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OM in the News: Takata Lacks Processes for Tackling Air-Bag Defects

February 9, 2016
The panel’s report found Takata lacked its own program for spotting defects in air bags once they’re installed in vehicles

The panel’s report found Takata lacked its own program for spotting defects in air bags once they’re installed in vehicles

Takata Corp., the supplier behind defective air bags in millions of recalled vehicles, lacks clear processes for tackling potential safety defects and needs improved manufacturing methods, an independent panel found. Takata employees tasked with raising safety concerns also don’t have well-defined roles and rely on reports from auto makers about quality problems instead of ferreting out problems themselves. In addition, Takata often has employees load air-bag-inflater propellants by hand and lacks enough automated manufacturing processes that can better ensure consistent products, the report found.

Takata’s CEO said the company planned to implement all of the panel’s recommendations. “Takata’s products play a critical role in protecting the driving public, and we understand that the quality of our operations needs to be beyond question,” he said. Car companies are recalling more than 24 million vehicles in the U.S. equipped with the air bags, which can explode and spray shrapnel.

Regulators also cited Takata for misleading and inaccurate testing reports.  “I don’t think they lived it and breathed it the way other people do,” noted the report’s author in The Wall Street Journal (Feb. 2, 2016). The report outlined a series of recommendations to improve Takata’s approach to quality, and suggested employees working on quality be able to not only intervene in manufacturing, but stop product designs when raising concerns.

The report concluded: (1) Testing data must be recorded and reported accurately; (2) Takata should develop its own standards for air-bag-inflater testing as opposed to relying on specifications from auto makers, regulators and others; (3) employees should be paid based on how the address quality issues to incentivize reporting concerns; and (4) Takata should create a dedicated quality team to implement the recommendations.

Classroom discussion questions:

  1. What were the weaknesses in Takata’s quality program?
  2. What tools in Chapter 6 could the firm employ?

OM in the News: Business Students Find Real World Applications for OM Topics

February 7, 2016

dnaCrime-scene DNA is processed three weeks faster at a state forensic laboratory thanks to internship work by recent Washington State University graduate Kristina Hoffman, writes WSU News (Feb. 3, 2016). A forensic scientist with the Washington State Patrol, she applied “lean” business management practices that resulted in a 26% increase in productivity, $5,200 savings on overtime pay, and reduction in the average turnaround time for processing DNA samples from 93 days to 71.

“The importance and impact are immediately translatable to the public at large,” said the director of the WSU degree program. A DNA sample could help identify a serial criminal who would be arrested 3 weeks sooner, thus making communities safer. Alternately, if you were a suspect in jail awaiting DNA analysis, you time in jail would be shortened by 3 weeks,” she said.

 

For her internship, Hoffman sought to reduce the delay in DNA sample processing by applying the principles of lean management, the topic of Chapter 16, which systematically seeks to achieve small, incremental changes in processes in order to improve efficiency and quality. She enrolled in Lean Agility, one of the WSU professional science master’s courses. At the State Patrol, she incorporated lean principles into various aspects of the workflow, from DNA case assignment to sample analysis to sample result reporting.

In the Lean Agility class, adds our new coauthor, Chuck Munson at WSU, students learn how to minimize problems and maximize productivity. They use statistical and logical techniques to identify and deliver improvements in production and operations management.

Classroom discussion questions:

  1. Ask students for ideas as to how lean could be used in companies they know.
  2. What are some areas in which lean could be applied at your college?

OM in the News: Chattanooga’s 3-D Hub

February 5, 2016

3-D Ops printed heart valve

3D Ops printed heart valve

“Chattanooga faced a moment in truth in 1969 when Walter Cronkite declared the city to the most polluted in the nation,” writes Industry Week (Jan. 27, 2016). But the city cleaned up its toxic plants so much that by the mid-1980’s Nissan and GM set up shop and brought advanced technology to the area. With the growth of the auto industry and its supply chain, the region gained high tech manufacturing capability and was designated as an advanced tech area by the U.S. Over the past few years, the city has become a hub for 3D printing. The backbone of the growth of this sector is the city’s gigabit internet network, the most advanced smart grid system in the nation. This network provides the speed necessary for 3D printers.

“The availability of a variety of 3D printers, some so new that they aren’t even on the market yet, is a big draw for our company,” explains the CEO of 3D Ops. That firm uses CT scans and MRIs to build 3D printed models of body parts (such as an aorta valve), so that surgeons can better plan medical procedures. 3D Ops converts an MRI to a 3D printable file, then prints it for an average of only $400. The models provide surgeons with a more accurate approach to simulated surgery, decreasing the overall amount of time spent in the operating room. The surgeons are able to practice on physical models of body parts they will operate on.

Another 3D company, Branch Technology, recently introduced 3D printed interior walls. The company uses the world’s largest freeform 3D printer to print cellular matrixes out of ABS plastic, and then reinforces those structures with carbon fiber. They then use whatever material needed for a particular project to create the exterior of the walls. The technology necessary for the 3D companies to thrive was brought about by an aggressive plan that resulted in the city becoming America’s first “Gig City” with a citywide gigabit (1,000 Mbps) Internet service.

Classroom discussion questions:

  1. Why did Chattanooga attract 3D printing firms?
  2. Compare the region to other clusters noted in Chapter 8.

OM in the News: Reshoring to the U.S. Gains Momentum

February 3, 2016

reshoringIn a sharp reversal, more large manufacturers that are planning to add production capacity for goods consumed in the U.S. say that they will add that capacity in the U.S. than in any other country,” reports the Reshoring Initiative (Feb., 2016). Thirty-one percent of respondents to The Boston Consulting Group’s annual survey of manufacturing executives said that their companies are most likely to add production capacity in the U.S. within 5 years, while 20% said they are most likely to add capacity in China. Asked the same question in 2013, 30% of respondents said that China was the mostly likely destination for new capacity, while only 26% said capacity would be added in the U.S.

Moreover, the share of executives saying that their companies are actively reshoring production increased by about 250% since 2012. This suggests that companies that were considering reshoring in previous years are now taking action. By a 2-to-1 margin, executives said they believe that reshoring will help create U.S. jobs at their companies rather than lead to a net loss of jobs. “These findings underscore how significantly U.S. attitudes toward manufacturing in America seem to have swung in just a few years,” said the BCG report. “We are seeing more evidence of an American manufacturing renaissance. There is good reason to believe that the cost-competitiveness of the U.S. compared with China and many other economies will continue to improve in the near term.”

This year’s survey also confirmed that factors such as logistics, inventory costs, ease of doing business, and the risks of operating extended supply chains are weighing heavily in executives’ decisions. (76% of respondents reported that a primary reason for reshoring production of goods sold in the U.S. was to “shorten our supply chain,” while 70% cited reduced shipping costs and 64% said “to be closer to customers.”) The decreasing costs and improved capabilities of advanced manufacturing technologies such as robotics also make manufacturing in the U.S. more attractive than in economies whose chief advantage is cheap labor.

Classroom discussion questions:

  1. Does reshoring mean a resurgence in manufacturing jobs?
  2. Why are more companies considering returning?

Guest Post: Designing the Effective OM Classroom

February 1, 2016

Matthew_Drake-1Today’s guest Post comes from Prof. Matt Drake, who is the Witt Faculty Fellow in SCM at Duquesne University’s Palumbo-Donahue School of Business.

Most of us have heard the common refrain that a student “has never been good at math.” But I have found that the vast majority of my students possess the analytical capabilities that my courses require. Some just need to gain the confidence in these abilities.  My courses are largely still lecture-based on the surface when I present new material. However, I do try to turn the class into active problem-solving sessions wherever possible to keep the students engaged.

When I present example problems, I sometimes get feedback that I go too quickly for some of them to keep up with me. As a compromise, I post the Excel files that I build during class on our course website so that students can download the files and compare their notes to mine.

I also try to use at least a few cases in each course. In my experience, students enjoy and appreciate considering the real-world decision scenarios that cases offer. I have 3 additional thoughts for designing effective OM courses:

  • Be understanding and flexible with deadlines and attendance, especially with part-time students. I always accept late assignments with a point deduction to be fair to other students.
  • Don’t be afraid to say, “I don’t know.” No one person can be an expert in everything. If students ask questions to which I do not know the answer, I tell them that I do not have an answer off the top of my head. I then try to follow-up after I have had the chance to research the issue. Students seem to appreciate this honesty.
  • Students appreciate rapid feedback to their questions and to their work on assignments. I try to return all graded assignments within a week, and I reply to emails as soon as I can.

OM in the News: Is Fast Shipping Fast Enough?

January 30, 2016
Everlane, an online clothing and accessories brand, offers one-hour shipping in New York at no extra charge and in San Francisco for $2

Everlane, an online clothing and accessories brand, offers one-hour shipping in New York at no extra charge and in San Francisco for $2

“Free shipping isn’t enough any more,” writes The Wall Street Journal (Jan. 28, 2016). Online shoppers want fast shipping, too, and their expectations of an acceptable delivery window are shrinking. The new demands are largely a result of Amazon Prime, rival retailers say. Tens of millions of Amazon Prime members pay $99 a year and get unlimited 2 day shipping on millions of products, from snow boots to dog food. Now, the retailing giant is upping the ante, offering same day shipping in some markets. Other retailers, whose default shipping option is often 5 business days or more, are scrambling to keep up. Customers for the most part are no longer willing to pay extra for expedited delivery.

With shipping an increasingly expensive part of the business equation, operations managers are looking for cost effective ways to ship faster. They are building more distribution centers, fine tuning ship-from-store logistics and devising more creative delivery options. “Amazon kind of set the path for everyone with Prime. People just expect things faster,” says a luxury competitor. Cole Haan offers free 2 day shipping to online shoe shoppers who spend more than $250. Nearly 1/4 of customers either meet the threshold or pay $15 extra for 2 day shipping. Next month, Gap will narrow its free shipping window to 5-7 business days, down from 7-9 days. To shave off those 2 days, the company is relying on new technology to better manage logistics and routing.

Even just a few years ago, online shoppers were content to wait a week or two. Last year, the average delivery time for online orders was 4.1 days, down from 4.6 days in 2013. To speed up their delivery times, retailers are putting product closer to customers. Some of the biggest companies have a distribution center within a 10-hour drive of anyone in the country.

Classroom discussion questions:

  1. What are the advantages and disadvantages of adding distribution centers (see Figure 11.3 in the text)?
  2. Why does a shoe company, like Cole Haan, offer expedited shipping?

OM in the News: When Wal-Mart Closes Shop

January 28, 2016
Wal-Mart’s presence in Winnsboro, S.C., a town of about 3,500 people, influenced almost every wrinkle of local business since opening in 1998.

Wal-Mart’s presence in Winnsboro, S.C., a town of about 3,500 people, influenced almost every wrinkle of local business since opening.

The arrival of a Wal-Mart Supercenter in small towns throughout the U.S. often drove out smaller stores that couldn’t compete with its selection and pricing, reports The Wall Street Journal (Jan.27, 2016). And it was no different when the giant chain opened in Winnsboro, S.C. in 1998. It was the town’s biggest employer and 2/3 of the town’s sales tax came from Wal-Mart purchases, which allowed residents to avoid paying property tax.

The Winnsboro location is one of 154 U.S. outlets Wal-Mart shut this week, the first time it has closed more than a handful of domestic stores at once. It is also one of 12 Supercenters, the roughly 180,000 square-foot discount outlets that fueled Wal-Mart’s growth for decades, being closed. But when Wal-Mart opened the store in that town, it fell in line with the company’s longtime real estate strategy of opening in rural, often overlooked areas outside of city centers. Winnsboro sits about 30 miles north of Columbia, S.C., the largest city in the state.

“We never planned on actually going into the cities. What we did instead was build our stores in a ring around a city—pretty far out—and wait for the growth to come to us. That strategy worked practically everywhere,” wrote Wal-Mart founder Sam Walton in his 1992 autobiography. But population growth flowed east and west of Columbia, not north to Winnsboro. Locals say they hope Wal-Mart’s exit will leave room for smaller businesses to thrive again. Town officials are already soliciting grocery store companies and encouraging the few remaining downtown businesses to stock a wider variety of products.

Classroom discussion questions:

  1. Evaluate Wal-Mart’s location strategy under Sam Walton.
  2. What were the advantages and disadvantages of a Wal-Mart entering a small town?
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