Category Archives: Manufacturing

America’s Second Railroad Revolution

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FEBRUARY 4, 2014

Union Pacific's Bailey Yard

Rail is on a roll in the U.S. As Forbes(Feb.10, 2014) writes, “The relic of the 19th century will become the most important logistics system of the 21st century.” Thanks to leaps in technology, more and more freight traffic has moved from roads to rails, where trains can move one ton of goods about 500 miles on a single gallon of fuel. The industry, so recently an aging also-ran in the age of superhighways, has seen revenues surge 19% to $80.6 billion since 2009, creating 10,000 new jobs at railroad companies. Less than a decade ago diesel prices were so low that manufacturers rarely considered rail for shipments of less than 1,000 miles. Now they’re ditching trucks in favor of trains for jobs as short as 500 miles.

All of which is driving a multibillion-dollar revival in rail R&D and infrastructure, investment unseen in America since the transcontinental railroad. Thousands of new state-of-the-art locomotives–far more fuel-efficient and less polluting than the ones they replace–are now operating on U.S. railroads. And the boom (with $20 billion in infrastructure spending annually) has been underwritten by industry, with no cost to taxpayers. Further, the Rail Safety Improvement Act of 2008 required railroads to fund, build and implement a new, safer “Positive Train Control” system by the end of 2015, refitting locomotives and tracks, and placing GPS devices on every locomotive.

This technology has been revolutionizing freight hauling, allowing the railroads to pinpoint a locomotive’s location within one yard. And instead of sending trains speeding across the country only to stop at each red signal, the new system means conductors will be able to know about planned stops well in advance, allowing them to simply reduce speed (and fuel consumption) to a level that won’t force them to stop altogether and burn major amounts of fuel when restarting from a standstill.

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.

U.S. Factory Jobs are Gone?

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JANUARY 30, 2014

bmwThe headline in the latest BusinessWeek article (Jan.27-Feb. 4, 2014) reads: Factory Jobs are Gone. Get Over It. The magazine writes: “Politicians think creating millions of high-tech manufacturing jobs is the answer. It isn’t.”  Over the past 60 years, U.S. GDP increased from $2.6 trillion to $15.5 trillion, which means that absolute manufacturing output more than tripled. Those goods were produced by fewer people. The number of employees in manufacturing was 16 million in 1953 (about a 1/3 of total nonfarm employment), 19 million in 1980 (about a 1/5), and 12 million in 2012 (about a 1/10). Service industries have taken up the slack. Even much of the value generated by U.S. manufacturing involves service work—about a 1/3 of the total. More than 1/2 of all people still employed in the U.S. manufacturing sector work in such services as management, technical support, and sales.

Over the past 30 years, manufacturers have spent more on labor-saving machinery and hired fewer (but more skilled) workers to run it. From 1980 to 2012 across the whole economy, output per hour worked increased 85%. In manufacturing output per hour climbed 189%. The proportion of manufacturing workers with some college education has increased from 1/5 to 1/2 since 1969.

Developing countries have taken over much of the low-skilled, low-capital production once done in the U.S. Consider the garment industry or tire manufacturing. Such low-tech work is even more mind-numbing and poorly paid than it was when the work was done in the U.S. through the 1970s. Many of the workers killed in the recent Rana Plaza garment factory collapse in Bangladesh earned just $3 a day. Some politicians have regretted the loss of similar jobs in the U.S. The question is: Do we want such jobs here now?

For every $1 spent by the federal government on retraining workers and helping them find jobs after they lost theirs to trade competition, the U.S. spends about $400 on Social Security and disability payments for those who exit the workforce rather than seek new work. So perhaps retraining programs are the solution.

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 Skates To Where The Puck Is Going To Be

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JANUARY 22, 2014

Evidently,  Amazon.com has read hockey great Wayne Gretzsky’s famous quote: “I skate to where the puck is going to be, not where it has been.” Amazon thinks it knows you so well it wants to ship your next package before you order it. The Wall Street Journal (Jan. 17, 2014) writes: “The Seattle retailer gained a patent for what it calls anticipatory shipping, a method to start delivering packages even before customers clickbuy.”

The technique could cut delivery time and discourage consumers from visiting physical stores. Amazon says it may box and ship products it expects customers in a specific area will want – based on previous orders and other factors — but haven’t yet ordered. The packages could wait at the shippers’ hubs or on trucks until an order arrives. In deciding what to ship, Amazon said it may consider previous orders, product searches, wish lists, shopping-cart contents, returns and even how long an Internet user’s cursor hovers over an item.

Today, Amazon receives an order, then labels packages with addresses at its warehouses and loads them onto waiting UPS, USPS or other trucks, which may take them directly to customers’ homes or load them onto other trucks for final delivery. It has been working to cut delivery times, expanding its warehouse network to begin overnight and same-day deliveries. The patent demonstrates one way Amazon hopes to leverage its vast trove of customer data to edge out rivals.

A possible Amazon logistics trail

A possible Amazon logistics trail

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.