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OM in the News: Samsung and Apple’s Love-Hate Supply Chain Relationship

October 5, 2017

When the iPhone X goes on sale next month, Apple rival, Samsung, has good reason to hope it is a roaring success,” writes The Wall Street Journal (Oct. 3, 2017). The South Korean company stands to make $110 from each $1,000 iPhone X that Apple sells. The fact reflects a love-hate dynamic between the phone makers that is one of the more unusual supply chain relationships in business. While each company vies to get consumers to buy its gadgets, Samsung stands to make billions of dollars supplying screens and memory chips for the new iPhone—parts that Apple relies on for its most important product. “These are two of the largest companies on the planet deeply tied at the hip and directly competitive,” says one Harvard prof.

Apple and Samsung are expected to be the world’s two most-profitable companies in 2017. And they will depend on each other to get there. Apple needs Samsung’s parts to make the iPhones that accounted for 2/3 of the company’s $216 billion 2016 revenue. Samsung needs Apple’s orders to fuel a component business that delivered 35% of the South Korean firm’s total revenue of $195 billion in 2016.

The relationship grew after Apple moved into selling smartphones. Apple’s immense demand for parts—it sells more than 200 million iPhones a year—limits the field of possible suppliers. Samsung is one of a handful of semiconductor makers that can make a small chip crammed with extra memory capacity. And it is the only significant manufacturer of the organic light-emitting diode displays Apple has adopted to create the iPhone X screen.The relationship took an acrimonious turn in 2011, when Apple sued Samsung over patent infringement, accusing the Galaxy S of ripping off the iPhone’s design. Samsung countersued Apple with its own patent-infringement. Six years on, the U.S. lawsuit is unresolved.

Classroom discussion questions:

  1. Describe similar relationships between competitors in other industries?
  2. Why does Apple depend on Samsung so heavily?
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OM in the News: Why Does IBM Have More Employees in India than in the U.S.?

October 3, 2017

The IBM logo identifies a company building in Bangalore. Dozens of other foreign technology companies have offices nearby.

IBM dominated the early decades of computing with inventions like the mainframe and the floppy disk. Its offices and factories, stretching from upstate New York to Silicon Valley, were hubs of American innovation long before Microsoft or Google came along. “But over the last decade, IBM has shifted its center of gravity halfway around the world to India, making it a high-tech example of the globalization trends that the Trump administration has railed against,” writes The New York Times (Oct. 1, 2017).

Today, the company employs 130,000 people in India — 1/3 of its total work force, and more than in any other country. Their work spans the entire gamut of IBM’s businesses, from managing the computing needs of global giants like AT&T and Shell to performing cutting-edge research in fields like visual search, A.I. and computer vision for self-driving cars. The work in India has been vital to keeping down costs at IBM, which has posted 21 consecutive quarters of revenue declines as it has struggled to refashion its main business of supplying tech services to corporations and governments.

The tech industry has been shifting jobs overseas for decades, but IBM is unusual because it employs more people in a single foreign country than it does at home. The company’s employment in India has nearly doubled since 2007, even as its work force in the U.S. has shrunk through waves of layoffs and buyouts. It employs well under 100,000 people in the U.S. now, down from 130,000 in 2007. The salaries paid to Indian workers are 1/2 to 1/5 those paid here, and the range of work done by IBM in India shows that offshoring threatens even the best-paying American tech jobs.

Classroom discussion questions:

  1. When the trend in manufacturing is “reshoring,” why is IBM offshoring more?
  2. What other industries are outsourcing to India?

Guest Post: Effects of the SWARM Effect on Total Team Collaborative Learning Results

October 1, 2017

 

Our Guest Post comes from Phillip Flamm, who teaches Operations Management in the ISQS department at Texas Tech University. This is his 10th posting on our OM blog.

I have been working with total team collaborative learning (TTCL) for 5 years and the impact it has on student retention and speed of learning. In short TTCL involves the manner in which a team of 3-4 students process lecture material. Step by step:
• Lecture 1…Team covers Lecture 1 notes and compile a cumulative understanding of that lecture which is distributed to all members
• Lecture 2…Team covers Lecture 2 then reviews Lecture 1
• Lecture 3…Team covers Lecture 3 then reviews Lectures 1 and 2
• Lecture 4…Team covers Lecture 4 then reviews Lectures 1, 2, and 3
• One last review of all Lectures before an exam yields good scores

Results have been very, very good. TTCL teams tend to average 15 to 20 points higher on exams than the class (450 students) average.
The SWARM process adds to TTCL:
• Lecture 1….same process as above
• Lecture 2….a member from each team rotates from their team (1) to the next team (2) carrying the cumulative version of Lecture 1. Team (2) combines both documents and then covers Lecture 2
• Lecture 3….different team member from 1 goes to 2 with cumulative Lecture 2. Team 2 reviews both cumulative documents then 2 and 3
• Lecture 4….different team member (1) goes to 2 with cumulative 4 document and so on

The idea is that the movement of cumulative documents/students will make available the notes of 8 students instead of 4. I suspect that the exam scores will be higher than previous TTCL classes, but how much is the question.

The next step in my research is to compare a class with no organized collaborative learning teams to the SWARM – TTCL in terms of exam grades.

OM in the News: Is Amazon a Clone of Sears?

September 29, 2017

A pneumatic-tube station in the Sears mail-order plant in Chicago

A century ago, a retail giant that shipped millions of products by mail moved swiftly into the brick-and-mortar business, changing it forever. Is that happening again? “The history of Sears predicts nearly everything Amazon is doing,” writes The Atlantic (Sept. 25, 2107). 

In the last 2 years, Amazon has opened 11 physical bookstores. It just bought Whole Foods and its 400 grocery locations, and announced a partnership with Kohl’s to allow returns at the physical retailer’s stores. The company’s corporate strategy adheres to a familiar playbook—that of Sears. Sears might seem like a zombie today, but it’s easy to forget how transformative the company was 100 years ago. To understand Amazon’s evolution, strategy, and future, can we look to Sears?

Mail was an internet before the internet. After the Civil War, the telegraph, rail, and parcel delivery made it possible to shop at home and have items delivered to your door. Americans browsed catalogues for jewelry, food, and books. Merchants sent the parcels by rail. Then Sears made the successful transition to a brick-and-mortar giant. Like Amazon among its online rivals, Sears was not the country’s first mail-order retailer, but it became the largest. Like Amazon, it started with a single product category—watches, rather than books. Like Amazon, the company grew to include a range of products, including guns, gramophones, cars, and groceries.

By building a large base of fiercely loyal consumers, Sears was able to buy more cheaply from manufacturers. It managed its deluge of orders with massive warehouses. But the company’s brick-and-mortar transformation was astonishing. At the start of 1925, there were no Sears stores. By 1929, there were 300. Like Amazon today, the company used its position to enter adjacent businesses. To supplement its huge auto-parts business, Sears started selling car insurance under the Allstate brand. Perhaps the shift from selling products to services is analogous to the creation of Amazon Web Services—or Amazon’s TV shows. The growth of both companies was the result of a focus on operations efficiency, low prices, and an eye on the future of U.S. demographics.

Classroom discussion questions:

  1. What did Sears do right that Amazon can learn from?
  2. What has Sears done wrong that Amazon should avoid?

Guest Post: Teaching OM in the European Classroom

September 27, 2017

Dr. Steven Harrod is Associate Professor in the Department of Management Engineering at Technical University of Denmark.

Will this be on the exam?” In my decade of teaching OM in the U.S., this was by far the most frequent question from students. The typical American course is assessed on a running sum of credit for attendance, participation, written homework, midterm and progress exams, and a final exam, much like the bill after a stay at a Hilton resort.

Speaking from my experience in Denmark, the European evaluation process and value system is much different. One of the clearest ways I have experienced this is with Heizer/Render/Munson’s popular  MyOMLab system. In the U.S., MyOMLab was well received and many students actively worked homework assignments to accumulate grade points. Here in Denmark, the response was, “Just give us the questions and the answers, and we’ll figure it out ourselves.”

Students are definitely more independent here than in the U.S. Written exams, numerical or multiple choice, are limited to courses with more than 40 students. Since all of my courses are smaller, I have exclusively held oral exams. An oral exam typically offers the student the opportunity to set the topic of the exam. Very often the examiners are external, not participants in the course delivery, and brought in at exam time. The student has a very real chance to emphasize topics of strength and avoid topics of weakness, and is very much “in the driver’s seat.”

And the examiners often represent potential employers, which makes for a different student to job market relationship than in the U.S. Although students here desire recognition and good grades, there is a relaxed relationship between students and the job market that supports a more exploratory, investigative education. The typical course I teach here is a form of “mass customization.” The lesson plan often contains multiple streams of related concepts.

The learning environment in Europe offers some interesting opportunities for exploration and growth, but it is also dependent on the many structural and cultural elements of Europe.

OM in the News: Product Design at McDonald’s

September 25, 2017

McDonald’s is dropping the Minute Maid apple-juice box from its Happy Meals and replacing it with a watered-down organic juice with less sugar made by Honest Kids. The change is the latest step in the evolution of the Happy Meal toward healthier options as parents are increasingly turning away from 100% fruit juice in favor of water and other drinks with less sugar.

Amid a backlash against the fast-food industry for contributing to America’s obesity problem, McDonald’s six years ago reduced the size of its french fry servings in Happy Meals by more than half and added sliced apples. Later, the chain stopped promoting soft drinks as an option in children’s meals and instead started including juice, low-fat milk and water on its menu boards and in its advertising.

McDonald’s also has added low-fat yogurt and clementines as side options, and last year removed artificial preservatives, colors and flavors from its chicken nuggets. McDonald’s could, of course, still do more to make Happy Meals more nutritious, perhaps by offering vegetables and rotating in different fruits to expose children to a variety of healthy items. But a company spokeswoman said the company is proud of the changes it has made and that, “We are committed to continuing our food journey for the benefit of our guests” (The Wall Street Journal , Sept. 16-17, 2017).

Product design is an ongoing process at McDonald’s, just as it is at Apple, 3M, Honda, and other industry leaders that we discuss in Chapter 5.

Classroom discussion questions:

  1. Is product design the most important of the ten OM decisions?
  2. What other major product design changes has McDonald’s made in the past two decades?

Guest Post: An Experiential Learning Exercise for Teaching Line Balancing

September 21, 2017

Our Guest Post today comes from Brent Snider, senior instructor of Operations and Supply Chain Management at the University of Calgary’s Haskayne School of Business, and Nancy Southin, Assistant Professor at Thompson Rivers University.

Are you looking for an engaging way to teach assembly line balancing to your OM class but leery of the various games that consume significant class time and require the purchase of various materials such as Lego? We have developed a 30-minute experiential learning exercise that can help. It requires only a few minutes of photocopying, and can be done before any lecture content on line balancing is covered.

The exercise features a scenario in which a company is considering re-shoring their laptop production to improve their triple bottom line performance. Student groups are provided the required assembly tasks and then challenged to develop a task assignment that is physically feasible (i.e., satisfies precedence requirements), meets or exceeds expected daily demand, and minimizes the number of employees (stations) required. Groups must submit their solutions for review in front of the class.

Students are motivated to try their best by knowing that their design will be publicly peer reviewed, and also by a food prize for the group that develops the best design. Each submission is displayed on-screen and the class asked “how would this perform?” Through assessing the various submissions, students quickly discover potential pitfalls like exceeding cycle time, out of sequence tasks, and excessive employees. The instructor then facilitates a quick summary discussion, formalizing the “rules” for optimally balancing an assembly line.

Student surveys showed 96% of students recommended continued usage of the exercise and 92% believed the competition taught them how to determine a feasible solution for line balancing problems. Students who learned line balancing though this exercise were also found to have at least the equivalent learning as lecture based learners.

If you are looking for a low admin exercise that significantly improves student engagement when teaching line balancing, then this peer reviewed competition approach is for you. E-mail us at brent.snider@haskayne.ucalgary.ca and nsouthin@tru.ca and we will send you the full lesson plan!

 

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