The Problem of Over Supply

(2018/07/21) For many, it's hard to imagine that business rather burning their over-production items than selling those at its salvage value. But for some firms, burning inventory is the best way to avoid "brand devaluation."

"Burberry, the upmarket British fashion label, destroyed unsold clothes, accessories and perfume worth £28.6m last year to protect its brand."

Walmart to lower prices on a million online-only items if you opt for store pickup over shipping

(4/12/2017) If you can get discount from online-only items on Walmart.com but you have to pick up at Walmart store, will you do that? You may try. That's what Walmart is trying to have a close fight with Amazon.com in online shopping. Walmart wants to lure millions of online shoppers who visit Walmart stores but never try to shop on Walmart.com.

However, I don't think that will work for Walmart. Why? Because I did shop at Walmart.com and I don't have the confidence. But there is several other reasons that I think Walmart 'underestimates' the complexity of online-and-real-store retailing and how consumers will react to any shipping issues.

1. The service time @ Walmart is terrible and it's well known. You may save several dollars, but at the cost of waiting for 20 minutes in Walmart's long lines? 
2. Think of a situation: a consumer has a shipping issue (say wrong items, or cannot find the package while it's said 'arrived' on notice) or the consumer remembers the wrong store to pick up. Since the consumer is at the store already, he will ask what's going on (At Amazon, the buyers will trace and figure it out by themselves, at consumer's own time). It's an extra burden on Walmart's employee's service time. 
3. Imagine a situation in point 2. How many Walmart employees do you think are capable to solve the complex logistics problem, capable of using sophisticated corporate computer to figure it out? Many of Walmart associates have less than $10 hour-wage, don't have computer and broadband Internet at home? With minimal employee training, do you think they can solve online shopper's problems? 

I don't think so. 

Analyst Calls Fire At Gap Distribution Center “A Fortuitous Reduction In Inventory”

(10/06/2016) Well it is embarrassing. Gap's warehouse in NY got fire last month. Normally this type of disaster to business causes various degree of damage. But  an analyst thinks that fire will be just fine to Gap since their sales was down over the years and the fire may just slashed some unwanted inventory level. However, WSJ had a report saying that the fire will slow down the delivery of Gap's online order. In fact, the share price of Gap just jumped more than 14% today, so maybe the analyst's perspective is correct.

Amazon Prime Day is biggest day for online retailer ever

(7/13/2016) Amazon is like a crazy vacuum machine. Amazon's self-created sales holiday is now the biggest online sales event ever.  It may sucks out many people's summer purchasing budget and makes many other retailers dismal in their summer sales. Did you get sucked in?

Tiered Pricing for Angie's List? Not Successful

(2/24/2016) Home improvement service company, Angie's List, admitted that their tiered pricing is not doing a good job. The CEO says the new paid subscribed members tend to just subscribe the cheapest rate, and they have a hard time to convince free or low-paying members to pay more. Angie's List faces some free service competitors like Homebuilder.com. It seems that there is rigidity of raising price, but there is always some room to drag down the price.

Buy Dung Cake on India Amazon and eBay? You Got It Delivered

(12/28/2015) ECommerce's growth is outstanding this shopping season in the US. In India, online shopping also has extended to some commodities that you may think is the last thing to be sold online: Cow dung cakes. Don't make judgement yet. Cow dung cakes are still an important energy source for many Indian family for cooking. My mom told me that it does not smell bad at all. Maybe they are even labeled 'organic?'

Mulberry Harbor -- Evidence of the Importance of Operations Management

(6/6/2015) When I teach the first class of Operations and Supply Chain Management, I always ask students whether they play war game. The origin of modern operations and supply chain management is from warfares, especially from World War II. Watching some D-day special program on TV today, it mentioned Mulberry Harbor played a critical to the success of D-Day. In this site, you can see how Mulberry was constructed.

Airlines try to save time with speedier boarding process

(6/2/2015) If you fly with several different airlines, you will notice the processed that airlines use are very different. Southwest does not assign seats and board passengers by A/B/C groups that passengers compete (with extra payments) on their seats. Other airlines that assign seats normally have different boarding groups, among them some board passengers in the front first, some board passengers in the back first. You may wonder what is the operational logic behind their processes. Now, Southwest and Delta are trying new approaches to improve their boarding process. If you are their frequent flyer, check if their new process makes a difference.

Robot Kivas May Replace Warehouse Workers

(11/20/2014) Recent years, Amazon had several labor troubles in their fulfillment centers in the US and Germany. In the long run, robots are definitely more attractive for big retailers like Amazon or Walmart. This is a news about Robot Kivas working in the warehouse of Amazon. They are not doing the picking jobs. Instead, they move inventories around on racks to get closer to the pickers such that the pickers can save their time from walking all day long.

As technology progresses, one day maybe the picker's job will be replaced by Kiva too.



(12/1/2014) Amazon just announced that they will release 15,000 Kivas in the warehouses for their pickers.  One worker says that their picking productivity is two to three time more than before and it will save 20% of operating cost. Yes, it also says that it will not eliminate current jobs; but, in another words, it means they don't need to hire as many pickers as before.

Apple Is Losing Its Pricing Grips

(4/3/2014) Apple is knows for its pricing power. You rarely see Apple's products hugely discounted in the retailers. Most retailers have to follow Apple's pricing strategy and cannot give huge discount to consumers. The reason is to protect its long-term interest since slashing prices will decrease Apple products' prestigious images and eventually decrease Apple's profitability. To the retailers, breaching the rule means losing license to sell Apple's product.

However, a news analysis from Dealnews.com shows that Apple's grip on its pricing may get loose now. When retailers start slashing prices, there will be less consumers buying directly from Apple, which is an important revenue source for Apple. Their recommendation to the consumers is: don't buy directly from Apple. Shop around to get the best deal!

Costly Winter for US Airlines

(3/3/2013) It has been a very costly winter for U.S. Airlines. Snow storms pounded onto the U.S. midwest and east one after another and the cost to the airlines can be as high as $6 billion. Passengers are frustrated too. Not only the flights can be canceled, it take a longer time to rebook an alternative flights since the airlines have been cutting flights in increase its load factor. When my flight back to Taiwan early January was canceled due to a snowstorm, my travel was delayed for two full days.

McDonald's Menu Issue

(1/27/2014) When I walked with my friend on the street in a night market in Taipei, there are plenty of food vendors. My friend commented: "If a restaurant serves good foods, it only needs to be good in a few items. When a food vendor tries to sell everything, it means it is no good in any." This is very true especially for Taiwanese, which eating is very important in its culture.
       When we look at McDonald's recent performance, we see the exact problem: McDonald offers too many options to its customers. Extensive menu can be destructive for fast food restaurant, in which the service speed is critical for its fast-speed customers. The more options customers have, the longer time it takes to make a decision, then the more slowly it can finish an order. A minor increase in the service time can trigger significant performance downgrade in customer's perception if you analyze the queuing problem. So it is not surprising to see McDonald's lackluster performance in recent quarters.

McDonald's recent dollar menu.

The famous "阿桐阿寶四神湯" in Taipei. It's famous of its soup, fishballs, Siu-mai, ... It has 6 items on its menu.  

Southwest And Airtran's Painful Merge

(11/20/2013) If you were an Airtran's loyal customer, you probably are not happy with its new boss: Southwest Airlines. Since its merger from 2011, these two companies' merger has been painful and frustrating many customers (probably more on Airtran's customers since Southwest will change Airtran's operations into Southwest's style). Wall Street Journal had a good article showing the complexity of process integration between Southwest and Airtran. Overall, the merger and system integration was not as bad as United and Continental if you judge from media exposure. As a Southwest happy customer, I hope one day I can have an easy flight to Cancun or Aruba via Southwest.

McDonald Add 3rd Drive Through Window

(11/16/2013) Do you order at McDonald's drive-through? Do you think the waiting time of McDonald is getting worst? McDonald finally heard your complaint. McDonald announced that they will add a 3rd windows in their drive-through to improve their ailing service. One factor that deteriorated McDonald's service is their expanding menu items. The more items on the menu, the more options customers can choose, the more complex the service has become. With a third window, maybe you don't have to park you car and wait for your food next time when you order at McDonald's drive-through, .

Queuing Analysis Simulator

(11/13/2013) I found these two online queuing analysis simulators when I was preparing for my class.  This first one is provided by supositorio.com. It provides only queuing systems with Poisson arrival rate and Exponential distributed service time. (that is M/M/.... system). You can imbed its link of this calculator Queueing Theory Calculator on your webpage:

The second simulator, which is provided by Dr. Jaroslav Sklenar, is more powerful and flexible. It allows you to set different distribution patterns in the arrival rate and service time of the queuing system. You can also configure batch arrival/service or configure an open/closed queuing system. However, you have to really understand the details of your queuing systems and know how to write simple coding for it.

Pick Your Top Two Priorities

(7/23/2013) I love this sign very much. It fits into the basics of operations management very well.

Psychology of Waiting

(1/23/2013) Here I summarize some interesting psychological observations of waiting:

1. Skinner’s Law – “The other lines always move faster.” Everybody knows this feeling on the highway or at the toll booth.
2. Jenkin’s Corollary: However, when you are stuck in traffic and decide to switch to another other lane, the lane you left moves faster. 
3. Occupying customers: While entertained or occupied, the customers feel much less  waiting. For example, Disney theme park's waiting line management (see the picture below) or the mirrors in the elevator. However, the music played by the 800 customer service call center is often tolerated only when the waiting is reasonable.
4. Unoccupied time goes slowly
5. Pre-service waits seem longer that in-service waits: For example, at the pharmacy you are less impatient if the pharmacist keeps you waiting when (s)he is doing your prescription than you are waiting in the line. 
6. The Light at the End of the Tunnel: Reduce anxiety with attention, this is extremely important in undesirable waitings. For example, when there are aircraft mechanical problems airlines should give delayed passengers some information about how long they have to wait (but don't go far...).
7. Under promise, Over deliver (not the other way around): restaurant hosts tell you you will be waiting for 25 minutes, but your waiting is only 15 minutes.  

Before a new ride starts, Disney entertains visitors with videos or arrange employees dancing, playing, or telling you a story to make you feel you are not waiting. 

Wholefood's Waiting Line

(1/22/2013) People don't like to wait, however, we wait quite a lot in our whole lifetime. Coffee shop, highway, bus, cross the traffic line, surfing internet.... Supermarket's checkout is often configured as a multi-waiting-line system. Customers often find a line with a shortest queue to load their grocery on the belt; however, it does not guarantee you will be served earlier than other customers who come later than you. Do you see the lady in front of you just takes out her check book? Gee....

Wholefood's shop in New York City changed its multi-queue system into a single-queue system in 2007. Read this article to see how their customers react. Very interesting.

Southwest Let Passengers Fight with Each Other

(1/22/2013) Southwest's no seat assigning policy has been its unique service feature. Since it introduced A/B/C boarding group policy in 2007, passengers have to check-in in the 24-hour window before departure early enough to get an early boarding number in order to get a better seat. Later, after introducing its Early-bird check-in in 2009, it's $10 early-bird check-in earned $23 millions in the second quarter of 2010 (and it's 'other revenue' continued to grow fast in 2011 and 2012.). Now it is introducing again a $40 "cut-in" to let the last-minute B or C group passengers to get a A boarding pass. What a smart strategy, Southwest Airline just let passengers to fight with one another and collect huge revenue. I wonder where is the limit that passengers become upset?

Usage-based pricing for Internet

(1/3/2013) The unlimited broad-band internet may be gone soon. Can we still consume online videos and movies as much as we want?