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Archive for the ‘product variety’ Category

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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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? (more…)

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Most of us think of IKEA as “just some oak and some pine and a handful of Norsemen selling furniture for college kids and divorced men” but they also move a boat load of food. The Wall Street Journal reports that with food sales of around $2 billion per year, they are around the same size as Panera and Arby’s (IKEA’s Path to Selling 150 Million Meatballs, Oct 17). Just why and how did IKEA get into the meatball business? Check it out.

And here’s the reporter with a little more information explaining how IKEA has grown its food business.

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Fast food is supposed to be, well, fast. But is speed everything? If you think about how different chains advertise, they are often emphasizing price or some expansion of their offerings. Essentially no one ever says that they will get you on your way in two minutes. Speed is taken as a given but there has to be some interplay between the range of what a firm offers and how fast they can serve customers.

That gets us to QSR Magazine‘s annual survey of drive-thru lane performance (The Drive-Thru Performance Study, Oct 2013). Drive thrus matter since they can account for 60 – 70% of sales and QSR’s survey is something of an industry standard since they have been at it for 15 years. You can find information on their methodology here and a paper co-written by Gady that uses this data here. The most interesting insight from the survey comes from comparing data on service times (i.e., how long does it take from when you get to the order board until you have your bag of food) this year with last year.

QSR DataAs the data shows, service times are getting slower as a whole. The industry average went up about 5% from 172 seconds to 180. What’s driving the increase?

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When I was a kid, I loved Legos. So I was, of course, pleased when my kids started playing with them. In the last year or so, my kids have outgrown them. And while having all the Legos put away makes it a little safer to walk barefoot across the family room, it does make me a litte sad. Which is why, I guess, I have a soft spot for stories about Legos.

Like, for example, a BBC story asking just how many Legos can you stack on top of each other (How tall can a Lego tower get?, Dec 3). Turns out, you can make a pretty tall tower.

Ian Johnston and the team do two more tests to be sure we hadn’t just happened upon the strongest Lego brick in existence. And in fact they were impressed at the consistency of Lego manufacture.

The average maximum force the bricks can stand is 4,240N. That’s equivalent to a mass of 432kg (950lbs). If you divide that by the mass of a single brick, which is 1.152g, then you get the grand total of bricks a single piece of Lego could support: 375,000.

So, 375,000 bricks towering 3.5km (2.17 miles) high is what it would take to break a Lego brick.

Here’s a graphic to help visualize 375,000 Lego bricks.

lego

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For once we are not reporting on external content but on our own: I am excited to announce a totally new approach to executive learning and education on operations. Co-author and co-blogger Gad Allon and I have been working with our friends at McKinsey & Company to design the Executive Operations Experience: From Strategy to Execution.

A new collaboration between the Kellogg School of Management and McKinsey & Company.

Operations executives who are eager to stay current, hone their skills and broaden their networks, take note! In an exciting cooperative venture,  the Kellogg School of Management at Northwestern University in Illinois, USA, and McKinsey & Company will be offering a first-of-its-kind, experiential learning program starting in the fall of this year. Four, three-day sessions taking place at McKinsey’s model factories throughout Europe will provide a curriculum that covers all operational functions, jointly taught by both academics and consultants. Learn if the new 2013 program might be right for you here.

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Many years ago I used to live in Boston and would on occasion wander over to Harvard Square. A frequent stop would be Harvard Book Store a large independent bookstore. A lot of things have changed in Harvard Square since then but Harvard Book Store is still there. Forbes reports that one of the reasons is that a new owner made an aggressive bet on printing books in the store  (The Man Who Took on Amazon and Saved a Bookstore, May 10).

Essentially, Jeff installed a printing press to close the inventory gap with Amazon. The Espresso Book Machine sits in the middle of Harvard Book Store like a hi-tech visitor to an earlier era. A compact digital press, it can print nearly five million titles including Google Books that are in the public domain, as well as out of print titles. We’re talking beautiful, perfect bound paperbacks indistinguishable from books produced by major publishing houses. The Espresso Book Machine can be also used for custom publishing, a growing source of revenue, and customers can order books in the store and on-line.

You can walk into the store, request an out-of-print, or hard-to-find title, and a bookseller can print that book for you in approximately four minutes.

We have written about Espresso Book Machines before. They are a nifty piece of technology and from an inventory management point of view make a lot of sense for lower volume titles.

But here’s the thing: Amazon has the same technology. (more…)

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According to the WSJ, Something is rotten in the state of Walmart (“Wal-Mart Tries to Recapture Mr. Sam’s Winning Formula“)

When it reports earnings on Tuesday, the retailer is widely expected to post its second straight year of declining domestic same-store sales. Wal-Mart’s U.S. comparable-store sales already had fallen for six consecutive quarters, an unprecedented losing streak.

The article puts some on the blame on recent changes at Wal-Mart. In an attempt to attract wealthier customers, they have changed the mix of products they sell with stronger emphasis on organic food and trendy fashion goods. They have also reduced the clutter in the stores and improved what people refer to as servicescape. Wal-Mart also got away from its promise for every-day-low-prices. As growth slowed and Wal-Mart began running out of room to build new supercenters, the chain began running promotions and discounts on select products—Wal-Mart calls them “rollbacks”—while raising prices on other items.

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The Economist had a cover story on the emergence of three-dimensional printing, with the prediction that it will transform manufacturing (“Print me a Stradivarius“)

3D printing is a technology that allows people to transform digital designs into products (see video below). Products are built by progressively adding material, one layer at a time: hence the technology’s other name, additive manufacturing. The technology itself is not new, but the cost of such machines has gone down significantly in recent years.

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So Girl Scout cookies are very big in my household. Thin Mints in particular. And they are a very big business nationally. Wikipedia says that 200 million boxes are sold per year. However, change is afoot! According to the Wall Street Journal, the Girl Scouts are testing out reducing the number varieties that are offered from eight down to six (Cookie Cutters: Girl Scouts Trim Their Lineup for Lean Times, Jan 27). As is mentioned in this video (that is mostly about the over-professionalization of Girl Scout cookie sales), the goal is to cut cost and raise revenue:

So what the fortunate six flavors? The list starts with the five most popular flavors (this is take from the Girl Scout Cookies FAQ):

25% Thin Mints
19% Samoas®/Caramel deLites®
13% Peanut Butter Patties®/Tagalongs®
11% Peanut Butter Sandwich/Do-si-dos®
9% Shortbread/Trefoils

The sixth flavor is Lemon Chalet Cremes. It along with the other also rans make up just 23% of total sales. The flavors getting the ax include Thank U Berry Much and Dulce de Leche.

Now is it reasonable that this will make a significant difference in the Girl Scouts’ profit? (more…)

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