Monthly Archives: March 2014

Now Comes the Hard Part for General Motors

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MARCH 11, 2014

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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.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

 

Lowe’s Turns to Satellites to Forecast Customers

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MARCH 5, 2014

lowesForget Amazon’s package-toting drones—the future of retail may lie in satellites. That’s how Lowe’s is catching up to Home Depot in the hunt for customers. Lowe’s, writes BusinessWeek(Feb. 26, 2014), says that “it has been gauging traffic at its almost 1,900 stores from space, scanning satellite images of its parking lots to find out how many shoppers it can expect at every hour of every day.” It has also started syncing its parking lot observations with actual transaction counts to see how many people drove away without making a purchase.

The space snooping is a great way for Lowe’s to manage its workforce, scheduling surges in floor staff when parking spaces are about to become hard to come by. Evidence shows the satellites are helping move the needle for Lowe’s. The fourth-quarter close rate—the share of shoppers who bought something—improved by almost 1%, and total sales per hour of labor increased by 2%. The company’s profit in the recent quarter increased 6.3%, while sales ticked up 3.9%.

Anyone who has every wandered through a hardware superstore looking for an odd screwdriver or a particular kind of sandpaper understands how critical staffing is for Lowe’s. Cornering an aproned employee can seem more challenging than fulfilling the project. And there are few greater frustrations in retail than standing by with a simple question while another customer solicits a protracted product review.

Lowe’s and Home Depot more or less sell the same products at the same prices in the same places. Assuming their supply chains and marketing strategies are in sync, their market shares ride almost entirely on service. From that perspective, being able to have more employees around when more customers need help is success–and not paying them to sit around in the store when shoppers are sparse helps, too.

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

The Humble, High-Tech Shipping Container

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MARCH 4, 2014

shipping containersAsk somebody to name the most important inventions of the second half of the 20th century, and you may hear of the silicon chip, the contraceptive pill, or the hydrogen bomb. Few would answer the shipping container. “Yet those humble, standard-sized steel boxes, invented in 1956, have changed the world,” writes The Economist (Mar. 1, 2014).  Some economists think the shipping container has done more for global trade than every trade agreement signed in the past 50 years.

Even revolutionary products can be improved, though, particularly after half a century of service. One idea just proposed at the American Association for the Advancement of Science, is to make containers out of carbon-fiber composites. Such containers would be easier to use, because they would be lighter and might be folded flat when empty, saving space. A carbon-fiber container would need to travel only 120,000km (three times around the Earth) to prove cheaper than its steel equivalent. It would also be more secure, because it would be easier to scan without being opened.

That is an important consideration. In 2006, Congress passed a law requiring all containers arriving from abroad into American ports to be scanned to make sure they do not contain drugs, illegal immigrants, or fissile material. Doing this has proved hard, though, and the deadline for compliance is constantly being pushed back. Scanning steel needs high-power X-rays, or even gamma rays. These are expensive and dangerous. Carbon-fiber could be scanned with “soft” X-rays, which are easier to generate and use.

Another way to improve containers’ security is to track them properly. At the moment, authorities in a given port are usually told only about a container’s most recent movements. Better to give each container a comprehensive history, recording every port it has visited and every ship that has carried it. Such data could be crunched to detect suspicious patterns.  Carbon-fiber containers, fitted with sensors, a travel history and the ability to talk to the authorities, may one day replace many customs officials.

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