply in recent years. VW is ending production of the Beetle 7 decades after the car was first designed. The original Beetle was designed for Hitler in the 1930s.

The car’s simple design and air-cooled engine eliminated the need for a more complicated water-cooled system and helped make it a postwar hit. Despite the Beetle’s connection to Hitler, it became a symbol of ’60s counterculture and the best-selling import of the era in the U.S. For the Woodstock generation, driving a Beetle or its larger cousin, the VW van, was a form of protest against materialism and the gas guzzlers churned out by the big American carmakers.

By the 1970s, though, the Beetle was showing its age. It was slow, and its heating system barely worked. Volkswagen also had trouble adapting the 1930s technology to increasingly strict pollution standards. The New Beetle, which was introduced in 1997, was meant to tap into nostalgia for its predecessor. The two cars had little in common mechanically. Beneath its Beetle-like exterior, the New Beetle was essentially a Volkswagen Golf. But the car was a hit in the U.S. Although about 1.2 million New Beetles were sold from the product’s introduction through 2010, by last year, annual sales had slipped to just 60,000.

VW was careful not to rule out reviving the model in the future. “Never say never,” said the CEO for VW-America.

Classroom discussion questions:

  1. Name a few products that just don’t seem to ever die.
  2. Name a product for each of the four life cycle stages.

OM in the News: Tesla’s Lean Problems

September 19, 2018

A recent report in Industry Week (Sept. 12, 2018) suggests that Tesla, like a lot of facilities, has trouble being lean.  Here are a few observations from industry experts who visited the Fremont manufacturing plant.

From a Lean Enterprise Institute advisor: “High, leaning stacks of cardboard boxes and other items make it difficult to see. There was stuff piled up on the floor, and the stuff was dirty. There were fork lifts—I haven’t seen these in an assembly floor in a long time. Most of the AGVs  were empty. The aisles were narrow and crowded, and some of the stuff, piled up, was leaning into the aisle. Rear doors are on the Model 3 body going down the main assembly line, while the front doors aren’t.  In most of the plants I’ve been in, all four doors are off while it’s going through the main interior assembly so the workers can get better access, and the doors don’t get damaged.”

From the CEO of the Center for Automotive Research: “The low production numbers, with the number of workers and the size of the facility, indicates inefficiencies where the manufacturing team is doing a lot of manual work instead of optimizing the production process. The fact that the entire outdoor area—a collection of tents—is set up for rework says they’re having fundamental issues with quality.”

From a manufacturing technology consultant: “They first focused very much on high levels of robotics and automation, only to realize how difficult it was, and now they’re scaling back. So they wasted time ramping up and going back so they could get to the levels of automation that they thought they could. It’s very likely that someone with real, deep manufacturing experience could have realized it early enough.”

Classroom discussion questions:

  1. Why do you think Tesla is facing such production problems?
  2. There have also been reports of multiple paint room fires and a higher than average number of safety incidents. How can OM help resolve such issues?


OM in the News: Vision-Automation Technology is Taking over the Factory Floor

September 17, 2018


Humans overseeing the toppings at a German frozen-pizza plant, a task now within the reach of technology.

Robots that see underpin the future of self-driving cars, humanoid robots and autonomous drones, writes The Wall Street Journal (Sept. 14, 2018). Now, food manufacturers are combining advances in laser vision with artificial-intelligence software so that automated arms can carry out more-complex tasks, such as slicing chicken cutlets precisely or inspecting toppings on machine-made pizzas.

Being able to see is a major frontier in robotics and automation—crossing it is key to autonomous vehicles that can navigate obstacles, humanoid robots that can more closely integrate with humans and drones that can fly more safely. Companies world-wide are investing in computer vision-based technology.  Intel recently bought Mobileye for $15 billion, in part for the Israeli company’s vision-based driver-assistance technology.

Food manufacturers have been early adopters of new technologies from canning to bread slicers, and vision automation has been used for years for tasks such as reading bar codes and sorting packaged products. Leaders are finding the technology valuable because robot eyes outpace the human eye at certain tasks. Now technical improvements, tougher materials and declining prices mean Tyson can integrate vision technology in its new $300 million chicken-processing plant. The technology helps optimize the use of each part of the bird.

Advances so far allow vision technology to ensure frozen pizzas have the correct toppings. Other applications include the ultrasonic slicing of cheese, cutting bread rolls with water jets and picking pancakes off a production line. Car makers, historically the biggest user of vision technology, are using it for emergency braking and scanning road signs; logistics companies deploy it to more quickly identify packages, and consumer electronics companies to position liquid-crystal display screens more precisely than is possible with the naked eye.

Classroom discussion questions:

1. Why are vision systems becoming an important OM tool?

2. Will driver-assistance technology really eliminate the need for drivers? Why? When?


OM in the News: Merck Introduces Automation to its Supply Chain

September 15, 2018

German pharmaceuticals firm Merck plans to deploy artificial intelligence and predictive analytics throughout its entire supply chain by the end of 2019, reports The Wall Street Journal (Sept. 11, 2018). Occupying the forward edge of an industry-wide shift towards automated supply chains comes with a competitive advantage. But it also will require that Merck address those jobs affected by the technology, a process called AI augmentation.

The company is using analytics software from Aera Technology to mitigate supply shortages, predict spikes in demand and bottlenecks with about 100 products. It plans to expand the pilot program to its 5,000 products by the end of next year. Merck views AI as a way to augment the jobs of the company’s supply chain planners, and reduce often tedious and repetitive work. By 2021, AI augmentation will save billions of worker hours.

The Aera software captures supply chain data from dozens of data bases and ERP systems throughout the company. Then machine learning algorithms analyze it and suggest recommendations, such as whether and when to adjust product supply or demand forecasts. The algorithms factor in external data such as weather, natural disasters, trends in patient health and expansion plans of pharmacies.

In the pilot test, 10 supply chain planners get detailed alerts via automated phone messages every morning about supply shortages and spikes in demand. The system offers suggestions, based on real-time demand data, such as whether to increase inventory, start production or identify a replacement product across 100 drug products globally. By the end of 2019, one hundred supply chain planners will be using the technology. The goal is eventually to have the retrained supply chain employees make more accurate decisions about how to better position inventory, in order to guarantee supply for patients more effectively.

Classroom discussion questions:

  1. What is predictive analysis?
  2. What is the goal of AI augmentation?



OM in the News: Setting Inventory on Fire

September 12, 2018

A Korean Burberry store

Every winter the Tuscan workshops of Stefano Ricci, a high-end menswear label, box up the year’s unsold products—from cashmere suits and silk ties to finely woven cotton shirts—and send them off on trucks to be burned. “Destroying unsold inventory is a widely used but rarely discussed technique that luxury companies perform to maintain the scarcity of their goods and the exclusivity of their brands,” reports The Wall Street Journal (Sept. 7, 2018). In Italy and many other countries, they can also claim a tax credit for destroying the inventory.

Last week, British fashion label Burberry thrust the technique into the spotlight by announcing it would immediately stop destroying unsold stock, bowing to pressure from environmental groups who say it is wasteful. The amount of stock Burberry destroys had risen sharply in recent years, from £5.5 million in  2013 to £28.6 million last year. Other high-end brands, however, say destroying inventory is a necessary evil. Goods that end up in outlet stores or in the gray market, priced at a steep discount, contradict the industry’s main sales pitch: that luxury goods command higher prices because they are inherently more valuable. Executives see the destruction of inventory as a service to the customer. Clients don’t want to spend thousands of dollars on a suit, only to see the same item a few months later selling at an outlet store for half the price.

Burberry’s announcement was aimed at younger shoppers who are environmentally conscious and, increasingly, a core demographic for the luxury-goods business. Brands across the industry are abandoning fur; imposing animal-welfare standards on their suppliers; and touting their policies for recycling and reducing waste.  Burberry said it was also ditching the use of fur.

Classroom discussion questions:

  1. What should Burberry do with unsold inventory?
  2. Why do apparel makers burn their stock?


MyLab Operations Management: Some Important Features–Part 2

September 10, 2018

Today, we would like to tell you about a few more features of MyLab Operations Management that you may not be aware of: (1) the Test Bank; (2) Learning Aids; (3) Learning Catalytics; and (4) the Instructor’s Resource Page.

Test Bank: With about 4,000 questions, ranging from multiple choice to short essays to mathematical problems, out Test Bank allows you to mix and match types of questions, including questions about the video series, OM in the News, etc. Questions can be scrambled so students see differing versions–or you can add your own favorites to the system.

Learning Aids: When students are trying to answer a homework problem and they run into a roadblock, they can turn to “Question Help” once you have activated that MyLab feature. Four help options will be available: (1) E-text will take them to the proper page in the book to review: (2) Videos of similar problems being solved by the authors may be selected; (3) the “Ask my Instructor” button emails you (or your TA)  a screen capture of the problem, with the data the student has entered, along with the student’s comment; and (4) “Help me solve this” provides a similar problem, with step-by-step help as the student walks through the problem.

Learning Catalytics: Do you remember the old system called “clickers” allowing students to buy a clicker for use in answering questions you pose in class? MyLab includes this feature free, where students can use their cell phones or laptops to respond. This is a popular tool that increases active learning. We provide 100’s of pre-written multiple choice questions, or you can create your own.  (You find this feature under “Course Home”‘ the scroll down to “enrich your Course”).

Instructor’s Resource Page: When you click on “Instructor Resources”,  select “What else do you need”, for our invaluable Instructor’s Resource Manual, all the Powerpoints, the Solutions Manual, Test Item files, and 3 Excel-based games for class use.

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