By Ken Boyer, Fisher College of Business and Rohit Verma, Cornell University

Authors: Operations and Supply Chain Management for the 21^st Century, 2009, Southwestern Cengage Publishing

Well, it is that time of the year.  Fall is approaching, the leaves are turning colors and it is getting colder.  Ok after this past summer, maybe it is not quite getting cold yet.

But, it is college football season … and that means that millions of fans are looking for their tickets in the mail.  Have you ever thought about the operational challenges here?  Consider this:

• Ohio Stadium, AKA the Shoe, will host 8 home football games for the Ohio State Buckeyes this season.
• Seating capacity is 102,329, making the Shoe the 4th largest stadium in the NCAA and the 7th largest non-racing stadium in the world
• It seems like this would provide sufficient capacity, except as 3rd year professor at OSU and 0 year ticket receiver, I can honestly say NOT SO MUCH!  Faculty members apparently come after students and large ($$ wise, not size wise) donors).  There are at least 4 people who want every ticket – at least the good ones, you know Miami, Penn St. and that school from up North.

What the OSU athletic department do to get tickets out?

• If all 102K are given to season ticket holders, each of whom get 2, that involves mailing 51K envelopes at a cost of … does anyone know what a stamp costs anymore?  Let’s say $2 since the envelopes are big (at least I have heard).  That is $102K to the post office.
• Since we know the USPS never loses anything, no problems there.  Oh wait a minute, suppose 1 in a thousand envelopes gets lost —- 51 angry people calling the ticket office — or a lot more.
• Or, suppose 1 in 10 people are not happy with their seats (or lack thereof) … imagine how many calls the ticket office gets … or emails … or in person tirades.
• Think about the number of people who lose their tickets — or try counterfeiting them.

All of this makes me think I am glad I don’t work in the ticket office.  Then again, I could get tickets!

Go Bucks, Beat Marshall!

The Shoe on a sunny fall Saturday

To Read More about the Shoe: http://en.wikipedia.org/wiki/Ohio_Stadium

Well … beating the odds and by focusing on the basics that made this company a household name in the past – Ford does it again. A recent article in the Time Magazine (click here to read the entire article) mentions that in order to become more efficient, Ford is closing two brands and drastically reducing number of parts , inventory and workforce. The article also mentions Ford’s original classic success – Model T (the car that was made in any color you wanted as long as it was black!).

Ford’s path to higher effectiveness in its production process relates to achieving a better balance between the economy of scale (volume) and economy of scope (variety). Earlier, by expanding the product line extensively (to increase market-share), Ford’s cost structure had become too high and its inventory management too complex. Now by streamlining product line and by renewed focus on quality, Ford can improve both its cost and market performance.

Many concepts for quality management being implemented by Ford are discussed in detail in Chapter 2 of our Textbook. The balance between variety and volume is discussed within the context of Product-Process Matrix in Chapter 4. Enjoy!

A couple of years ago we started hearing the news that once fact-growing company Starbucks was starting to experience some financial difficulties. Clearly its net income took a sharp decline during late 2008.

However more recently Starbuck has again started showing growth in its net income and stock valuations. So what may be the cause of this reversal of trends? How about a careful and successful implementation of lean thinking as one of the possible causes? A recent article in The Wall Street Journal explains how Starbucks was able to apply lean thinking to reduce waste and improve the performance of its store operations.

To view an interactive display of Starbuck’s application of lean principles click on the image below.

By Ken Boyer, Fisher College of Business and Rohit Verma, Cornell University

Authors: Operations and Supply Chain Management for the 21^st Century, 2009, Southwestern Cengage Publishing

The early weeks of July include the famous Tour de France, which Lance Armstrong is trying to win for, what, the millionth time?  There are numerous other cycling events around the world.  In its second year, the Pelotonia is a grassroots bike tour with one goal: to end cancer. Pelotonia raises money for innovative and life saving cancer research at The Ohio State University Comprehensive Cancer Center – James Cancer Hospital and Solove Research Institute. Driven by the passion of its cyclists and volunteers, and their family and friends, Pelotonia’s annual cycling experience will be a place of hope, energy and determination. Pelotonia proudly directs 100% of every dollar raised to research. It is a community of people coming together to chase down cancer and defeat it.

Pelotonia Logo

        A noble purpose and a fun event for the ~3000 participants that ride – but what does this have to do with managing operations?  A lot.  Let’s start with a list of volunteer opportunities from the Pelotonia website:

• Pre-Event Course Preparation
• Expo Area Setup
• Site Logistics
• Food and Beverage Service
• Registration / Information Tables
• Bike Maintenance
• Communications Crew
• Road Crew/Support Vehicles
• Bike Corral & Storage
• Bag Check & Luggage Management
• Merchandise Sales
• Site Beautification

There is another link that describes volunteer opportunities in detail.  There is a mechanical crew that provides mechanical assistance to riders along the route.  There is a luggage management team to organize transportation, delivery and tracking of riders’ baggage during the event.  There is a route signage team that puts up route signs at the beginning of the event and then takes them down on completion.  I hope this team is good with its GPS – imagine hundreds of lost, hot and tired riders!

            Putting together an event like this requires excellent project management, careful inventory management (remember those luggage bags and imagine trying to get all of them to the right place – plus food management, signs, parts etc.), scheduling and numerous other activities.  The Pelotonia is sponsored by Huntington Bank, the Limited Brands foundation and Peggy and Richard Santulli.  This group has committed $8 million in funding over five years so that 100% of funds raised by riders go directly to support cancer research.  The thousands of riders and volunteers raised $4.5 million in 2009 and are hoping to better that amount in 2010.  So, grab your bike, or find a rider to sponsor – it is for a great cause!

Sponsor a Pelotonia Rider:

• http://www.pelotonia.org/ride/about.jsp

CNNMoney.Com recently published a list of ten most American cars. The list contains ranking of cars based on the percentage of parts they used are built in the United States. The list includes five car models with either “Toyota” or “Honda” brand name. If a similar list were put together (say) 15 or 20 years ago, I am very sure that we would have only seen cars made by the big three US automobile corporations.

Source: http://money.cnn.com/galleries/2010/autos/1006/gallery.american_made/index.html

While these results may not be surprising to some readers, I wonder how the list will change in another ten to fifteen years. Will be see a TATA (India) or a Hyundai (Korea) on this list? And how will a similar list look like for (say) China, India, Russia, Brazil or other emerging markets?

When a patient is admitted to a hospital for a surgical procedure, then they too need a clean, safe and comfortable accommodation – in addition to appropriate clinical and medical care, of-course. In fact, depending on the nature of the hospital visit, the patient needs include many of the same aspects of a hotel stay such as food & beverage, service, and so on.

So to enhance their effectiveness, should the healthcare facilities focus on what they do best (i.e. clinical and medical care) and partner with hospitality firms to offer the services which are their core competence?

Does the above idea seem far-fetched? Maybe not so — we have witnessed outsourcing and supply-chain partnerships between manufacturing firms located around the world for the last several decades. Similarly, during the last few years, there have been many-many successful examples of service outsourcing and supply chain partnerships across many industries including financial services and other business processes.

Maybe hospitality and healthcare organizations should seriously consider active partnerships and build on each other’s strengths. Whenever possible, this approach will allow them to focus on their own competitive priorities and core competences and leave the rest on their respective supply chain partners. Still not convinced – take a look a this news article which describes how an orthopedic clinic has partnered with Hilton to provide a better care to its patients. A win, win for everyone … and 20% cheaper.

http://www.startribune.com/lifestyle/health/92146304.html

Authors: Operations and Supply Chain Management for the 21^st Century, 2009, Southwestern Cengage Publishing

Its hard to turn on the TV or access the internet right now without hearing something about the huge oil spill from the Deepwater Horizon oil rig in the Gulf of Mexico.  On April 20, 2010 the rig had a huge blowout, blew up, caught on fire and sank.  The blowout killed 11 workers, will cost several billion dollars to stop and clean up, and is leaking between 10,000 and 250,000 barrels of oil per day into the Gulf, depending on which estimates you believe.  No matter your point of view, this is a disaster of tremendous magnitude.  But what does it have to do with operations management?  Read on to see a few linkages:

Quality Management: One of the central pieces of equipment in the disaster is the Blowout Preventer (BOP).  Essentially a very expensive Poke yoke or mistake proofer, the blowout preventer did not work.  For more information on how blowout preventers are supposed to work, go to the following link:

Project Management: A useful rule of thumb for major projects is that “anything that can go wrong, will go wrong” or “expect the unexpected.  According to a 60 Minutes interview with Mike Williams aired on May 16,   the initial estimate to drill the well, 5000 feet underwater and then 13,000 feet below the bottom of the ocean, was 21 days – at 1 $million a day.  But the well took twice that – 42 days.  With the schedule slipping, the BP manager ordered the drilling speed to increase.  Thousands or millions of project managers over the years have “crashed a project” – speeding up the pace or spending more money to finish earlier, yet often this comes with an increase in the risk of quality problems.  In this case, the Williams says “ going faster caused the bottom of the well to split open, swallowing tools and that drilling fluid called “mud.”  The original well had to be abandoned and a new one started.

Supply Chain Conflict: BP was the customer of a company named Transocean, which contracted to drill the well.  When things get outsourced, there is often tension and competing objectives.  According to Mike Williams and CBS:

“In the hours before the disaster, Deepwater Horizon’s work was nearly done. All that was left was to seal the well closed. The oil would be pumped out by another rig later. Williams says, that during a safety meeting, the manager for the rig owner, Transocean, was explaining how they were going to close the well when the manager from BP interrupted.

“I had the BP company man sitting directly beside me. And he literally perked up and said ‘Well my process is different. And I think we’re gonna do it this way.’ And they kind of lined out how he thought it should go that day. So there was short of a chest-bumping kind of deal. The communication seemed to break down as to who was ultimately in charge,” Williams said.”

To see the entire 60 minutes interview, click on the following link.  See how many operational challenges can be seen.  Clearly, in hindsight, there were numerous decisions that should have been made differently.  Unfortunately, hindsight is 20/20 – in oil rig drilling it is hard to determine the proper course of action in the moment.

Sources:

• http://www.cbsnews.com/stories/2010/05/16/60minutes/main6490197.shtml?tag=currentVideoInfo;segmentTitle
• Video of Mike Williams discussing the BP oil disaster on CBS 60 Minutes: 
• http://www.cbsnews.com/video/watch/?id=6490348n&tag=related;photovideo

Nurse Kellie Meserve works at a wheeled workstation as physical therapist Laurie Hettinga works at a drop-down computer workstation last week at the acute care of the elderly unit in Virgina Mason Medical. The workstations are an element of Virginia Mason's effort to boost efficiency and reduce waste.

May 16, 2010

By Ken Boyer, Fisher College of Business and Rohit Verma, Cornell University

Authors: Operations and Supply Chain Management for the 21^st Century, 2009, Southwestern Cengage Publishing

Virginia Mason Hospital in Seattle has employed aspects of the Toyota Production System to its healthcare procedures.  “At the end of the day, the Toyota production system is all about the customer,” said Dr. Gary Kaplan, the CEO of Virginia Mason Hospital. “For us the patient.”

After a coincidental meeting with Ian Black, the then lean director of Boeing, Gary Kaplan, CEO of Virginia Mason, became convinced that lean production was the solution. In 2002, Kaplan and a team of executives and managers began annual trips to Japan to study at the Shinjijutsu International Center, one of the world leaders in the Toyota production system. On their return, staff immediately put into practice what they had learned and the benefits of implementing this new way of managing hospitals and patient care. Gains in productivity freed up 77 full-time equivalents (the number of full-time employees) with many being reassigned work in the newly developed lean promotion office. Defects in patient care reduced by 47 per cent while kaikaku workshops (see box) saved the hospital over US $12m during the period 2002 to 2004.

One change made in just five days using the kaikaku technique concerned the delay between a doctor’s referral to a specialist and the first consultation. By examining the process closely it was found that the secretaries, whose job it was to arrange these referrals, were not needed. Instead the doctor would page or text the consultant the instant he decided a specialist was required. This specialist then had to respond in ten minutes, even if just to confirm receipt of the text. Delays in referral to treatment dropped by 68 per cent as a consequence.

On another occasion, staff in the radiation oncology department began an exercise looking at and mapping out the value stream with the intention of eliminating all the waste they could find. Due to the removal of these unnecessary non-value adding activities, which only soaked up resources, the time a patient spent in the department fell from three quarters of an hour to just 15 minutes.

Kaplan takes staff to Toyota’s factories in Japan every year and practices what the car maker preaches. Just as the automaker’s executives spend part of each day on the factory floor, Kaplan tours the hospital daily looking for problems and solutions. Everyone is encouraged to look for changes to make work more efficient. Nurses developed ways to spend most of their time with patients instead of at the nursing station.  How?  COWs – short for Computers on Wheels.

At a meeting each week the staff reviews the results of what Toyota calls “Rapid Process Improvement Workshops,” looking for ways to increase efficiency.

In their four day workshop, with the help of a home video camera, the staff of one clinic acted out what happens to a new patient. They came up with 10 things they would start doing differently immediately.

Virginia Mason reached out to area employers like COSTCO and asked them what they needed most from hospital visits.

“I care about quick treatment,” said Katrina Zittnick with Costco. “Immediate appointments, the right treatment at the traumatic, acute time.”

So at Virginia Mason’s back clinic there were dramatic changes, where treatment time was cut from an average of 66 days to 12.

The application of lean techniques is expanding in healthcare.  Britain’s National Health Service (NHS) is getting in on the act:

The NHS has been slower to fully embrace lean thinking but is now rapidly making up for lost time. Last January saw the first lean healthcare forum in Birmingham and a second was held in June. Chaired by author and prominent lean thinker Dan Jones, these forums have helped explain and consolidate lean knowledge.

One NHS organisation that has begun the lean journey is Bolton Hospitals NHS Trust. Under the direction of CEO David Fillingham lean has found its way into every department and management decision, reducing waste wherever it occurs and adding value to each step along the patients’ care pathway. Staff too have become more motivated and focused on providing quality care to patients, with each employee responsible for analysing what they do and how they can do it better.

Lean has also been successful in decreasing the length of time inpatients stay in the hospital from an average of 34.6 days to just 23.5. The principal method for bringing about these changes involved looking at the whole supply chain’s value stream as the patient travelled along his or her unique care pathway. Often, in organisations, change happens in a piecemeal fashion with separate departments initiating changes independently.

A lean approach, on the other hand, requires departments to consider from the start their positions in the supply chain and any impact their changes will make on the whole. By ensuring that all the necessary supporting services, such as health records, pathology and secretarial services, work together and come into play at just the right time, the patient, after entering the hospital and beginning the journey, does not need to be kept waiting between processes.

The patient moves or, rather, flows through the system. As one set of processes or treatment finishes another clicks into place immediately.

The Bolton Hospitals and NHS trust has also enjoyed some dramatic changes which have been made to its accident and emergency department and pathology lab, which now operates in half the space it used previously.

As with the Virginia Mason hospital, Bolton has used the kaikaku technique for implementing rapid change. These multi-disciplinary workshops aim to fix a problem in just five days with the new system up and running by the following Monday.

The way it works is quite simple. On the first Monday, a team made up of the department under review, for example radiology, and members from various departments immediately before and after in the supply chain, get together and map the current processes.

The next day, the ideal future state map is drawn up with all wastes identified and removed leaving the following days free for implementation strategies. The idea is that by Friday all the problems will have been solved and a new method of working will have been discovered and implemented ready to begin the following week.

When redesigning the blood science laboratory at Bolton, the team even invaded the hospital’s car park and used cardboard cut-outs of the equipment to map their ideal positions in the lab. They have managed to decrease the number of physical steps it now takes a technician to process a patient’s blood sample. Fewer steps equal less walking time, which means a speedier service. Consequently, blood sample turnaround times have dropped by 90 per cent.

Discussion questions:

• Which techniques/tools of lean can you identify in the stories of Virginia Mason and Bolton Hospitals?
• What are the potential benefits of lean within healthcare?  Dangers?

Sources:

•  “A Carmaker As A Model For A Hospital?”, John Blackstone, CBS Evening News, June 9, 2009, (http://www.cbsnews.com/stories/2009/06/06/eveningnews/main5068218.shtml)
• http://www.nqic.org/publication/c4-1-125.shtml

So why have all major airlines started charging for checked-in baggage? Clearly one motivation behind the new baggage policy is cost reduction due to reduced handing of luggage by the ground staff. Furthermore, if passengers start carrying less baggage then the net weight of an airplane will be reduced leading to lower fuel costs. On the other hand, if passengers continue to carry the same amount of baggage as before then the airline gets additional revenue due to checked-in baggage charges (see: http://blogs.wsj.com/middleseat/2010/05/06/ticket-change-fees-surpass-baggage-charges-at-some-airlines/) for additional details. Win, win both ways for the airlines – or maybe not.

Well, no action goes without reaction, and sometimes they cause many unintended consequences. So let’s discuss some consequences of checked-in baggage fee policy:

Marketplace Effects:

By charging a specific price for every component of a service, the airlines may be converting their market offerings from a “service” to more like a “commodity” and less like an “experience” (see Figure 3.9, page 81 from the textbook inserted below). Past research suggests that such a move will make it harder for airlines to differentiate themselves from each other ultimately leading them to charge only market prices and not premium prices.

Operational Effects:

Since checked-in baggage is not free, passengers are more likely to carry the maximum-size permitted baggage with them as a carry-on luggage. However the storage space in a passenger cabin typically does not have enough capacity to store high volume of luggage carried by majority of passengers. Therefore, during the busy periods and in nearly full-flights, this shortage of capacity requires that the airline check-in the excess baggage (for free!) during the last phase of the passenger boarding process. Such last-min onboard baggage checking means a lot of manual handing of luggage by airline personal in a short amount of time. It is quite possible that during the busy period such last-min loading of luggage may lead to flight delays. Furthermore, some of the last minute luggage may not get loaded on the airplane on time — leading to additional headaches for the passenger and additional costs for the airlines (see http://online.wsj.com/article/SB10001424052748704423504575211960765813420.html?KEYWORDS=airline+baggage+#articleTabs%3Darticle) for a related discussion.

What Next?

Some recent news reports had suggested that now airlines will start charging for carry-on luggage too! Well, this new policy will solve some of the operational problems associated with passengers carrying too much carry-on luggage! At the same time, it will make airlines even more-so like a commodity product. Thankfully, many airlines have decided not to implement such policy (see — http://www.nytimes.com/2010/04/19/business/19bags.html?src=busln).

By Ken Boyer, Fisher College of Business and Rohit Verma, Cornell University

Authors: Operations and Supply Chain Management for the 21^st Century, 2009, Southwestern Cengage Publishing

What percentage of the world had ever heard of the Eyjafjallajokull volcano in Iceland on April 13?  One percent?  I am guessing much less than that number.  But we have all heard of it now.

On April 14, this Icelandinc volcano with an extremely hard to pronounce name began erupting and spewing ash up to 9,000 meters in the air.  By April 15, the enormous clods of ash over Europe led to the cancellation of between 5,000 and 6,000 flights.  By April 17, air traffic in 21 European countries remains paralysed.   Almost 17,000 out of 22,000 scheduled flights are cancelled in Europe, an unprecedented situation.

Fast forward to April 24, airlines and travelers around the world are trying to “get back to normal”, but struggling with the aftermath of the worst disruption of air traffic since the September 11 terrorist attacks in the United States in 2001.  At its peak, the crisis affected 1.2 million passengers a day and 29 percent of all global aviation, according to the International Air Transport Association.  The International Air Transport Association estimated earlier this week that the Icelandic volcano crisis cost airlines more than $1.7 billion in lost revenue through Tuesday.

But air travel and stranded passengers are not the only victims of the Iceland volcano.  Over 1,000 tons of produce and flowers are sent daily from Kenya to Europe.  The continent accounts for 82% of Kenya’s exports in this perishable industry, but with air travel clogged by ash, farmers were faced with piles of wilted flowers and rotten produce.  The eruption was estimated to have cost Kenyan farmers up to $3 million a day.

Workers push cart loaded with discarded fresh roses at a flower exporter's farm in Naivasha, 19 Apr 2010