The Cheesecake Factory and 2.5 % food waste

Posted on September 5, 2012 by aviyer2010

An article by Atul Gawande in the New Yorker (August 13, 2012) describes the processes used at the Cheesecake Factory restaurant to decrease its food waste to under 2.5 %. These include guest forecasting – which estimates the demand each day based on historical data at the level of individual items. New items are introduced with specific plans regarding production along with other items. Buying in bulk but synchronized to demand prevents wasted product. Given the over 308 items on the menu, forecasting enables a the delicate balance between supply and demand. Can the lessons from the Cheesecake Factory be used to decrease waste in the health care industry ? Can the make to order strategy of individual meals be the secret to decreased waste ? Can the lessons from the Cheescake factory be used by families to decrease wasted food – estimated to be over 25 % ?

Posted in Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , , , | Leave a comment

The impact of incompatible fast charge plugs on electric vehicle growth

Posted on September 5, 2012 by aviyer2010

An article in the New York Times (August 31, 2012) describes two incompatible fast charging plugs – one standard, CHAdeMO, developed by Nissan, Mitusbishi and others, with separate prongs for slow and fast charges, installed in over 1,500 chargers. The other, developed by Detroit’s automakers and German automakers, with a combined plug for slow and fast charge. Should the simplicity of a single plug demand a new standard that could make charging difficult for existing vehicles ? Will the incompatibility of these alternate standards diminish the rate of growth of electric vehicles ? Will there be a benefit from a single government standard for electric vehicle plugs ?

Posted in Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , | Leave a comment

Volkswagen (VW) and its Modular Transverse Matrix strategy for part commonality

Posted on September 3, 2012 by aviyer2010

An article in Fortune (July 23, 2012) describes VW’s plan to standardize the 60 % of a car model’s cost – the front axle, heating, air conditioning etc across 40 car models and thus seven million units. The projected savings in development costs is 20 %, part costs saved is estimated to be 20 % and production time saved is estimated to be 30 %, thus suggesting a “$ 3 billion in annual savings or $ 500 a car”. But worries about the flip side of standardization is that these models become commodities, potentially losing their brand premiums. Will the current growth in sales and profitability be fleeting, and be followed by a longer term loss in market positioning as consumers become unwilling to pay the premiums associated with some models ? Will the supplier benefit to standardization drop margins for spare parts ? Will such standardization increase the flexibility for VW to expand globally or become its Achilles heel ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , | Leave a comment

Lending plants to get OEMs back on track after the Japanese earthquake

Posted on September 3, 2012 by aviyer2010

A report published by the Congressional Research Service (“The Motor Vehicle Supply Chain: Effects of the Japanese Earthquake and Tsunami” by Bill Canis, May 23, 2011) describes an example in which Denso, a Tier 1 supplier to Toyota, decided to suspend production of automotive air conditioners at one of its plants. Denso lent the plant to a smaller Toyota supplier, Fujikura Rubber, whose plant was severely damaged, thus starving Toyota of much needed parts. How should supplier plants be structured to enable such capacity sharing? Given that these are independent companies, how does Toyota manage to enable sharing of the individual company and supply chain wide benefits from such schemes? Given the vulnerability caused by the concentration of production by small suppliers, how should the larger OEMs protect their supply chains while fostering the innovation offered by such suppliers ?

Posted in Collaboration, Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , | Leave a comment

40 % of US food produced is wasted – what is the impact ?

Posted on September 3, 2012 by aviyer2010

A paper produced by NRDC called “Wasted: How America Is Losing Up to 40 Percent of Its Food from Farm to Fork to Landfill”, suggests that 40 % of US food produced or $ 165 billion of value is wasted. This wasted food generates 25 % of methane emissions, but also wastes the water and energy required to cultivate and process the food. The study estimated that reducing waste just 15 % could feed 25 million citizens. How should the supply chain participants, all the way to the customer, be incented to reduce this waste ? Should manufacturers change pack sizes to reduce waste, and if so, how can this be coordinated? How should consumers be alerted to the cost associated with the wasted food and how to balance it against the convenience of disposal ?

Posted in Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , , | 4 Comments

Planning for Greece exiting the euro

Posted on September 3, 2012 by aviyer2010

An article in the New York Times (September 3, 2012) describes plans by US companies in the event of an announcement that Greece will exit the euro and move back to the drachma. Some of them include sending employees into Greece on trains with 50,000 euros in cash to pay employees, requiring buyers in Greece to pay in advance, lowering the amount of cash in Greek accounts, having accounts in the new currency ready to operate etc. But the scenarios also include one country (Greece) exiting the euro, multiple countries exiting at the same time and the eurozone collapsing as a whole. Will such detailed planning hasten the drop of Greece from the euro, by suggesting a smooth exit with minimal impact? Given the estimated higher costs to manage supply chains in Greece, will prices start rising to cover these costs and thus further slow down recovery ? Will the physical movement of cash into Greece mean the need for banks to worry about inventories of cash outside their normal locations ?

Posted in Global Contexts, Operations Management, Service Operations, Supply Chain Issues | Tagged , , , , , , , , | Leave a comment

Robots and the new US manufacturing competitiveness

Posted on September 2, 2012 by aviyer2010

An article in the New York Times (August 18, 2012) describes a solar panel plant in San Francisco that uses a significant amount of robots and few people, a Philips plant in the Netherlands that uses 10 % of the labor as its plant in China with most of the work done by robots and a grocery distributor, C & C Wholesale Grocers, that uses robots to efficiently store and retrieve products. The question then is, if US manufacturing returns with a significant use of robots instead of labor, will that be an acceptable alternative even if it is the only competitive choice for companies ? Will the supplier base required to service all these robots and program them generate sufficient jobs to compensate for the smaller workforce at the plant ? Will the skills required for this new manufacturing be those that can be acquired by the displaced plant workforce or will it be done at a distance, at an efficient global location ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , , | Leave a comment

Shift to territorial tax regime, or reduce environmental regulations to grow US manufacturing ?

Posted on September 2, 2012 by aviyer2010

An article in the Wall Street Journal (August 29, 2012) describes recommendations by manufacturers to the US government to enable growth in US manufacturing. Some recommend reducing environmental laws and thus decrease costs for US production – but this will impact the health of US consumers and thus increase helath care costs. Is this an acceptable compromise ? Others suggest moving to a territorial tax regime that would require US companies to pay taxes only on their US income and not their worldwide income. But will this cause manufacturers to become more competitive and thus increase US employment or provide them the incentive to move more manufacturing out of the US ? Another suggestion is to decrease US corporate taxes but also eliminate various tax credits to compensate. Will this approach enable sufficient tax income to pay for roads and education required by manufacturers ?

Posted in Global Contexts, Operations Management, Supply Chain Issues, Sustainability | Tagged , , , , , , | Leave a comment

Indonesian illegal tin mining and the smartphone and tablet connection

Posted on September 2, 2012 by aviyer2010

An article in Bloombergbusinessweek (August 23, 2012) describes the dangerous conditions faced by miners at illegal mines in Indonesia, with demand and price increased riven by the collateral impact of bans against “conflict materials” in the Congo. With the tin content in 16 iPads being greater than that in a car, growing demand for smartphones and tablets has driven up demand for tin solder. But efforts to control illegal mining by Indonesian authorities is criticized by the “Solder Products Value Council” – an industry supplier group – as being the reason behind price spikes. How much should end product manufacturers, such as Apple and Samsung, be held responsible for the supplier work conditions and regulatory compliance? Are the price increases associated with legal environmentally friendly mining practices a desirable feature that will incent material usage reduction by OEMs? Should tracking of material to the source be a requirement that should be permitted to be demanded by customers and NGOs for global supply chains ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , , , , | Leave a comment

Making shoes for the world in Ethiopia ?

Posted on September 2, 2012 by aviyer2010

An article in the Economist (June 9, 2012) describes demand for $2 shoes in Ethiopia, as protection against injuries, worms etc that affect bare feet. The population of Ethiopia is expect to double by 2040, chronic hunger impacts fewer Ethiopians and leather is plentiful thanks to a large livestock population. Labor costs are low and handicraft is a generations old skill. So a Chinese company, Huajian Shoes, expects to invest $2 billion to make shoes for a global market. Will poor infrastructure prevent Ethiopia from producing for the world ? Can a focus on Ethiopian traditional craft capability justify it as a global source of vegan friendly shoes ? Does the growing domestic market justify the country as production site, along with its low wages, lower than China ?

Posted in Global Contexts, Operations Management, Supply Chain Issues | Tagged , , , , , , | Leave a comment