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OM in the News: Global Sourcing Creates a Giant Backlog at Boeing and Airbus

February 27, 2017

airbus-sourcingThe aviation industry is bulging with orders for new planes. If only it can get them made. There were so many almost-finished jetliners, missing their engines, piled up at an Airbus factory last May that executives joked they were in the glider business. It ceased to be funny when a frustrated Qatar Airways canceled orders for 4 planes that were months overdue.

Airbus and Boeing must build 30% more planes annually than they do now to meet existing orders, in one of the industry’s steepest production increases since World War II. The scale of the ramp-up is putting companies to the test.

Suppliers of seats, toilets and engine parts are stretched to the limit and sometimes falling short. In one of the worst holdups, Pratt & Whitney informed Airbus in September it would ship only 75% as many engines in 2016 as planned. P&W struggled with making the engine fan blades, which initially took twice as long as expected. French aviation-parts supplier Zodiac Aerospace was late delivering business-class seats, which cost about $100,000 each, for new Boeing 787s headed to American Airlines. Zodiac also was late delivering seats and lavatory doors to Airbus for its A350 long-range jet, at a time when Airbus was sharply raising production of that plane in 2015.

Both Boeing and Airbus are making adjustments to cope, retooling factories and tightening oversight of their globe-spanning supply lines. Airbus may dedicate more resources to “supporting and understanding proactively possible hiccups with suppliers in the future,” said its CEO.

Classroom discussion questions:

  1. Why are the supply chains so hard to manage?
  2. Can Airbus and Boeing bring more manufacturing in-house?

Video Tip: Watching UPS’s Drones Deliver

February 25, 2017
A drone-equipped UPS van, seen from above

A drone-equipped UPS van

“Both the drone industry and federal regulators are years away from actual legal drone deliveries in the U.S.,” writes USA Today (Feb. 21, 2017). But that’s not stopping UPS from testing possibilities, both to get the visual of a drone with their logo out in front of the public and to see what works. The firm this week ran a test of a truck-launched drone delivery system for rural areas in Lithia, Fla. The drone-equipped vans would only be used on rural routes, says UPS.

Imagine a triangular delivery route where the stops are miles apart by road. The van-top drone would allow a UPS driver to make one delivery at the lower-left of the triangle, after launching a drone that would autonomously fly and deliver to the top of the triangle. While the drone is making its delivery, the driver would continue to the next stop, make another delivery by hand, and the drone would then rendezvous and recharge on top of the UPS truck.

UPS’  aim isn’t to replace drivers but to make them more efficient by allowing one driver to more quickly and efficiently deliver to several homes near one and other.  The drone is fully autonomous. It doesn’t require a pilot. So the delivery driver is free to make other deliveries while the drone is away.

UPS estimates that reducing the distance its truck drive by just one mile per driver per day over one year could save the company up to $50 million. Rural delivery routes are the most expensive to serve, due to the time and vehicle expenses required to complete each delivery.

Here is a very short video your class will enjoy!

OM in the News: Technology and the Oil Recovery

February 22, 2017
A control room operator for Pioneer Natural Resources in Midland, helping manage all of the company’s drilling sites in 21st-century style

A control room operator helping manage all of Pioneer Natural Resources’ drilling sites

We blogged a few weeks ago about changes in the oil drilling industry and how automation is creating a new demand for high-tech workers. It is in the news again. “Despite 163,000 lost oil jobs since 2014, U.S. oil production is galloping upward, to 9 million barrels a day from 8.6 million a few months ago,” reports The New York Times (Feb, 20, 2017).

Nationwide, with only 1/3 as many rigs operating as in 2014, production is down less than 10% from record levels. Wells that 3 years ago required a breakeven oil price of $60 a barrel now need $35, well below the current price of $53.

Much of the technology has been developed by the aviation and automotive industries. Now most oil firms have organized teams of technicians that collect well and tank data to develop complex algorithms enabling them to duplicate the design for the most productive wells and to repair parts before they break down. The result is improved production and safety, but also a far smaller–more brain-oriented– work force.

Texas’ Pioneer Natural Resources has slashed the number of days to drill and complete wells so drastically that it has been able to cut costs by 25% in wells completed since 2015. The typical rig that drilled 8-12 wells a year just a few years ago now drills 16. Last year, the company added 240 Texas wells without adding new employees.

With the loss of manual jobs has come a transformation in the job force, with demand growing for more data analysts, math scientists, communications specialists and robotic design engineers. In the last 2 year, Switzerland’s ABB has opened two plants in Houston for assembling robotics into oil field operations.

Classroom discussion questions:

  1. What are the implications of increased productivity in this industry?

      2. How is OM changing the drilling industry?

OM in the News: Understanding South Korea’s Chaebol System

February 20, 2017
The heads of South Korea’s most powerful chaebol companies at a recent parliamentary hearing in Seoul as part of a corruption inquiry.

The heads of South Korea’s most powerful chaebol companies at a recent parliamentary hearing in Seoul as part of a corruption inquiry.

I was just chatting with my coauthors, Jay and Chuck, about our coverage of keiretsu networks in Chapter 11, Supply Chain Management. We don’t mention the somewhat similar system of interconnected companies in S. Korea in that chapter, but the New York Times (Feb. 18, 2017) just published an article called “Inside the Chaebol of S. Korea” that is worth sharing. Chaebols, a handful of family-controlled companies dominate economic life in South Korea. Some, like Hyundai, LG and Samsung, are well-known outside their home country. But domestically, they all wield immense power — and are coming under increasing scrutiny. The word comes from the combination of the characters for “rich” and “clan.”

Chaebol are generally conglomerates of affiliated companies. LG, for example, makes smartphones, televisions, electronic components, chemicals and fertilizer. It also owns Korean baseball and basketball teams. Hyundai, which makes the Hyundai and Kia cars, also makes elevators, provides logistics services, and runs hotels and department stores.

Chaebol rose from the ashes of the Korean War. After the conflict ended, officials steered relief funds and cheap loans to businessmen who promised to rebuild the country. The government also protected homegrown industries from foreign competition to help them develop. The recipe proved to be potent: Chaebol played a major role in South Korea’s rise as an industrial giant in the following decades.

But the recipe also created imbalances. Money meant for the common people often ended up in the hands of the wealthy families, creating resentment that lingers to this day. Chaebol became sprawling businesses that held a nearly 2/3 market share in S. Korean manufacturing by the end of the 1990s. The Asian financial crisis at that time stirred worries that the cozy relationship between chaebol member companies could lead to severe damage across multiple businesses and supply chains if one failed.

Classroom discussion questions:

  1. What is the difference between Japan’s keiretsu networks and S. Korea’s chaebol?
  2. Why is chaebol a potential supply chain issue?

Guest Post: Four Ways to Make Your Online OM Classroom More Interactive

February 17, 2017
amy-petersonOur Guest Post today comes from Dr. Amy Peterson, who is  Senior VP of course design, development and academic research at Pearson, which publishes our OM texts.

The convenience and flexibility of the online learning environment allows learners to develop new skills and further their education, regardless of where they live. However, it can sometimes feel isolating for students and faculty.The question is: how do you build a sense of community in your online OM course? Here are 4 practical tips:

1. Integrate real-time interaction There is often limited interaction between you and your students and class members with each other. Consider how impromptu conversations outside the traditional classroom forge relationships, clarify ideas, and spark new insights. Try setting up webconferencing opportunities for class members to meet online synchronously both formally and informally.

2. Get creative with discussion boards In an online environment, you can structure your discussions so that everyone contributes, plus they’ll have more time to consider what they want to say before responding. In a larger class, you can set up smaller discussion groups of 20 so that students can get to know their fellow classmates. You can also create even smaller groups (5-7 people) for more intimate interaction.

3. Maximize engagement with non-task interaction Non-task interactions are those exchanges that are not part of the direct learning, but help create a supportive learning community. You can facilitate these types of interactions by leveraging the social networking capabilities that are available in many LMSs, such as chat and webconferencing.

4. Use multiple communication tools In addition to external social networking tools, such as Facebook, Telegram, Slack, and WhatsApp, students can meet each other in real time on Skype and Google Hangouts. Preprogrammed communication, such as introductory videos (like the ones created for the Heizer/Render/Munson text), content presentation, and email, are still important components of online learning, but student interaction can take the learning further, faster.

Guest Post: Problem-Based Learning for SPC

February 15, 2017

bumblauskasToday’s Guest Post comes from Dr. Dan Bumblauskas, who is an assistant professor and the Hamilton/ESP International Fellow for Supply Chain and Logistics Management at the University of Northern Iowa. Dan is also VP at PFC Services, a consulting firm dedicated to helping businesses improve process efficiency. 

If you’re reading this blog I am sure that you, like me, have experimented with and deployed a variety of teaching techniques in OM courses over the years. Today I’d like to share one such initiative I embarked upon a number of years ago: the development of a problem-based learning module for statistical process control (PBL-SPC).  Along with faculty and graduate students from both the colleges of business and education, I developed a web-based simulation in which students immerse themselves in a Frito-Lay factory environment based on Jay, Barry, and Chuck’s cases provided in their textbook.

The motivation for the PBL-SPC was that I found this to be a challenging topic to cover which students often find difficult to relate to and/or boring. Three different poor quality scenarios are provided (crushed chips, stale chips, and poor tasting or nasty chips) and students, as individuals or in teams, must traverse the simulated environment to assess the situation. By “speaking” with the fictitious characters created in the simulation the students get varying perspectives from the manufacturing supervisors for each area of the plant. In addition, some stations have data sets that can be downloaded as MS Excel spreadsheets to be further analyzed using SPC techniques.

Here is the link to the PBL-SPC: where you can access various menu options by hovering over the “Home,” button or clicking on 1 of the 3 scenarios. Under the “Home,” button, you will find the mission statement, production line schematic, staff profiles, an operational overview and a production video produced by Jay and Barry (Pearson) a few years ago.

For more information and materials, such as the team-based rubric created in conjunction with the PBL website, contact me at or 319-273-6793.

OM in the News: Can Sneaker Makers Come Home?

February 13, 2017

robot“A new Trump administration has industry players who import almost all their sneakers from low-cost locales in Asia talking about their efforts to switch more production to the U.S.,” writes Businessweek (Feb. 6-12, 2017). They already know that manufacturing closer to home would lower the time it takes to get products to market. Now, sneaker makers’ efforts to manufacture here could also help deflect attention from the fact that they overwhelmingly are in the business of designing and marketing made-in-Asia footwear for American consumers.

Nike’s products are made by 1.1 million workers in 645 factories located across 42 countries. About 400,000 of the workers are in Vietnam, with 202,000 in China. Only 7,000 are in the U.S. Footwear companies are hoping for incentives for manufacturing onshore to speed up their made-in-America ambitions. But as they look to bring production back to the U.S., shoemakers are embracing a new kind of worker: robots. Sneakers, with lots of pieces stitched or glued together, are labor-intensive. That’s one reason so many plants are located in low-wage nations. So automating is key for any shift.

Still, getting U.S. production to account for more than a tiny fraction of their global totals will be tough. Nike employs 1,300 at factories in Oregon and Missouri, and says it plans to invest in advanced manufacturing to bring production to the U.S. Even if many shoe factories were to get built in the U.S., most of the jobs they’d bring would likely go to industrial robots or 3D printers, not people. Adidas, for example, says its upcoming “speed factory” in the Atlanta area will initially employ only about 160 people. And Under Armour uses just a dozen workers to make its 3D-printed shoes in New Hampshire.

Classroom discussion questions:

  1. Why does the U.S. want shoe jobs back?
  2. Will Nike ever leave its plants in China and Vietnam?
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Andreas Wieland’s supply chain management blog for academics and managers

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Thoughts on continuous improvement: from TPS to XPS