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It’s been a rough week for some IT guys. United Airlines, the New York Stock Exchange, and TD Ameritrade all had very public network failures. So far, no one has claimed that anything nefarious was going on. That is, these shortcomings were not the result of any cyber attacks or hacking attempts. Rather, they appear to have been the result of failure in standard operating procedures.

How can such a thing happen?

To some degree, such failures are not so much a question of if, but of when. No system is perfect and problems of one sort or another are inevitable. The question is what is an acceptable rate of failure. That is, if the NYSE cannot be guaranteed to be always working perfectly, what is an acceptable rate at which to have disruptions?

The Wall Street Journal had an article that somewhat relates to this point (What We Learned From the NYSE, United Airlines Tech Outages, Jul 9). The article notes that old-fashion land line telephones had an uptime of 99.999% — that is, Ma Bell would leave you without a working phone only about five minutes out of every year. Of course, old school phone systems were regulated and nudge to that level of reliability by their overseers. Unregulated, private networks aren’t held quite to the same standard. The article claims that firms are generally unwilling to invest to the level that would raise their reliability to the level of a land line. It also notes that there are other things going on.

Today’s problems with reliability are more fundamental, a reflection of the complexity of contemporary networks, the volume of data, the pace of change, insufficient organizational and cultural practices, and a legacy of arcane and poorly written business software that traditionally put little emphasis on usability or customer experience.

Outages persist because of the interdependency of computer systems, fueled by the rise of digital services across all industries, particularly those with customer-facing software such as mobile apps, according to former NYSE Euronext CIO Paul Cassell, now CIO of Pico Quantitative Trading LLC.

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IKEA has big growth plans. According to the Wall Street Journal, it aims to increase its revenue by €50 billion by 2020 — 74% higher than its 2014 revenue (IKEA Can’t Stop Obsessing About Its Packaging, Jun 17). Part of that growth is going to come from expanding into new markets, some may come from new formats, but a lot of it has to come from selling more stuff through existing stores. And that is going to require finding ways to cut prices to move more volume.

That’s where design comes in. IKEA is reviewing products in order to find ways to reduce their production and — importantly — their distribution costs. As this graphic demonstrates, this is pretty much a war on air.

BT-AC519A_IKEA_16U_20150616174511

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How to get people on to planes is something we have covered many times on this blog. However, it is always interesting when some airline tries something new. That gets us to Delta’s Early Valet (Airlines try to save time with speedier boarding process, Associated Press, Jun 1).

Delta’s Early Valet service will offer to have airline employees take carry-on bags at the gate and put them in the bins above assigned seats. The airline wants to see if its own workers can load the bins faster than passengers.

The service began Monday on about two dozen flights, and that number is expected to rise steadily during June, Delta spokeswoman Morgan Durrant said.

Early Valet will be offered through August on some departures from Delta’s busiest airports — Atlanta, New York, Los Angeles, Detroit, Minneapolis, Salt Lake City and Seattle.

It will be available only on flights that typically have a high number of vacationers. Presumably, business travelers know how to board a plane efficiently. Specially tagged bags will be stowed on the plane before boarding begins, Durrant said.

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How is this for a bold assertion: All your clothes are made with exploited labor.

That is the title of a recent Atlantic article which discusses what Patagonia learned when it audited the practices of its second-tier suppliers. These are not the firms sewing sweaters or assembling backpacks. Rather these are the mills producing fabric and factories producing components that go into those sweaters and backpacks. It turns out that a lot of those mills were engaged in some dubious practices.

About one-quarter of those mills are based in Taiwan, and the majority were found to have instances of trafficking and exploitation.

The problems stemmed from how those mills found the people to work their factory lines. They didn’t hire workers themselves and instead turned to so-called labor brokers. These labor brokers charged migrants exorbitant, often illegally high fees in exchange for jobs. There were other red flags, too. Suppliers would open bank accounts into which the workers deposited their paychecks, so that fees for labor brokers could be automatically deducted. Workers’ movements were also restricted through the confiscation of passports. The recruitment and hiring process used by many labor brokers can create a cycle of fear and debt that leaves workers neither able to leave their jobs nor to make a decent living.

The article goes on to explain that sourcing labor through brokers is both legal and common in Taiwan. It is arguably necessary for the mills to be cost-competitive. Still it is an embarrassment for a brand such as Patagonia which has staked quite a bit on being a better global citizen than the typical clothing brand. (Check out the social responsibility page on their website.)  Continue Reading »

EM-BE840_BARREL_16U_20150512051208Bourbon, as you may know, is having a moment. As the graphic above shows, production and sales have soared in recent years. But the Wall Street Journal reports that supply chain problems may keep the industry from growing further (Bourbon Feels the Burn of a Barrel Shortage, May 11). The specific issue relates to barrels. Federal law requires that bourbon be aged for two years in new oak barrels (Why is there a federal law about bourbon? See here.) and it is getting hard to get enough bourbon barrels.

The shortage reflects a supply-chain conundrum. Upstream, barrel makers face a wave of demand because a half dozen established bourbon distilleries and 300 new, craft distilleries are increasing production amid a bourbon boom. Downstream, they face a shortage of white oak wood used in barrels because the lumber industry hasn’t rebounded from the housing market’s collapse. …

All the growth might have been intoxicating except for a sobering fact: The demand for more barrels coincided with a massive contraction in the lumber industry. As the housing market crashed in 2007, sawmills shut down and loggers abandoned the market. Lumber production shriveled to about 5.9 billion board feet in 2009 from 11.7 billion board feet in 2005, according to the Hardwood Market Report, which tracks the forestry industry.

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What’s your address? For most readers of this blog, that is a pretty easy question to answer. You have a street name and a unique number. Throw in a postal code and maybe an apartment number, and you are good to go. For much of the world’s population, however, things aren’t so easy. Whether because they live in rural villages or poorly planned, rapidly growing cities, many people in developing nations don’t have a standard address. This creates a variety of problems. In particular, it cuts them off from many parts of modern commerce. How do you deliver a package to someone who can’t easily write down where they live? Note that this matters for a developing nation. If a country has an under-developed retail market, fostering an e-commerce industry is likely a better solution for many products than building out physical locations — but that cannot happen without some way of locating customers.

Solving this addressing problem is the goal of what3words, a start-up firm profiled in a recent BBC article (Giving everyone in the world an address, Apr 30). Their plan is to match every three-meter-by-three-meter square on the globe with a three-word triplet. Under this scheme, the house I grew up in becomes collapsed.networking.farm — which would only be better if it were collapsed.networking.firm.

The argument is that it is easier to remember three words than, say, a set of random numbers.  The goal then is to come up with words that are simple and unambiguous to use. Here is how their website explains the process.

Each what3words language is powered by a wordlist of 25,000 dictionary words. The wordlists go through multiple automated and human processes before being sorted by an algorithm that takes into account word length, distinctiveness, frequency, and ease of spelling and pronunciation.

Offensive words and homophones (sale & sail) have been removed. Simpler, more common words are allocated to more populated areas and the longest words are used in 3 word addresses in unpopulated areas.

How does this play out in practice? Continue Reading »

When a firm makes something, should it also take responsibility for delivering the product? For many firms, the answer is a firm”no”. They happily hand over the logistic of schlepping products to some third party. Most firms are happy to let someone else own trucks and recruit drivers. That’s what make the story of Ashley Furniture so interesting (A Radical Supply Chain Idea: Own Your Trucking Operation, Apr 29, Wall Street Journal).

Ashley Furniture Industries Inc., the largest U.S. maker and retailer of furniture, has resisted that trend. It owns and operates about 800 trucks and delivers the vast bulk of its own products from factories to stores. “We think it is a core competency,” says Todd Wanek, chief executive of the family-owned company.

Ashley employs about 3,000 people in transport and warehouse functions in the U.S., nearly a quarter of its U.S. head count. Its distribution centers feature racks specially designed to speed loading, and its managers arrange for trucks returning after they deliver their furniture to carry loads for other companies for a fee. Its drivers, dubbed Ashley Ambassadors, are also charged with building customer relations.

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