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OM in the New: Wal-Mart Introduces OTIF Inventory

July 31, 2017


Packages move along a conveyor belt inside a Wal-Mart fulfillment center.

“Long known for squeezing its vast network of suppliers, Wal-Mart is about to step up the pressure,” reports Businessweek (July 24, 2017). The focus this time is delivery scheduling, and the company’s not messing around. Two days late? That’ll earn you a fine. One day early? That’s a fine, too. Right on-time but goods aren’t packed properly? You guessed it–fined.

The program, labeled On-Time, In-Full, or OTIF, aims to add $1 billion to revenue by improving product availability at stores. It underscores the urgency Wal-Mart feels as it raises wages, cuts prices and confronts a powerhouse rival in Amazon that’s poised to grow with its planned purchase of Whole Foods. Says a retail expert, “They’re trying to squeeze and squeeze and squeeze.’’

The initiative builds on progress Wal-Mart has made in reducing inventory and tidying its 4,700 U.S. stores after the back rooms became so cluttered it often stored surplus products in cargo trailers parked out back. The new rules begin this August, and the company said they will require full-truckload suppliers of fast-turning items — groceries, paper towels — to “deliver what we ordered 100% in full, on the must-arrive-by date 75% of the time.” Items that are late or missing during a one-month period will incur a fine of 3% of their value. Early shipments get dinged, too, because they create overstocks.

By February, 2018, Wal-Mart wants these deliveries to be “OTIF” 95% of the time. Its previous target was 90% hitting a more lenient 4-day window. “Variability is the No. 1 killer of the supply chain,’’ says a senior Wal-Mart exec. While big suppliers should be able to invest in fancy inventory-management systems to get up to speed with the new rules, smaller businesses will feel more pain. Some don’t even know what “OTIF’’ stands for.

Classroom discussion questions:

  1. What are the implications of OTIF to suppliers?
  2. Why is Wal-Mart introducing this inventory strategy?

OM in the News: Foxconn’s U.S. Factory Plans

July 28, 2017

Foxconn makes iPhones and other gadgets for Apple

Foxconn, which helped turn China into the center of electronics manufacturing, just announced it will build a $10 billion plant in Wisconsin to make display panels used in TVs and other products. This marks the first major U.S. investment for Foxconn, the world’s largest contract manufacturer of electronics and the maker of iPhones.

“Foxconn,” writes The Wall Street Journal (July 27, 2017), “is betting the U.S. can rebuild an electronics supply chain that largely shifted to China and other lower-cost Asian countries in recent decades.” The factory is expected to employ 3,000 people initially and as many as 13,000 people eventually. The state is providing Foxconn with a $3 billion, 15-year incentive package of tax credits.

In addition to the factory workers, it is estimated that the plant will create 22,000 indirect jobs and another 10,000 construction jobs– and draw as many as 150 supporting suppliers to Wisconsin and nearby states. The average salaries for the 13,000 jobs at the factory would be $53,000 annually, plus benefits.

The 20-million-sq.-ft. campus will primarily produce high-resolution liquid-crystal displays, known as 8K resolution LCD, used in smartphones and car dashboards, in addition to TVs. Many TVs currently sold in the U.S. are assembled in Mexico, so it is possible that the displays made in Wisconsin could be shipped across the border to be installed in TVs that are later shipped back to the U.S. for sale.

Classroom discussion questions:

  1. Why is Foxconn entering the U.S?
  2. What are the benefits and risks to Wisconsin?

OM in the News: Robots Picking, Retailers Grinning

July 26, 2017

An engineer adjusts a robotic arm at RightHand Robotics

“Robot developers are close to a breakthrough—getting a machine to pick up a toy and put it in a box,” writes The Wall Street Journal (July 24, 2017). It is a simple task for a child, but for retailers it has been a big hurdle to automating one of the most labor-intensive aspects of e-commerce: grabbing items off shelves and packing them for shipping. Several companies, including Saks Fifth Avenue and Chinese online-retail giant have recently begun testing robotic “pickers” in their distribution centers. Robotics companies say their machines can move gadgets, toys and consumer products 50% faster than human workers.

Retailers and logistics companies are counting on the new advances to help them keep pace with explosive growth in online sales and pressure to ship faster. Picking is the biggest labor cost in most e-commerce distribution centers, and among the least automated. Swapping in robots could cut the labor cost of fulfilling online orders by a fifth.

Until recently, robots had to be trained to identify and grab each item, which is impractical in a distribution center that might stock an ever-changing array of millions of products. Now, several automation companies are working on automating picking. Hudson’s Bay is testing startup RightHand Robotics’ robots in an Ontario distribution center.  “This thing could run 24 hours a day,” said Hudson’s SCM VP. “They don’t get sick; they don’t smoke.”

Previous waves of warehouse automation didn’t lead to sudden mass layoffs, partly because order volumes have been growing so fast. And automated picking is still at least a year away from commercial use. The main challenge lies in creating the enormous databases of 3D-rendered objects that robots need to determine the best way to grip new objects. (There is also 4 minute video that accompanies the WSJ article).

Classroom discussion questions:

  1. Compare this change to other advances in warehouse automation.
  2. Why is robotics so important in order fulfillment?

Teaching Tip: The First Day of Your OM Class

July 24, 2017

There’s no discounting the importance of the first day of your OM class. What happens that day sets the tone for the rest of the course. Here are a few novel activities (see Faculty FocusJuly 19, 2017) that emphasize the importance of learning and the responsibility students share for shaping the classroom environment.

Best and Worst Classes –  On one section of the blackboard you write: “The best class I’ve ever had” and underneath it “What the teacher did” and below that “What the students did.” On another section you write “The class from hell” and then the same two items beneath. Ask students to share their experiences, without naming the course or teacher, and begin filling in the grid based on what they call out. In 10 minutes, 2 very different class portraits emerge. Move to the best class section of the board and tell students that this is the class you want to teach, but that you can’t do it alone. Together you and your students have the power to make this one of those “best class” experiences.

First Day Graffiti – Flip charts with markers beneath are placed around the classroom. Each chart has a different sentence stem. Here are a few examples:

“I learn best in classes where the teacher ___”
“Students in courses help me learn when they ___”
“I am most likely to participate in classes when ___”
“Here’s something that makes it hard to learn in a course: ___”
“Here’s something that makes it easy to learn in a course: ___”

Students are invited to walk around the room and write responses. After there are comments on every flip chart, you walk to each one and talk a bit about 1-2 of the responses.

 Behaviors: Theirs and Ours – Put students in groups and have them respond to: “What are 5 five things faculty do that make it easy to learn?” Make a master list to share in class or online. Below the 5 things faculty do, you can also list the 5 things students do that make it hard or easy to teach.

OM in the News: Retailers Check Out Automation

July 21, 2017

The Cash360 machine now in the back rooms of most of Wal-Mart’s 4,700 U.S. stores.

Shopping is moving online, hourly wages are rising and retail profits are shrinking—a formula that pressures retailers, ranging from Wal-Mart to Tiffany, to find technology that can do the rote labor of retail workers or replace them altogether. “Many U.S. retail jobs are ripe for automation, with 2/3 at high risk of disappearing by 2030,” reports The Wall Street Journal (July 20, 2017).

Self-checkout lanes can replace cashiers. Autonomous vehicles could handle package delivery or warehouse inventory. Even more complex tasks like suggesting what toy or shirt a shopper might want could be handled by a computer with access to a shopper’s buying history, similar to what already happens online today. “The primary predictor for automation is how routine a task is,” says a Citi researcher. “A big issue is that retail is a sizable percentage of the workforce.”

Nearly 16 million people, or 11% of nonfarm U.S. jobs, are in retail. Now, as stores close, these jobs are disappearing. Since January, the U.S. economy has lost about 71,000 retail jobs. Automation is filtering through many parts of retail. Tiffany is using machines to polish jewelry. Home Depot has self-checkouts in most stores and is testing scanner guns for shoppers buying bulky products like lumber.

Wal-Mart has long squeezed efficiency out of its business. Although it employs 1.5 million people in the U.S., it has around 15% fewer workers per sq. ft. of store than a decade ago. Its U.S. stores now have a Cash360 machine, making thousands of positions obsolete. Employees whose task was to count cash and track the accuracy of the store’s books have been replaced by the hulking gray machine that counts 8 bills per second and 3,000 coins a minute–then digitally deposits the money at the bank.

Classroom discussion questions:
1. What other jobs are likely to be replaced by automation in the coming decade?

2. Why is this an OM issue?

MyOMLab: Improvements for Fall–Part 3

July 19, 2017

Here are four more upgrades we have made to MyOMLab for Fall 2017Click for details

OM Simulations Each of these 4, self-contained simulations help students employ critical thinking and analysis to make OM decisions in realistic business contexts. From inventory management for a new tech product to forecasting fuel consumption, students gain valuable exposure to how OM works in the real world, learning key course concepts as they go. Topics Include: Inventory Management, Quality Management, Project Management and Forecasting. (If you are one of our over 500 adopters who is still not using MyOMLab, this one feature alone makes the learning system worthwhile!)

Automatic Grade Sync for Canvas  MyOMLab instructors who have integrated their courses with Canvas have the option to select automatic grade sync, allowing for a seamless way to sync grade data between MyOMLab and their LMS. Automatic grade sync saves time for instructors by transferring grades completely touch-free, eliminating the need to manually transfer grades. Instructors have the option to select all assignments or specific assignments to automatically sync.


Dynamic Study Modules (DSMs) DSMs provide students personalized assistance by continuously assessing their activity and performance in real time. Summer 2017 updates introduce a student dashboard and expand instructor reporting capabilities, giving faculty easier insight into student, and class, mastery of concepts. Five new DSM reports and dashboard views provide instructors with the following: ● A high-level summary of a class’ aggregate performance ● Information on topics where students tended to answer questions incorrectly, but with a high degree of confidence ● An in-depth view into the activity of students who continue to answer questions incorrectly ● Insight on student progress towards completing assigned DSM activities ● Details on student’s specific performance.

MyOMLab Plus Portal Update The overall look and feel of the MyOMLab Plus Course Portal is being refreshed to give instructors a more modern, clean, and user-friendly experience. Improvements have been made to the MyOMLab Plus Portal to allow for easier course organization and management.

MyOMLab: Improvements For Fall–Part 2

July 17, 2017

Here are five more upgrades we have made to MyOMLab for Fall 2017. Click for details

My Course Portal Updates Instructor access to information about courses in the My Courses Portal has been improved! Updates include a refreshed forgotten username/password screen and visible listing of third-party LMS partners. Instructors will also now have the ability to create categories for improved organization and a shortcut for easier access to member sections of coordinator courses via the new pin/unpin functionality.

Shortcuts to Nested Courses Instructors will now have the ability to create a shortcut for easier access to member sections of coordinator courses on the My Courses Portal home page via the new pin/unpin functionality. This functionality is available in both the tile and list view.

Assignment Manager Updates The Assignment Manager is now easier to navigate. The ability to filter assignments by type and “Set Prerequisites” have been nested within drop down menus, and “Individual Student Settings” has been moved to the menu bar.

Gradebook Updates Updates to the options available when managing roster, managing incompletes, and the ability to show/hide class metrics allow instructors to easily access and navigate to the student performance data that’s important to them.

Improved Accuracy of Time-Spent Values Homework assignment inactivity alerts have been reduced from 60-minutes to 30-minutes. If the user does not respond to the alert within 5 minutes, the assignment will be saved and closed. In addition, a 30-minute alert has been added to media assignments. Inactivity alerts will reduce large time-spent values and increase the ability for instructors to track time-spent more accurately.

More to come!

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