A Volcano Melts World Operations
OM Blog: April 24, 2010
By Ken Boyer, Fisher College of Business and Rohit Verma, Cornell University
Authors: Operations and Supply Chain Management for the 21st 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
Other industries buried by the ash:
- “I do not have any more scallops,” seafood supplier Christophe Malysse said in a Friday report by GlobalPost. He normally would be flying them in to European restaurants, providing revenue for the fishing industry in the US and Canada.
- The flight disruptions also grounded about half of the daily cargo volume between Asia and Europe, according to an Asia-based aviation analyst. About 7,000 tons of goods are flown daily on average from Asia to Europe and an additional 4,000 tons from Europe to Asia, the analyst estimated, involving mostly electronics, luxury items and perishable goods such as fruits, vegetables and meat— raising concerns about possible shortages of some products if disruptions continued.
- John Cleese spent 30,000 Norwegian krone (£3,300) on a taxi from Oslo to Brussels. He was then hoping to hop on a Eurostar train from Belgium to London. And Northampton cab firm Amber Cars got the ‘fare of a lifetime’ when they were contacted by seven executives who wanted to get to a meeting in Geneva. The cost? £1,700. And three-day eventer Oliver Townend paid £1,600 for a taxi from Paris to Madrid in an attempt to catch a flight to the US to compete in the Rolex Grand Slam event in Kentucky.
Stories of industries losing millions of dollars, euros, pounds etc. abound. This was a huge, unintended and unplanned for event. It is an apt illustration of the increased probability of supply chain disruption in an increasingly interconnected world system. Experts have increasingly been researching and examining ways to manage risk and react promptly to supply chain disruptions over the past few years. Yet, it is a huge challenge. The following article offers an interesting discussion on risk:
Discussion questions:
- What would you have done if you were a stranded passenger?
- Did the European airlines and air control agencies react appropriately? Were they too conservative in shutting down all flights? What are the costs of being right/wrong on this decision?
- Are their businesses that actually may benefit from this event?
Sources:
- http://www1.voanews.com/english/news/africa/east/Kenya-Losing-Millions-as-Volcano-Grounds-Flights-91522474.html
Buffet Restaurants: It’s not Always About Feeding You More – Sometimes it’s About Reducing Labor Costs and Challenges
Taverna Banfi’s is an upscale restaurant located in Ithaca, New York. Here is how the restaurant’s website describes its service offerings (see http://www.tavernabanfi.com/):
“Delightful and idyllic, Taverna Banfi is an enchanting Italian trattoria specializing in tantalizing Tuscan cuisine. Situated on the second floor of The Statler Hotel, with captivating views of the Cornell University campus, this warm, welcoming gathering place is renowned among the best Ithaca restaurants by hotel guests and locals alike. Savor an enticing menu featuring the freshest ingredients from nearby Finger Lakes region farms. Enjoy friendly, enthusiastic service, provided by our Hotel School students. Fun and flavorful, with a dash of sophistication, our signature Ithaca restaurant welcomes you for breakfast, lunch, and dinner — as well as the city’s best Sunday brunch.”
When visiting the restaurant for lunch, the guests are escorted by the welcoming staff to their table. On the way to the table, the host stops in front of a spectacular display of buffet items which includs salads, warm entrées, soup and desserts. After being comfortably seated, a server appears, takes beverage orders and then asks if the guests would like to help themselves to the buffet or would like to order from the menu (see lunch menu here: http://www.tavernabanfi.com/food/documents/7.08.09LunchMenu.pdf).
The full buffet is served for $17, soup and salad buffet (excluding hot entrées) costs $13. Both buffet options also include the guests’ choice of beverages. The prices for individual items of menu vary quite a bit: soups and salads cost $5 – $14; sandwiches cost $11 – $14; and Luncheon entrées cost $9 – $16. The guests also have to order beverages and any desserts separately.
Taverna Banfi’s is not unique in offering both buffet and menu ordering options to its guests. Many sit-down restaurants offer similar alternatives to its customers. From the customers’ point of view, buffet may offer much better value compared to similar items ordered from the menu individually. However the customers do have to self-serve, be willing to spend a higher amount for lunch, and be very hungry! At the same time, the customers do not have to wait to get their food as it has already been prepared in advance. Ordering from menu, on the other hand, allows guests to customize their order according to their individual needs, tastes and budget. However, the customers do have to wait for their food to be prepared.
Questions:
1. What are the labor and material costs associated with the two (buffet vs. ordering from menu) options?
2. What are the operational tradeoffs associated with Buffet (or made-to-stock production) and order-from-menu (made to order)? (Chapter 4: Process Design and Analysis)
3. While the items on the menu are decided a-priori but prepared on demand, the restaurant needs to decide what items to offer on its menu? How do they make this decision? (Chapter 3: New Product Development)
4. Is one option always more profitable for the restaurant? Or are there situations when one option will be better than the other? Why?
5. What are the capacity planning and labor scheduling implications associated with each of the two options? (Chapter 10)
6. Do you know of any all buffet restaurants? How about restaurants where the buffet is actually cheaper than ordering off the menu? How does this alter the scheduling of workers, production etc.
A sports fan in 2010 is able to follow their team in a number of ways – on television, on the internet, in a newspaper or on the radio. What most sports fans don’t realize is that there is a huge amount of behind the scenes action in putting together a televised broadcase – an operations plays a key role. Take a Columbus Bluejackets hockey game for the NHL. A typical local (i.e. not national) Fox Sports Ohio broad cast of a game requires:
- Producer Travis Williams, director Christian Roberts and a crew of 25 people.
- 40 videoscreens
- 12 cameramen – and cameras
Director Roberts choreographs an intricate dance – telling cameramen what to shoot and when, choosing from multiple screen shots, deciding when to air commercials – after all someone does need to pay for the broadcast – and choosing when to air replays. Consider the following descriptions of the scene behind the scenes from a recent Columbus Dispatch article:
“Just ahead of the scheduled 7 PM start, Ed Milliken, sits in front of the 40 video screens and puts on headphones. “Hello darlings” he says to announcers Davidge and Jeff Rimer. As captain of the ship, Milliken spends the evening telling commentators how long to talk and giving them game-related insights to repeat. He decides simultaneously what viewers will see – a wide look at the ice, a scan of fans, a close-up of a player. Next to Milliken, director Christian Roberts makes the captain’s requests happen – guiding the 12 cameramen stationed throughout the arena. Seven people in the truck – parked in the loading dock since 10 AM – handle the sound and graphics and track player statistics.
During the first period, Riner calls Jackets defenseman Anton Stralman by the wrong name – Thrashers defensemen Ron Hainsey – and the crew notices.”
This activity continues for nearly three hours. Crew members look forward to breaks in the game so that they can air commercials and take a very short break. Yet, they don’t get any for nearly 20 minutes – at one point joking “Can you throw some nickels out on the ice”. Think about how hockey differs from basketball, football and baseball in terms of breaks in play and timeouts – this makes a smooth broadcast more challenging. Late in the game, Roberts has to keep a careful eye on both the action, and where he expects the action to be:
“With five minutes left in the game and the Jackets up 2-0, Milliken starts talking about the stars of the game. The clock reaches 2:30 and Roberts tells a cameraman to “sit on the white goalie”, referring to Johan Hedberg of the Thrashers. Atlanta pulls Hedberg and fans at home see him skate off the ice”
In short, televising a sporting event requires a lot of work, many people and some good operations management.
Discussion questions:
- How do television stations/networks handle unexpected events or long delays in a game? What is the equivalent of inventory for if something goes wrong?
- What elements of project management contribute to a smooth/good broadcast? (Chapter 8: Project Management)
Sources:
- “Ice, Camera, Action!” March 13, 2010 by Suzanne Hoholik, Columbus Dispatch.
