Category: Operations Strategy

Why commonality sometimes fails

Posted by MIT Sloan Executive Education - 29 days ago

Commonality, or the reuse and sharing of components, manufacturing processes, architectures, interfaces, and infrastructure across the members of a product family, is a strategy targeted at improving corporate profitability. Companies from Toyota to GE use product platform strategies to deliver more variety to their customers and compete more effectively. For example, Black and Decker uses shared motors and batteries across a range of power tools. Volkswagen models such as the Jett and TT share similar underbody components and other aspects.

Typical benefits of a commonality, or a product platform strategy, include:

  • Shared development costs
  • Common testing procedures
  • Production economies of scale
  • Amortized fixed costs
  • Reduced inventory

By definition, commonality seems like an obviously good thing. Why incur the cost of making different parts for different products if the parts do the same thing?  Because as it turns out, commonality is not always the right thing to do. And even when it is right, it can be difficult to achieve.

Dr. Bruce Cameron is a lecturer in MIT's Engineering Systems Division and a consultant on platform strategies. His research at MIT uses a healthy dose of systems thinking to tease out when commonality makes sense and how to get companies to pull it off. Cameron oversaw the MIT Commonality Study, which closely examined 30 firms over eight years. The study was the first work to uncover that many firms fail to achieve their desired commonality targets, showing weaker investment return on their platform investments. "That type of behavior and phenomenon is seen in studies that we did in automotive, consumer products, and transport," says Cameron.

Continue reading

Market Basket: One year later

Posted by MIT Sloan Executive Education - 1 month and 16 days ago

Market Basket

Last summer, New England's consumers and much of the business world were mesmerized by the public saga of Market Basket, a privately held, small chain of grocery stores in Massachusetts, New Hampshire and Maine. Market Basket is owned by the DeMoulas family, which saw a long-running battle over control of the chain by two of its family members, Arthur T. DeMoulas and his cousin Arthur S. DeMoulas. 

Disputes like this are often confined to board rooms, but this one also played out in the public arena. After the board voted to oust the president, Arthur T. DeMoulas (commonly referred to as Artie T.), Market Basket employees (who are not unionized) decided to walk out on their jobs as a sign of solidarity with Artie T. Eventually the public, and even Market Basket's vendors, supported the walk out, leaving shelves empty and the chain’s business in jeopardy. Arthur T. was reinstated to the management ranks on Aug. 28, 2014, after reaching an agreement to buy the 50.5 percent of Market Basket owned by Arthur S. and other relatives. Employees worked day and night to replenish shelves stripped bare by the summer-long family standoff over the business.

So why did non-unionized employees, many of whom are paid by the hour, risk their jobs for a multi-millionaire? Because for decades they had been treated well and shared in the company's profits. As the business drama unfolded, the public heard dozens of stories by Market Basket employees about the ethical and generous gestures of Artie T.

Continue reading

Complex risk management--as seen on TV

Posted by MIT Sloan Executive Education - 3 months and 25 days ago

FV Northwestern

Reality TV is largely a wasteland of odd, meaningless drivel, in which business leaders rarely have the time (nor should they make the time) to invest watching. But within the very broad category, there are some meaningful glimpses of how people solve complex business problems. The stands-out show in this category might be  Discovery Channel's Deadliest Catch, which some herald as the "original" reality TV show.

For those not familiar with the show, now in its eleventh TV season, it focuses on a handful of boats fishing for crab in the Bering Sea off the coast of Alaska. And while many fans watch the show for the drama of the cold, vicious waters and the inherent danger in the job, others can glean some secrets for managing complex business operations. More than just entertaining TV, Alaskan red king crab (just one species caught and sold by the boats on the show) was valued at more than $90 million in 2012.

The title Deadliest Catch reflects the stark reality of the commercial fishing industry: since 1992, when the Bureau of Labor Statistics started publishing fatality rates by occupation, fishing has consistently ranked as the most deadly occupation. In 2006, the bureau found commercial fishing has an almost 75% higher fatality rate than that for pilots, flight engineers, and loggers (the next most deadly occupations). The fatality and injury statistics for Alaskan crab fisherman are even higher than the average for the industry, due to the dangerous conditions out on the Bering Sea.

When one watches the show with a discerning eye, it's apparent that crab fishing is, in fact, a very complex business. Each captain must manage multiple aspects of risk against hard deadlines, in real time. 

Continue reading

Managing the seasonality of products

Posted by MIT Sloan Executive Education - 10 months and 20 days ago

The seasonality of products is an issue that manufacturers, distributors, retailers, and consumers are well aware of. We all know back-to-school advertising, products, and sales hit stores in July. Soon after, we see Halloween items. And before Halloween even arrives, we start to see Christmas advertisements and promotions. Getting ahead of the season has become standard operating procedure.

But when is it too early to issue a seasonal product? Many craft beer aficionados are beginning to argue that the practice of "seasonal creep" has gone too far. Simply put, seasonal creep is when a beer specific to a season appears on store shelves way before the season actually hits. The best example is the category of pumpkin beers.

Continue reading

Can the cab industry innovate?

Posted by MIT Sloan Executive Education - 1 year and 2 months and 29 days ago

Those of us who work and/or live in Cambridge are quite familiar with the controversies stirred up by the wildly successful business, Uber Technologies, Inc. Uber considers itself a technology company, offering a mobile app that connects riders with drivers. The company has taken an innovative approach to making it easier to get from one point to another, eliminating the need to hail a cab on the street.

Continue reading

It’s time to rethink wages

Posted by MIT Sloan Executive Education - 1 year and 3 months and 7 days ago

For the last year or so, there’s been a significant amount of news coverage around the wages paid to low-income earners, such as those working at fast food outlets and in retail stores. There have been public protests, calls for boycotts, and legislation to raise the minimum wage in some states.

Continue reading

Process improvement—useful does not mean used

Posted by MIT Sloan Executive Education - 1 year and 3 months and 26 days ago

Lean production, high performance work systems, virtual communications, and collaboration applications are all examples of the latest tools, technology, and processes executives are encouraged to implement in efforts to improve productivity and efficiency. But why are there more useful tools and processes out there than there are organizations that use them?

Continue reading

The need for supply chain flexibility

Posted by MIT Sloan Executive Education - 1 year and 4 months and 9 days ago

According to David Simchi-Levi, Professor of Engineering Systems at MIT Sloan, “a growing number of U.S. executives are moving some production operations back from overseas.” While there are a great number of factors driving that trend, one is the need for supply chain flexibility. Today’s global supply chain presents a significant amount of risk, mostly due to the combination of geographically diverse supply chains and Just-in-time (JIT) manufacturing that results in low inventory levels. 

Continue reading

Search innovation@work Blog

Subscribe to Blog by Email

Media Gallery

Visit the Media Gallery to view videos and read articles and blog posts written by MIT Sloan Executive Education faculty and staff.

Interested in writing a guest post?