Knowledge@Wharton -- Operations Management

Finding a Common Language for Disaster-resistant Supply Chains

Wed, 27 Feb 2013 15:13:57 EST

Disasters such as Superstorm Sandy, the 2011 earthquake and tsunami in Japan and the volcanic ash cloud that disrupted international airplane flights for several days in 2010 have highlighted the need for companies to better prepare for potential risks to their supply chains. A number of groups are working to create a common framework to help firms accomplish this, but experts note that the increasingly complex nature of the modern supply chain -- and a tendency by many companies to be reactive rather than proactive when it comes to disasters -- are hindering the effort.

Pseudo Science: How Lack of Disclosure in Academic Research Can Damage Credibility

Wed, 20 Jun 2012 13:53:13 EST

It sounds like a simple, straightforward proposition: Scientists should disclose how they collect and analyze the data supporting their scientific publications. Yet as Wharton professors Joseph Simmons and Uri Simonsohn and UC Berkeley colleague Leif Nelson point out in a recent research paper, too much emphasis is placed on getting research results published in respectable journals, without worrying enough about whether the evidence backs up those findings. The result: Even solid research that can lead to new insights about everything from investment behavior to product marketing to consumer psychology is called into question.

A New Approach to Decision Making: When 116 Solutions Are Better Than One

Wed, 28 Sep 2011 13:16:47 EST

Making sense of Philadelphia's City Council district map resulting from the 2000 Census is a head-scratching exercise, due in part to extensive, politically motivated gerrymandering. Yet Wharton professor Steven O. Kimbrough and a team of researchers managed to tackle the problem by using a genetic algorithm that mimics natural selection to "breed" endless variations of solutions. Their method can be applied to many other challenges -- from mapping out fire districts and streamlining sales regions to collecting trash and designing distribution systems.

Marshall Fisher on 'The New Science of Retailing'

Wed, 17 Aug 2011 15:34:03 EST

In today's economy, retailers are hard pressed to increase revenues. Among the biggest challenges they face is matching supply with demand. In The New Science of Retailing: How Analytics Are Transforming the Supply Chain and Improving Performance, Wharton professor Marshall Fisher and co-author Ananth Raman argue that retailers have the data they need to manage supply chains more efficiently and increase sales and profits. Knowledge@Wharton spoke with Fisher about what types of data are most important for retailers to collect, how they can use this information to identify home-run products and why the retailing industry might be missing as much as one-third of potential sales.

'The Democratization of Fashion': William Fung and Vera Wang on the Implications of Going Global

Wed, 13 Apr 2011 15:12:19 EST

As retailers face greater pressure to sell more products, expand into new markets and streamline production, the fashion industry is feeling the heat. Designer Vera Wang, for example, is trying to turn her business into one that is widely known and widely worn. William Fung, managing director of Hong Kong-based trading company Li & Fung, is trying to stay ahead of new complexity in the production process. Both Wang and Fung discussed ongoing challenges in the fashion industry during a recent presentation at Wharton.

Manufacturing in a Two-speed World

Thu, 10 Feb 2011 09:00:41 EST

Whether a company operates in a high-growth or slow-growth market, lean products and systems are a must. They allow companies in low-growth markets to respond quickly to customer needs, and in high-growth markets they keep costs down while supporting customization and rapid increases in output when needed. Another step up in efficiency: shared production platforms that allow high-end and low-end products to be built at the same facility -- sometimes even on the same assembly line. But all of these considerations -- including geographic location and labor costs -- must be balanced against logistical costs and risks. Customers want lower cost and quick delivery.

Winning in Two Worlds: Supply Chain Flexibility

Wed, 26 Jan 2011 14:59:57 EST

Companies must create adaptable supply chains in a two-speed world that work for both slow- and fast-growing markets -- without sacrificing sales volumes or margins. In high-growth emerging economies, this often means creating high volumes of low-cost -- and sometimes low-margin -- products, and distributing them at the lowest possible cost. In low-growth developed economies, supply chains must enhance efforts to defend or steal market share through better and faster innovation, and exceptional service.

Outsourcing: New Pressures to Stay Home, Old Reasons to Go Abroad

Tue, 11 Jan 2011 15:59:35 EST

Has outsourcing run its course in the wake of the recession and complaints from U.S. politicians about stubbornly high jobless rates? Exports from emerging markets fell markedly in 2009, and more companies are thinking harder about the unknowns of going abroad. But the cost savings in Asia are still highly attractive to multinationals, and export levels went up again in 2010. What's more, China's workforce is gearing up to manufacture an ever-wider range of products.

Checking Everything Off -- Except the Resistance to Change

Fri, 11 Jun 2010 02:36:47 EST

Errors and omissions of the most ordinary and preventable kind kill thousands of patients every year in hospitals throughout the developed and developing worlds. A simple solution exists to this problem, argues Atul Gawande in his most recent book, The Checklist Manifesto: How to Get Things Right. A surgeon and a journalist, Gawande shows just how effective checklists can be to reduce the damage caused by human fallibility in industries including medicine, construction, aviation and others where the work environment depends on complicated processes, technology and equipment. So why aren't checklists used in every operating room and ICU? The answer is simple: In the existing medical establishment, too many doctors don't like to be told what to do. Add one more box to the checklist -- the need for cultural change.

The Lean Evolution: From Factory Floor to Service Centers -- and Beyond

Wed, 11 Nov 2009 13:33:29 EST

Toyota's legendary lean production system emerged after World War II and transformed the auto industry. Since then, lean principles have moved into every area of an organization and every industry. One Wharton professor remembers trying to talk with hospitals about lean initiatives several years ago. "They thought I was evil. They said, 'We're doctors. We help people. We are not Toyota!' Now these same institutions have chief medical officers saying, 'We want to run this place like Toyota!'"

Pay for What You Get: Putting Performance-based Contracting to the Test

Wed, 14 Oct 2009 15:33:51 EST

Every company wants to improve the efficiency and cost-effectiveness of its supply chain, but what's the best way? Since 2004, the United States Defense Department has required its suppliers to adopt performance-based contracting so that it pays them a fee based on the amount of time big-ticket items like F-22 fighter jets are in use without requiring repairs. But is that better value than more traditional contracts that charge customers for time and materials when products break down? According to a new study co-authored by Wharton researchers, the answer is yes.

Rethinking the Long Tail Theory: How to Define 'Hits' and 'Niches'

Wed, 16 Sep 2009 16:45:37 EST

The Long Tail theory suggests that the Internet drives demand away from hit products with mass appeal, and directs that demand to more obscure niche offerings. Yet a new research paper by Wharton professor Serguei Netessine and doctoral student Tom F. Tan challenges that theory using data from the movie rental company Netflix.

The Economic Incentives of the 'Store-within-a-Store' Retail Model

Wed, 02 Sep 2009 16:37:02 EST

The sign above the entrance may say Macy's, Nordstrom or Neiman Marcus, but the salespeople at the cosmetics counters inside do not work for the store at all. Instead, they are employed by brand name cosmetics manufacturers which lease space from the marquee retailers. In an arrangement that is common in stores across Asia and in other parts of the world, U.S. department store retailers often cede the cosmetics category to branded manufacturers in return for fees paid to occupy prime retail real estate. New Wharton research looks into the dynamics of this model.

Raising the Bar: Can China Meet the Quality Challenge?

Wed, 03 Jun 2009 16:43:40 EST

After being stung by consumer backlash and stiffer penalties for piracy, counterfeiting and contamination, China is working hard to overcome its reputation for poor quality. Many experts see quality issues as the simple growing pains of an accelerating economy. After all, China already makes high-quality products such as iPods. The challenge today for foreign partners: How to set and enforce effective quality benchmarks.

Chinese Manufacturing in an Age of Resource Price Volatility

Wed, 03 Jun 2009 16:43:34 EST

China is slowly moving away from energy subsidy policies that hold down prices -- especially for industry. Those subsidies protected exporters from devastation when energy prices shot up to record-setting levels in 2008 and helped to keep social unrest somewhat under wraps. No one knows for sure how far China will go in reducing energy subsidies for business in the future, but China could use subsidy policies as a tool in pushing particular industries away from low-value exports that generate a lot of waste to higher-value goods that produce less waste.

Is This Madness? How Losing by Just a Little Can Help a Team -- or Company -- Win

Wed, 18 Mar 2009 16:34:51 EST

Pay attention to the first-half scores in the early rounds of the NCAA basketball tournament, which began yesterday with 64 college teams vying for the National Collegiate Athletic Association championship. According to recent research by a pair of Wharton professors, teams that trail by a little at the half actually have a better chance of winning the game than the squad in the lead. The findings, they say, apply to the business world, too.

The Race for Energy: What Will It Mean for Western Firms?

Mon, 22 Sep 2008 16:33:05 EST

Rising energy demand from China and India has unleashed a worldwide race to secure access to scarce fossil fuel resources, a more difficult proposition with the emergence of national oil companies in the resource-owning countries. While Western companies will likely feel the pain of increasing energy costs, there is a potential upside to global energy scarcity, according to experts from Wharton and The Boston Consulting Group: Renewable and nuclear energy present huge opportunities for investors and entrepreneurs.

Procurement -- Performance-based Logistics

Mon, 14 Jul 2008 11:13:41 EST

These days, when the U.S. Department of Defense buys a fighter jet from Lockheed Martin, it doesn't simply pay Lockheed for the physical product. Instead, the government has a "performance-based contract" with the defense supplier, according to Serguei Netessine, professor of operations and information management at Wharton. This contract says, in effect, that the government's reimbursement to Lockheed hinges on the jets' performance -- that is, how often the planes are able to fly. In this interview, Netessine describes how performance-based contracts are becoming more common in a variety of industries.

Procurement -- Managing Commodity Risk

Mon, 07 Jul 2008 12:59:43 EST

Managing commodity risk has emerged as a key issue in today's economy. Consider airlines, which have seen fuel costs rise seven-fold over the last few years, says Bob Tevelson, a partner and managing director at BCG. In this interview, Tevelson says commodity risks are associated with both price volatility and supply availability. More and more companies may wish to turn to hedging strategies to manage commodity risk, he notes, but such strategies can pose risks themselves unless they are properly implemented.

Procurement -- Subcontracting and Product Quality in China

Mon, 30 Jun 2008 10:23:30 EST

Marshall W. Meyer, professor of management at Wharton, has made many trips to China to research the rapid growth of its economy and the successes and difficulties it has had in growing so quickly. In this interview, Meyer discusses the recent controversy surrounding China's exports of substandard toys and pharmaceuticals to the United States, and the implications for supply-chain management.