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.

It makes some sense that semiconductor manufacturers were out in front on these systems. Making chips requires lots of expensive, sophisticated equipment with relatively little direct labor (in comparison to, say, assembling cars). Hence, the machines truly control the process so one could think of doing sophisticated experiments without worrying about humans introducing unwarranted variability. Now it seems that similar approaches are being developed in other forms of manufacturing that don’t necessarily happen in a clean room and involve working at a micron level. But how can this kind of analysis be useful?

One obvious answer is tighter quality control.

At Harley-Davidson Inc.’s newly renovated motorcycle plant in York, Pa., software keeps a constant record of the tiniest details of production, such as the speed of fans in the painting booth. When the software detects that fan speed, temperature, humidity or some other variable is drifting away from the prescribed setting, it automatically adjusts the machinery.

“It allows us to be more consistent,” says John Dansby II, vice president for global manufacturing at the motorcycle maker. In the past, he says, operators had a bit of leeway on paint jobs and each could do the work in a slightly different way. Now it is supposed to be an exact science, not an art.

Note that this implies some real discipline in how the process is designed and executed. They are limiting discretion in how workers are doing their jobs in order to assure consistency. Of course, process standardization is often step one in many lean or quality programs. It may make the job more rote but it does increase productivity.

A second use of these system is to identify bottlenecks.

Harley has also used the software to find bottlenecks that could keep it from its goal of completing a motorcycle every 86 seconds. Recently, by studying the data, Harley managers determined that installation of the rear fender was taking too long. They changed a factory configuration so those fenders would flow directly to the assembly line rather than having to be put on carts and moved across an aisle.

This is an interesting twist. I suspect that front-line managers would have a pretty good idea of where issues in product flow arise. Automating the data collection, however, can put concrete numbers on what kind of changes are needed or what kind of payoff can be expected from saving a handful of seconds on a task.

So is this a good idea?

Whether it is or not depends on what we take as the status quo. That is, it may be a dumb idea but it could be less dumb than what they are currently doing. As we have posted about in the past, American implemented a random process about two years ago. (See here and here.) Letting those who don’t need an overhead bin go first seems to build on this. If they are scattered around the plane, then they are effectively boarding randomly. It would also seem to free up aisle space more quickly to the extent that those with just a laptop bag can get into their assigned seat tout de suite. According to the Associated Press (American will favor passengers without roller bags, May 16), American believes that this will save them two minutes per flight.

But there are some catches here in how they are implementing this policy.

American tested the new boarding procedure at several airports earlier this year and began applying it to all flights Thursday. Passengers carrying just a personal item — a purse, backpack or computer bag that will fit under the seat — will board right after Group 1 premium passengers and before boarding groups 2, 3 and 4.
The airline said that it will let passengers check a carry-on bag at the gate at no charge. That means savvy travelers will be able to move up in the boarding order and avoid checked-bag fees — $25 for the first bag, $35 for a second on flights within the U.S. — although they’ll have to retrieve their bag at baggage claim after they land.

Consequently, passengers don’t have to commit to parting with their roll-aboard until they are at the gate. Indeed, they have incentive to do so since they dodge the checked bag fee. The question then is whether the additional work of gate checking bags will ultimately outweigh the time gained from less fighting for overhead space.

I suspect that this system might work well. Why? Because there is now a reason to for passengers to give up their bags early. Currently, when a flight is very full, the gate staff announces that overhead space will be tight and if you are in a late-boarding group that you may be up a creek. It’s not clear that announcement is enough of reason to part with your bag. There is no clear benefit to giving up the bag so why not see if you luck out? Now, there is a reason to give up the bag. Said another way, gate checking bags are already part of the process but this system may help it be a bit more orderly.

A final point, American is not alone in playing with this approach. A former student emailed last month explaining that Air Canada was piloting such a process.

Teams deal with StubHub because the online reseller provides a trusted outlet for season ticket holders to dispose of tickets to games they don’t attend. Buyers also have confidence that tickets on StubHub are not counterfeit.

But the first signs of backlash against StubHub appeared in the past offseason, when MLB renewed its five-year agreement with the website.

Two teams, the New York Yankees and the Los Angeles Angels, opted out of the partnership to form their own ticket exchanges with Ticketmaster because they wanted more control over pricing on the secondary market, said Bob Bowman, CEO of MLB Advanced Media.

StubHub spokesman Glenn Lehrman was more blunt: “There’s one clear reason why those teams are not using StubHub. They did not like to see tickets resold below face value. We let the market dictate prices.”

The Cubs also considered opting out. Team officials were unhappy after some of their tickets were listed on StubHub for less than a $1, not including fees, for the team’s final three home games last season. In 2012, the Cubs lost more than 100 games for the first time since 1966.

To address some of the league’s concerns, StubHub now includes fees in ticket listings. The cheapest baseball ticket on StubHub is $6, which includes commissions and a delivery fee.

The Cubs also are one of two teams that cut off StubHub sales six hours before game time, up from two hours in 2012. By ending sales on StubHub earlier, the Cubs presumably hope to sell more last-minute tickets.

We have posted about the Dodgers and the Evil Empire opting out of MLB’s deal with StubHub before. As I wrote then, I do not see how artificially setting a floor for aftermarket tickets is beneficial for season ticket holders. I went a bunch of Cubs games last season and, frankly, a buck might have been a little too rich for my blood by the time September rolled around. Pricing really low is the only way season ticket holders are going to be able to unload some tickets.

Forcing season ticket holders to sell on a tight deadline is also not particularly friendly for season ticket holders. If the game is in high demand, it doesn’t matter. They can ask for a premium and will likely be able to get it. If, however, it seems unlikely that the seats will be in demand, sellers likely need to discount more aggressively in order to move the tickets before the deadline. At 9:00AM, a seller has just four hours (instead of eight) to match with a buyer for a game that starts at 7:00PM.

Apparently, not many Cubs season ticket holders think that the Rockies are going to draw well. Sellers were offering four seats for a grand total of $40 when the Cubs were asking for $141.20 (including service fees) to sit in the same section.

The delicate business of transporting fresh-cut flowers from field to vase is being quietly rearranged, with more and more blooms taking a slow steam by sea from South America and Africa instead of being whisked by air.

Global cut-flower sales approached $14 billion last year and most move by cargo plane, but high jet-fuel costs and improvements in chilling technology are prompting a shift to more ocean shipping, particularly for imports to Europe.

Ocean transport costs can be half those of airfreight, an important consideration for price-conscious supermarkets and florists. Mom is unlikely to notice the difference in her Mother’s Day bouquet. Proponents say certain roses, carnations and other hearty varieties show no ill effects from the sea voyages spent in refrigerated containers a degree or two above freezing.

According to the article, some industry participants say that ocean shipping could account for a significant chunk of the market in coming years. Currently, airfreight accounts for 99% of shipments.

There are, of course, some challenges to overcome. As noted above, this works better for some varieties than for others. Also, it takes a fair amount of coordination between multiple parties to make this work.

Transporting flowers by container ship takes significant cooperation among growers, shippers and wholesalers. Blooms must be chilled to near freezing shortly after harvest, putting them in a kind of suspended animation, and then maintained at the temperature in refrigerated shipping containers for a sea transit that can take up to two weeks. …

Ms. Scattini said better insulated, fully welded steel containers are among the improvements in refrigeration equipment over the past decade that have made the procedure possible.

Flowers sent by cargo plane undergo a one- to two-day transit. They are cooled after harvest, but not to near-freezing, and they can experience temperature changes inside air-cargo holds or during loading.

A fun story. At some level, this seems like a comparison between innovative and functional supply chains (to use Marshall Fisher’s terms). Importing flowers would generally put a premium on speed since the product has such a short life span. That is, they sound like innovative products. On the other hand, cut flowers are now sold through a wide variety of outlets and price matters. Finding a way to reduce shipping costs out and treating at least some varieties as functional then makes sense. A florist could  have a base supply of some varieties cheaply available and supplement them with a mix of other blooms so regular customer still sees changing fresh offerings over time.

The first, written in Forbes by Tom Ryan, is about AmazonFresh, the grocery overnight delivery service founded by Amazon in 2007, but still only serving the greater Seattle area.  Why?  In class we show the difficulty of this business and I praise the operational focus of Amazon.  If Amazon is using this as a testbed for future expansion, it confirms our findings that this is a slow business where one must build density household by household.  It simply takes a long time to arrive at profitable density: even for Amazon, it’s taking more than 6 years.

In his article, Tom proposes a second raison d’etre of AmazonFresh:

AmazonFresh isn’t about “competing with a small market with razor-thin margins and a checkered history.” It’s all about helping Amazon.com attain the scale to support its ambition to build a national same-day delivery shipping model.

In other words, it’s not about making money in groceries but more strategic: groceries would just be akin to providing “base capacity” (stable, predictable, frequent) to Amazon’s aspirations for same-day delivery shipping.  This is an interesting conjecture and it has several good reasons behind it, but I am skeptical that moving into same day logistics will be a profitable move for Amazon.  (How likely is it that it can do this better than say UPS or FedEx ground? And, how long will it take to build the household customer base to provide this base capacity at every node of the network?)

The second story is related along two dimensions: it is on grocery delivery and is written in Seattle.  But that’s where the similarities end.  The second story is a study by University of Washington Professor Anne Goodchild and doctoral candidate Erica Wygonik and has a more interesting thesis:

University of Washington engineers have found that using a grocery delivery service can cut carbon dioxide emissions by at least half when compared with individual household trips to the store. Trucks filled to capacity that deliver to customers clustered in neighborhoods produced the most savings in carbon dioxide emissions.

“A lot of times people think they have to inconvenience themselves to be greener, and that actually isn’t the case here,” said Anne Goodchild, UW associate professor of civil and environmental engineering. “From an environmental perspective, grocery delivery services overwhelmingly can provide emissions reductions.”

The article has two very cool graphs (one is below, graph2) but, to me, the interesting fact is:

“We tend to think of grocery delivery services as benefiting urban areas, but they have really significant potential to offset the environmental impacts of personal shopping in rural areas as well,” Wygonik said.

So, it is not just about density, but also about the comparison of the e-grocers “traveling salesman route” compared to the sum of individual customer routes (each almost going back-and-forth along spokes to a grocery store at the hub):

This diagram shows how a delivery truck can save on mileage when compared with personal vehicles driving to and from a store.

Excellent point for the SOCIAL benefits in fuel, time, and carbon reduction.  The challenge, however, is how to align this with the profit concerns of the e-grocer.  Aligning social and individual preferences using carbon taxes would ease this challenge.  Perhaps some time in the future…

Of course, the US ain’t exactly the right benchmark here. The real alternative is China and  the Wall Street Journal reports that wages there are four times higher than those in Bangladesh (The Global Garment Trail: From Bangladesh to a Mall Near You, May 3). That kind of cost advantage together with a tariff advantage with the EU gets you growth like this.

So what happens from here? One might expect that brands will bail out of Bangladesh but that is not really a guarantee of lowering the risk of a disastrous industrial accident or a scandal tied to the poor treatment of workers. As a different Wall Street Journal article tells it, there are plenty of  developing nations in Asia whose track records on worker treatment range from spotty to godawful (Apparel Retailers Confront Tough Options, May 8).

While Bangladesh has become a poster child for what’s wrong with Asia’s factories, Myanmar, Pakistan, China, Indonesia and India are even riskier to brands for sourcing goods and investing, according to Maplecroft, a risk-analysis firm based in Bath, England.

In September, more than 300 workers died as a result of two factory fires in Pakistan, with workers trapped behind locked doors in both cases. One of the fires, at a Karachi textile plant, ranked among the deadliest industrial factory fires in history, surpassing Thailand’s Kader Toy fire, which killed nearly 200 more than 20 years ago. Factory fires also are a problem in China and India.

In Cambodia, mass-fainting incidents, in which large groups of workers faint within a short period, have raised concerns about worker malnutrition, excessive heat and poor ventilation of factories. As many as 2,000 factory workers passed out on the job in 2012, according to union and government statistics.

Of course, the $64,000 question is whether anyone cares. It is natural to feel outraged that workers have to risk their lives to make polo shirts. What’s less clear is whether enough people are willing to translate moral outrage into economic action. The reality is that we really REALLY like cheap clothes. Check out this graph of how American spending on apparel as a percentage of disposable income has changed over the years (Apparel Spending as a Share of Disposable Income: Lowest in U.S. History, Seeking Alpha, Mar 21, 2010).

Now Americans as a whole have become a lot richer over the last eighty years but a bigger denominator is not the only explanation here. A drop in the real price of shirts and shoes is also involved and we now own a lot more clothes. For those with a teenager in the house, think about how many pieces of clothing they have relative to what you had as a kid. Or think about how much closet space your parents had and whether you would consider a walk-in closet a necessity. (For more on this see Elizabeth Cline’s Overdressed: The Shockingly High Cost of Cheap Fashion.)

In a world where people are happy to snap up cheap clothes, it is hard for a large-scale brand to buck the trend and take on additional cost in order to ensure ethical treatment of workers in its supply chain without some evidence that consumers are willing to pony up. Some retailers, however, appear to be trying to get ahead of the curve (Some Retailers Say More About Their Clothing’s Origins, New York Times, May 9).

Nordstrom says it is considering adding information about clothes produced in humane working conditions. …

Nordstrom said it had provided factory information in response to shoppers’ calls, and was considering going a step further, said Tara Darrow, a spokeswoman. The Nordstrom Web site specifies eco-friendly products, “so how can we do the same with people-friendly?” Ms. Darrow asked. “Hearing from customers and knowing they care definitely compels us to want to do more.”

While one can applaud Nordstrom taking action, it is not clear that they and similar firms are in position to change the market. They play at a higher price point and at a minimum need to aim for higher quality. If quality correlates with well-run factories that employ workers sufficiently skilled that they can choose where to work, Nordstrom may be able to offer transparency pretty much for free since this ain’t really their problem. It’s going to take pressure on more down market retailers for there to be substantive improvement in global supply chains. There is likely an analogy here with the American food supply chain. An individual consumer may be appalled by the conditions on factory farms and that might create an opportunity for Whole Foods to sell grass-fed beef and cage-free eggs but as long as most of America eats on a tight budget, industrial-scale farming isn’t going away.

With a lean economy squeezing their sales, thousands of restaurants are extending their hours to try to get more people through the door. But franchisees are learning that it can take a lot of work to get the most out of off-hours snackers.

The basic problem: Restaurants need to shoulder more expenses to keep the lights on longer—but the crowds usually aren’t that big at odd hours, and customers don’t end up spending very much. In fact, franchisees and industry experts say, some markets may not have enough all-night types to make the concept work at all.

The drop off in traffic in the wee hours of the morning is illustrated here.

We have touched on the question of how service providers should set their hours of operations previously in this blog but it’s been a while. I have long found this an interesting question if only because I know of no really good theory that provides a general illustration of the trade offs involved. One can argue that having longer hours of operations than a competitor can be advantageous since for at least part of the day the firm is a monopolist. It can then either charge more or offer lower quality and still attract customers. (We covered that argument here.)

Alternatively, one can point to examples in which restricting hours of operations can lower costs and improve profits if customers are willing to conform to the firm’s schedule. Chicago’s Saturday Audio Exchange is my favorite example along these lines (and is discussed here).

Neither of these arguments really fit the quick-service restaurant example. For one, these are not really search goods in the sense that not many customers are going to alter their dinner time to accommodate a burger chain with very short hours. Also, expanding hours is not going to cover reducing quality or increasing price. One of the main reasons to go to a large restaurant chain is that the product is consistent. Losing  sales at the lunch peak because of a quality degradation is probably not going to be offset by people with the munchies at 2:00AM. A similar argument would apply to raising prices in a competitive market.

So what does the article recommend? For one, it discusses essentially the reverse of my argument for restricting hours of operations. The Saturday Audio Exchange story is more or less training customers to come in a restricted window. The article makes the case that success with extended hours requires perseverance to train customers that you are open late. That is, it takes time for people to realize that late night (or early morning) food is a possibility.

One thing that the article doesn’t mention that some firms do is to tweak the menu so that a limited selection is available at off hours. That simplifies operations and should lower cost while still offering increased convenience.

As the Wall Street Journal tells it, there are quite a few options. A recent article discussed process changes and new technologies different firms are using to try and reduce customer waits (Retailers Wage War Against Long Lines, May 2). The most interesting to my mind was what supermarket chain Kroger is trying.

Supermarket giant Kroger Co. is winning the war against lengthy checkout lines with a powerful weapon: infrared cameras long used by the military and law-enforcement to track people.

These cameras, which detect body heat, sit at the entrances and above cash registers at most of Kroger’s roughly 2,400 stores. Paired with in-house software that determines the number of lanes that need to be open, the technology has reduced the customer’s average wait time to 26 seconds. That compares with an average of four minutes before Kroger began installing the cameras in 2010.

“The technology enabled us to execute at the front of the store without that additional (labor) expense,” said Marnette Perry, senior vice president of retail operations for Kroger.”It’s remarkable that we’ve been able to improve execution as much as we have without a big price tag.” …

The system includes software developed by Kroger’s IT department that predicts for each store how long those customers spend shopping based on the day and time. The system determines the number of lanes that need to be open in 30-minute increments, and displays the information on monitors above the lanes so supervisors can deploy cashiers accordingly.

So Kroger isn’t so much using technology to substitute for labor or to make labor more productive as it is making sure that its staffing is tailored to actual demand. This is a pretty neat idea. Stores have long been able to use traffic counters to build a forecasting model of customer arrivals. I have seen demos of fancier systems that promise to be more accurate than simple electric traffic counters. For example, they may be able to differentiate between two adults walking in and a child trailing a parent.

But in, say, a grocery store, that is only half the battle. At a call center forecasting how many calls will arrive in some time bucket is sufficient since (in a perfect world) customers move immediately into service upon arrival. In retail, you also need to estimate how long people will shop since customers aren’t ready to move right into check out after walking through the door. That’s where the cameras above the registers matter. Otherwise, one has to estimate the time of arrival at the register from check out receipts but that builds in wait time at the registers. That is, one could estimate that a spike in arrivals translates into a spike in check outs 25 minutes later. But if you are just looking at register receipts, you don’t know whether customers are shopping for 24 minutes and waiting in line for only one minute or shopping for 20 minutes and waiting for five. With the cameras, one should be able to build a decent model of how long shopping trips are and how they might vary by day of week and time of day.

The question then is how to deploy staff to take advantage of this information. Compare this to a call center. In a conventional call center, they have a forecast of how many call will come in on, say, Tuesday morning. On any given Tuesday, that forecast might be wrong. The call center manager might realize that but there is not much the manager can do. It may not be possible to call in extra staff if the actual number of calls significantly exceeds the forecast. The front-end manager at your local Kroger might actually be in a position to do something. Since there is a time offset between when customers enter the store and when they check out, he or she has a bit of time to staff up the registers — assuming that there is flexible labor in the store to pull from stocking shelves.

So what’s a reasonable wait to charge your Tesla?

I pulled into Barstow, and both superchargers were in use. Neither owner was anywhere to be seen. So I waited.

After 30 minutes one Tesla owner showed up, and after another 10 minutes of charging, he was on his way. I plugged in, and waited another 40 minutes to get mostly charged up. The other Tesla was still plugged in, hogging the charger, unable to be unplugged.

And that’s the rub: Charger etiquette. The Model S retails between $70,000 and $100,000. These cars are bought by people who are rarely told “no.” They detest waiting.

This is just a fun queuing story. It reflects a basic fact of queuing systems. Large service systems (i.e., one’s with high arrival rates) will need a lot of service capacity but that capacity can be heavily used and still provide good service (in the sense of short waits). Thus they are very efficient. Think of a large truck stop off an interstate. It may have twenty pumps that are almost always busy but drivers rarely have to wait more than a minute or two for their turn.

Conversely, service systems with low arrival rates are prone to being very inefficient. They don’t need an absolutely large amount of capacity to provide good service but that capacity is not going to be very heavily utilized. That’s a Tesla Supercharger station. Even if charging up a car took as little time as filling a gas tank, Tesla would need to provide relatively more capacity than a gas station in order to assure short waits. Throw in that charging takes tens of minutes, and the situation gets much worse. I would venture that Tesla could double or triple the number of chargers in Barstow and still not match the convenience of gassing up. And that is not even accounting for rude behavior of drivers going AWOL while their car hogs a charging station.

Now Ms. No Status may get her chance to score an upgraded if she is willing to open up her wallet as several airlines are starting to auction off upgrades (Flier Auctions: Better Seats, Going Once, Going Twice…, Wall Street Journal, Apr 24).

Airlines overseas have started auctioning off upgrades, with travelers in economy or premium-economy cabins bidding against each other for seats that offer better space, food, service and sleep. Bids for premium seats that otherwise might fly empty begin online weeks in advance and typically close 48 hours before takeoff. The company behind the auction technology says it may come to the U.S. soon.

So far, airlines say travelers end up spending more for upgrades in online auctions than they would spend at check-in. Unlike a casual offer at an airport kiosk, the auction system can generate excitement as fliers strategize about how to win.

“You can buy the cheapest ticket and still have a chance of sitting in business class,” said Danny Saadon, North America vice president for El Al Airlines, where the average winning bid for a business-class upgrade is $800. That’s a deal when the airline’s business-class tickets cost anywhere from $3,000 to $10,000 more than coach.

Different airlines run the auction in different ways since the system from Plusgrade, a New York City company, allows flexibility. An airline can choose who can participate in the auction so it may choose to offer the opportunity to bid to all customers or only those that bought in a particular fare class or to those that meet a certain profile. Besides access to business class, El Al also auctions off empty middle seats to those in couch want some extra elbow room.

Clearly, this is an interesting program. In some ways, the only surprising thing is that it is just coming to the market now.

The fact that customer pay on average more than they do when offers are made at check in reflects what I said above. Frequent flyer status does not necessarily reflect willingness to pay. A kiosk-offer designed to move, say, four seats has to be priced at the expected level of the fourth highest value for moving up. An auction, on the other hand, extracts more from those who really want to move. (OK, I acknowledge that is based on some very sloppy logic but it gets at the intuitive idea that a flat price cannot discriminate among people with different values.)

This is made worse by the information asymmetry between the firm and its customers. As is noted in the article, customers don’t how many seats are available, how many other people are bidding and so on. (Note that a similar issue exists for Delta’s program where customers bid to get bumped from oversold flights.)

A final point. There has to be some losers here. The article says that airlines claim that they are taking care of their high status frequent fliers but that can only go so far. A top-tier flier who bought a full fare ticket will be OK but a mid-tier flier who once would have had a hope for an upgrade is likely now stuck in coach.