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Posts Tagged ‘Operations Strategy’

BN-FQ183_AMAZON_M_20141119154808

We have posted a few times about how miserable it can be to work in an Amazon fulfillment center. (See for example here.) We have also had a few posts on Kiva robots — both before and after Amazon bought the company in 2012. Kiva produces automation systems for fulfillment centers. These are essentially robots that bring shelves to pickers who select what is needed to complete customer orders. At the time Amazon bought them, Kiva’s clients were firms like Crate & Barrel that while significant catalog/web retailers had far less variety than Amazon. Indeed, one of our posts on Kiva was basically asking when the robot hordes were coming to a fulfillment center near you.

According to the Wall Street Journal, those hordes have now arrived (Amazon Robots Get Ready for Christmas, Nov 19). Back in May, CEO Jeff Bezos claimed that they would increase their number of robots from 1,400 to 10,000 over the year. What difference does this change make?

At a 1.2-million-square-foot warehouse in Tracy, Calif., about 60 miles east of San Francisco, Amazon this summer replaced four floors of fixed shelving with the robots, the people said.

Now, “pickers” at the facility stand in one place and wait for robots to bring four-foot-by-six-foot shelving units to them, sparing them what amounted to as much as 20 miles a day of walking through the warehouse. Employees at some robot-equipped warehouses are expected to pick and scan at least 300 items an hour, compared with 100 under the old system, current and former workers said.

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Americans are drinking more hard liquor — particularly in fancy cocktails. If you run a bar, this is good news to the extent that mixed drinks typically sell for more than beer. But this is potentially also a problem. Mixing a complicated drink is more time-consuming than just drawing a beer so service slows down. Further, you need to have enough trained staff. If your bar is competing on offering a variety of fancy craft cocktails, you need to make sure you always have a competent mixologist behind the bar at all times.

But there are creative ways around this problem. According to the Wall Street Journal, bars are now putting some drinks on tap (Mixed Drinks on Tap: Faster Manhattans, Negronis and More, Sep 10).

As demand for creative craft cocktails shows no sign of slowing, bartenders have struggled with how to serve drinks quickly while preserving the taste. From small bars to hotel chains, they are making large batches of cocktails and connecting them to tap systems like those used for beer. And cocktails on tap, also called kegged or draft cocktails, make it easier to serve mixed drinks at large events.

“You can sell it with the speed of a draft beer. It’s the best of all possible worlds,” says Anthony Caporale, a cocktail consultant and representative for Drambuie, the whiskey liqueur that sponsors a competition for kegged cocktails.

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The history of manufacturing is to some extent the history of substituting capital for labor. Devising a way of making things that is more reliant on equipment (or an organizing principle like the Ford assembly line) allows workers to be more productive and generate more output per hour worked. But capital requires, you know, capital. Adding new equipment like robots requires an upfront investment and having that investment payoff depends on scale at which the business operates. Big firms like Roger-&-Me era GM can afford robots even if they have limited capabilities but smaller firms have a harder time taking the plunge. Until now that is, if the Wall Street Journal is to be believed (Robots Work Their Way Into Small Factories, Sep 17).

Robots have been on factory floors for decades. But they were mostly big machines that cost hundreds of thousands of dollars and had to be caged off to keep them from smashing into humans. Such machines could only do one thing over and over, albeit extremely fast and precisely. As a result, they were neither affordable nor practical for small businesses.

Collaborative robots can be set to do one task one day—such as picking pieces off an assembly line and putting them in a box—and a different task the next. …

Small businesses often need flexibility “because they’re not just packaging cookies endlessly,” says Dan Kara, a robotics expert at ABI research, a market-research firm in Oyster Bay, N.Y.

Here is a graphic of describing some of the machines discussed in the article.

MK-CP408_SBAUTO_G_20140917141817

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Airlines compete, in part, by offering lots of origin-destination pairs. Not matter in which backwater burg you reside, they strive to get you to every equally lonely outpost. That might overstate the case, but most airlines try to offer options that connect most reasonably sized cities. Most airlines consequently favor hub-and-spoke configurations for their networks that funnel passengers from all over into a limited set of points (like Chicago and Houston) before heading back out to a range of cities.

But how should an airline arrange its flight into a hub? One option is to bunch arrivals closely together so that departures can similarly be bunched together. Call that peaked scheduling. Alternatively, the airline can have a smoother flow of planes coming in. Arrivals to a hub are spread across the morning as opposed to, say, having a large number of planes land between 9:00 and 10:00.

Peaked scheduling was used by most airlines for many years but has been on the outs for the last decade or so. Now, however, it is making a comeback (Airlines Create Rush Hours, Crowds and Full Flights, Sep 10, Wall Street Journal).

Instead of spacing flights evenly throughout the day, American in August started bunching them together. The change restores an old format of “peak” scheduling, grouping flights into busy flying times followed by lulls when gates are nearly empty. After Miami International, American next year will “re-peak” schedules at its largest hubs in Chicago and Dallas-Fort Worth. …

In Miami on a typical weekday, 42 flights depart between 9 and 10 a.m. Then between 10 and 11 a.m., only a handful are scheduled to take off. The process repeats during the day with 10 “banks” of flights that fill about 45 gates at a time.

The interesting part of this is that a peaked versus non-peaked schedule is really a trade off between customer service and operating cost. (more…)

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One of my sisters-in-law (I have several) runs a frame shop. A trip to my wife’s hometown often means stopping by her sister’s shop and hanging out while mats are being cuts and frames assembled. So I was curious then to read an essay to read in the New York Times about running a frame shop — even more so given its title, The True Price of Customer Service (Aug 21).

The essay is written by the founder of Artists Frame Service, which is based here in Chicago and has generally been very successful. It has been open for more than three decades and (according to the article) is 20 times bigger than the average US frame shop. Part of how it got that way is by promising faster service. Since its founding, it has promised to turn around orders in a week. Consistently delivering on that, however, creates operational challenges.

What I was really asking about was the one-week turnaround: Was it worth the trouble? Did it matter enough to customers? I was asking because it is not an easy commitment to keep. If someone orders framing on Monday afternoon, it will not go into production before Tuesday morning. And it has to be done by Friday for it to be inspected and wrapped and put in the pickup shelves by the following Monday. That means we really only have three days to get it done.

The challenge has always been that some weeks are so busy that my staff members have to work 10 or more hours of overtime, while other weeks are slower and their hours are cut. I considered switching to a 10-day turnaround. This would effectively double the amount of time that we have to complete an order. But I worried: Was this the equivalent of cutting Samson’s hair and losing the magic?

Let me start by saying that in terms of operations, this is a really nice problem to think about. It highlights some important points about managing processes to provide fast service. (more…)

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Here is an interesting factoid for you: 24% of all the vehicles manufactured right now are built on just ten platforms. What’s more, by the end of the decade that number is expected to grow to 30%. The number comes from an Automotive News article that looks at some of the consequences of the trend (With the push for standard parts, quality is key, Aug 6).

First, why automakers are trying to move in this direction is clear. Being able to build multiple model off one basic platform saves a ton of money in product development as well as tooling and build manufacturing facilities. Further, they benefit from a bit of risk pooling; if one model is not selling particularly well, that may be offset by another that can be built at the same plant. Thus, even if a model slumps, all that expensive capacity is till being used. (See this post from last fall on how Ford is cutting its number of platforms from 15 to 9.) Globalization also plays a part in this. What kinds of vehicles sell well might vary across different continents, but if European, Asian and North American models can all be built on the same platforms, manufacturers with a global footprint can be ever more cost competitive.

But what about suppliers? With purchased components making up a significant chunk of the cost of a vehicle, car makers would like standardization there. In a perfect world, you would have the same break system on every model built on a platform, but that brings challenges.

“The requirement that we face is clearly to develop products from the outset in such a way that they can be used in all the platform derivatives without the expense of making changes,” said Sabine Woytowicz, regional quality director at Valeo in Germany.

But with mass standardization, a part with a quality problem can now be supplied to millions of vehicles. That puts a premium on quality. …

Martin Thier, director of corporate quality management at the Mahle Group, said: “When obtaining an order, we check its feasibility for both product development and manufacturing even more closely.”

It comes down to “knowing precisely what you do, what you can do and how good you are at it.”

For example, he said, there is now a more intense interest in investigating how an inconsequential error in one part would produce an effect in a different component.

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I have never really given T.J. Maxx much thought. I can’t recall the last time I was in one of their stores, and going to T.J. Maxx has not been an obvious choice to me since I was in high school (and that tells you more about the shopping options in Manchester, NH, in the early 80’s than anything else). But now Fortune has an article singing the praises of T.J. Maxx — or more accurate its parent company TJX, which also owns Marshalls among other retail chains (Is T.J. Maxx the best retail store in the land?, Jul 24). The article is full of all sorts of interesting nuggets (TJX is basically the successor company of Zayre, another retailer from my childhood, who knew?!) as well as laying out seven “secrets” from the company playbook. Some of these are about positioning in the eyes of the customer (e.g., Put real treasure in the treasure hunt) or management talent (Find a CEO who gets retail). But many of their points go right to the stores operations and how it manages its supply chain.

The off-price business is a volume game: selling a ton of goods and selling them fast. The measure of speed here is how quickly a company turns over its inventory: TJX does that every 55 days, vs. 85 for its peer group, according to Morningstar. Indeed, the company is structured to whisk items through its distribution centers and stores—and a lot of items they are: TJX shipped some 2 billion units to its stores in its 2014 fiscal year (which ended on Feb. 1), up from 1.6 billion in fiscal 2010.

Former employees say that the stuff moves so rapidly that merchandise is often sold before TJX has paid its vendors for it. The busiest stores can take daily delivery of product, which employees put out on the floor right away—a “door to floor” approach that cuts down on the amount of space needed for backroom storage. Sources say items typically go on markdown if the turn rate is slower than about seven weeks, which also contributes to the rapid flow.

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