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Archive for the ‘Operations Strategy’ Category

Have you ever thought about how drugs get made? Not your Walter-White kind of drugs but proper ethical pharmaceuticals. As the Wall Street Journal tells it, major players in the industry like Novartis and Johnson & Johnson are taking new approach to producing drugs (Drug Making Breaks Away From Its Old Ways, Feb 8).

For decades, drug makers have used cutting-edge science to discover medicines but have manufactured them using techniques dating to the days of the steam engine. …

Under the new approach, raw materials are fed into a single, continuously running process. Many other industries adopted such a “continuous-manufacturing” approach years ago, because quality can be checked without interrupting production—with weeks shaved off production times and operating expenses cut by as much as 50%.

Until recently, pharmaceutical companies have been stuck making drugs the old-fashioned way, mixing ingredients in large vats and in separate steps, often at separate plants and with no way to check for quality until after each step is finished. Any desire to modernize was partly blunted, industry officials say, by the high margins netted on the industry’s string of billion-dollar-selling drugs.

To give you an idea of the scope of what is happening, the article reports that J&J is aiming to have 70% of its highest volume products produced under a continuous-manufacturing approach within eight years. (more…)

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I have a sweet tooth. I am rarely too full to pass on dessert. However, an article in Washingtonian magazine suggests that restaurants (at least those in metro DC) may inadvertently be saving people like me from ourselves by offering less attractive options for dessert or even foregoing offering dessert all together (Why DC Restaurants No Longer Care About Desserts, Feb 4). The interesting part of this is that the retreat from dessert is largely driven by economic and operational concerns.

In the post-crash economy, pastry chefs are no longer seen as essential employees but as pricey appendages.

“It’s not just saving the salary,” one restaurant owner told me. “It’s saving the space, too. To have a good pastry program, you need a designated area of the kitchen, you need a place to store the ingredients. The 10,000-square-foot restaurant has become the 7,000-square-foot restaurant. Everything’s smaller now. There isn’t the space.”

More and more, the task falls to chefs and line cooks who, lacking any background in baking, have contrived to fill their menus with simple, quick-fix solutions. Puddings, custards, panna cotta (an Italian term for what is essentially Jell-O made with cream) don’t require a lot of effort or expense; all can be made in the morning and stashed in the walk-in refrigerator.

Some restaurants have given up entirely. “More restaurants than you would think” are outsourcing their sweets to independent bakers, says Mark Bucher, who owns Medium Rare, with locations in Cleveland Park and Barracks Row. Bucher’s is among them. “You give them your recipes and they’ll make them for you. That way you can still say that they’re your desserts.”

(more…)

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Sustaining manufacturing in the US (or any high wage location) has been one of the recurring themes in this blog. Manufacturing has long meant well-paying jobs for those without advanced education. The loss of manufacturing jobs consequently causes much hand wringing as policy makers and workers about how a large number of people will achieve a modicum of middle-class financial security. Consequently, firms that are finding away to compete with US-based manufacturing are interesting.

That brings us to Zuzii, an LA-based firm producing made-to-order shoes that retail for $90. Here is a video from Marketplace about the company (A visit to LA-based shoe company Zuzii, Feb 16).

Here is the accompanying radio report that has some additional information.

So what is it about Zuzii that lets them succeed?  (more…)

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You may not be familiar with Xiaomi, but you likely will be soon enough. Xiaomi is a Chinese smartphone maker. It sold its first smartphone in 2011 and is already the third biggest player in the market. It also holds the distinction of being the most valuable tech start up going — yes, even more valuable than Uber. (See here and here for more.)

How did they get so big so fast? Mostly by being cheap. Their phones offer a level of value that, say, Apple cannot touch. A new iPhone without a contract with a carrier (i.e., without a subsidy) will set you back at least $600. If you want more storage and a bigger screen, that creeps up to near a thousand dollars. Xiaomi’s phones top out around $500 and they have offerings under $150.

So how does Xiaomi manage to offer so much for so little? That is the topic of a TechCrunch article (This Is How Xiaomi Keeps The Cost Of Its Smartphones So Low, Jan 19). Now part of their success is due to their distribution strategy. In China it sells only on-line. Hence, it can cut retailers or carriers out of the equation. But that is not the only factor. How they mange their product line and purchasing (and consequently their supply chain) also makes a difference.

 [Hugo] Barra [the company’s VP of International] explained that Xiaomi is able to make price concessions thanks to the combination of a small portfolio and longer average selling time per device.

Importantly, Xiaomi continues to sell older devices (and tweaked versions of them) at reduced prices even after it releases newer models.

“A product that stays on the shelf for 18-24 months — which is most of our products — goes through three or four price cuts. The Mi2 and Mi2s are essentially the same device, for example,” Barra explained. “The Mi2/Mi2s were on sale for 26 months. The Redmi 1 was first launched in September 2013, and we just announced the Redmi 2 this month, that’s 16 months later.”

(more…)

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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.

(more…)

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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.

(more…)

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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.

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(more…)

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