1 Operations & Productivity

A Thousand Lives: The Hidden Cost of Clothes

Posted on by spr1322mjamil

Three weeks ago the Rana Plaza factory building in Bangladesh collapsed, killing 1,127 people. A majority of these were workers producing garments for sale in the United States and Europe. The factory manufactured apparel for brands including Benetton and Walmart among others. An investigation revealed that the building was deemed unsafe just days before the collapse, but factory supervisors ordered their employees to continue working in these hazardous conditions.

jp-bangladesh1-articleLargeThe obvious question is why a tragedy like this would occur, even after there had been a forewarning. The answer is because factories like Rana Plaza and others in Bangladesh are under immense pressure to produce a high volume of low-cost garments for their biggest buyers, Walmart, H&M, Inditex (which owns Zara), and Gap to name a few. These companies pride themselves on their ability to get apparel into stores only weeks after designing them. However, this incredible efficiency requires a tremendous amount of manual labor, and no where are labor costs cheaper than in Bangladesh. The massive global supply chains of a majority of apparel manufacturers flow through the South Asian country which trails only China in terms of garments exported. Unfortunately, most of the large Western companies are unaware of the conditions that exist in the factories where their products are being produced.

The latest tragedy has finally caught the attention of European and American companies. This past week H&M, the largest buyer of garments from Bangladeshi factories, agreed to a plan to improve fire and building safety in Bangladesh’s apparel factories. The five-year plan calls for independent safety inspections and for companies to make the findings public. Joining H&M were Inditex, the world’s biggest clothing retailer, and several other European apparel companies. However, PVH, the owner of brands such as Tommy Hilfiger and Calvin Klein, is the only American company that has signed the pact. Companies including Gap, Walmart and JC Penney have considered the plan, but have not yet signed on, mostly due to the cost and how legal issues would be resolved.

130430150217-made-in-bangladesh-620xaI believe this safety pact is a step in the right direction on the road to abolishing subpar working conditions around the world. Therefore, from a management perspective, I think that companies that are not signing the pact, like Walmart and JC Penney, are making a mistake. Not signing sends a negative message to consumers and investors, if the companies are unwilling to spend money to protect human lives customers will question the ethics of the company’s management. Ethics is an important facet of operations management. The managers at American apparel companies need to recognize these issues, like their European counterparts have, and address the dangerous working conditions that exist in their supply chain. I think in the long run the benefits of ensuring safe conditions for all in the supply chain will outweigh the cost.

What is your opinion on the decision of many American companies to not sign the safety pact?

Do you think it is the duty of American companies to ensure the safety of workers in foreign countries?

 

Sources

http://www.businessweek.com/articles/2013-05-13/h-and-m-pledges-to-make-bangladeshi-factories-safer 

http://www.ft.com/cms/s/0/79cedd4e-c000-11e2-b19c-00144feab7de.html#axzz2TmPslBBP

http://money.cnn.com/2013/05/13/news/companies/hm-bangladesh-safety/index.html

http://www.nytimes.com/2013/04/25/world/asia/bangladesh-building-collapse.html?pagewanted=1&_r=0&hp

http://www.bloomberg.com/news/2013-05-14/h-m-inditex-joining-bangladesh-pact-pressures-wal-mart-retail.html

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

Posted on by spr1311jdubin

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For the past few years Yahoo.com 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.

http://money.cnn.com/2013/05/19/technology/yahoo-tumblr/index.html

For GE: old school is new school

Posted on by spr1311sabraham

 

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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: http://money.cnn.com/2013/05/06/leadership/general-electric-industry.pr.fortune/index.html

Has Starbucks Met its Match?

Posted on by izzydelly

 

 

The popular coffee franchise has made a statement in a number of different markets, but has it met its match against Vietnam? The Seattle based coffee chain put its first location in Ho Chi Minh City in February. This country is known to have a very specific way of making coffee; nothing like what Starbucks has in the U.S.

The main concern here is if Starbucks will thrive in this new country, or become a complete failure. I believe The Critical Decisions of Operations Management should be highly considered.  One of the points is based on the design of goods and services. Starbucks has made a point to please the locals by making a special drink called the Asian Dolce Latte to appeal to local palates. By doing this Starbucks has a better chance to win over the locals that are so keen to stick to their original tastes.  When taking a domestic product abroad, I believe having differentiation in the good or service is also extremely important. Since Starbucks has a flavor of coffee unlike anything the Vietnamese are used to, this differentiation can potentially give them the competitive advantage they need in order to succeed. Starbucks CEO Howard Shultz quotes, “The environment that we create, the store design, the experience…they all add up to a much different position to anything that anyone in Vietnam currently occupies.”

Another critical decision is location strategy. Now, Shultz did not just wake up one morning and decide he wanted a new location in Vietnam. There are currently over 3,000 locations in Asia alone. Starbucks in fact purchases a large quantity of Arabica coffee from Vietnam, thus building a location in Vietnam makes a lot of sense. If they can move closer to the supply, this could greatly reduce exporting costs. To be even more specific, Starbucks purposely located their café in the capital’s higher-end neighborhood, District 1. Here, those that live in the area can afford the expensive taste that Starbucks has. Starbucks essentially nailed it on the head when it comes to this aspect: they are now near raw materials, and they are near to their target customers.

Going global has given Starbucks a vast amount of knowledge on how to succeed. However, they also face some cultural issues as well. As I stated before, the type of coffee served at Starbucks in the U.S. is much different than what the Vietnamese are used to. They enjoy a more bitter and higher caffeinated drink, and in order for Starbucks to do well, they must adjust to the new scene and roll with it. They have also brought a roast-duck wrap and a French baguette to the menu to achieve this goal.

Overall, I believe Starbucks has done an amazing job going global, and if they review and understand the critical decisions of operations management, they will continue to strive to new levels.

Thoughts for discussion:

Will Starbucks succeed in their takeover of Vietnam? Why or why not?
What does this mean for local coffee shops?

Sources:

http://online.wsj.com/article/SB10001424127887323582904578487192544295444.html 

http://travel.cnn.com/can-starbucks-make-it-coffee-mad-vietnam-921956

 

The Lighter the Better, Says American Airlines.

Posted on by spr1322jkurzac

Do you ever find yourself incredibly frustrated when boarding an airplane? Travelers tend to find themselves wondering about the order in which everyone boards the aircraft. Recently, American Airlines decided to adopt a new method to allow passengers to board quicker. This new method saves about two minutes on average per flight. Although the new method does not necessarily make a large difference for passengers, it does cut about 6,000 minutes a day for the airline company. American Airlines longs to improve their on-time performance.

The airline’s previous method was arranged by groups. Each passenger was assigned either group 1, group 2, or group 3, starting with group 1 at the front of the plane. The new method permits passengers with only a carry-on item on the aircraft second. This carry-on item, however, must be small enough to only fit under the seat in front of them. Passengers who buy business class or first class tickets do however, board first. This new method benefits passengers because those that do not have large pieces of luggage enter the aircraft and immediately take their seats.  Additionally, more passengers were willing to check their bags in at the gate because in return, they got to avoid baggage fees and were allowed to board early. Once those passengers are seated, those with luggage pieces have an easier time boarding since all the overhead bins are empty. Do you think this new method makes more sense? Personally, I have always thought the best way would be to board those in the back of the airplane second, then the middle of the airplane third. Business class would still board first, however.

Virgin America has tried this boarding process about two years ago and decided it wouldn’t work for their company. The problems they encountered included debates between customers and employees about sizes of bags that would/would not fit under the seat in front of the passenger. Additionally, sometimes those passengers that boarded first used the overhead bins anyway. An airline consultant, Robert Mann, said this new boarding method can however, cut down American’s revenues from baggage fees.

I got to experience this new boarding method when I took a flight to/from Fort Lauderdale. I decided to check my bag in as I printed my boarding pass because I did not feel like lifting my bag and creating a line once I boarded the airplane. I was especially annoyed when I got to my gate and realized that the airline was allowing passengers to check-in their bags free of charge. I spent around $50 checking my bags in only to realize the airline was doing it for free. When I asked if I could get a refund I was told it was non-refundable. Although the new method makes complete sense and I support it, I do not think it is fair to trick loyal customers into spending unnecessary money on baggage fees. At the end of the day though, I am happy companies are trying to new methods to make traveling easier for customers.

 

 

Photo:http://l.yimg.com/bt/api/res/1.2/2bP5nJdDKrEtP4NxjC37FA–/YXBwaWQ9eW5ld3M7cT04NTt3PTYwMA–/http://media.zenfs.com/en_us/News/Reuters/2013-04-27T171531Z_1_CBRE93Q1BY500_RTROPTP_2_USA-AVIATION-DELAYS.JPG

http://www.forbes.com/sites/tedreed/2013/05/18/will-americans-new-boarding-process-work-it-failed-at-virgin-america/

 

Olympus Reduces their Camera Lineup

Posted on by Vince Ladisa

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?

Sources
http://blogs.wsj.com/digits/2013/05/16/olympus-to-drop-cheap-point-and-shoot-cameras/
http://www.olympusamerica.com/index.asp

Mercedes’ Management pulling in Wealthy Chinese again

Posted on by spr1322tgutheil

After Daimler’s CEO Dieter Zetsche sat in the Mercedes S-Class, he realized it would not recline as far as a seat in an airplane did, and therefore not give the same amount of comfort that the wealthy individuals that would buy this car are accustomed to. This was especially an issue in China where the car-owner sits in the back a lot of the time as they have chauffeurs. Zetsche had his designers recline to 43.5 degrees to make it more comfortable and luxurious and therefore more appealing to the wealthy Chinese. When the backseat reclines, the front seat automatically moves forward a bit to give more legroom, and the seats even have a massage feature for ultimate comfort.

Mercedes Revamps the S-Class to Lure China's Wealthy Buyers

To be able to realize that this is necessary is very impressive forecasting while also looking at the past sales and realizing that something is wrong. For the CEO to go out and try the features of the Mercedes S-Class and help come up with solutions shows the dedication he has to the company, and shows good management as well. It is rare that you hear that a chief executive officer figures out the issue a company has and makes it a point to fix it.

Chinese buyers account for more than half of all the sales of the S-Class, which makes improving the sales even more important. With Mercedes operating profit margin down in comparison to BMW and Audi, it is important that the sales of the S-Class are improving again because the profit margin is 25% for these cars. Zetsche was also smart

in realizing that innovating and improving this car is important to the bottom line of making more money, as it is the most profitable.

China is a huge market as the sales of luxury cars are projected to go up 12 percent annually up through the year 2020. Clearly the operations management of Mercedes is of highest quality, because being able to put together all of the factors I have talked about and realizing that perfecting the S-Class is essential is rather impressive.

A Mercedes S-Class can cost as much as 486,000 dollars in China due to very heavy import levies. Due to the halo effect, Mercedes is able to generally charge more for its other cars as well. Mercedes sold about 20,000 more of their luxury cars than BMW and a little over 40,000 more than Audi’s luxury car, so clearly Mercedes is the best at perceiving an image of luxury and highest of quality. With this fact in mind, Mercedes’ management needs to realize that they need to improve the sales of their other cars to become the most profitable company in overall again in comparison to their biggest rivals of BMW and Audi.

What do you think Mercedes can do to improve their sales and become the most profitable company again? Are you impressed by the improved S-Class moves?

Can You Have Your Cake and Eat It Too

Posted on by spr1311dferek

As I’m lounging on the sofa in the family room watching my husband decorate the cakes that he baked for both our moms on Mother’s Day, thoughts about how he plans the whole process are running through my head. While my husband wasn’t enthused about the interruption, I was busy asking him multiple questions regarding how to forecast future demand, how to manage quality and quantity, and finally what inventory method is used by businesses that produce wedding cakes.

Forecasting is a critical aspect of the business to effectively manage overhead costs, ingredient inventories and most importantly, volume projections to meet demand while maintaining a profitable business. To achieve desired profitability, the business should deliver a wide variety of designs at competitive prices.

In class, I had learned about five quantitative forecasting methods. The simplest method to forecast how many wedding cakes will be produced next month is looking back at the last month’s production quantity. Another forecasting model is using the moving averages forecast method. This method uses an average of the most recent periods of data to predict of how many wedding cakes need to be produced next period. For example, the bakery may use a 3-month moving average by adding the last 3-month production of wedding cakes and dividing by 3 months. However, to use this method, we would assume that the market for wedding cake demands is quite stable.

Next important aspect for a Wedding Cake business is how to efficiently manage the quantity and quality of the cakes. Higher quality of ingredients used during production will lead to a better reputation for the business and create higher customer satisfaction, leading to repeat customers. Moreover, business would save ingredient costs by purchasing larger volumes.

This reminded me of what I had recently learned in my class about product focus. Some bakery businesses focus on producing high volumes and low variety. For example, one business can focus on a niche market and produce only wedding cakes that will deliver a high volume but limited designs. But such a business will need to be highly completive in the market in order to be successful. On the other hand, another bakery might produce low volume of cakes, but cater to a much broader customer base such as birthdays, graduations, anniversaries, Bar Mitzvahs, etc.

Managing inventory of raw ingredients as well as finished goods is another critical aspect that has to be closely managed. The perishable nature of the products makes it very important to effectively manage inventory of seasonal products, while maintaining stocks for rush orders. Also, inventory management is crucial in maintaining business profitability by reducing waste of both raw ingredients and expired finished products.

Although I learned a great deal regarding the wedding cake industry from my husband, I”m still left with a few questions: What is the best way to forecast wedding cakes? What process strategies should be used by bakeries? Would it be more profitable to use process focus or mass customization strategy?

http://smallbusiness.chron.com/examples-management-strategies-cake-bakery-business-12208.html

Rob Peter to pay yourself?

Posted on by spr1312chackney

Fraud, embezzlement, and misuse of funds are some terms that the politically correct like to use. To others its stealing and theft.  One of the most important aspects of running a business or corporation is ethics.  From the CEO’s, CFO’s and other leadership positions to the lowest ranking employees and customers you serve people have been stealing for ages.

I believe that an honest corporation will draw the interest of honest employees.  With a more open and honest culture, management can create a more honest workplace.  Now I understand that sometimes no matter how hard a company tries some people will still take what’s not theirs.  With the integrity and trust of many corporations in question it’s no wonder so many people steal from companies.

Leading from the front is the first step in preventing a large loss for businesses.  With some corporations making an effort of supporting the claim of, “the customer is always right” many companies have to remain vigilant when exchanging checks, money, or merchandise.  Scammers have evolved into creative ways of getting away with stealing from businesses.  Although I enjoy not having a hassle when correcting an issue businesses must be aware of these scams and check for these fraudulent acts.

By separating a businesses account from an account used only for wire transfers a business can minimize the risk and hassle of being robbed via wire transfers.  The extra step of creating more accounts can be a pain in the neck, but minimizing the risk could potentially save the corporation not only peace of mind, but anywhere upwards of millions of dollars.  When starting or growing a business startup funds are essential.

A very common practice by scammers these days is phishing.  You could only imagine how many people are desperate for startup funds and are more than willing to exchange their information.  Once a phisher has their information they can gain access to that business’s accounts and open up other fraudulent accounts and company credit cards in that business’s name.  At the end of the day companies should be more cautious when giving out information regardless to how bad they want the funds.

If you’re looking to start a small business it appears it’s not a simple task, and there’s more involved than just simply coming up with a catchy name, selling some product or service, and getting money from the bank.  These scammers are pitfalls and must be paid close attention to.  Do you think that with all the scams going on in today’s world that small lenders trying to enter a market thrived on by scammers can be successful?  Should small businesses stick to the big name lenders to be on the “safe side?”  What percentage of businesses costs should be appropriated towards theft and fraud prevention?

 

http://business.time.com/2013/05/17/arresting-small-business-fraud/

Simonds, Lauren. “Arresting Small Business Fraud.” Business Money Arresting Small Business Fraud Comments. Time.com, 17 May 2013. Web. 17 May 2013.

Ouya to Enter the Competition a Bit Later than Scheduled

Posted on by spr1332shuang

For those of you that do not know, Ouya, by OUYA Inc., is the highly anticipated gaming console that is powered by Android. Ouya has raised approximately $8.5 million via Kickstarter, which became Kickstarter’s second highest earning project. The console sells for $99.

The launch of Ouya was originally planned for June 4th. However, its launch date has now been pushed back to June 25th. The delay is not that far off from the product’s original launch date, but it is a delay nevertheless. The company decided to delay the release of the console due to a high demand for the console. In order to meet the increased expectations for the console, they decided to delay the release by three weeks in order to produce more consoles, and to be able to have more units available in stores on its launch day.

Ouya also discovered a slight problem in regards to the design and placement of the buttons on the console’s controllers. The issue was that the buttons could get stuck under the faceplate. Although this was a minor design flaw, it can become a great problem when users get frustrated with the buttons sticking and getting stuck. Nothing is worse than an angry customer that is angry because of a product’s design flaw. The flaw was reported by some Kickstarter backers who received their consoles on March 28th and discovered the sticky buttons when trying the product out. After being notified of this issue, Ouya has implemented quite a simple solution which was to enlarge the button holes. This has already been implemented into production and the corrected controllers will be available for launch day with the consoles. Ouya stated that “If [Kickstarter] backers have a problem with their controller, we will work with them to resolve the issue via customer service.”

In my opinion, Ouya made a smart move in pushing back the launch date in order to put more hours into production so that more units of their product will be available when the consoles are officially released. Hopefully there will be enough units to not create another iPhone5 disaster in not having enough units ready to meet the consumers’ demands. Ouya is also quick to fix and implement the solution to a design flaw to their product, and provides great customer service in offering to work with those that run into problems with their controllers if they received a faulty one.

What do you think about Ouya’s decisions to push back their launch date for this highly anticipated product? What can other companies learn from Ouya when it comes to new products or services in the future? How do you think Ouya will fare in the market for consoles?

Sources
Joystiq – Ouya launch delayed to June 25, controller defect being fixed
Joystiq – Ouya: Joyqstiq takes a closer look
Image taken from: Droid-life.com