I have a long-standing interest in Black Friday — less because I want to go shopping but more because it poses some interesting questions on how firms compete and how they manage customers. The news this year is that Black Friday is creeping evermore into Thanksgiving proper as retailers keep moving up their opening times. So why are they doing that? Two posts on Businessweek.com put forward theories. The first posits that this is being driven by customer segmentation (The Game Theory Behind Macy’s Thanksgiving Opening, Oct 15).
Traditions are being trampled on by the Corporate Retail Complex! Of course, consumers don’t have to go. Some won’t, and that’s precisely what the strategy folks at Macy’s are betting on.
The purists scandalized by the thought of shopping on the holiday itself aren’t likely to avoid Macy’s altogether. And with the die-hard bargain-hunters swarming the stores on Thursday, Friday shopping will likely be much more pleasant for those who are a little less committed.
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Posted in Pricing, Queue management, Retail | Tagged Black Friday, Pricing, Queues, Retailing | Leave a Comment »
I spent this weekend in Miami (OK, Coral Gables) teaching the core Ops class for an executive MBA section. One of the topics we usually cover in the core (especially with execs) is the cash-to-cash cycle. The cash-to-cash cycle (intuitively) measures how long it takes a firm to capture the gain on its investment in inventory. Mathematically, it consists of days of inventory plus days of accounts receivable minus days of accounts payable. Thus when a firm purchases inventory, it takes a while for those goods to sell. It may then need to wait to collect cash from its customers. However, it may get credit from its suppliers so time in inventory may be offset by the time it has to pay its suppliers. Taken together, these measures give an idea of how effectively a firm uses its working capital. It also may suggest where the firm should target improvement. For example, benchmarking might show that its accounts receivable is out of whack with industry norms so that could be a real opportunity to pursue.
As I said, I had to teach this stuff this weekend. Fortuitously for me, Supply Chain Insights just happened to publish a whole report on the cash-to-cash cycle packed with data and eye candy (Supply Chain Metrics That Matter: A Closer Look at the Cash-To-Cash Cycle (2000-2012), Nov 11). To start with, here is some data on how cash-to-cash cycles vary across industries and over time.
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Posted in Auto Industry, Operations Strategy, Pharmaceuticals | Tagged Apple, Auto Industry, Cash-to-Cash Cycle, Operations Strategy, Supply Chain | Leave a Comment »
Three weeks ago, I had the pleasure to visit one branch of my extended family and BMW Welt (BMW World), the “multi-functional customer experience and exhibition facility of the BMW AG, located in Munich, Germany.” Supposedly, BMW Welt is the second most popular tourist destination around Munich, after Neuschwanstein Castle which inspired Disneylands’ Sleeping Beauty Castle. If you like architecture or cars, you should visit BMW Welt.
OK, but this is the Operations Room, so what else is worth knowing? It turns out that this month, BMW starts selling in Germany its long-awaited i3 (the USA will have to wait until 2014) and here’s some personal pictures to highlight three aspects:
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Posted in Auto Industry, global operations, Green ops, Innovation, Luxury goods, Manufacturing, Network, Offshoring, Product Development, product variety, Technology | Leave a Comment »
Fancy, luxury handbags start off looking like this:
Not exactly the image of exclusivity and sexiness that the likes of Hermes and Longchamp want to project when trying to convince customers to pony up for a bag but leather starts with hides and hides don’t start off in fancy colors.
The image comes from a Wall Street Journal article on Tanneries Haas, an old-school Alsatian tannery (French Tannery in Demand as Source of Top-Notch Leather, Nov 6). The article walks through the production process (quick: name a use for chromium!) but the interesting part of the story is how the industry of supplying high-end hides has changed. Tanneries Haas remains independent but luxury houses are buying up tanneries.
Until just a few years ago, the tanning business was the least glamorous cog in the designer-handbag industry. But recently Tanneries Haas and other French tanneries have found themselves the object of attention from famous luxury labels jockeying for secure sources of top-notch leather. “When they saw a certain number of tanneries disappear, they had to think about protecting their suppliers,” says Jean-Christophe Muller Haas, a sixth-generation French tanner. …
By acquiring suppliers, luxury goods purveyors hope to get more control over raw material costs. Prices of calf hides have soared in recent years due to Europe’s falling veal consumption. Calves are slaughtered primarily as a source of veal and skins are a byproduct. With fewer calves slaughtered to meet shrinking demand for veal, the supply of skins available for luxury leather goods is also diminished.
This move is not just limited to European calf leather. Businessweek reports that luxury firms are also buying up crocodile farms (A Crocodile’s Bumpy Road From Farm to Handbag, Oct 24).
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Posted in Integration, Luxury goods, Procurement | Tagged Luxury goods, Operations Strategy, vertical integration | Leave a Comment »
The National Highway Traffic Safety Administration maintains a website that users track how many motor vehicle recalls there have been this month. As I am writing this, there have already been 17 in November. As the graphs below show, there have been an increasing number of recalls in recent years affecting an increasing number of vehicles.
Those graphs come from an Automotive News article (Despite quality improvements, costly safety issues continue to dog automakers, Oct 28) that gets to an interesting question: If the general quality of cars has improved, why are there so many more recalls? Continue Reading »
Posted in Auto Industry, Quality | Tagged Auto Industry, process improvement, Quality, Recall | 1 Comment »
A few weeks ago we had a post on 100th anniversary of Ford’s moving assembly line. Now the New York Times has an article on how the assembly line has evolved at Ford and other automakers (100 Years Down the Line, Oct 29). What stands out is how Ford and others are seeking to manage variety.
Flash forward to today, inside Ford’s five-million-square-foot, ultramodern Michigan Assembly Plant in the city of Wayne. Nearly 5,000 hourly workers staff the plant in three shifts. The assembly line is three miles long and features more than 900 robots. In the last four years, Ford has spent more than $500 million to refurbish the plant, which dates from 1957.
What makes the plant unusual is the variety of vehicles it makes. Its primary product is the Focus, one of the best-selling cars in the world. But the factory does not just build Focuses with traditional gasoline engines. It can also build them in electric and plug-in hybrid versions.
And the company recently added production of the new C-Max Hybrid — a smallish wagon that shares many parts with the Focus but has an entirely different shape and style.
Recently, as Focuses and C-Maxes hummed smoothly along the line behind him, Mr. Fleming, the Ford executive, said that the company was intent on making all its plants as flexible as Michigan Assembly.
“Within the next five years, our plants globally will be able to produce an average of four different models or derivatives of a model,” he said.
So how is Ford able to manage so much variety on one line? Continue Reading »
Posted in Auto Industry, Manufacturing, product variety | Tagged Auto Industry, Manufacturing, product variety | Leave a Comment »