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OM in the News: Collaboration as an Operations Tool

May 22, 2015

collaboration2We discuss the importance of collaboration in Chapters 3 (Project Management), 5 (Product Design), 10 (Human Resources), and 11 (Supply Chain Management). Is collaboration at work all it’s cracked up to be? Recent research by profs at BU, Harvard, and Northeastern concludes that collaboration sometimes hinders problem solving because individuals in big groups tend to parrot one another, resulting in a narrow set of solutions. “We just get caught up in our own gospel around collaboration,” says one author in The Wall Street Journal (May 20, 2015).

The researchers broke down problem solving into 2 parts—gathering facts about a situation and devising solutions—and divided study participants into groups of 16. Some of those groups were connected to each other in a clear team structure. Other groups were less connected, and information wasn’t shared among the entire group. The highly clustered groups were better than the loosely connected ones at gathering facts about a problem. Yet those collaborative groups came up with fewer solutions than the more isolated groups did. People tend to copy each other and agree more when they are trying to come up with solutions together. The phenomenon is similar to “group think,” although the authors said it could also be described as “cognitive laziness,” since members seem to lack the will to argue with the group.

The trick for companies is to figure out how to divide problem solving into two parts: fact gathering and generating solutions.That isn’t always intuitive or easy to do, especially under tight time constraints. Consulting firms such as McKinsey and Boston Consulting Group tend to remix team structures at various points in a project. Larger teams are good at the start of brainstorming sessions, where workers can share widely what they know. When it comes time to refine those ideas employees could do well to break into smaller groups.

Classroom discussion questions:

1. Why do the consulting firms reconfigure their teams during a project?

2. Make the case for more collaboration. Against it.

 

OM in the News: Honda’s Newest Product Flies

May 20, 2015
Mounting the engines over the top of the wings reduces the drag in flight

Mounting the engines over the top of the wings reduces the drag in flight

Honda is finally getting its wings”, writes The Wall Street Journal (May 18, 2015). Some new products, as we discuss in Chapter 5, go from inception to market in months, and some in years.  But for Honda, it involved 3 decades of planning and development to deliver one of its most unusual innovations: an ultrafast business jet that carries its engines above its wings. The $4.5 million 7-seat HondaJet is set for delivery to customers mid-2015. For Michimasa Fujino, the 54-year-old CEO of Honda Aircraft, it is the culmination of a decadeslong fight to make a Honda aircraft in the face of skeptical executives, technical delays and the global recession. His influence touches every aspect of the design, from its curves to the manufacturing process. “This airplane is my art piece,” he states.

The jet gives Honda—which also makes robots, boat motors, and lawn mowers—entree into a new market. But no modern car company has successfully made the transition to building aircraft. Honda is betting that technological advances will trigger new demand from buyers with its lightweight body made of carbon-fiber composites–providing 17% better fuel efficiency than competitors while having the highest speed in its class: 480 miles per hour.

Fujino’s first decade produced a pair of designs, but the breakthrough came in 1996 when he sketched the basics of the plane’s current design on the back of a wall calendar. Inspired by principles in a 1930s aerodynamics textbook, the design mounted jet engines atop the wings to boost cabin space and cut noise. In 1997, Fujino presented the business case to the board with the sketch in hand, receiving approval for a flying prototype. It would take 3 years of persuasion, using simulations and wind tunnels to prove his point. He and 40 employees started building the prototype in 2000 in a hangar in Greensboro, N.C. The prototype flew successfully in 2003. Today, HondaJet’s workforce has grown to 1,300 at its 133-acre N.C. campus, providing easy access to the U.S. and Europe, 80% of its estimated market.

Classroom discussion questions:

1. Why did product development take so long?

2. Provide a brief SWOT analysis of the new product.

OM in the News: Chobani Learns That Operations Management Can’t Be Ignored

May 18, 2015
Chobani's plant in New Berlin, N.Y.

Chobani’s plant in New Berlin, N.Y.

Hamdi Ulukaya used to say that no one could run his yogurt startup better than he could, proud that Chobani Inc. grew to $1 billion in annual sales without help from a “professional CEO.” Today, a professional CEO is exactly what Chobani is seeking, reports The Wall Street Journal (May 18, 2015). Ulukaya admits that Chobani has grown beyond his ability to run it. (Chobani’s share of Greek yogurt sales in the U.S. is down nearly 15 percentage points to 44% from its peak in 2012).

Chobani almost single-handedly set off a craze for Greek-style yogurt, growing explosively in the process. But it was in over its head: losing money, and building the world’s largest yogurt factory had saddled it with debt. Its operations were scattered, purchasing was inefficient and it lacked an adequate quality-control team—a deficiency that surfaced dramatically when Chobani had to recall yogurt from the new factory in 2013.

Executive offices were in the basement of the factory. Ulukaya handled most of the hiring himself, assembling a staff that suited a startup but not the large company Chobani was becoming. Ulukaya handled the books, too, using Quicken software for small businesses even after the company grew beyond such a status. “We didn’t have any corporate executive types,” said Ulukaya. “I didn’t want to hear all that marketing, supply chain, logistics stuff—most of it is BS.”

He would learn those operational systems couldn’t be ignored, even though rapid growth hid some problems. The drawbacks of the seat-of-the-pants style became clear starting in 2013. The previous December, Chobani had opened a $450 million factory in Twin Falls, Idaho, nearly 2,000 miles from its headquarters. Though it offered access to an abundant dairy supply, the plant’s remote location stretched Chobani’s management, and differences in the milk’s protein composition and in the machinery required tinkering with Chobani’s recipe.

This is a great story to share with your class, as most are familiar with the company. It appears OM is important after all!

Classroom discussion questions:

1. After the new CEO, what is Chobani’s next step?

2. What are the operations issues Chobani is facing?

 

OM in the News: And the Winner of Volvo’s New $500 Million Plant is— S. Carolina

May 14, 2015
A Volvo plant in China. The automaker is hoping to increase its American sales volume, which fell 8% last year.

A Volvo plant in China. The automaker is hoping to increase its American sales volume, which fell 8% last year.

Volvo just announced that it will build a $500 million factory near Charleston, South Carolina, making it the first time a Chinese-owned automaker will have an auto assembly plant in the U.S. The company said that the plant — its first in the U.S. since entering the market 60 years ago — would eventually employ 4,000 and will open in 2018. The factory will initially be capable of making 100,000 vehicles a year.

Volvo already operates two plants in Europe and two in China. It is hoping to increase its American sales volume. Globally, the company is growing, up 9% last year to nearly 470,000 vehicles — helped by surging demand in China.

Volvo will receive about $200 million in combined incentives, reports The New York Times (May 12, 2015). That includes $120 million in economic development bonds, $30 million in state grants and an additional $50 million of incentives from a state-owned utility company. The firm said it chose the S. Carolina site for its proximity to seaports and the quality of autoworkers and facilities in the region. “One of the main criteria for us was infrastructure,” said the CEO. “South Carolina has people who know the industry, can work in the factory, and who understand our business.” He added that the company was looking long-term at its first production on American soil. “A commitment like this you don’t make for 10 or 15 years,” he said. “It’s designed for decades.”

Volvo’s announcement is the latest in a series of production expansions by foreign automakers in the U.S. In July, VW announced it would spend $600 million to expand its plant in Chattanooga.

Classroom discussion questions:

1. How do these incentives compare to prior offers to automakers?

2. Why is Volvo opening the U.S. plant in S. Carolina?

Teaching Tip: Your Students Are Not Paying Attention in Class? Shocking!

May 13, 2015

studentsWe have all had the experience of having students sitting in our OM classes and knowing that they are not paying the least bit of attention. Attention, as defined in the literature, refers to the idea that students have a finite amount of cognitive resources available at any given moment to devote to a particular stimuli from their sensory environment. To that end, students’ attention is constantly shuttling between what they are experiencing externally and internally.  If class is interesting and there is activity, students can focus on those activities and work to remember that information for later use. However, when class isn’t engaging, students will find other things to occupy their attention.

Sometimes, students work to multi-task while in class. In this case, students try to engage in activities on their laptop, iPad, or phone while also believing they are “paying attention” in class.  But by doing so, students draw necessary resources away from immersing themselves in the content, resulting in poorer performance.

Although some of us believe that the burden of attention rests solely on the student, there are things we can do to help to keep them actively involved in their learning. For students to pay attention, there has to be sufficient need for that attention to be devoted to the material at hand. That is, we need to engage the students in ways that make it difficult for them to pay attention to anything else. There are two key benefits to this: (1) students report that the class goes by more quickly and they remember more, and (2) faculty report fewer problems in the classroom and that students seem more prepared for class.

Here are 5 strategies, writes Faculty Focus (May 4, 2015), for engaging students in the classroom that require that their attention is devoted to the class :

  1. Ask questions and require students to write responses.
  2. Have students respond to questions about a previous class activity.
  3. Create mini-lectures to include time for student comment, feedback, and response.
  4. Focus learning on student perspectives.
  5. Create rapport with students and build a comfortable classroom climate.

OM in the News: How 3-D Printing is Saving the Italian Artisan

May 11, 2015
A worker in Italy polishes a lampshade created by a 3D printer.

A worker in Italy polishes a lampshade created by a 3D printer.

Northeast Italy’s industrial heartland stretches roughly from Milan to Venice. In the 1960s, farmers in the region began setting up small family-owned businesses, each specializing in just one small part of a finished product. Within a generation, many of these companies became world leaders in their respective fields, and small Italian cities thrived as manufacturing hubs. The town of Montebelluna once produced 3/4 of the world’s ski boots. About 70% of Europe’s chairs were designed and manufactured by 1,200 small outfits near Manzano.

But the region has fallen on hard times. Italy’s craftsmen have been undermined by competition from China–and the industrial sector has shed about 135,000 jobs—17% of its total workforce. A few years ago, in an effort to diversify offerings, one firm teamed up with an artist to create manufacture-to-order lamp shades and jewelry on 3D printers. The pieces take shape slowly, each layer fused from powdered nylon by a high-power laser. The project was a surprising success, building products that no one had earlier envisioned.

Techniques such as the 3D printing have helped turn northeastern Italy into an unlikely hothouse of innovation, writes BusinessWeek (May 5, 2015). Last year growth in the region was positive for the first time since 2007. A trade school in Trento for 14-18 year olds, specializing in fashion design and tailoring, recently added a class in which students incorporate 3D printing, laser cutting, and microcontroller chips into their designs. “You have to offer the jobs of the future,” says the administrator.

The use of 3D printing and other similar technologies is expected to boost revenue at Italy’s small-scale manufacturers by 15% and allow companies to compete with multinationals, like YouTube videos hold their own against traditional video production. The advent of rapid prototyping and other innovations means “you can compensate for your disadvantages with variety, customization, and a rapid response to what the market is demanding,” says an Italian business professor. “If something doesn’t work, you simply stop producing. You haven’t filled a warehouse.”

Classroom discussion questions:

1. Name several other clusters and their products.

2. What are the advantages of 3-D printing in this Italian industry?

OM in the News: A Radical Idea–Own Your Supply Chain

May 7, 2015
Ashley's plant in Arcadia, Wisconsin

Ashley’s plant in Arcadia, Wisconsin

Most manufacturing companies long ago outsourced their truck deliveries in the belief that outside experts could do the job more efficiently, reports The Wall Street Journal (April 30, 2015). But Ashley Furniture, the largest U.S. maker and retailer of furniture, has resisted that trend. It owns and operates about 800 trucks and delivers the vast bulk of its own products from factories to stores. “We think it is a core competency,” says the CEO.

Ashley employs about 3,000 people in transport and warehouse functions in the U.S., 1/4 of its U.S. head count. Its distribution centers feature racks specially designed to speed loading, and its managers arrange for trucks returning after they deliver their furniture to carry loads for other companies for a fee. About 80% of Ashley’s trucks are filled with other firms’ goods on the way back but Ashley aims to increase that above 90%

It has become very unusual for manufacturers to own transport fleets. Typically, switching to a third-party transport service leads to greater reliability and savings of at least 10%.

Trucks in Ashley’s fleet, from Volvo and Kenworth, average about 2.5 years old. The industry average is about 6 years. Providing drivers with comfortable seats, beds inside the cab and other amenities helps keep them loyal. Ashley also tries to keep drivers happy with predictable schedules allowing them to sleep at home frequently. Its drivers, dubbed Ashley Ambassadors, are also charged with building customer relations. In terms of delivery times and reliability, “they’re unbeatable,” says one furniture store owner.

Classroom discussion questions:
1. Why does Ashley control its own delivery supply chain?

2. What are the advantages of outsourcing instead?

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