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OM in the News: The Drones Will Have to Wait at Amazon

December 27, 2018

Instead of charting a future that makes drivers obsolete, Amazon is so dependent on them it’s copying FedEx to build a network of independent couriers around the country in a frantic effort to keep pace with demand that peaks in December. Jeff Bezos captured the world’s imagination when he appeared on CBS’s “60 Minutes” and pledged to fill the skies with package delivery drones. “Five years on, Amazon’s CEO is betting on decidedly more terrestrial technology: drivers.,” writes Material Handling & Logistics (Dec. 18, 2018) 

Bezos this summer issued a call-to-arms to aspiring entrepreneurs, offering them a chance to earn $300,000 a year by starting their own businesses making Amazon deliveries. All for as little as $10,000 up front, far less than the $250,000 it takes to open a fast-food franchise like McDonald’s or the $1 million required to buy a typical FedEx delivery business. Instead of charting a future that makes drivers obsolete, Amazon is so dependent on them it’s copying FedEx to build a network of independent couriers around the country in a frantic effort to keep pace with demand that peaks in December.

So far, Amazon has attracted tens of thousands of aspirants eager for a ground-floor opportunity serving the fast-growing company led by the world’s wealthiest man. Applicants go through phone interviews followed by several days of training. In just a few months, hundreds of new businesses have sprouted up around the country that employ thousands of drivers.

Shipping is one of Amazon’s fastest-growing expenses and consistently outpaces online sales growth. The company must find cheaper ways to deliver packages or its e-commerce business could be unsustainable without further price hikes.

Classroom discussion questions:

  1. What are the strengths and weaknesses of this delivery approach?
  2. Would your students be interested in joining such a business?
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OM in the News: The Future of the Auto Industry

December 21, 2018

The future of the auto industry is going to look like the history of the cell phone, writes IndustryWeek (Dec. 18, 2018). The two even share technology: the lithium-ion battery. As the world’s automakers gradually switch from combustion to charging, some of today’s dominant car companies will share the fate of a few former titans of the smartphone. Remember BlackBerry, Nokia and Palm?

This transition will play out as electric options flood showrooms. In the next 2 years, 85 more battery-powered models will be marketed, bringing the global fleet to 357. VW is near the front of the pack, promising 20 new electric models by 2020 and another 80 by 2025. VW just announced the internal combustion vehicles being designed now will be its last!

Being first, however, is no guarantee of success. Honda’s Insight promised 70 mpg as the first U.S. hybrid in 1999. Yet the Toyota Prius, which reached the market later, became the icon of greener wheels. A crowd of copycat hybrids arrived but none came close to matching the Prius.

For the next decade, old-school car executives will try to pull off a tricky financial stunt: driving returns with gasoline engines until their electric models have enough momentum to start keeping pace. They are essentially using an old technology to fund the transition to the next. Jump to the electric too soon and the whole works will grind to a halt; jump too late and lose the EV race. Startups such as Tesla don’t have to make this awkward jump. They don’t have to worry about feeding a legacy business as it slowly winds down.

Electric drivetrains and smart manufacturing systems have the potential to open up car manufacturing–and remove the stranglehold car companies have had on the business because of the high cost of capital.  And as we note as one of our 10 strategic decisions of OM, Product Design (Ch.5) is critical. Products must be designed to a dynamic market meeting sometimes harsh capital and labor requirements and time constraints. VW, like other auto manufactures is “biting the bullet.”

Classroom discussion questions:

  1. Is VW making a wise decision? (SWOT analysis)?
  2. Where would you place EV and gasoline cars on the product life cycle curve now and in 10 years? (See Figure 2.5 in the text)

 

 

More Homework Problems and Questions in the New Editions

December 18, 2018

The 13th edition of Operations Management and the 11th edition of Principles of Operations Management will be available on January 15th and we would like to let you know about some of the changes. First and foremost, you are always asking for more and more material to assign. So here it is:

More Homework Problems—Quantity, Algorithmic
We know that a vast selection of quality homework problems, ranging from easy to challenging (denoted by one to four dots), is critical for both instructors and students. Instructors need a broad selection of problems to choose from for homework, quizzes, and exams—without reusing the same set from semester to semester. We take pride in having more problems—by far, with 818—than any other OM text. For this edition, we have added 180 new algorithmic problems in MyLab Operations Management, with printed versions of each in the text!

Concept Questions

These are multiple choice questions found in MyLab Operations Management that can be used as pretests before you cover a new chapter, as exam questions, or for pop quizzes. There are 4-6 per major text heading (A heads), with over 940 to choose from, including 270 brand new ones.

OM in the News Questions

We have added dozens of new readings, called OM in the News to MyLab. These are 300 word summaries of articles from BusinessWeek, The Wall Street Journal, the New York Times, and a dozen other magazines and publications, along with links to the full articles. Each reading has four multiple choice questions that you can assign, and which and are graded by Mylab.

Video Questions

The 46 short videos that we have produced specifically for the text, including 5 brand new ones featuring Celebrity Cruises, are also found in MyLab. Each has four multiple choice questions from which you can select to quiz your students.

 

OM in the News: Plastic Water Bottles Threaten a Crisis

December 15, 2018

“Bottled water, which recently dethroned soda as America’s most popular beverage, is facing a crisis,” writes The Wall Street Journal (Dec. 13, 2018). A consumer backlash against disposable plastic plus new government mandates and bans in many stores have bottled-water makers scrambling to find alternatives.

Workers sort plastic bottles at a Swiss recycling facility

Evian this year pledged to make all its plastic bottles entirely from recycled plastic by 2025, up from 30% today. It hopes the move will help it regain market share and win over plastic detractors who are already pressuring the makers of straws, bags and coffee cups. There’s a big problem. The industry has tried and failed for years to make a better bottle. (A decade ago, for example, Evian pledged to use 50% recycled plastic in its water bottles by 2009. Nestlé’s plastic water bottles use just 7% recycled material in the U.S., while Coca-Cola’s use 10%, and Pepsi uses 9%.)

Existing recycling technology needs clean, clear plastic to make new water bottles, but low recycling rates and a lack of infrastructure have stymied supply. Danone, Evian’s parent company, is betting its reputation on a new technology that turns old plastic from things like dirty carpets and ketchup bottles into plastic suitable for new water bottles. Less than a third of plastic bottles sold in the U.S. are  now collected for recycling, with less than 1% processed into food-grade plastic. The bottled-water industry says using more recycled plastic in bottles will incentivize the collection of old bottles by giving them value. Companies are launching new marketing campaigns, employing more waste pickers and backing new bottle deposit schemes to encourage recycling.

Bottled-water sales have boomed in recent decades amid safety fears about tap water and a shift away from sugary drinks. Between 1994 and 2017, U.S. consumption soared 284% to nearly 42 gallons a year per person. Recently, images of bottles overflowing landfills and threatening sea life have soured consumers. Plastic drink bottles are the 3rd most common type of item found washed up on shorelines—behind cigarette butts and food wrappers.

Classroom discussion questions:

  1. How is this a triple bottom line issue (people, planet, profit)?
  2. What other consumer products are facing similar backlash crises?

OM in the News: Fiat Chrysler to Open New Factory in Detroit

December 11, 2018

Fiat Chrysler plans to open a new vehicle factory in Detroit, the first new U.S. assembly plant to be built by a major domestic car maker in at least a decade, reports The Wall Street Journal (Dec. 7, 2018). The Italian-American auto maker plans to make an SUV at the new factory as part of its efforts to expand its iconic Jeep brand. The firm will roll out more truck and SUV models as it responds to a sharp consumer shift away from passenger cars.

The move comes as GM has upset lawmakers about its plans to end production at assembly plants in Ohio and Michigan. President Trump and other elected officials also have blasted GM for the cuts, which will result in up to 6,700 factory layoffs and 8,100 salaried workers layoffs.

The factories GM plans to idle are making slow-selling sedan lines. Fiat Chrysler, which eliminated nearly all of its car lines a year ago, has much less empty factory space in the U.S. Many of its truck and SUV plants operate around the clock making popular models like the Jeep Wrangler and Cherokee, and its Ram truck. Fiat Chrysler has continued to max out its existing factory space. The auto maker’s plant utilization—a measure of its output versus its production limit—is 92%. That is far higher than the 81% rate at Ford and 72% at GM.

Assembly plants are typically major employers, hiring several thousand workers on multiple shifts, and can take up to two years to construct and cost about $1 billion.

Classroom discussion questions:

  1. What major trends are taking place in the auto industry?
  2. Why is plant utilization important?

OM in the News: A Primer on Predictive Maintenance

December 9, 2018

“Nearly everyone in manufacturing, from equipment manufacturers to processing plants, commonly face the challenge of keeping their fleet, machinery, and other assets working efficiently, while also reducing the cost of maintenance and time-sensitive repairs,” writes Industry Week (Dec. 6, 2018).  So it is crucial to identify the cause of potential faults or failures before they have an opportunity to occur. Emerging technologies such as the Industrial Internet of Things, data analytics, and cloud data storage are enabling more vehicles, industrial equipment, and assembly robots to send condition-based data to a centralized server, making fault detection easier, more practical, and more direct. By proactively identifying potential issues, companies can deploy their maintenance services more effectively and improve equipment up-time.

Using AI to identify anomalous behavior, the information derived from the equipment sensors can be turned into meaningful and actionable insights for proactive maintenance of assets, thereby preventing incidents that result in asset downtime or accidents. Known as predictive maintenance (a topic we have added to Chapter 17 in our new edition, due out Jan. 1st), this added intelligence enables organizations to forecast when or if functional equipment will fail so that its maintenance and repair can be scheduled before the failure occurs. As industrial customers become increasingly aware of the growing maintenance costs and downtime caused by the unexpected machinery failures, predictive maintenance solutions are gaining even more traction.

Predictive maintenance is also a step ahead of preventive maintenance. As maintenance work is scheduled at preset intervals, maintenance technicians are informed of the likelihood of parts and components failing during the next work cycle and can take action to minimize downtime. In addition to the advantages of controlling repair costs, avoiding warranty costs for failure recovery, reducing unplanned downtime and eliminating the causes of failure, predictive maintenance employs non-intrusive testing techniques to evaluate and compute asset performance trends.

Classroom discussion questions:

  1. How do preventive maintenance and predictive maintenance differ?
  2. What technologies are allowing predictive maintenance to spread?

Introducing Our Newest Text Editions

December 7, 2018

Has it been three years already? I guess so, since our newest editions of Operations Management (13th ed.) and Principles of Operations Management (11th ed.) are due out on January 15th! Jay and Chuck and I really excited about all the new features in these books and in MyLab Operations Management. Over the next few weeks we will highlight the changes for you. But today, we want to describe the themes of the books.

About 21 years ago, Jay and I decided to focus on a different well-known company in each edition. We created a series of video case studies featuring the strengths of each firm, and discussed those firms throughout the edition. The covers of each edition, starting with Hard Rock in 2001, also tied the book to that organization. Arnold Palmer Hospital followed, then Darden (Red Lobster/ Olive Garden), Frito-Lay, the Orlando Magic, and Alaska Airlines. As you see, we provide students with a broad coverage of industries, stressing the service sector, as that is where most jobs lie. The idea is to show how important OM is in the real world, with these 45 motivational short films.

With our new editions, we decided to talk about the floating cities called cruise lines. What a vast range of OM issues are faced by the Captain of a vessel with 3,000 passengers and 1,800 crew from three dozen countries! The featured firm, on the covers as usual, is the leader in the “premium” market, Celebrity Cruises, based in Miami. We think the students will really enjoy the five new video cases, which are featured in Chapter 1 (overall use of OM) , Chapter 5 (design of the new ships), Supplement 5 (sustainability), Chapter 6 (quality), and Chapter 12 (inventory). We will take you inside this cruise line for a fascinating look at how operations drives almost every decision on board. Welcome aboard!

Barry in the Celebrity Edge control room on its maiden voyage this week.

 

 

 

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