WSJ reports that Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of silicon chips, would spend $12 billion to build a chip factory in Arizona. I have been arguing on this blog for sourcing suppliers closer to the customer location (my first research paper was on dual sourcing and near sourcing) and building more plants in the US. So, I view this development as good news, but with a fair amount of caution. It is frustrating. News reports always seem to score these decisions based on how the political benefit will play out and this WSJ report is no exception. (This is an election year in the US. Which year isn’t an election year? In addition, US Senator McSally…
Leave a CommentTag: Outsourcing Operations
Lego’s revenues for 2017 are now out. In September 2017, Financial Times reported on problems at Lego, which was then planning to cut about 8% of its workforce. Indeed, Lego has been suffering from increasingly bigger global operations problems, with poor sales in Europe and North America. There have been reports of inventories piling up at distribution centers. One of the reasons attributed for Lego’s troubles is that Lego has been distracted from its core competencies, by investing in movie franchising and so on. While that is partly true, as I will explain below, Lego’s core business itself has some fundamental issues, that need to be resolved. Let’s look at some Data and I point out two issues with Lego’s Operations Planning.…
Leave a CommentHow to think about the role of Artificial Intelligence in Operations? Many people talk up AI, IoT, automation, etc, as the Fourth Industrial Revolution (following steam power, electricity, and computerization). Here is an example. I am more persuaded by the counter-arguments. For example, see a post by Luke Muehlhauser arguing there was only one industrial revolution, because one of the revolutions is substantively larger than, and different from the others, as exhibited in the figure below (data from the site). The Second Machine Age, by Erik Brynjolfsson and Andrew McAfee, which ironically, I read on paper, explores the effects of the rapid digitization and information technological advances (AI, Automation, etc) on the nature of work, wealth and society. Brynjolfsson and McAfee…
Leave a CommentHere is a New York Times article by Farah Stockman that focuses on the story of a steelworker Shannon Mulcahy who had to go through the unenviable task of training her replacements when her job was outsourced to Mexico. It is good to see that journalism is alive and well. Stories that focus on one person are illustrative in the same way as business school case studies that focus on a firm. Shannon especially represents the admirable traits of every-day Americans: charity and decency. Outsourcing decisions are terribly fraught with real human costs, especially when there are few other economic opportunities for those whose jobs are outsourced, with no political solution on the horizon. I wanted to mention a few points that…
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