Category Archives: Domestic Business

The Revolution in Vehicle Design

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OCTOBER 24, 2013

Design software produces ideal shapes for vehicle parts like this motorcycle frame

A revolution in vehicle design that has been sweeping the auto industry, writes The Wall Street Journal (Oct. 21, 2013) . Advances in computer-aided engineering (CAE) and big investments in computing power have given manufacturers new tools to create designs and the ability to test their ideas in a fraction of the time and at far less cost than they could before. The result: many more design ideas are being conceived and tested, and the best are being adopted quickly, helping manufacturers improve the fuel efficiency and their vehicles. “This new process is allowing us to do a lot of innovation,” says Ford’s head of CAE.

Car makers are using computers to run through dozens of design possibilities in the time it once took to produce a single prototype. Only a few years ago, it might have taken as long as 8 months to get from the idea for a new cylinder head to the building of a prototype, and it would have cost millions of dollars. Today, the part is created in a computer simulation that comes up with the most efficient design possible. Engineers then alter that design to account for manufacturing constraints and test the revised design virtually in models that use decades of data on material properties and engine performance as a guide. The firm then creates the mold to make a real part that can be bolted onto an engine for further testing. The entire process takes days instead of months and cost only thousands.

In the past 4-5 years, car makers have been ditching physical prototypes as computer simulations of real-world conditions improved. Costs, performance and safety designs have been digitized so they can be weighed by design programs. The vehicle can be built, run through snow banks, started in frozen or hellishly hot conditions and crashed repeatedly—all inside a network of computers.

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.

Goldman Sachs cafeteria’s genius pricing plan?

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OCTOBER 22, 2013

goldmanGoldman Sachs’ cafeteria has been described as something out of Gattaca, the 1997 science fiction film, reports The Washington Post (Oct.18, 2013).  It’s a wide-open space full of furniture that looks like it was smuggled from a utopian future in which nothing is ever dirty, broken or unintentionally asymmetrical. It isn’t just the physical design of the 11th-floor space that creates this impression. It’s the way Goldman administers it with a clever policy designed to economically engineer efficient eating.

The most crowded time of the day to eat lunch is, naturally, during lunch time. For most people, this falls around noon. This creates the phenomenon of the lunchtime rush hour. Goldman didn’t like the idea of its people waiting on long lines to get their lunch. People are capital to Goldman. It wants to use its capital efficiently. Standing on line waiting for a burger is not an efficient use of Goldman’s capital. So the cafeteria has a set of timed discounts. If you show up before 11:30 or after 1:30, you get a 25% discount on your food.

As it turns out, Goldman folks are both especially attuned to economic incentives and ruthless about capital efficiency. Some take pride that they’ve never eaten lunch inside the “cost penalty window,” as one trader referred to the 2 hours when the discount isn’t in effect. In the cafeteria around 1:20 pm, the lines at the pay registers are empty. So are many of the tables. But the area between where the food is collected and where you pay is quite crowded. The Goldman lunchers are chatting with each other, waiting for the final minutes to tick down until they can save a dollar or two.   When its spokesman was called about Goldman’s lunch market manipulation, neither he nor anyone else in his office was available around 1:30. “Goldman approves of employees using their capital efficiently,” he said later.

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.

Amazon Moves In With P&G

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OCTOBER 18, 2013

amazonAt the end of a road in Tunkhannock, PA., called P&G Warehouse Way, sits a warehouse stocked with Pampers diapers, Bounty paper towels and other items made by  P&G. Inside the distribution center, reports The Wall Street Journal(Oct.15, 2013), is another company: Amazon.com. Each day, P&G loads products onto pallets and passes them over to Amazon inside a small, fenced-off area. Amazon employees then package, label and ship the items directly to the people who ordered them.

The e-commerce giant is quietly setting up shop inside the warehouses of a number of important suppliers as it works to open up the next big frontier for Internet sales: everyday products like toilet paper, diapers and shampoo. The under-the-tent arrangement is one Amazon’s competitors don’t currently enjoy, and it offers a rare glimpse at how the company is trying to stay ahead of rivals.

Logistics have long been crucial to success in retail. Years ago, Wal-Mart set up a system that lets suppliers monitor what needs to be replenished. Amazon instead is going out to its suppliers by piggybacking on their warehouses and distribution networks. Amazon is able to reduce its own costs of moving and storing goods, better compete on price with Wal-Mart and club stores like Costco, and cut the time it takes to get items to doorsteps. P&G began sharing warehouse space with Amazon 3 years ago and has expanded the practice. Amazon is now inside at least 7 P&G distribution centers world-wide,

The economics of the arrangement benefit both sides. For Amazon, “co-location” reduces the cost of storing bulky items like diapers and toilet paper and frees up space for the Web retailer to stock higher-margin goods in its own distribution centers. P&G, meanwhile, saves on the transportation costs that it would have incurred trucking products to Amazon’s regional distribution centers. Plus, it gets Amazon’s help in boosting online sales, a priority for many in the industry.

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.