Is Caterpillar’s Labor Management Leading To Its Demise?

Recently manufacturing employees at Caterpillar plants in Illinois and across the world suffered significant pay cuts as well as cuts to some of their benefits. Now Caterpillar is experiencing a backlash from its employees. At an Ontario plant, workers were locked out when they refused to accept a 50% pay cut. In response, Caterpillar moved production to Muncie, Indiana where workers were willing to accept the lower wages. In May of last year, Caterpillar threatened to cut health care and other benefits for employees at a plant in Joliet, which resulted in a three month strike. Workers were finally forced to accept the cuts and returned to work. Caterpillar is also currently in a dispute with workers at a Milwaukee plant.

On the contrary, Caterpillar’s earnings would not indicate a need to cut employee wages. The company earned almost $6 billion in profits this year from a record-setting $66 billion in sales. In addition, the average salary of executive at has increased by 56% in the last six years and CEO Doug Oberhelman’s salary has risen by sixty percent since 2011. He made $22 million last year. His rationale behind Caterpillar’s hard line on labor is that they have a need to stay competitive. He says the only reason executive salaries rose so greatly is because people in these positions are going to find other work if they don’t receive a competitive wage. Whether such a steep increase is justified depends on who you ask. At the same time, he believes he has no reason to raise employee wages when he can just easily open a plant in a Southern state, where workers would gladly accept lower wages. He also contends that workers these days are less skilled and thus don’t deserve more money.

Oberhelman has received opposition on both of these points. Opponents argue that the only reason workers seem less skilled is because too much is demanded from them for too little pay. They also say that manufacturing employees at nearby rivals Cat and Komatsu plants are paid $3-$4 more per hour for the same work. However, people in these positions have much less mobility because there are a lot less manufacturing jobs today.

Caterpillar needs to resolve this issue with its employees before serious damage is done. Their reputation is on the line, which could ultimately affect their bottom line. Constant conflict with its employees could result in reduced productivity and quality from them. I believe they should just pay their employees wages that are comparable to nearby competitors. If the company is profitable and executives are experiencing pay bumps, shouldn’t lower-level employees experience them too? Who do you think is right or wrong in this situation? Do you think Caterpillar’s ongoing conflict with its employees is going to hurt the company in the long run?


Higher Price Better Healthcare?

Healthcare is one of the most talked about topics especially recently with Obama care being introduced. Most of us have yet to pay a medical bill but as we are closer to the real world we will be forced to start paying for it .If you were told that if you payed more for healthcare you would receive better quality what would you think? If you couldn’t afford it how would it make you feel to know that the wealthy would be more healthy than you? Most of us probably have never really thought about the link between cost and quality of healthcare.  Research was done on whether or not the link  existed.

healthcarePeter S. Hussey, PhD, from RAND Health, Arlington, Virginia, and colleagues conducted a systematic review of 61 studies and “found inconsistent evidence on both the direction and the magnitude of the association between health care costs and quality,” they write. “To our knowledge, there has been no previous systematic literature review of evidence on the cost–quality association in health care.” (McReady, 2012) The research  that was conducted included studies from bibliographies of selected papers, informal searches and consultations with experts. In order to assess the quality measures they used 5 categories such as structure, process, outcome, patient experience, and access. The measures of cost were put into 4 categories such as: accounting cost, charges expenditures, and a “care intensity index.

The results were that there was a link of higher cost and better quality of care. They did 61 studies and of them 21 said that their was a positive link between the two. Also, 18 of those studies showed a negative relationship and 22 showed no relationship at all. So we can assume that it is still somewhat unclear as to whether or not paying more money results in better healthcare. Still, more data is needed to come to this conclusion.

Some advice was given to physicians such as learning more about the cost and price of services that they provide.  The article also gives advice to “payers that they should reconsider the extent to which they shift financial risk onto provider organizations, and incentives for quality targets should be offered to promote processes of care that are well supported by evidence.” Lastly, the article states that everyone should participate in monitoring of care processes both  spending and clinical, as well as the patient experience and the outcomes that result for them.

Overall, this article was interesting because it allowed us to think of the results we are receiving from healthcare for how much we pay for it. I would be furious if the quality of healthcare was better if I payed more for it. Imagine all the families that can’t afford it, should we just leave them to receive less healthcare treatment? This would be horrible if it was a huge connection between the two.

PlayStation and Xbox 1-up Nintendo

PS4 controller

Sony has already announced its new console called PlayStation 4, and Microsoft has also confirmed to announce its next generation Xbox, for which the name has not been revealed yet but publications are referring to it as either Xbox 720 or Xbox Durango. Sony’s strategy for PlayStation 4 is to introduce a more game-centric model rather than focusing on applications, while Microsoft wants to dominate the living room by establishing  “a must-have living room…object, that everyone, gamer or not, will want.” However, this does not mean that Sony will not work on its applications or Microsoft will lack focus in their games. Both consoles seem to be different than each other, and each want to portray concepts and strategies that will give them a unique and a distinct recognition.

Despite these two leading labels, we cannot forget about another contender in the race, which we have been aware of from a really long time, Nintendo. Nintendo launched Wii and flourished considerably, heavily disrupting the stability of its competition at the time. Nintendo’s strategy with introducing creative motion controls in Wii helped them attain great popularity and profit.

After Wii’s success, Nintendo took a step and later presented another console, which was the Wii U, but it turned out to be a step backwards for Nintendo as Wii U struggled terribly in the market. People thought Wii U was just an add-on to the Wii instead of being a totally different console.

Additionally, there were more mistakes that led to this lack of success such as when the system came out, all the attention was given to the gamepad, or the tablet controller, of Wii U without showing off the box of the system at all, and when the box was shown, it probably was just confused with the one previously used for the original Wii as people thought they looked similar. Several games were created by 3rd party developers, and those games had already been released for other gaming systems before. During the launch, players were also shown using old Wii controllers as Wii U only comes with one gamepad. The graphics of Wii U had improved noticeably compared to the Wii, but did not meet the standards of the next generation systems.

Pursuing this further, Nintendo prospered with portable, handheld game consoles like DS and 3DS even when people were utilizing their smart phones and tablets. Nintendo also came up with entertaining games and innovative motion controllers for the Wii that attracted masses but unfortunately, failed to do the same with the Wii U. Overall, Nintendo has lagged behind with the development of its unsatisfactory product and strategy.

It seems as if Wii U may soon be out of the picture after PlayStation 4 and Xbox Durango hit the market. How do you feel about Nintendo’s future? What changes can Nintendo make now in order for the Wii U to still be able to compete well in the market when the next generation PlayStation and Xbox are released?




Forecasting in the Restaurant Industry, How Are Restaurants Keeping Up?

Forecasting is being used across the nation in order to find out what new foods and technologies are going to be used within the restaurant industry.  Since we are so attached to our technology, trends have changed drastically.

The reports are showing that about half of the consumers interested in eating out are looking at menus online in order to see if the restaurant is up to their standards.  Thus, making it possibly harder for restaurants to bring in new customers if their menu is not up to par.  This is especially important because ‘”the typical American palate is now much more sophisticated than 10 to 20 years ago.”’

Because of this forecasting in restaurants is now not only for how many customers are coming in, but the newest trends in food.  And restaurants are having some difficulties getting customers to come and sit down at their establishment because about seventy percent is now coming from take out and food trucks out of convenience.  Since seventy percent of the industry’s traffic is coming from off site many restaurants and food vendors have conformed to using food trucks that drive around neighborhood to neighborhood. However, the city of Chicago passed an ordinance that does not allow food to be prepared on the actual trucks.  This means that the vendors would either need a physical restaurant or at least access to a certified kitchen.  Due to this ordinance these vendors will have to either invest more money to continue or get out of the food truck industry.

In order to keep up with these constant changes in the restaurant industry technology is being more relied upon in the actual establishments to encourage guests to come sit down and eat.  For example, at a Chili’s restaurant you will find a tablet on the table where you can play games, watch move previews, and pay your bill.  However, it is being said that more restaurants will participate by having iPads, in which, you can look at the menu and see more detailed pictures and descriptions of the menu items.

Along with all of these trends, many consumers are now more conscious than ever about where there food actually comes from.  People are looking for sustainability especially in large cities where there are many neighborhoods that are considered food deserts.  Restaurants are recognizing this and most of the newly opened establishments really take pride in offering sustainable food that has come directly from local farms.  And other restaurants are changing their menus in order to be friendlier to locally grown ingredients.

Do you typically go out to eat at an actual restaurant or do you find yourself getting take out?

How do you feel about restaurants using more sustainably grown ingredients?

Would you rather go to a restaurant that uses technology such as iPads or tablets for the tables or just a simple mom and pop’s?

Yahoo Or Google, Will Tumblr Change Which Website You Visit?

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For the past few years has struggled to keep its website and affiliates at par with its competitors, which include Google, Ask, and Bing. Yahoo has relentlessly tried to modify its site to meet the demands of its customers, as well as retain new users to visit the once sensational site. Three years ago Yahoo completely changed its design capacity for the site, going from a search engine with many links, to a website that prioritized news feed. This new integration has helped the site reach new heights, but has still left them in the dust compared to its main competitor, Google. Around the same time as Yahoo’s new design, which helped utilization and efficiency for the website, Google purchased an even bigger venture, known as YouTube. This astounding company has helped Google become a giant in their industry. In addition, Google recently has increased its stock share to over $900 per share, making it one of the highest growing stocks of this year. Yet Yahoo is still at a measly $26 per share, but has been increasing for the better part of six months. Why has Yahoo’s stock been increasing when Google has completely overwhelmed all of its competitors?

Today the answer to that question was given. According to CNN, Yahoo has purchased Tumblr for a record $1.1 billion. Clearly Yahoo is not afraid to spend money, as a famous person once said, “you need to spend money to earn it.” By purchasing Tumblr, Yahoo hopes to compete with Google at a much more even playing field. According to Wikipedia, Tumblr “is a microblogging platform and social networking website,” which “allows users to post multimedia and other content to a short-form blog. Users can follow other users’ blogs, as well as make their blogs private.” Moreover, when Google purchased YouTube, Yahoo’s usage rate fell dramatically, and today they purchased Tumblr in hopes to change that. In addition, according to the CEO of Yahoo, Marissa Mayer, Tumblr “would allow the search engine to tap into a young, active online user base at the social network.” She goes on to say that our goal is to “engage Internet users and get them excited about using Yahoo again.”

I firmly believe that Google will always hold a slight edge over Yahoo, mainly because of its simplistic search engine. However, I do consider that this new business enterprise will dramatically increase user traffic on Yahoo’s website.  Do you think that Yahoo will finally be at par with Google, or will they continue to be an after thought in the search engine industry? Moreover, do you use Tumblr, and if so do you think this will prompt you to use Yahoo more often? These are questions I am very curious about, as I believe Yahoo will become a giant along side Google moving forward.

For GE: old school is new school



General Electric (Ticker “GE”) Fortune Magazine World’s Most Admired Companies at rank 11.  GE is the single surviving company from the 1896 Dow Jones Industrial Index and currently has  roughly 305,000 employees and over 140 billion dollars in revenue last year [GE 10-K for the year ending March 31, 2013].  I believe it is safe to say these guys know what they are doing.  They are in the business of designing and manufacturing appliances plus energy, health, aviation, and transportation equipment in addition to operating a financial services company.

Due to GE’s aggressive and hard pressed past, there are very few companies with the same or even similar brand recognition, especially as they have had such a long standing track record.

Though a mammoth company, GE too had troubles fighting down turns in 2008.  GE’s financial services wing, GE Capital, found itself holding just about half of GE’s profits.  GE Capital was having difficulties and thus GE had to cut its dividend which was a huge blow to its image.  All of this finance/business aspect of the company then affected how GE would then change its ways operationally.  GE realized it needed to simplify, and was most definitely a task involving and most reliant on its operations management team.

Most interesting for me was the refocus on a portfolio of the company to refocus on its traditional core industries.  That is, they are now going to focus and dominate at what they are good at.  For example, in 2012 GE began to make water heaters which was its first new product in 50 years.  The site that it was built on was named Appliance Park, KY (notice any connection?) though this site had been used less and less due to favorable overseas factories which were much cheaper.  Interestingly, in 2009 GE shifted toward moving those overseas jobs back into the domestic light.  This process is just being finalized and in full swing.

The result?  A cheaper and much more rapid production thanks to an efficient domestic supply chain perfected by the company.

Another interesting note about this company’s changes: GE is spending money on investments in the “industrial internet” in order to take hold of ‘big data’ to make more efficient machines.

Things to think about:

-How do you think GE asses’ its ‘utilization’ and ‘efficiency’ for its production facilities now that there is a fully implemented shift into domestic production for this large company.

-We discussed in our course lecture the concept of ‘planning over a time horizon’.  How do you think GE will have to change the way it plans its capacity or the upper limit or ceiling on the load that an operating unit can handle?

-We have seen virtually all large companies using automation and focusing on capacity.  We just discussed this in the course lecture last week.  How do you think GE’s focus on investing in the “industrial internet” will change the efficiency of their production machines?  Do you think this will be a drastic change? Something they won’t see for a long period of time?

Link to this CNN Money Article:

Improving the boarding process is like reinventing the wheel – it won’t work

Airlines constantly find ways to make their operations more efficient. They take action by leasing planes with high fuel efficiency, reducing airplane turn time, and in some cases, cutting an average of two minutes from a 40-45 minute boarding process for narrowbody aircraft (Reed).

American Airlines claims they found a way to cut an average of two minutes from a 40-45 minute boarding process for their narrowbody aircraft. American’s new method involves allowing passengers who are traveling light, with only a carry-on item that fits under the seat in front of them, to board early, before “group two” (Reed). American’s narrow bodies take off about 3,000 times a day, so this new boarding process can reduce a huge amount of time.

American’s new boarding method involves process management and an attempt to engage in breakthrough process improvement. Process management is planning and administering the activities – design, control, and improvement – necessary to achieve a high level of performance (Class Session 5-6). They used a Process Flow Diagram (PFD), which is one of the seven tools of quality, to easily visualize the entire boarding process and identify trouble spots. Process mapping (flowcharting), as it is called, is the use of a diagram to present the major elements of a process (Week 4). It is the ideal methodology by which to begin analyzing a process.

After American engaged in process mapping, they discovered that the current boarding process for their narrowbody aircraft can take up to 40-45 minutes. Rather than engage in incremental improvement, which is improvement implemented on a continual basis, they decided to engage in breakthrough improvement, which solves chronic problems through one-time major reengineering of change.

Virgin America tried this new boarding process for half a year. However, the results were lousy, and they eventually abandoned the new process. The new process may be more efficient, but it is very difficult to manage. For example, some passenger can abuse the loopholes, such as putting their bags in an overhead bin after they told the gate agent that they do not need one, or whether or not a carry-on is too big to place under a seat.

So if Virgin America abandoned the new boarding process, why would American follow in the same footsteps? Every airline is different. What does not work for one airline may work for another airline. America is about to become the world’s largest airline once its merger with US Airways is finalized, and its global status puts the company in the position to taking more risks. American should not engage in breakthrough improvement by radically changing their boarding process because it did not work for Virgin America, and there is a huge possibility that it will not work for American. Instead, American should engage in incremental improvement so it will not be as costly as breakthrough improvement, especially since airlines already have sky-high costs.

Do you think American should try to improve its boarding process even though the new process did not work for Virgin America, which is a very successful airline?



The so called “Cruise from Hell”

This  past winter break, my family decided to take a family vacation on one of the most popular cruise lines, Carnival. We took a 7 day cruise from Miami to an island in Mexico, Jamaica, and the Cayman Islands. It was definitely one of the best winter breaks I have had in a while, being a able to enjoy the hot sun in the month of December felt a little unreal! The service provided was great. Everyday there was some type of entertainment, and many different types of activities lined up. The food was great! From breakfast, to lunch, to dinner, we were offer a variety of great options! It was a definitely a vacation I would recommend to anyone!

That was MY experience in the Carnival Valor cruise ship, however many Carnival costumers will never get to say such great feedback on this company after the many different incidents that occurred this past February.

This past February, Carnival Triumph was stranded in the Gulf of Mexico for 5 days with a powerless engine. That was the result of a fire in the engine room. It left the ship with no working toilets and a damaged sewage. After the five days all passengers arrived safely to a port in Alabama and were compensated for the trouble.

The compensation consisted of a full refund for the cruise and travel expense, any expense made on the ship, an all paid for future cruise, as well as $500. Do you consider this fair? Many customers didn’t think so, as well as some critics! They believed that what these passengers went through was worth a lot more than just $500 dollars. Where and who agreed to the $500? According to Carolyn Spencer Brown, editor of, the Marketing department had the final decision. There were no other options or explanations given to the passengers.

These types of incidents affect the revenue and price of the cruise line, as well as the industry as a whole because who would want to take a cruise after hearing or going through this experience? How are managers suppose to better manage these type of situations to help prevent such catastrophe? Strategies for these kind of situations is what will help managers have a plan to be ready to deal with their clients and make sure they are satisfied. The operations strategy of how to handle catastrophes will also help on how to deal with these type of situations to be able to meet every customers needs in a well timely matter. In this case, Carnival can offer all the money possible to compensate the passengers on their experience, but at the end of the day these passengers will mainly remember how the situation was handle at that moment when they were stranded in the middle of the sea. Accidents can occur, whether you are prepared or not, and being able to meet your customer’s need in the middle of a catastrophe is what your customer will remember.

Do you think Carnival’s compensation was enough? How would you have handled it differently?


Olympus Reduces their Camera Lineup

As technology continues to advance, companies that are built around tech-based products are being forced to alter their tactics to avoid growing deficits in the market. Olympus is currently facing such difficulty with regards to their cheaper line of cameras. The fact of the matter is that cameras are now becoming mainstay secondary functions in phones, tablets, and the like. These devices such as smartphones are often offering more quality and pixels than the competing cameras Olympus offers on the lower side of the price spectrum. It doesn’t help Olympus’ case that something like a smartphones offers the ability to quickly share pictures rather than the more lengthy process of a typical compact camera.

As a result Olympus is reducing their product strategy by cutting the low cost option. Something like a camera is considered to be in the mature stage of the product lifecycle, and the standardized camera can already be found on existing devices. Accordingly Olympus will be placing more emphasis on higher-end models and reducing their product line. Their new objective is attempting to focus more on the differentiation that expensive lenses offer to consumers. Interestingly enough is that while lenses can be unique in their mechanics, they’re still standardized to be used for a variety of cameras. This means Olympus can put their effort into an already reliable camera design and construct more lenses around that which can be used interchangeably. Modular design is a simple way for companies to provide variety for consumers while cutting production costs.

It should be noted that it’s not just Olympus that is suffering in the market. Canon, arguably one of the most well-known brands, had a 34% decline in net profit according to the article. The same surge of profit loss can likely be said for any company doing business with stand-alone cameras. Canon to me seems like a company that focuses heavily on their expensive cameras and lenses, and yet they’re still suffering from such losses.

I’ve never known much about Olympus as their cameras always seemed to be low-rated when it came to their offerings for compact cameras. The article I read, however, really surprised me. Their biggest business isn’t even cameras, it’s medical equipment. I looked on their website and they offer a variety of devices for endoscopy, ultrasound, and so on. One could easily imagine that medical equipment is on the rise now more than ever before when considering the aging population.

Do you think it would be more beneficial for Olympus to completely cut all their camera offerings, and focus on their more profitable sectors (e.g. medical equipment)? Is there still a place for cheaper cameras amidst the evolving smartphone market? Could Olympus possibly offer anything for their expensive lenses/cameras that would cripple strong contenders like Canon?


Can the Cruise Industry Stay Afloat?

It’s been a nightmare at sea for this seasons start to the 2013 Cruise Season. From passengers going overboard, crew members dying and of course the horrific Carnival cruise ship that suffered a mass power outage that left over 4200 passengers stranded in the Mexican Gulf, the industry has been hit with new challenges.

Although, Carnival Cruise line has been getting the blunt of the bad media coverage for several equipment failures, the whole industry of cruise ships still have been affected. The Cruise Industry is now facing challenges of attracting new passengers due to recent events coupled with the old challenge of increasing operational costs and competition.

With high fuel costs, expensive airfare, and a rougher economy, almost every cruise line has been forced to cut costs while still trying to attract consumers. The Carnival Cruise ships have been proof that cutting costs in procedures, maintenance and quality crew members in order to provide over the top amenities and attractive destinations at reasonable costs to passengers have major consequences.

The challenge is not just picking attractive destinations and providing better service and perks then the next cruise ship.

All cruise lines have been optimistic in light of the horrific at-sea events, through the release of big upgrades, innovations and reengineered cruise ships in attempt to save the industry and their images. Cruise lines are taking on the challenge by restructuring ships to be the destination. An editor of , Caroyln Spencer Brown believes that “When you start focusing on shiny new ships with funky, fun, new amenities and features, the market comes back.” Or at least that is their hope.

The Royal Caribbean will release more thrill seeking attractions like bumper cars and simulated skydiving, while the Disney Cruise line will be redesigning their old ship to mimic the Marvel Comic Superhero theme. Several other major attractions like water parks, state of the art dining , world class exercise classes are all features that are changing the cruise line industry; it’s no longer just about the port destinations, its the ship itself that delivers the true experience.

While other cruise lines are adding over-the-top products and services to their ships, Carnival Cruise is sticking to product improvement. They have cancelled several cruises and spent over $300 million on safety upgrades and emergency generators to enhance their dependability and prevent anymore-technical nightmares.

Although, the thrill of walking on a plank, ice bars, eccentric food from Food Network Chefs, themes and celebrity shows sound enticing…I think there is a point where safety should not be forfeited. Also, is it really right for Cruise Lines to believe the ship “experience” outshines the actual destinations?


Ice Bar in Norwegian Cruise Ship

Observatory 300 feet above Sea Level

Would you pick a cruise based on it’s innovative amenities or on the basis of the trips destinations?

What dimension of quality do you think is most important for Cruise Lines to focus on?  Aesthetics? Service? Reliability etc..?