Perspectives on Various Issues of Interest

Memories of Grand Canyon

Unique combinations of geologic color and erosional forms decorate a canyon that is 277 river miles (446km) long, up to 18 miles (29km) wide, and a mile (1.6km) deep. Grand Canyon overwhelms our senses through its immense size. These pictures are from our visit to Grand in 2003.

The poem "Silence of the Canyon" by William Wendell Riley aptly captures my memories:

Grand Canyon had no speech to make.
She never said a word.
While I viewed her matchless glory,
I was startled by a bird.

It came flying, tumbling through the air,
And stopped beside me there,
And sung the sweetest little song.
How I wanted you to hear.

A little chipmunk then rushed out
And stood on his hind legs
And chattered me a welcome
To this land of towering crags.

Then, another little songster,
From the tip top of a pine,
Sang as sweet as ever echoed
In the valley of the Rhine!

But the Gorge was mute, but glorious,
Magnificent, sublime!
Her secrets still remain her own
And will throughout all time!

 

In "The Lost Continent" Bill Bryson writes, "… Nothing prepares you for the Grand Canyon. No matter how many times you read about it or see it pictured, it still takes your breath away. Your mind, unable to deal with anything on this scale, just shuts down and for many long moments you are a human vacuum, without speech or breath, but just a deep, inexpressible awe that anything on this earth could be so vast, so beautiful, so silent. Even children are stilled by it. I was a particularly talkative and obnoxious child, but it stopped me cold. I can remember rounding a corner and standing there agog while a mouthful of half-formed jabber just rolled backwards down my throat, forever unuttered. I was seven years old and I'm told it was only the second occasion in all that time that I had stopped talking, apart from short breaks for sleeping and television. …
… The scale of the Grand Canyon is almost beyond comprehension. It is ten miles across, a mile deep, 180 miles long. You could set the Empire State Building down in it and still be thousands of feet above it. Indeed you could set the whole of Manhattan down inside it and you would still be so high above it that buses would be like ants and people would be invisible, and not a sound would reach your. The thing that gets you - that gets everyone - is the silence. The Grand Canyon just swallows sound. The sense of space and emptiness is overwhelming. Nothing happens out there. Down below you on the canyon floor, far, far away, is the thing that carved it: the Colorado River. It is 300 feet wide, but from the canyon's lip it looks thin and insignificant. It looks like an old shoelace. Everything is dwarfed by this mighty hole."

 

Surprise...Surprise!

Trouble in Toyland

The article (written by Christina Binkley and Nick Wingfeld published in Wall Street Journal on Nov. 20, 2006) put together the issue of global sourcing and supply chain glitches quite nicely.

Several of the toy’s that were ordered during the holiday season are expected to be in short supply because of; (i) cautious retail strategies, (ii) unexpected consumer demand, and (iii) power and labor shortages in China. Much of the supply chain glitches during this holiday season are due to the cautious ordering by retailers for this season as a result of the lackluster sales last year. Manufacturers in turn also acted cautiously with placing orders for the raw materials of the toys.

Walt Disney struggled to convince the retailers about the potential demand for its gizmo-laden Mickey’s clubhouse. Now, Disney is spending to air freight these toys from China in an attempt to reduce 3 weeks of lead time. Such expenditures are expected to cause a dent on its profit margins.

Viewing from a global context, the socio-economic changes in China is causing some cause for concern. Toy makers have been working around growing labor shortages in China, since Chinese workers are choosing to work in high-tech factories. The problem is compounded by the occasional blackouts that plague southern China, where many toy factories are located. Mattel incurred the expenses of backup generators for all of its factories in China to avoid problems.

Meanwhile, in U.S. the demand for toys has strengthened this year. The orders are also coming in earlier than usual. Mattel had to take some severe steps as a response to the surprising trend they observed a day after the recent launch of TMX Elmo. The first day’s sales results came in far ahead of expectations and the company had to device a quick strategy for the expected demand. They planned to build more factory tools to add production lines and decided to fly the completed toys across the ocean. The company managed to increase production by 30%; still the lead time of 90 days from the production of the raw materials to the delivery of toys to stores created shortages in the holiday season. Some interesting “eBay entrepreneurs” emerged in the midst of these shortages. For example several of these “entrepreneurs” were selling for $3 to $5 leads on where to find the toy! A Web site TMX-tracker.com claims to sweep Internet sourced for inventory.

For Sony’s Playstation 3S the shortages was even more severe. These game consoles vanished from retail shelves as quickly as they landed on them at midnight Thursday. While scarcity is typically common in the event of a new game launch, since manufacturing slowly ramps up production to meet demand, with PS 3 the shortages were acute. The resulting average marked up price of these consoles on eBay and Craigslist was more than three times its regular price of $500 and $600 in retail stores.

Web Pioneers eBay and Amazon Face a Threat From Older Retailers

This is a summary of an interesting article that appeared in the Wall Street Journal on Nov. 16, 2006 (written by Vauchni Vara and Mylene Mangalindan). The article provide some insights regarding how the online retail is shaping up. It suggests that the two biggest online retailers, eBay and Amazon, are giving way to the online business of the traditional brick-and-mortar retailers such as Wal-Mart Stores Inc. and Target Corp. According to Forrester Research Inc., about 41% of Internet shoppers in the U.S. made their first online purchase within the past four years. The new web shoppers are not necessarily the prototypical young, well-off and male, but are often less affluent and less tech-savvy who care more about low prices name recognition of the brands. According to Majestic Research Corp. of New York, with the ramped up online operations of traditional retailers, the e-commerce spending on web-only retailers has fallen to 52% in 2006 from 55% in 2005 and 60% in 2004.

To face this competitive marketplace, the web-only retailers have adopted several new business approaches. For example, Amazon is keeping prices low, giving more choices which include products from other retailers, such as selling Target gift certificates on Amazon site and quicker shipment of items by introducing new membership program called Amazon Prime, offering two-day shipping on an unlimited number of orders for a $79 annual fee. E-bay on the other hand adopted strategic acquisition route. It acquired Shopping.com, a comparison shopping site, thereby helping tap into the large group of mainstream customers who are looking for new in-season items. Amazon’s sales growth in 2005 as 23% and eBay’s sales growth was 39% a far cry from the triple digit growth rates that they enjoyed in 1990s. The business innovations are initiated with an expectation for steady sales growth in the coming years. According to JupiterResearch, a division of JupiterKagan Inc., consumers are expected to spend $132 billion on nontravel Web shopping in 2006, up 19% from $111 billion in 2005. For the holiday season, eBay is promoting a new Web site called eBay Express, where items are sold at fixed price and where only sellers with high reputation are allowed to sell their goods. In 2005, eBay also purchased Internet telephone service provider Skype Technologies SA for $2.5 billion. Amazon unveiled a new video-download service in September. Investors are however not very enthralled by these investments; this year the stock of Amazon is down by 10% and eBay’s stock is down by 22%.

The traditional retailers have also initiated some innovative approaches to enhance their online sales. Wal-Mart unveiled a redesigned Web site, adding independent product reviews from CNet Networks Inc., offering advice for matching furniture sets or outfits, and promising customers a path to buy any product in four clicks.

Circuit City last year started promising customers that they could order an item online and pick it up at a local store within 24 minutes. Gap Inc., launched a Web site called Piperlime.com which sells shoes ranging from cheap flip-flops to designer boots.

Hard & Soft Manufacturing Technologies

In a study, co-authored with Paul Swamidass, we examined what top management thinks about the benefits from hard and soft technologies. Hard technologies are defined as the complex bundle of equipment, computer hardware and software, for example: CNC, CAD, CAM, computer-integrated manufacturing (CIM), local area network (LAN), automated inspection, robots, automated guided vehicles (AGVs), and FMS. Meanwhile, soft technologies are manufacturing techniques and know-how such as JIT, TQM, MRP I, MRP II, manufacturing cells, and SQC—equipments and computers are not essential to their successful use but can enhance their effectiveness.

The following six hypotheses are tested:
H1: Hard technology is significantly associated with product line breadth.
H2: Soft technology is significantly associated with product line breadth.
H3: Hard technology is significantly related to enhanced shop floor performance.
H4: Soft technology is significantly related to enhanced shop floor performance.
H5: Hard technology is significantly related to growth and profitability.
H6: Soft technology is significantly related to growth and profitability.

There were three notable findings from the study:

1) technology use has a tangible and measurable effect on growth and profitability;
2) soft technologies have an effect on shop floor performance, product line breadth, and growth and profitability, whereas hard technologies have negligible effect on the three performance
variables considered;
3) skilled use of technology provides explanation for the variance in shop floor performance, and growth and profitability.

In the research investigation, soft technologies emerge as a strong performance enhancing tool at the shop floor level, as well as at the business level, where growth and profitability are important measures. The term “manufacturing technology” is often associated with hard technologies. Therefore, a study such as this was an eye-opener. The lesson here is that, while hard technologies are appropriate for attaining certain limited goals, soft technologies have a much broader impact on the manufacturing plant.

Implications for investment decisions:

The evidence that soft technologies have a more significant effect on shop floor performance, product line breadth, and growth and profitability does not mean we must tilt technology investments toward soft technologies at the expense of hard technologies. In the plants we studied, both hard and soft technologies were used simultaneously. For localized benefits in manufacturing operations, investments in hard technologies may have no substitutes. For factory-wide impact, sof  technologies seem to be essential. To the practitioner, the important lesson here is that investments in hard technologies may be improper when investment in soft technologies is the need of the hour, or when investments in both are needed. For factory-wide improvements in performance measures, evidence shows that soft technologies must be a part of the investment.

The importance of the skilled use of technologies should not be ignored in investment decisions. There can be no skilled use of technologies without skilled employees who are trained and retrained. While enhancing the skilled use of existing investment  may yield unrealized benefits from technologies already in use, the shortage of skilled workers may hold back manufacturers from realizing all the benefits of technology use.

Investment in manufacturing technology is very expensive. Often manufacturing firms are criticized for not investing in manufacturing technologies. One of the reasons for manufacturers’ reluctance to invest in manufacturing technologies is that the link between investments and benefits is tenuous at best. Researchers have found it a challenge to establish a link between manufacturing technology use and plant performance metrics. This study has found that, in the opinion of top management in manufacturing firms, soft technologies have an impact on 1) shop floor performance; 2) product line breadth; and (3) growth and profitability. These finding should make the investment in soft technologies easier to justify. If top management controls the purse, and if it sees a link between investment in soft technology and tangible benefits in these three areas, getting top management to invest in soft technology should be easier. The evidence in our study underscores the importance of soft technologies and the skilled use of technologies.

Implications for public policy:

Policy makers have made tangible policies backed by budget appropriations to help manufacturers become more competitive through investments in manufacturing technologies. Certain governmenta  programs established through the NIST and the NSF channel funds to state and federally funded technology centers for enhancing the use of manufacturing technology in small plants. Many state and other programs target employee training to enhance the skill level of
manufacturing employees. Our findings about the benefits of the skilled use of technologies lend support to these policies.

The citation for the paper is as follows:

Swamidass, Paul M. and Nair, Anand. 2004. What Top Management Thinks About the Benefits of Hard and Soft Manufacturing Technologies. IEEE Transactions on Engineering Management, 51(4), pp. 462-471