Data from the factory floor

It is tempting to label everything involving data as big data these days as if the qualifier makes the topic inherently sexier. The Wall Street Journal is guilty of this in recent headline on “manufacturing execution systems” (How Many Turns in a Screw? Big Data Knows, May 15). While the headline may be hyperbole, the basic idea of these systems is pretty cool.

Raytheon is one of many manufacturers installing more sophisticated, automated systems to gather and analyze factory-floor data. The company uses software known as manufacturing execution systems, or MES, which has been around since the 1980s. Semiconductor and other high-tech companies were early adopters, but now “others are catching up,” says Tom Comstock, an executive vice president at Apriso Corp., one of the suppliers of this software. …

Manufacturers are looking harder at data partly because of increasing pressure from customers to eliminate defects and from shareholders to squeeze out more costs. Regulators are also demanding more data collection to trace safety problems. The cost of computers, scanners and other hardware has also come down, and technology for storing and moving data has improved.

At the same time, factory equipment has “got smarter,” says Mike Lackey, a vice president at SAP. The newest equipment comes with computerized controls that make it easier to collect data and share it with the rest of the company or suppliers.

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Service robots

We would be remiss if we did not note that this weeks Economist has a special series of articles on outsourcing and offshoring. The general theme is that after rush to send a variety work to cheaper locations, many firms are reconsidering and bringing some work back home. The rationales range from underestimating the impact of long lead times and the difficulty of coordination across continents to a belief that doing work in-house allows for greater flexibility. On the whole, the report is well worth reading. One article, however, stood out for me. It looks at the increasing use of automation in service centers (Rise of the software machines, Jan 19).

IPsoft is a young company started by Chetan Dube, a former mathematics professor at New York University. He reckons that artificial intelligence can take over most of the routine information-technology and business-process tasks currently performed by workers in offshore locations. “The last decade was about replacing labour with cheaper labour,” says Mr Dube. “The coming decade will be about replacing cheaper labour with autonomics.”

IPsoft’s Eliza, a “virtual service-desk employee” that learns on the job and can reply to e-mail, answer phone calls and hold conversations, is being tested by several multinationals. At one American media giant she is answering 62,000 calls a month from the firm’s information-technology staff. She is able to solve two out of three of the problems without human help. At IPsoft’s media-industry customer Eliza has replaced India’s Tata Consulting Services. …

A small British start-up, Blue Prism, has developed a software-development toolkit that allows people within a company to create their own software “robots” to automate business processes. …  An onshore information-technology worker may cost $80,000 a year and an offshore one perhaps $30,000, wrote James Slaby, HfS’s research director, in a recent report. But Blue Prism’s robots cost at most $15,000 a year. They can perform only routine, rules-driven tasks, but there are plenty of those about.

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Creepy developments in airline travel

So what are reasonable steps a firm may take to personalize its service offering? Clearly some on-line businesses record every link a customer clicks and serves up information based on those choices — one need to look no further than one’s Amazon recommendations to see that. But that setting is self-contained; a customer comes to Amazon.com and Bezos’ minions only use what he or she does on the site. Customers generally value the recommendations they receive but might feel differently about it if Amazon actively tracked what they did away from Amazon’s web site.

Which gets us to British Airways. They have been in the spotlight the last few days as a program they call “Know Me” has gotten some press. Here is how it is explained on Marketplace (Your usual extra pillow, Ma’am? British Airways mines passenger data, Jul 10).

Stacey Vanek Smith: British Airways is getting some flak from privacy watchdogs about its new Know Me program. BA will create a little database about business class and first class passengers, including photos from Google images and information gathered during previous flights. Things like the seat or drink you prefer or if you like an extra blanket. BA says it’s just trying to provide better service. This is nothing unique according to Bob Sullivan, a tech reporter with MSNBC.com.

Bob Sullivan: What they’re doing here is taking data that they already own, because they have a relationship with a customer, and data that’s publicly available, and they’re marrying it to find out interesting things, which, frankly, every company is doing right now. …

You and I, and I bet all your listeners out there, you know how often have they really gotten an ad when they were surfing online that was JUST what they wanted? The success rate is actually much lower than the big data people would have us believe. But on the other side the privacy invasions are enormous. And so the cost-benefit to me is really unclear.

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Competitive Benchmarking by Twinning: Do as the Belgians Do

How could I pass on blogging about the Wall Street Journal reporting on May 21 that 100 U.S. engineers and managers were flown across the Atlantic and told: “Do as the Belgians do!”?

The article, titled “Indiana Steel Mill Revived With Lessons From Abroad ,“ is part of their series on how globalization can improve local organizations and may be one reason why American manufacturing is growing again.  “Some steel mills are destroyed by globalization, others reborn.

Left for dead a decade ago, this 50-year-old facility on the shores of Lake Michigan has been rejuvenated thanks to an unusual experiment by its owner, Luxembourg-based ArcelorMittal.

In 2008, Burns Harbor was “twinned” with a hypermodern mill in Gent, Belgium. Over 100 U.S. engineers and managers, who were flown across the Atlantic, were told: Do as the Belgians do.

Burns Harbor now enjoys record output. Its furnaces, where steel is made out of iron ore, coal and limestone, are run with software developed in Belgium. Robots are in. Pencils are out. Workers are learning to make the same amount of steel with nearly half the people it employed three decades ago. Productivity is nearing Belgian levels.

Burns Harbor, according to the WSJ, is a case in point of the “upsides of globalization: … it puts pressure on U.S. factories to become more efficient to keep up with global competition, making it possible for them to survive.”  There are a few observations to be made:

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The StreetScooter: A Crowdsourced Electric Car

I just finished teaching Operations Strategy where we discuss many interesting decisions, including the impact of design complexity on outsourcing and the mechanisms to foster innovation in existing organizations.  The StreetScooter is a project that hits on both these topics: this is a modular car (not a scooter!) that is designed and manufactured in Germany through collaboration by more than 50 companies.  A prototype of the 5,000 euro vehicle with a 120km/hr top speed has been presented and production in Europe is slated for 2013.  Here’s the 1min promotional video:

In class we discuss electronic designs as perfect candidates for modular design: after all, each electrical connection only needs a few variables (e.g., volt, amps, and frequency). These variables are easily specified and define the interchangeable interfaces that then form the input or constraints in the design of each module (using, say, CAD programs).  This gave rise to the disintegration of the computer industry and all the wonders that followed.

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Using RFID to eliminate airport queues

How should airlines get passengers through airports with minimal delay? One possibility is to provide loads of capacity. There are two ways to do that. One is hire lots of staff or put out lots of kiosks. That requires both money and space. The Wall Street Journal reports (The Trump Card at Check-In, Dec 29) that Qantas has found an alternative way to expand check-in capacity on its domestic routes: Use technology to greatly reduce the processing time so the same number of kiosks can process far more customers. This graphic summarizes their revised process.

Radio-frequency ID cards (RFID) chips are key to making this work.

The system, built around radio-frequency ID cards (RFID), is similar to toll tags used on highways and bridges. Top-level frequent fliers get an ID card that is flashed at a kiosk in the ticketing area. In seconds, the system finds the reservation for that day, assigns a seat based on personal preferences if one wasn’t pre-selected and checks the passenger in. When everything is good to go, a beacon illuminates.

To check luggage, the passenger goes to a baggage drop point, flashes the frequent-flier card in front of a reader and drops luggage on a baggage belt. The bag is weighed, and lasers measure its dimensions to make sure it complies with limits.

Top-level frequent fliers have heavy-duty RFID tags called “Q Bag Tags” for their bags that replace paper luggage tags. The technology reads the bag’s “identity” as it moves from luggage belts to carts to airport tarmacs. This ensures luggage gets loaded on the same flight as its owner. Other travelers get a paper tag for their bag with an imbedded RFID chip.

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“Impact Sourcing” = outsourcing for social betterment

Impact sourcing refers to “the strategy of harnessing the Internet to bring low-cost data management jobs to remote and impoverished communities,” as David Bornstein wrote in the New York Times. He described two social enterprises that extend computer-based employment to people with modest educations in developing countries:

One of them is Digital Divide Data, a pioneering organization that employs 900 people in Cambodia, Laos and Kenya and was founded way back in 2001. The other is Samasource, a fast-growing enterprise that was established in 2008 and has already received recognition for its ability to manage “microwork” in a kind of virtual assembly line that spans 1,600 workers across Haiti, India, Kenya, Pakistan, Uganda and South Africa ― some of them living in refugee camps.

Both Digital Divide Data (DDD) and Samasource were founded by former management consultants whose experiences in the developing world led them to redeploy their skills to alleviate poverty.

Essentially, these companies help people from disadvantaged backgrounds gain a foothold in the global economy.  It is offshored outsourcing, but with an
ethical aspiration:

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The “Social Supply Chain”

Forbes had an interesting article, asking its readers whether they are ready for the social supply chain (“Are You Ready for the Social Supply Chain?”).  It seems that the author and I don’t really know what is a social supply chain, but the article brings several interesting points

 A recent report by  Buddy Media and Booz & Company identified Facebook (with 850 million users, it shouldn’t surprise anyone that 94% of respondents regard it #1), Twitter(77%) and YouTube (42%) as  the top three preferred social media platforms for brands to utilize. This information does not mean that the functionality of other social media platforms, including blogs, and enterprise systems like Moxie Software and Yammer are not valuable to enhance external communication and collaboration. “

Yammer improves communication within the organization by creating internal social networks for enterprise purposes, allowing employees to communicate among themselves. Clearly improving communication within the organization is a lofty goal, but is a social network the way to do it? I have seen firms in which employees were sitting in adjacent offices, and did not even share a common forecast, not to mention that none of them knew what inventory policy was the other person using. Is the only goal of this “social supply chain” to create a vehicle for communication among the different nodes in the chain?

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White collar automation

Slate’s technology writer Farhad Manjoo has had an interesting series of article on the increasing use of robots and automation in what many would consider white-collar profession. Despite the somewhat alarmist title (Will Robots Steal Your Job?), the series is a fairly evenhanded look at how technology is evolving. I found the piece on pharmacists particularly interesting (My father the pharmacist vs. a gigantic pill-packing machine, Sep 26). As the article suggests, Manjoo’s dad is a pharmacist so he has more than a passing interest in what happens in this market. What is happening is that pill sellers — whether hospitals or retail pharmacists — are relying more and more on machines to dispense pills. Here is a video of University of California-San Francisco’s pill-counting wonder:

Before installing the robot, UCSF needed about half of its more than 100 on-staff pharmacists to administer and check the drugs going out to patients on the floor; now nearly all have been reassigned to different parts of the hospital, where they make IVs, help adjust patients’ drug regimens, and perform other tasks that had been neglected when they were simply filling prescriptions The robotic pharmacy cost $7 million to install—less than one year’s salary for all those pharmacists—and when it’s running at full capacity, it can dispense more than 10,000 doses a day.  After it became operational last year, the robot filled 350,000 prescriptions without making a single error. (The first error it did encounter was a printer problem that was quickly caught by its human operators.)

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Your Amazon.com order has shipped – from a sweatshop?!

Three days ago, my friend Sheri forwarded me an email she had received from American Rights At Work (excerpts below) about sweatshop conditions in an Amazon warehouse.  I told my executive MBA class yesterday that I should write a blog entry about this for two reasons:

1. Illustration of the social power of the Internet to force change for the better. This story will quickly make it to the major newspapers which will force Amazon to quickly address this before it becomes a PR crisis.  (My colleague Daniel Diermeier will surely write about the reputation management principles that Amazon should follow.)
2. The use of performance measurement and temporary workers in a warehouse/service operation where every employee move is recorded.

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