Keeping Some Slack in the Operating Room

MARCH 28, 2014

hospitalOperating rooms at St. John’s Regional Health Center, an acute-care hospital in Missouri, had been running at 100% capacity. When emergency cases—which make up about 20% of the full load—arose, the hospital was forced to bump long-scheduled surgeries. As a result, doctors often waited several hours to perform 2-hour procedures and sometimes operated at 2 a.m. Staff members regularly worked unplanned overtime. The hospital was constantly behind, according to this interesting article in Strategy + Business(Spring, 2104).

The rather surprising solution: Leave one room unused. Crazy idea? The facility was already being squeezed, and now comes a recommendation to take away even more capacity?

On the surface, St. John’s lacked operating rooms. But what it actually lacked was the ability to accommodate emergencies. Because planned procedures were taking up all the rooms, unplanned surgeries required a continual rearranging of the schedule—which had serious repercussions for costs and even quality of care. The key to finding a solution was the fact that the term unplanned surgery is a bit misleading. The hospital can’t predict each individual procedure, but it knows that there will always be emergencies. Once a room was set aside specifically for unscheduled cases, all the other operating rooms could be packed well and proceed unencumbered by surprises. The empty room thus added much-needed slack to the system. Soon after implementing this plan, the hospital was able to accommodate 5.1% more surgical cases overall, the number of surgeries performed after 3 p.m. fell by 45%, and revenue increased. And in the two years that followed, the hospital experienced a 7 and 11% annual increase in surgical volume.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

The Barcode’s Intelligent New Rival

MARCH 24, 2014

Thin film technology

In June 1974 history was made at a supermarket in Troy, Ohio, with a ten-pack of Wrigley’s Juicy Fruit chewing gum. It was the first time a commercial item bearing a Universal Product Code was scanned by a cashier at the checkout. Forty years on, the barcode has transformed the world of commerce by providing reliable product identification, tracking and pricing. Nearly everything now comes with a barcode.

As revolutionary as it was, the barcode has limited abilities, reports The Economist (March 8, 2014). It can impart only the information it was printed with and that can be read by an optical device. The next generation of labeling contains tiny printable electronics able to generate, store and share information. The technology behind “smart labels” is a flexible film of electronics that can be printed like a barcode. The memory circuits which can be used by smart labels to store information are printed as a film of ferroelectric polymer sandwiched between two electrodes. A tiny 20-bit memory label can store over 1 million combinations.

Yet another advancement is called Near Field Communication (NFC). This allows a user to tap an NFC tag with a portable device, like a smartphone, to send or receive data. NFC is a more sophisticated version of RFID and is already used by some contactless payment systems. By incorporating NFC, smart labels will be able to communicate wirelessly. Besides conveying product codes, applications include recording storage times and temperatures for perishable goods like food and pharmaceuticals. Smart labels might even be programmed to automatically discount their prices in response to marketing campaigns. To gain widespread use, smart labels will need to be cheap. Basic printed-memory labels can be produced for around 2 cents. Printed sensor-labels cost 50 cents, compared with $10 or more for a system using conventional microelectronics.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

 

Outsourcing Auto Workers at Nissan

MARCH 23, 2014

Nissan's truck line in Tennessee

Nissan, the first of many foreign automakers to set up shop in Tennessee, is leading a trend, writesThe Washington Post (March 9, 2014).Companies from Amazon to Asurion to Dell have outsourced their warehouses and call centers to the hundreds of staffing agencies that have cropped up in the region. Tennessee went from having 51,867 temporary workers in 2009 to 80,990 in 2012, while median wages have stayed flat. Temps make up 3.1% of all jobs in the state.

Tennessee holds its low unemployment rate up as a shining example of success in the global economy — the return of American manufacturing after decades of decline, and the future of work for those left jobless by globalization and technological change. Nissan was Tennessee’s first major investment by a foreign automaker, and has since attracted a constellation of suppliers that support thousands more jobs. Since the plant opened in 1983, the town of Smyrna has grown from 8,000 to 41,000. In the plant’s first 2 decades, getting a Nissan job was like winning the lottery.

But Nissan’s brush with bankruptcy in 2001 and a turnaround plan that involved new models and much lower production costs led to using temps into front-office functions. In 2007-2008, Nissan reduced its permanent workforce by 1/3. As demand returned, it started to backfill production jobs with contractors, too — first on the “pick line,” where workers run parts up to assembly, and then throughout the plant. Now a majority of its 7,000-person workforce is supplied by staffing agencies.

Many work for Yates Services, an in-house contractor that’s hired thousands of people over the past few years to ramp up production. Yates is like a company within a company, with separate bulletin boards, rules and procedures. The bona fide Nissan employees are easily recognizable through their logoed shirts, which Yates workers don’t receive. Yates pays between $10 and $18 an hour, which is about half what Nissan employees make. The gap in benefits is equally wide.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

 

Japanese Auto Makers Drive Into Mexico

MARCH 21, 2014

Mazda's new Mexico plant will churn out 230,000 vehicles a year by 2016

When three-tiered car haulers packed with Mazda3s pulled out of the dusty Mexican rail yard here last month, they did more than mark Mazda’s return to North American manufacturing after pulling the plug on Michigan production in 2012. They represented the latest volley in a south-of-the-border blitz by Japanese automakers. Within four months, Nissan, Honda and Mazda have opened assembly plants in what is becoming one of the world’s hottest auto hubs. Mexico is on pace to become the world’s No. 1 auto exporting country to the U.S., thanks largely to the addition of 605,000 units of capacity by those three Japanese automakers, reports Automotive News (March 10, 2014).

Japanese manufacturers are poised for a new assault from Mexico because they can:

• Reap fatter margins from lower cost manufacturing, largely a function of cheaper labor.

• Avoid tariffs on car and truck imports into the United States.

• Mitigate exchange rate losses from yen-based Japanese exports.

• Improve product availability with a shorter pipeline to dealers.

With all this new Japanese capacity, Mexico will eclipse Canada and Japan as the No. 1 exporter to the U.S. next year. Labor and logistics savings are expected to be substantial compared with building cars in Japan and shipping them across the Pacific Ocean. Mexican labor costs are 1/9th those in the U.S. But any savings are initially offset by the upfront costs of the new factories. Honda, for example, sank $1.2 billion into its assembly plant and a new transmission line.  And successfully building an export hub in Mexico means developing a network of high-quality local suppliers.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

 

Ford Touts Car Parts Made From Plants

MARCH 17, 2014

green auto partsIf you’re driving a new Ford, chances are you’re sitting on a seat filled with foam made from soybeans, reports the Orlando Sentinel (March 14, 2014).  It’s part of the push by many automakers to produce cars that are cleaner and greener. Plant-based materials that are used now or are in some phase of development by Ford include:

1. Fibers from coconut husks that can be included in sound-absorbing underlayment for carpet.

2. Wheat straw that is showing promise as reinforcement for plastics.

3. Latex extracted from dandelion roots to produce natural rubber, potentially replacing rubber from Asia or synthetic rubber made from petroleum.

“We are a group of research scientists developing these formulations and composites and looking at non-traditional materials and implementing them in our vehicles,” says a Ford engineer. The long list of automobile parts and pieces made traditionally from petroleum ingredients include cup holders, floor mats, engine O-rings and seals, dashboard trim and many more. A typical car is made with 100 kinds of plastic materials that weigh a combined 300 pounds, which includes 30 pounds of seat foam. Ford requires plant-based materials to perform as well as and cost no more than conventional products.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

 

Big Mickey Is Watching

MARCH 14, 2014

Disney's bands track user patterns

The couple  tapped their lunch orders onto a touchscreen at the entrance to the restaurant at Disney World and were told to take any open seat. Moments later a food server appeared at their table with their sandwiches. “How did they know where we were sitting,” asked the guest.The answer, writes BusinessWeek(March 10-16, 2014), was on the electronic bands the couple wore on their wrists.

That’s the magic of the MyMagic+, Walt Disney’s $1 billion experiment in crowd control, data collection, and wearable technology that could change the way people play—and spend–at Disney. If the system works, it could be copied not only by other theme parks but also by museums, zoos, airports, and malls. Change is always tricky for Disney,  where introducing a new brand of coffee can spark a revolt by fans. And MyMagic+ promises far more radical change. It’s a sweeping reservation and ride planning system that allows for bookings months in advance on a website or smartphone app. Bracelets called MagicBands, which link electronically to a database of visitor information, serve as admission tickets, hotel keys, and credit or debit cards; a tap against a sensor pays for food or trinkets. The bands have RFID chips—which critics derisively call spychips.

The goal is to offer people what Disney calls “a more immersive, more seamless, and more personal experience”—allowing Disney employees to address a child by name, for example, or wish someone a happy birthday. Moreover, visitors with full Disney World schedules mapped out in advance on the MyMagic+ system will be less likely to jump spontaneously to one of the dozens of other attractions here in Central Florida, including Universal, SeaWorld, and Legoland. And, of course, the MagicBands make it so easy to spend. The new system also helped the Magic Kingdom park accommodate 3,000 additional daily guests during the Christmas holiday season by reducing congestion around the most popular attractions.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

 

Now Comes the Hard Part for General Motors

MARCH 11, 2014

gm recall“Less than a month after General Motors announced it would recall 1.6 million cars because of a defective ignition switch,” writes The New York Times (March 10, 2014), “the automaker now faces an arduous task: fixing the cars.” The process, particularly for older vehicles like the ones G.M. is recalling, is time-consuming and requires many steps, from designing the new parts, testing them to make sure they solve the problem, finding and informing owners, and actually completing the repairs.

The company has just started to send out the recall letters with a stern, if unusual, warning: “Remove all items from your key ring, leaving only the vehicle key.” That is because if the defective ignition switch is jostled, or even if the key chain is too heavy, it can turn off the engine and the car’s electrical system, disabling the air bags. G.M. said it had linked the defect to 31 crashes and 13 deaths since it was first alerted to the problem in 2004. The letter also tells owners that the replacement parts “are not currently available.”  G.M. said the supplier, Delphi, needed to prepare the machines that would make the part before mass production could begin. In some recalls, parts suppliers have already sold off those machines, making it even more time-consuming.

The G.M. recall is large, but it is one more than 900 recalls in the past 7 years, covering 50 million vehicles. While recalls are not unusual, the number of fatalities involved and the way G.M. handled this one stretching over the past decade has the potential to cost the company hundreds of millions of dollars in fines and possible legal damages, in addition to tarnishing its reputation. This is a great story to bring to your class both in the context of Chapter 17 (Maintenance and Reliability) and as an Ethical Dilemma in Chapter 5 (Design of Goods and Services.)

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.