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OM in the News: Amazon’s Drive to Revolutionize Logistics

April 28, 2017

Drones are a focus for Amazon

Amazon’s new initiative could help the company overcome one of its biggest logistical complications and costs: delivering packages quickly. Amazon is navigating the use of autonomous vehicles including trucks, forklifts and drones to move goods, reports The Wall Street Journal (April 25, 2017). In addition, driverless cars could play a broader role in the future of last-mile delivery, enabling easier package drop-offs.  “Amazon has a plan in place to shake up the entire supply chain as we know it today,” says one industry analyst.

There have been early signs of Amazon’s interest in autonomous-vehicle technology. The firm just won a patent for coordinating autonomous vehicles in a roadway. Over the past few years, Amazon has been building out its supply chain and logistics network, aiming to deliver more of its own packages. It also envisions transporting goods on a large scale for other companies, one day competing with delivery giants UPS and FedEx.

The company is leasing 40 planes and has bought thousands of branded truck trailers. Tractor trailers have long been considered a likely first target for implementing widespread driverless technology, in part due to how regularly they drive the same stretches of highway–so Amazon is very interested in autonomous trucking. Humans have a 10-hour limit when driving, but a self-driving truck could drive through the night. Instead of taking 4 days to drive coast to coast, it will take a day and a half.

The biggest portion of Amazon’s spending and energy has gone toward another type of autonomous means of transport: drones. That 2013 initiative is further along and is expected to continue to be the major focus of the company. Drones could communicate or pair up with driverless vehicles, for example, to coordinate deliveries.

Classroom discussion questions:

  1. Describe Amazon’s driverless ideas.
  2. Why does the firm want to get more involved in transporting goods?

OM in the News: Robots May Build Your Next House

April 25, 2017

An electrician checks her blueprint at Baltimore’s Blueprints Robotics factory.

“The future of U.S. homebuilding may depend on robots,” writes Businessweek (April 24-30, 2017). With construction workers in short supply and demand rising, builders are turning to “fast factories” that can build houses like cars on an assembly line, using robots to fire 1,000s of nails into studs each day without missing. Other machines cut, sand, drill, and insulate. The plants enable developers to fill the labor gap by having houses and apartment buildings manufactured off-site, for less money and in a fraction of the time. Even Marriott Hotels is increasingly turning to modular construction.

Builders hire the factories to manufacture homes in sections, which are transported on trucks, then laid down on foundations by cranes, like giant Legos. Sometimes the modules are fully framed rooms, complete with tile showers and gourmet kitchens. The house is 60% complete when it arrives. The idea of transporting homes in prefabricated sections has roots in the early 1900s, when homesteaders could buy kits from a Sears Roebuck catalog for assembly on their newly acquired plots of land. In the 1980s and 1990s, it became increasingly popular to build lower-cost homes in factories.

Today’s plants are capable of producing bigger buildings with more elaborate designs. The Blueprint Robotics factory in Baltimore is one of the first in the U.S. to use robots. Taller multifamily buildings, dorms and hotels are increasingly being manufactured indoors. And so are mansions that sell for millions. Having an indoor facility means weather delays are rarely a factor. Each worker is given a narrow concentration, like tiling floors or sanding drywall, which increases production speed. People without any background in construction can become skilled laborers in 2 weeks.

Classroom discussion questions:

  1. Provide 2 other examples of fixed position layout (see Chapter 9).
  2. What are the disadvantages of this automated, modular approach?

OM in the News: Hospital Checklists and TQM

April 23, 2017

“Surgery checklists save lives,” reports The Washington Post (April 18, 2017). Hospitals in South Carolina that completed a statewide program to implement the WHO’s Surgical Safety Checklist had a 22% reduction in post-surgical deaths. The study, to appear in the August 2017 issue of Annals of Surgery, is one of the first to show a large-scale impact of the checklist on the general population.

Surgical care requires careful coordination of a variety of skilled health-care providers in a complex infrastructure using specialized tools. “Safety checklists are not a piece of paper that somehow magically protect patients, but rather they are a tool to help change practice, to foster a specific type of behavior in communication, to change implicit communication to explicit in order to create a culture where speaking up is permitted and encouraged and to create an environment where information is shared between all members of the team,” said the Harvard Medical School prof directing the study.

A total of 14 hospitals completed the program, representing 40% of the total inpatient surgery population in the state. Researchers compared the 30-day post-surgery mortality results between the checklist hospitals with those of the rest of the hospitals in the state. The report includes major inpatient surgical procedures from various specialties, such as neurological, cardiac and orthopedic surgery.

The 19-item checklist encourages surgical teams to discuss the surgical plan, risks and concerns. Most of the items are simple, such as “does the patient have a known allergy” or “is essential imaging displayed.” Following surgery, patients are at risk of complications and death from a variety of causes, such as infection and organ failure. The checklist ends with a requirement for a conversation among the surgeon, anesthetist and nurse about the patient’s recovery and management plan. As a whole, the checklist items create an operating room communication culture that improves overall surgical care and safety before, during and after an operation.

Classroom discussion questions:

  1. What other tools described in Chapter 6 could be used in operating rooms to improve quality?
  2. Why are checklists so valuable? What other industries use them regularly?


OM in the News: Everything You Should Know About Lithium

April 20, 2017

Lithium is neither cheap nor easy to mine at this Nevada site

Lithium: “a metal crucial to what bankers, regulators, and clean-energy advocates see as the imminent transformation of the transportation sector and the electric grid,” writes Businessweek (April 3-9, 2017).

The lightest metal on the periodic table of the elements and a superb conductor, it’s what gives the lithium ion batteries in our cell phones, laptops, Priuses, and Teslas the ability to recharge more times, last longer, and provide more energy per weight or volume than other battery chemistries. (The lithium in a Tesla costs around $500). It’s also what makes devices explode if their battery-management systems aren’t working properly, as in many hoverboards or Samsung’s Galaxy Note 7.

How is lithium changing transportation? Chinese battery and auto manufacturer BYD just build its first American bus factory near LA. The buses are lithium-intensive; each uses about 8 times as much as an average electric vehicle, which in turn uses about 10,000 times as much as an iPhone. The vehicles are more expensive than ones that run on diesel or natural gas, but only initially. After 3 to 5 years, customers save $50,000 to $75,000 per year per bus on fuel and maintenance.

In Shenzhen, 20 miles north of Hong Kong, thousands of electric buses draw wind power from the grid overnight, when residential and business customers aren’t using it, and then disperse it during the day as they drive around the city. A shift toward electric vehicles is under way in Europe, as well. BMW and Daimler have each invested hundreds of millions of dollars in electrifying their fleets, moves that help drive the European Union’s policies. And China’s broader electric auto market will soon dwarf them all. Although electric vehicle adoption has been slower in the U.S. than expected, the price of battery packs has been dropping fast, to the point that electric cars are poised to become cost-competitive with gas-powered vehicles.

Classroom discussion questions:

  1. Why is lithium so important in manufacturing?
  2. Lithium prices have increased from $4,000 per metric ton in 2014 to $20,000 today. Why?

Video Tip: Robots and Humans Learning to Work Together in Warehouses

April 18, 2017

It was Amazon that drove America’s warehouse operators into the robot business, writes Businessweek (April 5-12, 2017). Amazon’s acquisition of Kiva (as we discussed in several earlier blogs) set off an arms race among robot makers and shippers across the U.S. who scurried to keep up with the e-commerce giant. For decades, warehouse operators were focused on the task of loading pallets and shipping them to retailers, who broke up the shipments and routed them to retail locations. Fulfilling online orders, on the other hand, requires shippers to pack boxes with a diverse set of individual items and route them on to customers’ homes.

That shift has given way to what people in the business call collaborative robotics, in which a human warehouse worker toils alongside an autonomous machine.

At the Quiet Logistics warehouse shown in this 1.5 minute video, the robots shorten the distance a warehouse worker travels on a typical day from 14 miles to less than 5 miles. The robots, meanwhile, park themselves directly in front of the shelf that the worker is supposed to pick from, decreasing the risk the human will pick the wrong item. That makes the job easier, and is appealing to employees.

What that means for warehouse humans is an open question. There are almost 1 million people working in the industry recently, up 44% over the past 10 years. The rise of e-commerce has created a need for more hands to pick items and pack boxes. Amazon’s rapid shipping times have taught customers to expect goods on their doorstep in 2 days or less, fueling a warehouse boom as retailers scramble to amass distribution hubs closer to their shoppers.

Logistics firms can have a hard time hiring enough people, particularly during peak shopping seasons. Adding robots should ease some of the seasonal shortages, and may make the work less physically demanding.

Video Tip: Starting Your Semester with the History of OM and the Ford Model T

April 16, 2017

Many instructors like to start the semester with a bit of OM history (see Figure 1.4). Your students will enjoy this 5 minute video featuring the Ford Model T, which changed the way Americans live, work and travel.  Ford’s revolutionary advancements in assembly line automobile manufacturing made the Model T the first car to be affordable for a majority of Americans. More than 15 million Model Ts were built in Michigan, and the automobile was also assembled at a Ford plant in Manchester, England, and at plants in continental Europe.

The Model T was built from 1908 until 1927. It quickly became prized for its low-cost, durability, versatility, and ease of maintenance. Assembly line production allowed the price of the car to be lowered from $850 in 1908 to less than $300 in 1925.

The Model T was offered in several body styles. All bodies were mounted on a uniform 100-inch-wheelbase chassis. The car was mass-produced in only one color—black. The engine was simple and efficient, with all four cylinders cast in a single block and the cylinder head detachable for easy access and repair. The engine generated 20 horsepower and propelled the car to top speeds of 40–45 miles per hour. The engine was started by a hand crank. The transmission, consisting of two forward gears and one reverse, was controlled by foot pedals. Throttle was controlled by a hand lever on the steering column. The 10-gallon fuel tank was located under the front seat. Because gasoline was fed to the engine only by gravity, and also because the reverse gear offered more power than the forward gears, the Model T frequently had to be driven up a steep hill backward.

OM in the News: Even Faster Fashion Scares Zara and H&M

April 13, 2017

Zara and H&M are the world’s two largest fashion retailers. Not by coincidence, they’re also the pioneers of fast fashion. Zara is able to take a coat from design to the sales floor in 25 days, and it can replenish items even more quickly. In the past couple of decades, the two companies have steadily trounced much of their competition, outdoing them on price and speed to claim an ever-larger share of shoppers’ spending. But both are being beat at their own game by even faster competitors.

British fashion retailers ASOS and Boohoo are now able to conceive, design, produce, and have clothing ready for shoppers on the sales floor quicker than Zara and H&M,” reports (April 6, 2017). ASOS expects sales to grow 30-35% this year. Boohoo predicts sales growth of around 50% for the year.

H&M is aware it’s falling behind, announcing plans recently to invest in and rethink its supply chain. Most of its manufacturing takes place in Asia in order to keep prices down, but it’s considering moving more production closer to Europe, to countries such as Turkey, which would let it get items to stores more quickly. That proximity is key to the speed of its faster rivals. Even Japanese retailer Uniqlo, which emphasizes that it isn’t driven by trends, has acknowledged that it needs to speed up.

Classroom discussion questions:

  1. How are supply chains at the heart of this issue?
  2. Why is speed of new product development so important in this industry?
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