Category Archives: Domestic Business

The Credit Card of Tomorrow

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APRIL 4, 2014

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credit cardSINCE the 1970s, paying with plastic has been pretty standard everywhere: Customers swiped their cards, signed receipts and took home their purchases. But after security breaches at Target last year led to the loss of personal data from as many as 110 million customers, the financial industry is racing to adopt technologies that will alter that decades-old ritual. To many, it is about time. The roots of the magnetic strip on credit cards extend back to World War II, ample time for thieves to learn to hack and steal those black lines of account information.

Credit card fraud totaled $5.3 billion in the U.S. alone in 2012, reports The New York Times (April 2, 2014), giving the industry plenty of incentive to devise a better system. The amount lost to fraud continues to grow 30-50% a year. Europe and parts of Asia have already used the system for the better part of a decade, while American merchants and issuers have balked, largely because of cost. Chip-equipped cards (called “E.M.V.” technology for “Europay, MasterCard, VISA”) cost $1.30 each to make, while a standard plastic card with a magnetic stripe on the back costs 10 cents. Retailers, too, have been loath to update their systems to accept chip technology because of the added cost.

“E.M.V. is going to cost billions of dollars to implement in this country,” says one analyst. But the system works. In 2005, when Britain fully phased in the E.M.V. technology, credit counterfeit card fraud was 25%; such fraud plummeted to 11% seven years later.

Visa, MasterCard and American Express all recently announced road maps for adopting smart chips, with the aim of forcing retailers and issuers to put E.M.V. in place by October 2015 in the U.S. By then, the liability for any counterfeit fraud will fall on whoever has not adopted the chip technology. From 17 million to 20 million chip cards have been issued in the U.S. But that represents just 2% of the 1 billion cards in use.

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.

Southwest Air’s Operations Problems

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APRIL 3, 2014

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Upstart Southwest Air in 1971

At Chicago’s Midway Airport on Jan. 2, Southwest Airlines canceled a third of its flights, lost 7,500 bags and, at one point, had 66 aircraft on the ground—about twice as many as the carrier has gates. Passengers were stuck on the tarmac late into the night.  A severe snowstorm was the main culprit, but Southwest managers also blamed ramp workers, suggesting that 1/3 of them called in sick to protest slow contract talks. The workers say they are chronically understaffed and are being blamed for executives’ mismanagement.

Maybe  Southwest is showing its age–43, writes The Wall Street Journal (April 2, 2014). Once the industry’s brassy upstart, the airline has begun to resemble the rivals it once rebelled against: carriers that were slow-growing, complex and costly to run. As we point out in Figure 2.8 on page 42, to help keep things simple and cost-effective, the airline flies one model of plane— 737—with lean, highly productive employees. Southwest employees do have a more demanding workload compared with others. The airline carries about 3,000 passengers per full-time employee, compared with 1,350 passengers per employee at its bigger rivals. But the average Southwest worker earned nearly $100,000 in 2012– compared with $89,000 at a traditional airlines.

The OM challenges are many.  Southwest is flying fuller planes, connecting more passengers and serving bigger airports that are prone to delays. As a result, some of its operational ratings have plummeted. Last year, it lost more bags per passenger than any other carrier. And after years as one of the most punctual airlines, just 72% of Southwest’s flights were on time in the 4th quarter—dead last in the industry. Further, from 2007 through 2012, Southwest’s cost to fly a seat one mile rose 42%—more than any other major U.S. airline. Southwest also faces costly upgrades to its outdated computer systems—a holdover from its simpler days—to bring them in line with industry standards.  After snowstorms forced airlines to cancel thousands of flights this winter, other carriers’ computers automatically rebooked many customers. But at Southwest, employees had to manually reschedule each disrupted passenger.

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.

 

Rise of the Robots

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APRIL 1, 2014

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robots industrial

“The exponential growth in the power of silicon chips, digital sensors and high-bandwidth communications improves robots just as it improves all sorts of other products,” writes The Economist’s special report (March 29-April 4, 2014).  Three other factors are also at play.

One is that robotics R&D is getting easier. New shared standards make good ideas easily portable from one robot platform to another. A robot like Rethink Robotics’s Baxter, with two arms and easy, intuitive programming interface, would have been barely conceivable 10 years ago. Now you can buy one for $25,000. A second factor is investment. (The biggest robot news of 2013 was that Google bought eight promising robot startups.) The third factor is imagination. In the past few years, clever companies have seen ways to make robots work as grips on film sets and panel installers at solar-power plants. Aerial robots—drones– let farmers tend their crops in new ways, give viewers and broadcasters new perspectives on events, monitor traffic and fires, look for infrastructure in need of repair, and more.

While society may benefit greatly, robots’ growing competence may make some human labor redundant. Aetheon’s Tugs, for instance, which take hospital carts where they are needed, are ready to take over much of the work that porters do today. Kiva’s warehouse robots make it possible for Amazon to send out more parcels with fewer workers. Click here to watch a great 3 minute video on Amazon’s robots. Driverless cars could displace millions of people employed behind the wheel today.

The advent of robots that are cheap and safe enough to be used outside big factories is one reason for a resurgence of interest in robotics over the past few years.  Foxconn, a Taiwanese company that manufactures and assembles electronics, is aiming to robotize much of its operation with hundreds of thousands of its own relatively cheap Foxbots.  Car companies use the lion’s share of industrial robots; they account for over 50% of robot installations in the U.S.

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.