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OM in the News: Walmart Bets on Consolidation Centers to Win at ‘Inventory Flow’

March 2, 2019

For big retailers with a lot of suppliers, it doesn’t make much sense to ship items directly from vendors to each individual store. It may not even make sense for vendors to ship to each regional distribution center. That’s where consolidation centers come in, writes Supply Chain Dive (Feb. 26, 2019). Walmart just announced it will open its 10th, a 340,000-square-foot high-tech consolidation center in California that will receive, sort and ship freight from suppliers before sending them to a distribution center.

Using consolidation centers, items from vendors whose purchase orders (POs) are smaller than what would fill an entire truck are consolidated with other similar shipments so that half-empty trucks aren’t showing up at stores. “We believe this investment is going to really set Walmart apart by being able to create a national purchase order for 4,600 stores where we can buy and flow inventory more efficiently than anybody else. The center will be the first to leverage best-in-class inventory management and automated inventory receiving and sortation,” said a Walmart exec.

The goal of the consolidation centers is to get items to Walmart store shelves as quickly as possible. Walmart also sees its consolidation centers as a better way to get the right inventory to the right stores. Walmart now has 10 of them, only not like this special one. They receive less-than-truckload freight shipments for all manner of products making their way to the retail stores and essentially collate freight into truckload shipments of products. From there, Walmart shipments go on to 42 regional distribution centers and the U.S. stores. What’s changing is that the new California consolidation center automates sorting, which allows it to process 3 times more freight volume than an equivalent manually-run facility. Further, order inaccuracies won’t be able to get as far downstream.

Classroom discussion centers:

  1. Explain the advantages of consolidation centers.
  2. What are the downsides?

 

OM in the News: Shortcoming in Boeing’s Quality-Control Program?

February 28, 2019

A Boeing final assembly line.

Boeing announced plans to eliminate up to 900 quality-inspector positions as part of a sweeping transformation of its manufacturing system. The idea is to move away from reliance on inspections by a second set of eyes to find any defects after a mechanic does a job. Instead, Boeing is redesigning tasks to make it easier for mechanics to get things right first time, and deploying smart tools and digital technology to track and monitor quality. Boeing is also using sampling rather than inspecting every job for accuracy.

But recently, a Boeing system called Process Monitoring revealed a breakdown in quality, reports The Seattle Times (Feb. 1, 2019). In one job category, an audit found only 93% of tasks were done correctly. To maintain this form of quality control in one important job category on the 747, 767 and 777 planes, Boeing set the requirement of a 95% pass rate.

One work task that recently fell short is called “Bond and Ground,” which means ensuring that all the components in the airplane are electrically grounded and that the connections between the components provide a continuous grounded electrical pathway through the metal airframe. (This is important to safely dissipate any buildup of static electricity. If a lightning strike were to hit an improperly grounded component, it could explode or start a fire).

As a result of the failed audit, Boeing must now revert to the former system using quality inspectors to check bonding jobs once work is complete. This much more labor-intensive regime must continue until 10 consecutive airplanes move through the system and meet the required quality standard. This will take months, since mechanics currently build a new 747 only once every 40 work days, a new 767 every 8 work days and a new 777 every 6 work days.

Inspectors are unhappy. One, referring to the failed audit, said the changes mean that “safety is going to be put at risk in favor of lower costs.”

Classroom discussion questions:

  1. After reading Chapter 6’s section called “The Role of Inspection,” comment on Boeing’s new approach.
  2. What would Philip Crosby say about the quality process (see Table 6.1)?

OM in the News: The High-Tech Chinese Pig Farm

February 26, 2019

One Chinese firm uses video to capture pig faces because they move a lot.

The new Chinese pig farm: A database of every pig’s face; Voice scans that detect hogs with a cough: Robots that dispense just the right amount of feed. “Chinese companies are pushing facial and voice recognition and other advanced technologies as ways to protect the country’s pigs,” writes The New York Times (Feb. 25, 2019). In this Year of the Pig, many Chinese hogs are dying from a deadly swine disease, threatening the country’s supply of pork, a staple of Chinese dinner tables. China has already culled a million pigs (out of a population of 400 million), set up roadblocks and built fences, to no avail.

There’s a lot at stake. China is the world’s largest pig breeder and its largest pork consumer. The meat is so important that China has its own strategic pork reserve. With 10’s of millions of pig farms, the Chinese government has endorsed technology on the farm. Its most recent 5-year plan calls for increased use of robotics and network technology, saying it wants to promote “intelligent farming.” Officials praised “raising pigs in a smart way” using the A-B-C-Ds: artificial intelligence, blockchain, cloud computing and data technology.

Technology companies say they can help farmers isolate disease carriers, reduce the cost of feed, increase fertility, and reduce unnatural deaths. JD.com’s system uses robots to feed pigs the correct amount of food depending on the animals’ stage of growth. SmartAHC uses A.I. to monitors pigs’ vital statistics, and hooks up sows with wearable monitors that can predict ovulation time.

Chinese are quick to embrace high-tech solutions to just about any problem. A digital revolution has transformed China into a place where nearly anything can be summoned with a smartphone. Facial recognition has been deployed in public bathrooms to dispense toilet paper, in train stations to apprehend criminals, and in housing complexes to open doors.

Classroom discussion questions:
1. Why will this high-tech approach be difficult to implement?

2. What technology is used in American farming?

 

Guest Post: Is Your Class Model Preparing Students for Career Success?

February 23, 2019

Beverly Amer is President’s Distinguished Fellow in the W.A. Franke College of Business at Northern Arizona University. She is also author of a workbook for college students on practicing soft skills and director of the 45 videos we provide with our text

Chances are good you’ve followed recent trends and have blended or flipped your OM course. Great! You’re modeling the kind of “workplace” students will join when they start their careers. They’ll be expected to source and evaluate resources independently, and come to work with knowledge, ready to contribute. But I suspect you’ve encountered a few bumps along the way, not the least is student confusion about what’s expected of them when so much of the “work” – that which you used to lecture over in class – is squarely on their shoulders.

My flipped undergraduate courses have benefited greatly from what I call a “student responsibility agreement.” It’s a simple syllabus appendix that explains our class model’s role in preparing them for career success, and my expectations of them. We all have classroom expectations, but reframing them along the lines of “career preparedness” can change the lens students use to view how their class behavior now can impact their future. I give this piece of advice: “If you can be the person in the room who not only identifies the problem, but generates 1 or 2 workable solutions, you’ll be viewed as an asset everyone will want on their team.”

So here goes – my list that moves the student from passive recipient of information to active participant in knowledge acquisition: (1) Read syllabus policies and schedules and use a calendar to avoid missed deadlines; (2) Start work on assignments well before the deadline so there’s time to seek help, if needed; (3) Build relationships with classmates for out-of-class work so in-class contributions are more meaningful; (4) Maximize efficiency by figuring out technology needs – and backups – before needed; (5) Don’t waste the time of your instructor by asking questions already answered in FAQ files, the syllabus, or other assignment materials; (6) Technology failures are never an excuse for missed deadlines; and (7) Sending me an email excuse for failure to finish right before a deadline does not guarantee any acceptance of such excuse.

Earth-shattering? Probably not. But laying a foundation of expectations early and explaining why learning to be a self-starter and problem-solver now can only benefit your students later.

OM in the News: Amazon’s Un-Location Decision

February 20, 2019

Protesters held signs during a protest at an Amazon store in Manhattan

When Amazon announced plans for a second headquarters in 2017, it promised 50,000 high-paying jobs and billions in investment for a community that would be coequal to its home in Seattle. The company, which outgrew the number of people it could hire in the Pacific Northwest, set off a nationwide frenzy, with more than 200 cities making bids. (We in Orlando even thought we had a decent shot for being selected. But I guess when Amazon listed cultural opportunities as a criteria, they didn’t count Disney World). In the end, Amazon decided last fall that no one city could provide the number of tech workers it needed and split the headquarters in two. The “winners”: Arlington, VA., and NYC.

But, as the whole world knows, Amazon last week canceled its plans to build the expansive campus in NYC after facing an unexpectedly fierce backlash from lawmakers, progressive activists and union leaders, who contended that a tech giant did not deserve nearly $3 billion in government incentives that the state and city had offered in their confidential bid package. The backlash in New York showed no sign of abating and risked tarnishing Amazon’s image beyond the city.

“Amazon, one of the richest companies in the world, run by the richest man in the world, had held a nationwide contest in which governments scraped together enough entitlements to satisfy it, even as those same cities struggled to fortify corroding infrastructure and stave off a housing crisis that has pushed the middle class to the brink and forced the poor into homeless shelters,” wrote The New York Times (Feb. 15, 2019). Our current system of location incentives, in which powerful corporations can pry billions in tax benefits out of cities and states to locate facilities, without any added investment in infrastructure, schools and other benefits, is one worth a class discussion.

Classroom discussion questions:

  1. How important are incentives, in the final analysis, in location decisions?
  2. What was the “final straw” for Amazon, in deciding to pull out of NYC?

Guest Post: A Case for Supply Chain Simulation in Your OM Class

February 17, 2019

Our Guest Post today comes from Chuck Nemer, who has taught operations management for 16 years at Metropolitan State University in Minneapolis. He is also a SCM trainer and can be reached at http://www.theguruofbiz.com

Here is what I often hear about supply chain management simulations from colleagues teaching OM:

• I want to provide a hands-on approach rather than get lost in theory
• I need to get more engagement from my students
• I need to present real-world challenges and the associated complexities

Using simulations, such as the ones that come free with the Heizer/Render/Munson text, in your classroom gives you all the above, as well as the opportunity to see for yourself that students “get it.” Students get to see not only how vital supply chain is to organizations today, but they can build a career where they touch all aspects of the organization and develop the ability to lead organizations successfully.

My experience has been simulation in the classroom aligns with and supports both the textbook and the body of knowledge for supply chain quite easily and successfully. Exciting to me, is that students walk away from the experience with confidence, and the ability to demonstrate to prospective employers they understand not just what supply chain is. But they also see what needs to be done to make a supply chain improve, grow, and compete successfully at a level greater than just from a textbook and lecture alone. Together, your knowledge, your class content, and the use of a simulation make a very powerful combination that you just have to consider these days where learners live and exist in a technology rich world and thirst for “an experience.” I really hope you will investigate the use of supply chain simulations and consider making them part of your classroom.

OM in the News: The Short Life Cycle of a Superjumbo Jet

February 15, 2019

An A380 landing in Heathrow. Production never met its grand ambitions and output quickly fizzled.

Airbus just announced that it is halting production of the A380 superjumbo plane, abandoning the $16 billion project after airlines around the world flocked to smaller, nimbler jets for long-range travel, reports The Wall Street Journal (Feb. 15, 2019). The A380 was the European company’s answer to Boeing’s 747, which brought long-haul travel to the masses 50 years ago and was the undisputed queen of the skies for decades. The A380, which first went into service in 2007, represented a future for long-distance commercial aviation based on big jets, shuttling between major hubs.

Passengers came to love the plane for its spacious, quiet cabins. Most airlines, though, were less enamored, turning instead to a new breed of fuel-efficient smaller jets that gave them the flexibility to serve less popular routes. A380 sales lost momentum early. Airbus never turned a profit on its flagship plane, and write-offs related to the program weighed on the company for years. This week, Dubai-based Emirates Airline, the A380’s biggest customer by far, cut sharply its plans to buy more of them. Airbus’ CEO said the airline’s decision  left the company with “no basis to sustain production.”

In 2000, Airbus unveiled its superjumbo program, saying it would spend $10 billion to build a 555-seat jet in an effort to supplant its U.S. rival’s 747. But development delays and $6 billion in cost overruns set the project back early. Boeing’s 747 has also fallen out of favor, but more gradually. The aircraft is now made mainly to haul cargo. Only about 230 A380s have been built, versus more than 1,500 747’s. But as we point out in Chapter 5, every product has a life cycle–some shorter than others.

Classroom discussion questions:

  1. Why was the 747 more successful in sales and longevity?
  2. Research some of the reasons why the A380 program was an OM nightmare.
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Andreas Wieland’s supply chain management blog for academics and managers

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