In our last class one of the things we learned about is inventory management which is one of the most important aspects of any business. Without control of product inventory, determining if the business has enough inventory on hand or how much product is needed to restock inventory would be difficult to ascertain. Not having enough inventories to meet the demands of consumers would be detrimental to a business and could lead to loss in customers and sales.

I am fully aware of the importance of inventory control and learned firsthand the effects it has on a business. One of the places I have worked at was a winery shop and the store had a certain Rosé champagne that was one of the best sellers. During the week of Valentine’s Day the store had a special on the popular Rosé champagne and I was in charge of ordering the champagne to restock our inventory. After taking inventory I needed to order 100 cases of Rosé champagne which has 6 bottles in each case. When I was placing the order online, I unknowingly ordered 10 cases instead of 100 and since we only received 10 cases the store did not have enough to accommodate our customers’ needs. So on Valentine’s Day the champagne that we had a special on was completely out of stock and we would have to wait a week to order the next shipment. The store loss potential sales because there was a good amount of people that came in and asked for that popular champagne. Now if I had double checked the order quantity then the shortage would not have occurred.

From this experience I understand the importance of inventory management and how vital it is for a business because sufficient inventory is needed to generate sales. Has anyone been in a situation where you had a shortage on products and had to tell customers that you were out? If so, how did you handle the situation and was the situation resolved?

I have always been fascinated by how learning can change the way my mind processes information, perceives problems, interprets details, and in a large all encompassing sense, the way it thinks. Learning fundamentally shifts the way I think. Learning new words gives me the ability to describe what I am feeling, to relate those thoughts to other thoughts and feelings, and to formulate conclusions with those associations. Vocabulary in a sense illuminates the world to my mind and enables me to actually understand.

The same can be said for ideas. As a student of commerce concentrating in economics and finance, I am constantly astonished at just how great an impact learning a new idea can have in terms of affecting how I interpret the universe. After a number of quantitative microeconomics courses I found myself seeing nearly any large-scale issue, both in my personal life as well as society at large, in terms of supply and demand functions, marginal equilibriums, and various other utility models. After a couple of courses in Industrial Organization Economics and Game Theory Analysis I began to see nearly every scenario involving more than two people as game theoretic equations. Just after a couple of crash course in Corporate Finance, I was surprised to yet again see myself breaking down multiple facets of my own life and the world around me into questions of present value and time valuations.

My point, is that the world rarely changes, but the ideas in our heads, what we have learned, that foundation of knowledge is constantly being tweaked, and more and more ideas are continuously being added. College is by far the zenith of this process. As a college student I am not only learning about myself, who I am, where I belong in the world, but in a more academic sense I am encountering new thoughts and ideas that change the way in which I process my surroundings. The inputs may be fairly static, but the mechanism for assigning meaning to those inputs, our own mind, is completely dynamic.

This realization hit me this past weekend when I found myself subconsciously utilizing ideas we learned about in our previous class, to help me understand my every day life. I saw that my operations management class was changing the way I understood the world, and transitively was changing who I am.

In our previous class we learned about process control charts that help managers see if their process for making goods is out of control. This would indicate that the process is being affected by special cause variation. If the process is out of control, something needs to be fixed; there is a problem that is not caused by mere chance. We learned how X-Bar charts control the central tendency of the process, R-Charts control the variability in a process, and P-Charts control for defects.

This past weekend, I realized on three specific occasions that I used these methods to isolate problems I encountered in a day. The first involved my car. I know roughly how many miles I can drive my car once I have filled up my gas tank, and any mileage above or below, I can explain, to certain extent, by good or poor driving. This weekend however, for two consecutive fill-ups, I got far fewer miles than I anticipated. This level was well below my mental lower control limit, so I knew there was a problem. This prompted me to look into the issue further, and when I did I saw that there was a leak in my gas line that was costing me A LOT of money. I used the same technique when I was planning how many hours of sleep that I NEEDED to be fully functional and capable for work on Saturday morning, and I realized that my lower control limit was about five hours. Thus I knew I should really make sure to get six hours of sleep. When I was solving math problems in a new subject area, I utilized a subconscious P-Chart when referencing my answers to the back of the book and looking to see if a satisfactory ratio were void of “defects”.

Have you noticed anything like this happening to you so far as a result of this class, or any other of your classes? It would be interesting to see how different majors see the world differently. Please share any interesting stories or additions.

 

In class, we participated in an activity where we had to estimate the amount of inventory that we needed in order to keep up with forecast demand.  At first, our group was a little bit lost.  Okay, A LOT a bit lost.  After figuring it out, we fared well and ended up understanding the purpose of the activity.

This activity made me think of a night at an old job I used to have.  I was asked to help take inventory of the items that were sitting outside, stock the shelves, and count and put whatever was extra into boxes to be loaded in our overhead shelving.  Thinking this would be easy and a quick way to end my night, I happily agreed to do it.

I walked outside, ready to do as told and just stopped dead in my tracks.  I didn’t want this task anymore and regretted taking it.  There were two wide isles of carts packed with items.  Apparently we must have really been doing well in sales, since we needed to stock ALL of this.  So I grab the closest cart to me, pull it inside, and start stocking the product where it belonged.  The space didn’t get filled, and I had no more of this particular product in any of the other carts.  Clearly we didn’t order enough.

The second cart went the opposite way.  I grabbed the cart of weed killer and went to the area to put everything on the shelf.  This area was full, so I went to return the cart back outside.  To my horror there wasn’t just this cart, but there were about twelve carts full of this weed killer.  And it wasn’t even the season for weed killer…

This overstock happened with quite a few other items, as did the shortage of popular items.  This was definitely an example of poor inventory management, and I’m curious as to exactly how much they spent on both holding costs and shortage costs.  They may have saved on ordering costs on overstocked items, but will end up having to order more of that which they understocked.  Someone added a couple extra zeroes to their weed killer order, and their inventory costs.

On the bright side, I can guarantee that their lawn will be weed free for the next ten years.

 

In an article found posted on the Wall Street Journal website, it describes the recent news that facebook is preparing to release its initial public offering and is expected to raise as much as $10 billion and value the company between $75 to 100 billion. This would be one of the largest IPO’s ever for a U.S. company. They deliver a social media service that has attracted more than 800 million members since they were formed eight years ago. People not only use it to communicate, but also as a source of entertainment through their games which are very popular. Morgan Stanley is supposed to be a leader in this deal and they could also benefit very heavily from this deal due to banker fees that could net them millions of dollars and also boost their image which could result in more clients.

Mark Zuckelberg, facebook’s CEO, is becoming of the great internet pioneers of his time and has positioned himself as a leading executive. He is the face of Facebook and has propelled it into an upper echelon company that has millions of users. In an internet age where social media sites are big, he has managed to penetrate the sector and position the company at the top. People used to use MySpace, but now they have clearly switched over to Facebook. It seems like it will be around for a while, but probably will decline eventually.

They have clearly gone through the introduction stage of the product life cycle and seem now to be going through the growth stage. Good companies that are innovative, have a good operations strategy, and a good leader tend to last long. Facebook is no Apple or Microsoft, but they still keep their position as a top company for a good amount of time. They are very innovative in their field and that is key in any sector of the internet. When do you think that they will experience their decline, if at all, and do you think that they will be able to recover and come back strong? The link of the article is found below.

http://online.wsj.com/article/SB10001424052970204573704577187062821038498.html?mod=WSJ_hp_LEFTTopStories

Have you ever thought about McDonald’s life cycle? What stage would you think McDonalds is in right now? The first McDonalds opened in 1940 in California. In the early 1980’s, after three decades of rapid growth, the fast-food market slowly went down and pushed McDonalds to expand abroad. During the 1990’s, McDonald’s expanded their menu offering chicken, pork, salad, milk shakes, soup, and also allowing restaurants to customize their menus to suit the tastes of customers in certain regions. Concerned about the environment, McDonalds began using recyclable paper wrapping and paper napkins.

I recently read an article in the Wall Street Journal that talks about late night sales for fast-food outlets. According to McDonald’s, their profit increases 11% between the hours starting at midnight to 5 a.m.. Fast-food chains are extending their hours now to serve their late night or early risers to increase sales.

McDonald’s has successfully adapted to changes in the marketplace, innovating new products and services for their customers.  It would appear, McDonald’s falls under the maturity stage of the life cycle and I think McDonald’s will continue to stay at the maturity level for many more decades to come.

Do you think McDonalds life cycle will ever begin to decline? If so, why?

Here’s the link to the article in the Wall Street Journal, you will need to suscribe in order to read the entire article:

http://online.wsj.com/article/SB10001424052970204624204577181173570958232.html?mod=WSJ_hps_sections_smallbusiness

When we started learning about market trends and how to predict company sales based on past performance I really was thinking that it didn’t seem right to even make an educated guess at how a company would do based on past performance. Think about any retail company in the month of December, are you going to tell me that January should outsell December? If anything I would say that sales would decline because of the Holliday being over (keep in mind that most companies keep this in mind and do not have crazy sales goals for January).
When Yahoo announced that they took a 5% dip in profits this year I was not surprised. Yahoo who used to be a major name in the online world has somewhat fallen off the map in most people’s eyes, and these customers would rather use a power house like Google to provide them with email accounts.  When co-founder Jerry Yang resigned from Yahoos board the stock actually increased 3.4%. Rumor has it that Yang stepped down because of the fact that Yahoo hired Scott Thompson as a Executive Officer. The BBC article went on to say that “This is clearly a positive. It provides a more objective and unemotional approach to strategic alternatives,”, and “It’s also good for the new CEO. He has one less entrenched legacy board member to resist his vision.”
This did not make any sense to me in terms of what we have learned thus far. Operations management is defiantly a huge part of a business, and this could be why the company saw an increase in profit once the CEO reigned. Like the article stated maybe the market believes in PayPals president Scot Thompson as its new chief executive, and that is why the value went up. This was just a overnight phenomenon while in fact total revenue fell 13% during the quarter, while net revenue ended $1.17bn – $20m below analysts’ projections.
This brings me back to my major point, how can a company really know what is going to happen over all. When I have seen companies’ project amazing sales numbers but at some locations completely miss their goal by thousands, while others crush their goal without even breaking a sweat. I understand the point of making these sales projections, but when a company like Yahoo drops 13% you have to wonder who did their job right and who didn’t. was it Yang that did not take Microsoft’s offer of 47.5 bn for the company that made the market a little uneasy over that decision? I think not, sometimes companies just have a rough year and either they will recover in the next couple of years or they will close shop and sell off everything they have to still come out on top. What do you think happened with Yahoo? Who used to use Yahoo and is now using Google or a different mail provider? Anyone out their still using AOL? They have been planning a come back for a couple of years now and I am interested to see what they do.

http://www.bbc.co.uk/news/business-16602041

http://www.bbc.co.uk/news/business-16713092

 

 

 Last class we talked about the design of a good or service.  It was after the activity with the paint can that I realized how much little changes can make such a difference.

When everyone listed the problems they had using a paint can to paint, professor Cook always gave a solution for it.  Such solutions implied getting other products just to fix the struggles of using a paint can.  If someone would have decided to accept those solutions then the cost of the paint would have increased because to paint not only you would need the paint, but now all those other products to make your paint can friendlier to use.

Later, she showed us an alternate container with improvement that solved the previous struggles we mentioned, some people asked how much more would that improved paint container cost.  And most said that would probably not buy that container because of its higher price.

This activity made me think about those times when you use a product that you need, but you are not particularly happy with.  Then an improved version or a competition comes with a better alternative, but of course at a higher price; and you are reluctant to adopt the new or improved version of the product just for its higher costs without really thinking how much money may be wasting by using a product you are not happy with.  For example, in a classmate’s post about Apple, I read how most people would buy other laptops rather than Apple ones because they think Apple is very expensive.  However, they do not realize the money they have to spend in anti-virus software every year or couple of years.  Such cost may match or even exceed an Apple’s Mac cost.

Have you been in a situation where you chose the cheaper product and ended up costing you more than you would have expected?

We all have our favorite store that we shop at and there are various reasons as to why we always choose to shop at those stores. Whether it’s great prices, friendly staff, or just the fact that they always have what you’re looking for, these are all due to the fact that quality control has been put in place to draw you, the consumer, in to buy their products.

When we find these desired products, we expect them to be in the best condition possible. We don’t even think twice about choosing that product because, having bought it so many times, we trust the fact that it will always be the same great quality product that we get. This is due to quality control and it is always being demonstrated in stores, restaurants, and even within the inner workings of people hired in businesses.

Our expectations are what keeps companies working so hard to keep us satisfied. They have to think of the most productive and cost-effective ways to get their products to us.

Quality control can also be seen on a more intimate level. When we go into the workplace we don’t act the same way as we would if we were spending time with our peers in a social sense. We control our emotions in different ways that we react to situations so that we come off as more professional and we remain consistent in our performance in the work place.

Whatever the case, quality control is expected and is regarded as important in our lives. This idea keeps our lives consistent and perhaps we are now dependent on consistency to ensure that we, as consumers, are receiving the biggest bang for our buck. As we saw in class with the M&M example, the packaging of the candy ensured us it would weigh a certain amount but when we actually weighed the packages individually we found slight variations. Without the exact weights, we assume quality control is doing its job and we are getting what we pay for . It sets our minds at ease.

One of the benefits of technology is knowing that quality control will be easier to keep up with, reducing the headache for companies. The biggest perk of keeping customers happy is giving them one less call to complain about some mundane defect.

 

 

 

During last week’s session, we had briefly discussed product strategy options.  We had a small discussion about how companies make themselves stand out and some of the ways of doing that were 1) differentiation, 2) have a low cost reputation, and 3) being known for rapid responses.

In a previous management class, my professor explained to me that rapid responses (or on a broader spectrum, customer service) is something that all companies need to work towards because it’s universally important in keeping customers coming back.  I agree with what I was told and although there are companies that are better at customer service than others, being known for rapid responses, doesn’t necessarily make an industry or company any different from the next because it’s a concept that most companies try to practice. However, when it comes to differentiation and low cost, these are attributes that we can see in practice everywhere we go.  I think a great way to portray this to look at food establishments.  The U.S has countless places to eat but how do we decide where to go or what to eat??  In Chicago, one of “the fanciest” restaurants in town is known as Alinea.  This restaurant is known for it’s completely unique and futuristic techniques in preparing their food.  Visually appealing and very well-known for some of the greatest culinary feats in Chicago, the bill foots out be a minimum of $210 per person.  This is a perfect example of differentiation because clearly, this place isn’t going for low cost but instead it has this reputation of being high-end, having wonderful staff, being ahead of it’s time, and (let’s not forget) expensive.

Taking a look on the opposite side of things, let’s examine a place such as McDonald’s.  It’s an everyday, “go-to” place when people want a quick and cheap meal.  The minimum bill here can be as low as $0.50 if you wanted it to be!  There is not as much discrimination at McDonald’s as there is when you compare the type of audience that may prefer a place such as Alinea.  Not that it’s a bad thing but there is clearly a different goal trying to be reached by both businesses.  This made me think, “well…can there be such a thing as to have both attributes of being low cost but also being different?” I lean toward the no because to stand out, you really have to put in the money to create the image that you want.  Apple has their iPad priced the way it is for a reason – that the technology inside and the appeal of the device – probably needed a lot of research, investment…money.  If each iPad needed to follow a $200 budget, I don’t know if the product we know today would be as good.

What do you think? Can differentiation coexist with low costs?

Many Netflix subscribers, myself included, were confused by the company’s decision-making last fall. First, the prices increased about 60 percent. Then, you may recall receiving a bizarre e-mail from CEO, Reed Hastings; I had frankly never heard of him until I read his two-page apology e-mail, saying “I messed up” and “Quickster” which left me even MORE confused about my DVD and instant-queue services. Subscribers were dropping like flies and shareholders were bracing themselves for some rough times ahead. However, according to a recent New York Times article, Netflix is experiencing a turnaround!

After a loss of about 800,000 subscribers in the third quarter, it is clear that there were some managing techniques that were not carried out to their optimal performance. It may be that Netflix assumed its market advantage meant that customer’s loyalty would withstand a price influx.

Unfortunately, the customer’s subjective view of Netflix’s quality did not match higher prices. After many problems in areas such as performance (Instant stream videos would buffer FOREVER), reliability (the biggest blockbuster has been taking weeks to get to the front door!) along with reputation (Reed Hastings’ apology letter [http://blog.netflix.com/2011/09/explanation-and-some-reflections.html] left many subscribers feeling that the CEO had just written them a high school breakup letter, not something caliber of well-managing CEO) all led to a negative perception of Netflix’s overall quality.

However, after a rebounding fourth quarter, it may seem that the forecast is changing for Netflix! Stock has increased about 30 percent in the last few weeks. This may be because Netflix had spent the past quarter reexamining Netflix’s product lifecycle. According to the New York Times, Netflix is no longer putting as much weight in its DVD options; with changes to technology (smart phones and tablets now seem to be at everyone’s fingertips, allowing easy media-viewing without a DVD player) the product lifecycle for DVDs is at the cusp of its decline stage. Instead, instant stream has taken the main stage. And Netflix’s instant-stream product opportunities may be looking even brighter due to recent legal changes to internet viewing rights (PIPA and SOPA) which may tighten the restrictions on media-access.

Through Netflix’s focus on instant streaming, be it a better selection of films or higher quality of picture, the company will have an easy time relating what the customer wants (movies instantly to their home) and how Netflix can provide a service to fulfill this want, and therefore, creating an optimistic outlook for the company after a somewhat turbulent autumn.

Do you think Netflix is on target with matching its services with its customers’ needs? What do you think about the product lifecycle of DVDs in relation to Netflix’s business model? What type of forecasting outlook do you think Netflix has?

http://www.nytimes.com/2012/01/26/business/media/a-turnaround-at-netflix-as-its-mail-sector-shrinks.html?_r=1&ref=business