Supply and Demand Dynamics

(9/29/2012)
When China was heavily investing in the infrastructure and factory expansion, US coal industry had a good time exporting coal to China. Now, China is confronting an economic soft landing (if lucky), and those good old days for US coal might be gone for a while. Probably only a high fuel price can help those coal miners.

Powder River Basin supplies 40 percent of coal in the United States

Japan's problem

(9/29/2012)
Reading an article from Washingtonpost.com: As Apple and Samsung dominate, Japan’s tech giants are in a free fall.

Japan's problem is not just in business, it is at the national level. So often, we see Japan has its own standard that is different from all other countries. They want to import to other countries, but don't want to buy imports from another country (because Japanese's products are the best). They ignore the economy of scale of globalization that is outside of Japan and rapidly expands in recent decades. So many Japanese tech giants were "innovating" for its own market and to become the leader in Japan market. Look at NEC and Fujitsu, they are PC leaders in Japan. But few consumers outside of Japan know them as PC makers. From the people, to business and the nation, they just overlook what is going on outside of Japan because they entered into a deadly self-breeding cycle for their diminishing future. 

Ignorance of social media

(9/28/2012) We moved into the era of social media in less than 12 years and many people are not aware of this big shift. While posting on social media, your words are not just circulating within a group of friends. Through the friends of friends, "politically incorrect" words spread like wild fire.

An CEO from a Montana ice cream company replied to his customer with no respect. the damage is not just between him and that customer. It becomes a social network sensation (maybe in a local level).

Two days after his improper remarks, the CEO of this ice cream company decides to step down. The power of social media. (9/30/2012)

The economics of video games

I am not a video game and have never played one. But this one looks very interesting. There is a news "The economics of video games" from the Washingtonpost.com.

Beer game.

(9/28/2012) This is a real beer game!

Today, we had our beer game. It was really fun (even though I am so exhausted now) and I forgot to take pictures. Next year, maybe.

Cyberattack Will Become A Reality One Day.

(9/27/2012)
Last week, there was a warning of cyber attack to the banking system. Today, we found out that the electricity grid has been intruded by hackers. No serious damage is done yet. Cyberattack in the Sci-Fi movie one day will become a reality.

Supplier Relationship -- Partners Or Enemies?

(9/27/2012) When the supplier relationship turns sour, the order cut from the dominant downstream customers' can be a trouble to the supplier. Recently, the smartphone lawsuit between  Samsung and Apple starts to dent the long term relationship between them (time of separation? well, that is impossible). Apple starts to cut nearly 50% of its LCD panel supply from Samsung. Apply turns its supply to LG and other Taiwanese suppliers. Luckily, compared to the $1B penalty of smartphone lawsuit loss, this is only a smaller dent to Samsung's revenue. Samsung is the world largest LCD panel manufacturer in 2011 and a leader in newest display technology. Even though Apple cuts its LCD panel supply from Samsung, Apple still heavily relies on Samsung to provide them flash memory chips (Samsung is also the world largest flash memory manufacturer), and processors. Apple and Samsung, partners or enemies? It will be both.

Well, from a long term perspective, Apple has to seriously consider the potential threat from its powerful competitor -- Samsung, and finds an alternative source for its critical components. Apple has a big ambition to launch Apple TV (rumored for a long time) and they cannot trust Samsung anymore. Under some under-the-table support (rumors), Foxconn (Apple's largest, and the world largest, contract manufacturer) has tried to invest the struggling Japanese LCD panel manufacturer -- Sharp. Different from Samsung that has its own brand consumer products, Foxconn is a "loyal" manufacturer for many PC and electronic product brands since Foxconn does not compete with their customers directly in the consumer market. Sharp has advanced display technology but is poorly managed in recent years. Foxconn's investment will help Apple to secure its future key component supply. At this moment (9/27/2012), this investment deal is stalled due to higher-then-expected loss in Sharp and disagreement of control power of Foxconn in Sharp's board (from several Taiwanese news reports without official's comments from Foxconn and Sharp). Let us wait and see how it will develop.

(10/22/2012) This is another interesting news. Amazon's cloud service is hit by real cloud (storms) in Virginia and many websites (Netflix, Pinterest, Instagram ...) are takend down. Do you see Netflix over there? You probably Amazon's video streaming is directly competing with Netflix, right? Let us see how long this business partnership will last.

(10/23/2012) The is a war between Amazon and top Brand suppliers. Top brand suppliers do not like to see their products priced lower than the lowest suggested retail price. Price competition among brand's distributors will undercut the brand's value and profit. However, on Amazon.com, there are many third-party sellers who are selling top brand products below he lowest suggested retail price. These 3P sellers can find the supply of top brand products from unknown sources and Amazon has a good reason not to interfere how these 3P sellers get their stock (that is one of reasons that many buyers go to Amazon to buy cheap brand products). The only weapon that the top brands can do is to cut the supply directly to Amazon (while they don't know to cut the supply for those 3P sellers on Amazon). So who will be the winner? Amazon? 3P sellers? or the top brands?

(3/19/2013) Amazon's sellers are furious for increasing fee for them to sell on Amazon. Will there be exodus of sellers on Amazon? Well it depends on how many other online marketplaces these sellers can switch and maintain enough successful sales if they choose to leave Amazon. This news shows a lot of details of Amazon's pricing schemes.

(3/22/2013) According to a Korean Publication, Apple will shift is LCD supply to two Taiwanese LCD panel manufacturers. These two tech big guys are drifting further away from each other.

You think iPhone is innovative? Look at these

(9/25/2012) When I first watched this video on Huffingpost.com, I thought it is on Comedy page. Then I check, No!!! it is on Tech page. You must think "you are kidding me." What it yourself.

I am not kidding you. Look at the company's information on http://www.studiobananathings.com/.

I feel like that I really need to be crazy in other people's view to be creative and innovation. Maybe we should all be crazy!

(10/16/2012) The following innovation is not as crazy as the one above. It is really intuitive: using a bra to detect breast cancer.



(10/17/2012) Is it the cost we pay to be innovative? Based on this report, "Creative types are thought to be more likely to suffer from mental illnesses, such as bipolar disorder and schizophrenia. A new large-scale study of the Swedish population helps confirm this link"

(12/13/2012) The inspiration from Porcupine: a better and more effective needle.

(1/17/2013) I don't think it is a good idea to make a thumb drive look like a "real thumb." It's too creepy.

(1/29/2013) Want to smell drunk? I cannot believe that people will put this shampoo on their hair. It is the deal of the day on http://www.graveyardmall.com/. No wonder it has such a big markdown.

(4/23/2013) There are some other weird product designs that you want to check. The following is one of them.

Seriously? 

(6/25/2013) Seriously? People will buy this special banana cutter to cut banana?

Accessed on 6/25/2013 through dealnews.com. It is insane.

(1/29/2015) We just had a big snowstorm in Rhode Island this week. Maybe I need this product- Ice Scraper Mitt w/ LED Light (there is a youtube file below).

MBA 518 footnotes

Hello students:


I will add some footnotes for MBA 518 in this page. It will be updated several times after our lecture and class discussion.

(9/25/2012) Regarding the productivity and utilization page that I used on 9/25 lecture, you can see here:

US Labor productivity & Utilization

When I said that the utilization for the whole industry is roughly between 75%-85%. This is not a strict rule for a company at any point of time. Of course, if the utilization is as high as 100%, it means the capacity is used and not wasted. When the customer demand is uncertain, it implies that you also have quite a lot of orders that is unfulfilled and may go to your competitors. As a result, a high utilization (normally is 85%-90%, not till 100%) signals an expansion is needed. 

When we talked about the inventory turns formula, Judy pointed out the difference between SCM and Accounting. Accounting uses inventory turns in the right formula below, and SCM uses both formula. When a firm has several different products (for example, Walmart has hundreds of thousands of items with various unit prices), the right one will be more useful to evaluate the inventory performance in a department or a company.

Picture provided by Yuwen Chen.

One operations book (not a textbook, but a novel Novel!? Yes, a novel about operations and process an agreement) I mentioned in the class is The Goal. If you are interested to know more about operations and process analysis, it is a well known and easy to read book.

(5/26/2012)
Today, we covered project management. When we used the wedding project planning as a class exercise example, it seemed many students were deeply involved and realized that the operations concepts are really around us. Bing brought up the similarity between "project management" and "cash flow" management, and I felt it s great part of team teaching. The time element in project management and in cash flow is similar. In cash flow, you have $$$ inputs and $$$ outputs. Even though there is no direct precedent relationship between two cash flows, you have be aware of your cash level in all time and the incoming of cash outflows, inflows and the cash at hand. In cash flow management, a mistake or mismatch of timing can bring the company into crisis. In project management, a miscalculation of the precedent relationship among activities or a delay in activities can ruin a whole project. Delay the project sometimes means you lose the whole opportunity. (Imagining a X'mas theme movie cannot be finish before December 25).

I strongly recommend you to watch some films that Hasbro participated and watch the production diary in the extra video part of the DVD. Sometimes, this production diary interviews reveal a lot of situations that a project manager (the director and the producer of the firm) encounter in a big project like film production. If you cannot find a good film (that Hasbro participated) with good production diary videos, I will recommend you to rent "Lord of the Ring" DVD. Their production diary is so complete and amazing. You normally won't get the extra materials from movie streaming.

5/28/2012 Beer Game

Today, we played the beer game in our class. There are several things that the beer game teaches us:
(1) Information sharing: our beer game did not allow you share information with your suppliers or customers. So, you don't know how much is the realized demand or how much is the production from your supplier. Lack of information sharing is one of the reasons that cause the inventory fluctuation.
(2) Supply chain lead time: in this game, the information takes two week to the supplier and the beer take two weeks shipping to the customer. Long lead time delays the information and the player cannot response in a timely manner.
(3) In a supply chain, there is no good player or bad player or there is no role is the easiest one to play (in the game or the real world). Well, yes, some players messed up the inventory calculation and disrupted the flow movement, but it is a different story. All roles in a supply chain are important. And your performance is subject to the actions of your suppliers and customers. For example, you may have a big order from your customer, but your supplier was conservative in stocking in the last several weeks and has a very lean inventory. If (s)he cannot satisfy your order, you will run out of stock.

Cross-docking

(9/25/2012)
Commodities at rest are not generating value for business. Hence, business wants to reduce those unproductive inventory in the supply chain. Cross-docking is a common practices used by several large retailers (like Walmart...) after 1980's. The commodities from the suppliers will still go through distribution centers to be shipped to the retail shops. Instead of resting in the warehouse (the process includes receiving, stacking, IS maintenance, warehouse operations, retrieving, then deliver) at the distribution center, cross-docking only allows various commodities stay in the distribution for several hours (in most of the cases).

As you see the left figure below, the trucks from the suppliers arrive at the cross-docking distribution center around the same time. Through a short time of receiving, break-bulk, sorting, various pallets of different products will be stack at gates to fill a full truckload (TL) that is ready to be shipped to the retail shops (or customers). Some products will stay in the distribution center for a longer time for some value added activities (like repackaging, bundling), so the cross-docking center still has a small space for these value-added operations. It is easy to see why cross-docking is only used by larger retailers. Small retailers may not have enough volume (economy of scale) to take advantage of cross-docking. To make cross-docking efficient, the coordination of logistics has to be very accurate. Any delay or disruption in this process will severely damage the benefits that cross-docking can bring. More information see wikipedia.

Forecasting Methods

(9/25/2012) Moving Average
One way I like to show students about moving average method is to check a stock price. Use Apple's stock price as an example, you can see apple's historical prices by clicking a "5Y" (5-year time frame).

1. Now click the left bar "Basic Tech. Analysis"
2. Click moving average "10" and see how the chart changes. You will see another moving average price line in a different color. 
3. Click moving average "50" and "200," you will see another two colored lines. 

What do you think from this chart?

The following is the historical gold price from 1833 to present, can you construct a moving average chart from it?

(9/25/2012) Cross-Impact Analysis

It assume that some future events are related to the occurrence of an earlier event. One famous example is "Redskins Rule" to predict US presidential election. It says "If the Redskins win their last home game before the election, the party that won the previous election wins the next election. If the Redskins lose, the challenging party's candidate wins." Since 1937, this forecast has been accurate 17 out of 18 times (missed 2004 election). Let us see whether it will be correct again.