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least-congested rail and trucking routes for getting there.

New York-New Jersey; Norfolk, Virginia; Savannah,

Georgia; and Charleston, South Carolina (the latter two are

distinct ports but operate in close proximity to each other)

all stand to gain share. They are relatively close to the battle-

ground region and the attractive rail routes to major markets.

They are in a strong position to be on the routes of the post-

Panamax vessels, which tend to make fewer and longer stops

than smaller vessels.Houston and the New Orleans-Gulfport complex, while

not major container ports today, also should grow as they ben-

efit from upgrades and from being able to serve the greater

Gulf Coast region.

Other ports on the East and Gulf Coasts may feel little im-

pact or may find that they need to rethink their value propo-

sition to shippers and carriers. Some will continue to serve

mainly regional markets, markets that are too small to be

served efficiently by the largest vessels. Others are likely to

need to position themselves as uniquely suited to serving spe-

cific industry sectors. Some ports will find that they have in-

vested in equipment and deeper channels to handle the largest

vessels only to find that the traffic does not materialize.

On the West Coast, Oakland, California, and Seattle-Taco-

ma are less likely to be directly impacted. Los Angeles-Long

Beach is likely to lose the most with the Panama Canal expan-

sion. It continues to be well-positioned to handle traffic to

major population centers and always will be the fastest option

for reaching a large share of the U.S.

But the port will face new competition in the region eastof Chicago once the Panama Canal is able to handle post-

Panamax vessels.

The recent labor dispute at the Los Angeles-Long Beach

complex also may motivate shippers to reduce their depen-

dence on the West Coast. It remains to be seen whether ship-

pers will fundamentally change their routing decisions to

minimize disruptions when the next labor contract is set to

expire. Absolute volume levels from Asia-to-U.S. container

trade should not decline at Los Angeles-Long Beach, but it is

likely to see slower growth levels than other ports, leading to a

shift in share over time.

FIGURE 1FIGURE 1

The fight heads eastOnce the Panama Canal completes its current expansion project, a battleground region representing 15 percent of U.S. GDP will be in

play between West Coast and East Coast ports.

Figure copyright The Boston Consulting Group

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2/39May 2016 | ISE Magazine 31

The cost, time and flexibility trade-offsShippers make different choices based on the value of their

cargo, transportation costs, transit time and flexibility. To un-

derstand these trade-offs, our analysis looked at tires, couches,

T-shirts and industrial pumps that would be shipped from East

Asia to the battleground market of Columbus, Ohio.

Those products broadly represent the range of goods in the

top four categories of imports that make up more than three-

quarters of East Asia container traffic into the United States.

They also represent different combinations of profitability, size

and time sensitivity.

If cost were all that mattered, shippers would route all these

products through an expanded Panama Canal to reach Co-

lumbus, Ohio, via rail from the New York-New Jersey port

(under specific scenarios for major cost drivers). At typical

market rates, that route would be about 4 percent cheaper than

one going through Oakland, California.But it also would take 11 days longer. That time difference

affects shippers in two ways. First, the amount of inventory

in transit will increase. Second, to avoid running out of in-

demand products, the shipper will need to stock more inven-

tory as a buffer to account for unpredictable demand during

those 11 days.

For some shippers, the 4 percent savings is pivotal. But for

others, the extra time matters more.

The savings gained by transporting tires and couches to

the battleground region through the Panama Canal are large

enough to more than make up for the extra inventory that

shippers will need to carry. But the analysis works out the op-

posite way for T-shirts and industrial pumps. The time ad-

vantage of shipping through the West Coast trumps the cost

savings of East Coast travel.

Do the mathIndustrial pumps and T-shirts have very little in common

other than the fact that, even after the Panama Canal expan-

sion opens, these products most likely will continue to move

through U.S. West Coast ports to reach the battleground states

where U.S. ports compete with one another for customers.

For both products, transportation constitutes up to 3 percent

of revenues at most, so shippers often do not believe that there

will be significant savings or that the savings from alternate

routes will outweigh the increases in transit time and mana-

gerial complexity. By routing a shipment of T-shirts through

the East Coast to Columbus, Ohio, for example, a retailer’ssavings would total just 0.13 percent. And the savings would

be half that for industrial pumps. Not surprisingly, the cost of

the extra inventory that retailers or distr ibutors would need to

carry exceeds these savings.

Shippers of both products also do not want inventory in

transit any longer than necessary, though for very different

reasons. Since T-shirts often feature trendy colors or the logos

of winning sports teams, retailers want shorter lead-times and

low inventory levels in order to keep up with changes in fash-

ion and avoid obsolescence.

Pump makers, on the other hand, accept higher inventory

The executive summaryThe Panama Canal expansion is expected to open in June

after years of delays and cost overruns. Last year, The Boston

Consulting Group and C.H. Robinson researched the impact

of a widened canal for their report “How the Panama Canal

Expansion Is Redrawing the Logistics Map.”

The authors, two of whom are the co-authors of this

article, concluded the following:

How the logistics landscape will change: Growth

rates for the larger ports on the West Coast will decrease.

Competition among East Coast ports will intensify. And rail

and truck traffic patterns may shift in response.

The time vs. cost trade-off: The West Coast always

will be the fastest option for reaching much of the United States, but the East Coast will become the least costly option for some shippers

and some commodities.

The battleground: The battleground where U.S. ports compete for customers could move several hundred miles west to a regionthat accounts for more than 15 percent of U.S. GDP.

Urgency to act: The expansion underscores the need for shippers, carriers and logistics service providers to adapt their strategies

and operations in light of the growing complexity of the logistics field.

Photo courtesy of www.industrytap.com

http://www.industrytap.com/



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eatthePanamaCanal

levels because having inventory in warehouses, not on ships,

allows them to take advantage of every opportunity to make

sales and provide high levels of customer service when a criti-

cal part fails. For both products, careful planning of inventory

levels is required.

Tires and couches, however, are much more expensive to

ship to the U.S. from East Asia, so the calculations work out

differently. Transportation makes up 44 percent of the cost of

goods sold for tires and 23 percent for couches. Even thoughthe cost of holding extra inventory is higher for these products

than for pumps and T-shirts, the savings of routing through

the East Coast to the battleground region more than make up

the dif ference.

In fact, by transporting tires to Columbus, Ohio, by way of

the East Coast, shippers can expect to save about 1.5 percent –

a big number for a low-margin product.

All shippers wil l need to conduct exercises similar to those

shown in Figure 2 for their product portfolios, assessing the

relative importance of minimizing shipping costs, maximiz-

ing time to market and properly gauging inventory levels.

The full pictureThese projections of cargo flows are the product of an eco-

nomic model that simplifies reality. Several other factors

could alter traffic through an expanded Panama Canal.

Three developments, in particular, likely would magnify

the shift in volume through the Panama Canal to U.S. East

Coast ports.

• A proposed canal through Nicaragua could be built if fi-nancing and other issues are resolved, providing an addi-

tional route for shippers to reach the East Coast.

• Carriers could increase their use of transshipment and make

a stop in the Caribbean to offload containers, a move that

could favor smaller U.S. and South American ports.

• The use of liquefied natural gas as bunker fuel for ocean

vessels could reduce transportation costs substantially.

The impact of most of the other potential developments,

however, is unclear. While many of these key factors look dif-

ferent now than they did when the Panama Canal expansion

FIGURE 1FIGURE 2

The math is importantShippers must calculate the time vs. cost trade-off by commodity.

Figure copyright The Boston Consulting Group

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4/39



IE skills are perfect for a world that is c

By Rona Howenstine

The chameleons of engineering




At what point in your life did you know that you

wanted to be an industrial engineer? When the

other kids were answering the question in your

grade school classroom, did your friends say they

wanted to be a teacher, fireman, policeman, art-

ist, pilot, doctor, dentist, astronaut, sports legend

or rock star? It is highly unlikely that anyone raised their handand espoused the desire to be an IE.

Maybe you didn’t know in first grade, your senior year, or

even your first few semesters of college, but the tenets behind

what makes a successful IE seem to appear at an early age and

are most likely part of a person’s natural disposition. IEs might

just be born that way without even knowing it, and that makes

them quite fortunate.

Considering the futureDisruption is a constant these days. A primary driver of dis-

ruption in every industry is the fact that all people – custom-

ers, suppliers, shareholders and even family members – are

raising their expectations on every front at an unprecedented

rate. Digital technology, radical new business models and the

agility of a virtual on-demand workforce are challenging the

definition of business as usual every day.

Business author Michael Grothaus recently published a

piece in Fast Compa y, “The Top Jobs in 10 Years Might Not

Be What You Expect,” where he interviewed three futurists.

The article provides predictions about what the top jobs of

2025 will and will not be. Graeme Codrington, one of the fu-

turists, states, “History tells us that somehow the labor market

creates new jobs when it destroys some old ones.”

The question that arises is will the next generation go to

college for a specific education or to develop generalized un-

derstanding, analytical thinking and the most versatile toolbox

possible? They will be marketing their skills vs. the degree

they earned and must be quite adept at communicating theirpersonal match with a company’s needs.

Some things remain constantIn 2014, economic modeling expert Joshua Wright published

“The Most In-Demand (and Aging) Engineering Jobs” in

Forbes.

“While every engineering area has added jobs, job growth

from 2010 to 2014 has been in the double digits in four oc-

cupations: petroleum engineers (30 percent), mining and

geological engineers (12 percent), biomedical engineers (10

percent) and industrial engineers (10 percent),” Wright wrote.

In some cases he even cites how the demand outweighs

supply. “The best example of this is industrial engineers, an

occupation with three times more unique monthly postings

(24,740) than average monthly hires (7,737) since the start of

2012,” according to Wright. Figure 1 shows the data.

The stability of the industrial engineering discipline and

continued demand is supported further by a U.S. Department

of Labor Bureau of Labor Statistics analysis that indicates the

outlook is stable over a 10-year horizon from 2014 through

2024, as shown in Figure 2.

A

FIGURE 1

To hire an engineerAccording to data from EMSI Job Posting Analytics, demand for industrial engineers was three times higher than the average number of

monthly hires.

30,000

25,000

20,000

15,000

10,000

5,000

0Civil

engineersMechanicalengineers

Engineers,all other

Industrialengineers

Electricalengineers

Electronicsengineers,

exceptcomputer

Computerhardwareengineers

Aerospaceengineers

6,025

13,657 12,523

9,599

2,197

7,857

24,740

7,737 8,898

5,8204,248 4,841

1,727 3,025 2,061 2,349

Average monthly postings (Jan. 2012-July 2014) Average monthly hires (Jan. 2012-July 2014)

Unique job postings vs. hires for engineering occupations



Thecham

eleonsofengineering

An additional source to consider is au-

thor and personal finance adviser Bobbi

Dempsey’s “Seven Most Universal Job

Skills,” published in Forbes in 2010. She

provided a list that is closely paired with

the skills that most successful IEs possess:

top-notch communication skills, creativ-ity, curiosity, good writing ability, ability

to play well with others, re-engineering

skills and computer skills

Likewise, in 2013, Seek, an Australian

job site, published its own version of

“Seven Most Universal Job Skills,” which

had a list that is even more closely aligned with the IE skillset:

great communication skills; flexibility, adaptability and inno-

vation; creativity and problem-solving; results focused; great

interpersonal skills; computer skills; and ability to research.

All of this information should make current IEs very com-

fortable with their personal career choice, even when all indi-

cations are that we need to “get comfortable being uncomfort-

able,” as the well-known self-help author Peter McWilliams

would suggest.

Additionally, while the concentration of IE careers tradi-

tionally has been in the automotive, aerospace, electronics,

medical devices and pharmaceutical industries, IE engagement

has broadened and shifted toward fields such as healthcare and,

most recently, financial services and insurance.

These facts should provide a level of confidence to IEs,

highlighting that they have been solid contributors historical-

ly, are able to adapt over time, and possess the skills to continue

to evolve into the roles they will play in the future. One might

refer to IEs as the chameleons of engineering. The data also

should provide every industrial engineer inspiration to bring

others along into such a stable and remarkable discipline where

every day brings a new opportunity.

What makes IEs so versatile?

IEs benefit from the consistent consideration of all situations

from a systems standpoint. Their purpose is to enable people,

processes and technology to work together synergistically to

create value for the world.IEs have long been considered the bridge between business

and engineering – able to speak both languages and to bring

disparate and diverse groups together to develop a common

solution. In many ways, IEs appear to be balanced from a left

brain and right brain aspect, with almost equal comfort em-

ploying the appropriate combination of technical skills and

soft skills.

Just think for a moment of all the different ways an IE could

specialize: lean Six Sigma, project management, organiza-

tional change management, financial management, opera-

tions management, process engineering, quality management,

artificial intelligence, big data/analytics, as well as in the tradi-

tional IE role as understood by most.

It is even more encouraging to recognize that some IEs have

become astronauts, CEOs (Apple, UPS, Accenture), company

presidents (Walmart, BAE Systems, Raytheon), lieutenant

governor (Indiana) and even an NFL football coach (Dallas

Cowboys). Industrial engineering applies to every industry

and every household in the world, which makes the discipline

extremely versatile. Like most engineers, IEs are usually quite

methodical and disciplined in their approach to work and to

their personal lives, which may drive our peers, friends and

families mad.

Consider how IEs approach and accomplish their work, and

therein lies the secret sauce to their versatility. Here are some

examples of what makes IEs unique:

1. How they think: IEs consider the entire system. They

examine processes from end to end and can immediately

identify waste and variation.

2. How they influence: IEs enable and convince individuals

and teams to make positive change with every engagement,

which requires great communication skills, the ability to

facilitate, high energy and, in challenging cases, a large in-

vestment of emotional capital.

3. How they approach situations: IEs can affect improve-

ment in incremental or monumental undertakings. Their

approach is always scalable, and they choose tools that are fit

for a purpose. IEs will take the time to teach and explain inorder to bring a team along and to ensure their fingerprints

are on the final solution. Proliferation of knowledge, facili-

tating through chal lenging situations and dispelling fear are

an IE’s specialty.

4. How they plan: IEs have all taken a project management

course and adapted their knowledge and style to the situa-

tion. They are well-versed in the quote attributed to both

Benjamin Franklin and Winston Churchill, “If you fail to

plan, then plan to fail.”

5. How they measure: IEs need to know what is being

measured, why, what success looks like and if the team is

FIGURE 2

IEs at workAccording to the U.S. Department of Labor Bureau of Labor Statistics, industrial

engineers had a median annual pay of $81,490 in 2014.

2014 median pay $81,490 per year

Typical entry-level education Bachelor’s degreeNumber of jobs, 2014 241,100

Job outlook, 2014-2024 1 percent (little or no change)

Employment change, 2014-2024 2,100




winning. They are hooked on operational definitions and

scorekeepers, sometimes to a fault. IEs understand that what

gets measured gets managed and that inappropriate mea-

sures drive bad behavior.

6. How they analyze: IEs begin with the notion that there

has to be a story that can be told from the data (if there is

data). Then, they dig for the information and have been

known to torture data sets until they scream for mercy. An

IE’s best friend is usually Microsoft Excel, Minitab or any

program that al lows them to codify, stratify, classify, evalu-

ate and visually display their data in a meaningful manner

that is easily explainable. IEs enjoy interpreting and simpli-

fying information and never suffer from analysis paralysis.

Oh, and Visio might be their second best friend.

7. How they solve problems: IEs seek to find and prove

root cause and to implement a permanent fix, without ex-

ception. It is never enough to fix a process for the short

term, and the worst thing for an IE is to revisit the sameissue a second time or, gasp, a third time.

8. How they make decisions: IEs have clear and concise

methods they use for decision-making. It doesn’t mat-

ter whether they are buying a house, choosing a daycare,

or transforming an entire operation, IEs know what fac-

tors matter in each situation. They can always calculate a

weighted average of all the factors so their team (or family)

can narrow the field and make the best choice in a timely

manner.

9. How they consider risk: IEs actually consider risk and

quantify it without fearing it, both at work and home.

Have you ever alerted someone to a risk that was very

likely to happen? Then when they ignored you and it ac-

tually occurred, you didn’t even say “I told you so.” An IE

would take this as an opportunity to help them resolve the

issue by assembling a full FMEA (failure mode and effects

analysis).

This list just highlights some of the more common behav-

iors one may encounter when observing an IE in the work-

place. What is even more interesting is to observe an IE apply

tried-and-true methods at home. If you have visited the garage

of an IE, you most likely will find a clean epoxy floor, shadow

boards, racks and cabinets with an enviable level of organiza-

tion. That’s where they try out all the workplace organization

and visual management concepts they learn.

On a similar note, it is probably safe to assume that every

IE has encountered the concept of inventory management.

However, they might not have heard of the concept of closetinventory management. For some overzealous IEs, there are

a fixed number of hangers – and no more – in each closet in

the house.

This means that if someone gets something new, then some-

thing of theirs must go. You can’t steal hangers from others’

closets when they are not looking. This also makes for a fun

game of “keep or give,” enabling a family to donate to others.

Now, it might be debatable whether this is IE or obsessive-

compulsive disorder or a beautiful combination of both, as

hangers should be equally spaced on the rod and clothes should

be grouped by category in color order, right? Just checking.



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eleonsofengineering

Training workers’ mindsPeter Bostelmann, a former SAP industrial engineer, is a great example of how IEs

can go in new directions and add value to their employers.

Bostelmann brought mindfulness training to his company. And according to the

San Jose Mercury-News , a growing number of companies, including Facebook,Twitter, eBay and Aetna, are incorporating such practices as meditation, yoga and

mindfulness into their workplaces.

The theory is that the traditional hard-charging nature of American business

makes workplaces toxic, driving employee disengagement. Improving employees’

emotional intelligence can help them feel more clarity, creativity and self-

confidence, which can drive innovation and engagement.

“People think this is touchy-feely ‘Kumbaya’-in-the-meadow stuff. But this

is cutting-edge mental training,” said Bostelmann, who is now SAP’s director of

mindfulness.

The IE likened meditation to physical workouts that build strength and

endurance. According to the concept of neuroplasticity, the brain forms new neural

pathways in response to changes in behavior, environment, thinking and emotions.

“Just like you work your muscles, you train your brain,” Bostelmann said.



10/39



Imagine for a moment that you are responsible for man-aging a manufacturing facility that has a few specialized

assembly lines producing a handful of variations of the

same widget.

You drive into work each morning and have key ques-

tions that you need answered immediately to begin cre-

ating your priorities for the day. “Are any machines down for

repairs?” “Have any members of my team called in sick to-

day?” “Are there any high priority or special orders that I need

to account for?” “What is my production schedule today, and

what should I prioritize?”

These are all pieces of daily information that you require,

and you likely have set up reports, analyses and regular com-munication methods to address these issues.

Now switch the manufacturing setting with a diagnostic

service department (X-ray, MRI, CT scan, ultrasound, etc.)

in a hospital. Which questions do you ask yourself as you begin

each day?

As it turns out, the information required for optimal per-

formance in service areas involves many of the questions listed

above, albeit with a patient-care focus. Yet many healthcare

facil ities around the nation have not identified or implemented

such a standard set of questions, along with the communica-

tion of daily logistical information. This is what performance

I




and order prioritization huddles aim to address.Performance and order prioritization (POP) huddles are a

framework for diagnostic departments in hospitals to address

efficiency barriers and prioritize patient services on a daily ba-

sis. They are attended by all department staff (technologists,

managers, director) and led by the shift team lead or lead tech-

nologist, although other staff can lead the huddle, generally in

a weekly rotation. These huddles shouldn’t take longer than

15 to 20 minutes, depending on the size of the department.

The huddles have two main components. The first is per-

formance, where huddle participants discuss, document,

address and escalate departmental efficiency and logistical

barriers or challenges. The second is order prioritization,

where huddle participants review known outpatient sched-

ules, inpatient orders and competing resources to decide

which orders to prioritize.

The performance elements of POP huddles are not para-

digm-shifting for the majority of service areas. Many diag-

nostic departments in hospitals already verbally discuss thesebarriers on a daily basis. However, they often do not have a

standardized method of documentation to provide at-a-glance

visibility to all department staff.

POP huddles are a forum for staff to al ign and identify chal-

lenges that may impede utilization throughout the day. All di-

agnostic departmental impediments are categorized into one

of three groups:

1. Machines and equipment: Diagnostic machines or pa-

tient-care equipment that is down for repairs, in short sup-

ply or not able to be utilized. Examples include a broken

MRI machine or a low supply of liquid contrast.

2. Staffing: Scheduled department or support staff members

who will not be working their shift, have been pulled to

other departments or are otherwise unavailable. Examples

include a technologist called off work, a transport depart-

ment that is short on transporters (which will hinder timely

patient movement), or an X-ray tech who unexpectedly has

to support surgery procedures.

3. Procedures: Some diagnostic service areas have to provide

resources and equipment for procedural departments like

surgery and cath lab. This category identifies known pro-

cedures and times that the department will have to provide

secondary support. Examples include a C-arm machine

that is being used by the surgery machine department all

morning, cath lab procedures that will require multiple

PICC line insertions and validation of correct placement

with diagnostic equipment.

Every barrier identified is recorded on a POP huddle board,

shown in Figure 1. These boards are displayed prominently

in the center work area of the department. The foundation of

the performance portion of the POP huddle is simply to allow

staff to verbalize daily barriers and display them visually forstaff or leadership who did not attend the huddle.

However, the POP leader can take this a step further and

document the barriers by category each day, possibly with

high-level details or notes. This record is maintained and ana-

lyzed to look at root causes of logistical issues that the depart-

ment experiences on a regular basis. For example, perhaps 75

percent of daily barriers fall into the machines and equipment

category. Leadership can use this information to begin to look

at the specific instances and how to anticipate downtime in

the future.

The order prioritization focus of POP huddles is often a new

Perfor der prior

huddles help diagram daily priorities

vice areas

By Alex Bohn

POP quiz:

What are theright questionsin hospitals?



POPquiz:Whataretherightq

uestionsinhospitals?

concept for diagnostic staff, or at least a new way of thinking

about how they approach their daily workload. Every order

(and associated patient) has a priority based on many different

factors. Too often, diagnostic areas prioritize their patients in

a way that optimizes their silo but does not create efficiency

within the entire system or align with hospital performance

goals.

Some factors, like the daily outpatient appointment sched-

ule, are easy to predict day-of and also not very flexible, so

they are used as the starting point for patient prioritization.

After that, diagnostic areas begin the day with a pile of stat

and routine order requisitions (tests and services for patients)

from inpatients and emergency room patients throughout the

hospital.

Currently, priority is often given to stat orders, emergency

patients and then whichever inpatients have been waiting the

longest. Some departments will slightly refine their schedules

to group inpatients by unit (critical care patients first, for in-

stance) or time of day depending on the test type and require-

ments.

With the implementation of POP huddles, a specific prior-

ity hierarchy is created (per department) to help guide staff on

which patients to begin their day with. An example of such

a hierarchy is in Figure 2. System-level factors must be taken

into consideration when creating this hierarchy so that onedepartment doesn’t inadvertently become a barrier for pa-

tient progression by attempting to optimize only their area

or schedule.

Examples of these systemwide factors, in no particular pri-

ority order, include the following four types of patients:

1. Patients who are approaching discharge: Are any of

these inpatients well enough and scheduled to be discharged

from the hospital today? If so, the department should make

sure to complete these tests today to avoid holding the

patient in a bed longer than necessary. Progressing these

patients through the system increases throughput for the en-

tire hospital and positively affects patient care factors, such

as decreasing the chances of a hospital-acquired infection.

2. Patients under observation: Do any of my morning

orders concern patients who are in an observation status

who are very time-critical to have a decision (discharge or

admit) made for them? If so, the department should look to

FIGURE 1FIGURE 1

Keep staff informedThis POP (performance and order prioritization) huddle board example comes from a CT department. Such boards should be displayed

prominently in the center of the department’s work area.

Machines and equipment

CT machine 2 down for repairsuntil Friday

Low supply of liquid contrast,back-ordered until Wednesday

Staffing

Kelly called in sick for today's shift.

Transporters are understaffedby two; expect to have to

self-transport some patients.

Procedures

CT-guided biopsies scheduledfor 10:30 a.m. and 2 p.m.

POP huddle: CT department Date: Tuesday 1/26

S.C. is checking that listSouth Carolina is undergoing a statewide experiment to see

if checklists can reduce errors in surgery, reported Modern

Healthcare magazine.

Project leaders say the pre-surgical safety checklist process,

a tool adapted from high-risk industries like commercial

aviation, could prevent enough mistakes to save 500 lives a year.

Many hospitals thought they were safe, even when surgical

teams would start procedures without speaking a word to each

other, Clemson University industrial engineer Ashley Childers

told the magazine. She has traveled more than 19,000 miles tohelp more than 50 hospitals with their checklist procedures.

While some hospitals now have nearly 100 percent

compliance with their checklist procedure, others continue

pushing back. And since the program is still gathering data,

Childers said, advocates don’t have the numbers yet to prove

that the system works.

And results from other projects have been mixed. For

example, a 2014 New England Journal of Medicine study

found that checklists in more than 100 hospitals in Ontario,

Canada, did not significantly reduce complications or deaths,

according to Modern Healthcare . But checklists in the state

of Michigan virtually eliminated catheter-based infections in

that state.




perform and obtain results of tests for these patients as early

in the day as possible. Observation patient management is

often a pain point for hospital efficiency and operations be-

cause the time to decide whether to admit or discharge is

generally 24 to 48 hours. Test results are key for clinical staff

to make timely and educated decisions about the patient’s

care.

3. Patients who require multiple services: Does my CT

patient also have any orders for an X-ray, an MRI, etc.?

If so, what time will they be receiving these services, and

can I coordinate with those areas so the patient can receive

all of the services sequentially? Coordi-

nating services results in patients being

transferred fewer times throughout the

day. This impacts both patient satisfac-

tion and the utilization of transporters in

the hospital.

4. Patients who have been hospital-ized for a long time: Have any of

these patients been in the hospital for

an exceptionally long time? If so, this

test result may be part of the discharge

plan put into action to progress the

patient to discharge or go to the next

level of care.

These factors often can be ascertained

by the POP huddle leader prior to the

huddle with a quick review of the patient

charts in a hospital’s electronic medical

record system.

The huddle lead can come prepared

to review which patients the depart-

ment should prioritize early in the day

and why. Therefore, staff members are

aligned and have an understanding of

why they are working on patients in a

meaningful order.

Throughout the shift, new orders will

come in and the priority order likely wil l

be adjusted. For example, if a patient who

comes into the emergency room requires

a handful of stat CT scans immediately,

the CT department will need to move

some noncritical patients around or ad-

dress them later in the day to accom-

modate. Unforeseen variability causing

minor deviations from the order priority

should be expected and planned for.

Effective communication is both a key

to success and an outcome of the POP

huddle program. The format encouragesstaff input and problem-solving, along with providing a daily

means for staff to discuss and escalate logistical obstacles to

department leadership.

Throughput, efficiency, staff and patient satisfaction are all

improved by applying fundamental industrial engineering

concepts to the diagnostic service area operations.Y

Alex Boh s a tra sformatio gi eer with Care Logistics who helps

hospitals i crease efficie cy a d improve patie t care. He has a degree

i i dustrial e gi eeri g from Ketteri g U iversity a d is a former

preside t of IISE’s You g Professio als group.

FIGURE 1FIGURE 2

Prioritizing ordersThis chart shows an example of order prioritization to move patients through hospital

diagnostic service areas.

P r i o r i t y o r d e r

Start Outpatient schedulePreviously scheduled daily outpatient appoint-

ments from scheduling systems

Current ER and stat orders

Top-priority, time-sensitive orders and patients

Observation patients

Patients with a current status of "observation"who need to be progressed or discharged

Discharge patients

Inpatients with an order for discharge or who arelikely to be discharged today

Multiple services

Inpatients who have multiple services ordered andcan be coordinated across multiple departments



help employees boost service through tec y

By Joseph A. Michelli

How to play niceand add value




Increasingly, technology impacts every facet of our life.

From the moment we awake to final actions before bed

(digital, mobile, automation and user-friendly apps),

technology aids us in everyday tasks at work and home.

Futurists spend a considerable amount of time hy-

pothesizing about extreme applications of technology,

including genetically engineered “designer babies” by 2053or longevity treatments to stop aging by 2065. The rest of us

simply try to manage the information age and the technology

boom happening around us now. In a world where goods and

services depend on the smooth integration of people and tech-

nology, leaders in manufactur ing and service-based businesses

are challenged to maximize the unique strengths of people as

well as computer-based technology. And many of the lessons

and opportunities faced in the service sector, particularly those

involved in helping people add value to technology, have ap-

plication in a broader set of manufacturing industries.

Let us use Mercedes-Benz as our benchmark.

Assessing the challengesMercedes-Benz faced mission critical challenges in the United

States dating back to 2011. Despite the company’s innovative

engineering and outstanding marketing, leaders at MBUSA

feared the brand couldn’t sustain sales levels. Customer stud-

ies conducted by outside research firms validated what leaders

inside the company were already recognizing – the dealership

experience of Mercedes-Benz customers was falling far short of

the brand promise to be “best or nothing.” In essence, the or-

ganization hadn’t innovated nor integrated people, process and

technology solutions in ways that resonated with customers.

As customer experience issues were becoming more appar-

ent, senior leadership at Mercedes-Benz USA was also chang-

ing. On Jan. 1, 2012, Stephen Cannon moved from vice presi-

dent of marketing for Mercedes-Benz USA to president and

CEO. From the onset, Cannon prioritized the Mercedes-Benz

sales and service experience. In his first 60 days, he sat down

with people in every department to identify the company’s

strengths, weaknesses, opportunities and threats.

“What crystallized to me from those conversations was that

we had an extraordinary opportunity to improve the experi-

ence customers encountered when they purchased or receivedservice on their vehicles,” Cannon recalled. “As a leadership

team, we believed that an investment in this area would result

in a disproportionate return.”

In order to generate that level of return on investment, lead-

ers at Mercedes-Benz USA had to overcome two rather large

obstacles: An existing and dominant product-centric culture

and limited ability to exert control over the experiences deliv-

ered by the brand’s 370-plus independently owned and oper-

ated dealer partners.

A company’s greatest strengths are often its greatest weak-

nesses. From the perspective of Daimler, engineering excel-

I



How top

layniceandaddvalue

lence, safety and innovation are the foundation that have led

to a very product-focused mindset. Many Mercedes-Benz

dealers in the United States (many of whom had been in busi-

ness for decades) relied heavily on product quality to build

customer loyalty, and they hadn’t addressed the need to design

and engineer the overall experience of customers in Mercedes-

Benz dealerships.Because of such a strong product focus at Mercedes-Benz,

new competitors entered the marketplace offering to add value

to their products by creating a better dealership experience.

They were integrating effective human services and leverag-

ing technology tools to make the experience easier for cus-

tomers.

Peter Collins, a retired area manager for MBUSA and cur-

rent general manager of the Mercedes-Benz dealership in Al-

exandria, Virginia, explained how things were changing.

“When I started with the brand in 1984, there was no Lexus.

There was no Infiniti. There was no Acura. Heck, there wasn’t

even the Internet,” Collins said. “Truthfully, whatever Daim-

ler sent us, we sold. That was the luxury market. That clearly

was an era where you were privileged to get a Mercedes-Benz.

However, as the age of consumerism, competition and tech-

nology advanced at warp speed, we became vulnerable if all

we offered was a great product.”

Mercedes-Benz of Virginia Beach service manager Pat Ev-

ans highlighted changing consumer attitudes as a risk factor

encountered by the Mercedes-Benz brand over the last several

years.

“I’ve been with Mercedes for 30 years. In the 1980s and

early 1990s, we were selling 50,000 to 60,000 cars a year, and

our customers were so in love with our product it didn’t matter

what happened to it. Just fix it and get me my car back,” Evans

said. “Now we’re selling 400,000. There’s a clientele buying

our product who simply don’t want the cars any longer if there

is even the slightest problem, and that includes a simple rattle

or squeak. Mercedes-Benz leadership is faced with position-

ing the brand in a changing consumer marketplace. Newer

customers, especially those who haven’t been committed to

the product for five to 10 years, not only want the best cars in

the world, but they also want the best reliability and the best

consumer experience in the world too.”Rather than designing an optimal customer experience

from the onset and selecting distribution partners who were

contractually obligated to deliver that experience (the founda-

tion of the Lexus brand), Mercedes-Benz USA, under Can-

non’s new leadership, faced the challenge of transforming

the mindset and behavior of longstanding dealers beyond an

established product-centric perspective entrenched through

generations of dealer ownership.

To achieve that transformation, leaders at MBUSA under-

stood that they needed their people to look for technology

solutions that would make the lives of customers easier and

that would help their people develop skills to add uniquely

human value. Let’s start with an example of the technology

improvement deployed at MBUSA and then move to a review

of a human skills development approach. We then conclude

with likely applicable lessons for your industry.

Digital Service DriveDigital Service Drive is the pinnacle of MBUSA’s integrationof processes, technology and human service. It is designed not

only to set standards for what specific components of the Mer-

cedes-Benz service experience should entail, but also to inte-

grate technologically various aspects of the customers’ overall

service experience.

Before Digital Service Drive, for example, while most deal-

ers purported to have “online-scheduling,” the claim could

mean anything from state-of the-art scheduling platforms

with mobile integration and texting capabilities to making

sure the service department phone number was on the dealer-

ship website so customers could call in and make an appoint-

ment.

By contrast, the major elements of the Digital Service Drive

program are:

• Online service appointment scheduling: Customers

are given the opportunity to schedule their vehicle service

needs and arrange a courtesy vehicle at any time using a

smart device or computer. They also can automatically up-

date customer information prior to a service appointment.

• Service drive tablets: The use of iPads and Digital Ser-

vice Drive technology enables a service advisor to complete

the write-up, vehicle history, walkaround, customer in-

formation collection and loaner contract processes all from

the advisor’s tablet. These activities take place in the service

drive, and customers don’t have to leave their vehicles.

• Status notification automatically sent via customer-

preferred method: The customer receives updates on the

service process and a summary of the work being completed

in easy-to-understand language.

• Flexible bill pay

– Online bill pay: This feature enables customers to use

their devices to make self-service payments by deliveringfinal parts and service invoices via text and email. It also

allows customers to pay anywhere and anytime that is

convenient to them.

– Active service cashiering: Service advisors can com-

plete the payment process on the service drive via their

tablet and enterprise payment system. Customers no lon-

ger have to go to a cashier (or wait in line) to pay.

From a dealer’s perspective, Digital Service Drive results in

greater customer satisfaction by providing patrons with choic-

es and offering cutting-edge tools that project a professional




image for the dealership while also demonstrating their invest-

ment in progressive, technology-rich retail experiences. From

the customer vantage point, the Digital Service Drive simply

means ease, convenience and more productive use of time at

the dealership.

The Mercedes-Benz journey to the Digital Service Drive is

largely predicated on addressing changing consumer expecta-

tions. Frank Diertl, general manager of aftersales business de-velopment, noted that the service was designed to address the

needs of customers who interact with brands through technol-

ogy and to offer them tools that fit the way they go through

their daily life.

“These consumers choose brands based upon the way those

companies enable them to technologically interact,” Diertl

said. “Not every customer fits into that higher technology

group, but their numbers are increasing. Today, many con-

sumers are looking for ease and for an app that facil itates that

ease. Our customer base is changing right before our eyes.

Zappos, Starbucks and even Domino’s Pizza are setting the

retail environment expectations that our customers are going

to judge us by. Not only do we want to keep up with the way

those other brands integrate people, processes and technology,

but we want to be a leader as well.”

In addition to investing in technology solutions that im-

prove “ease and efficiency,” Mercedes-Benz leaders helped all

brand representatives develop skills that maximize the value

that only humans can deliver. One such example of this em-phasis on “human value” came in the form of a training pro-

gram referred to as “Driven to LEAD.”

Driven to LEAD

Driven to LEAD was the largest customer experience training

program ever initiated by Mercedes-Benz USA. The LEAD

acronym stands for listen, empathize, add value and delight.

The development of the training materials was consistent

with the first behavior that MBUSA wanted brand representa-

tives to demonstrate: listening. Prior to crafting curriculum

materials, team members at MBUSA interviewed 10 percent

Lab boostshuman performanceIowa State University recently established

a human factors lab to study how

engineering can augment andunderstand human performance.

The Augmentation and Training

of Humans with Engineering in North

America Lab (ATHENA), which opened

in November 2015, is one of four

augmented human research labs in the

world and the only one in North America.

“In this lab, we take humans and

make them better,” said Richard Stone,

an associate professor of industrial andmanufacturing systems engineering who also

is the lab’s director and co-founder. “Through

technology, training and the principles of engineering, we

can make most tasks better.”

Examples include more effective and comfortable body armor and

better and faster training routines for welders and other professionals. One project involves an exoskeleton that helps soldiers and

police officers learn to fire handguns.

The training tool, made of sheet metal, wraps around a wrist like a sleeve. Wearing the exoskeleton is like having a firearm

instructor holding your hand to help with wrist and finger control. The technology could be paired with a laser gun, making training

easier and cheaper than live-fire exercises.

The lab also supports courses in occupational biomechanics, human factors, applied ergonomics and work design, cognitive

engineering and human factors in product design.



How top

layniceandaddvalue

of the Mercedes-Benz dealer principals in the United States

and sent surveys to 3,000 of their employees to gather their

insights and perceptions about the quality of the customer ex-

periences being delivered in dealerships.

By listening to feedback from dealer partners and their em-

ployees, relevant training materials were produced by a team

of 15 content developers. That content was then piloted anddelivered by 20 trainers over 83 training dates in a 23-city

tour. In essence, the focus of the training was to help develop

advanced skills to deliver experiences that technology can’t

provide.

Here is the essence of the skills targeted.

Listen. Business author Steven Covey noted that most peo-

ple listen with the intent to reply, not with the intent to un-

derstand. Listening to understand is the foundation of human

service excellence. Listening is an active process of clarification

and summarization. It requires lots of questions and statements

like: “Can you tell me more?” “Let me make sure I under-

stand.” And “When did the problem start?”

Empathize. While listening is an intellectual process of

comprehension, empathizing involves emotionally under-

standing another person. It typically requires a willingness to

hypothesize about the likely emotional experience of another.

It also is an opportunity to connect with a customer prior to

addressing their need or preference. It often involves phrases

like, “So I can imagine how you might be feeling,” or “Wow,

that probably was frustrating.”

Add value. People have become accustomed to having an

app for this and an app for that and even apps to help us orga-

nize our apps. While technology tools can make our l ife easier,

help us gain information with a push of a button and keep us

connected in a virtual sense, they cannot replace the need for

human contact.

When customers opt to be served by a human (for example,

passing up self-service on the web to reach out to a company’s

call center or passing up an ATM to be served by a teller),

those customers look for people who can do things that auto-

mation simply can’t. They are looking for people to add value

by resourcefully offering expertise or options beyond what

fixed computer programs or algorithms can offer.

For example, one team at MBUSA sought to add value bychanging the way vehicles are launched. Rather than reacting

to product issues that emerged at launch, this team formed a

“rapid response” unit that met daily and tracked input from

dealers and social media. Any emerging issues were flagged

immediately, and solutions were expected within 24 hours.

Departments were not allowed to silo or write defensive

emails. Collaborative answers needed to be forged daily.

Delight. Solid service brands remove pain points for their

customers. They “get service right” and “make things right”

when there are those occasional breakdowns in product or ser-

vice delivery. By contrast, outstanding customer service pro-

viders do all the things solid service brands do and forge strong

emotional connections with customers. Those connections

build customer loyalty and referrals.

Customers often talk about brand connections by suggest-

ing they are “delighted” or “wowed.” So what are “wow” and

“delight”? They are exceeding customer expectations in small

and large ways. It is demonstrating to customers that you notonly care for them through service excellence but also care

about them through your personal interest, thoughtfulness,

compassion and concern for their needs, well-being and fu-

ture.

Here’s a quick example of how Mercedes-Benz dealership

staff members work to deliver delight to customers. A woman

brought a car in for service and asked the service advisor to let

her know if the team found an earring on the floor. In addition

to performing the requested mechanical tune-up, the service

advisor and a Mercedes-Benz technician took the seats out of

the car to look for the earring.

The astonished customer, upon being presented with the

earring, burst into tears. As it turns out, the earrings were a

special gift from her husband and carried significant sentimen-

tal value. Only people can forge those types of emotional reac-

tions and connections with other people.

Adding humanity to technology adds valueSo what does all this have to do with me if I am not in a service

industry? In the past several decades it has become increas-

ingly apparent that large swaths of the workforce have been

displaced by technological advances. Automation has taken

previously manual tasks and improved the consistent quality

of products produced, made the workplace safer and increased

the efficiency of operations.

Despite heavy dependencies on technology to streamline

operations, leaders continue to be tasked to inspire their people

to add value above and beyond that derived from hardware,

software and robotics. It is the job of leaders to inspire their

people to look for needs that can be addressed by technology

and to seek technological innovations to meet those needs.

Further, it is essential that team members develop uniquely

human skills to add value for their co-workers and customers.

We might not see “genetically engineered designer babies”by the year 2053, but great leaders will be challenged continu-

ally to help their people play nice with and add value to the

technology advances to come. Hopefully, you are well on your

way to contemplating solutions for those challenges. Y

Joseph A. Michelli is a ter atio al speaker, co sulta t a d New

York Times No. 1 best-selli g author. His books have exami ed

busi ess operatio s i orga zatio s that i clude Starbucks, Zap-

pos a d the Pike Place Fish Market. His latest book is Driven to

Delight: Delivering World-Class Customer Experience the

Mercedes-Benz Way.




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discipline-specific groups. IISE’s member-run societies and divisions provide a unique

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Just like their for-profit peers, nonprofit organizations, including food banks, deal with

a lack of timely deliveries and other logistical complications. Since these problems are

just like similar issues that plague warehousing and manufacturing, lean and the Toyota

Production System (TPS) are ideal strategies to remove these obstacles.

Several years ago, The Greater Boston Food Bank in Boston faced issues with how

long refrigerated foods sat on the loading dock waiting to be picked up. The food bank’s

mission is to end hunger and provide at least one meal a day to every person in need in

Eastern Massachusetts. Numerous organizations pick up items from the food bank and

deliver the food to needy people.

Luckily, the food bank had a connection with Babson College. And in July 2013,

Wiljeana J. Glover, assistant professor of technology, operations and information man-

agement at the college, developed a group dedicated to improving the food bank’s

systems. The team included Glover, some of her students, operations and warehouse

management from the food bank, and the Toyota Production System Support Cen-

tre (TPSSC), a nonprofit Toyota subsidiary that has helped implement TPS outside of

Toyota since 1992.

“It was an opportunity for us as an academic institution to support that work but also away for us to start to think how we can train students to do more experimental learning

and learning by doing,” Glover said.

At that time, The Greater Boston Food Bank was delivering about 49 million pounds

of food. The food bank had a large warehouse with a lot of space for dry goods. Unfor-

tunately, Glover said, the refrigerated section was much smaller than the dry food section

given the volume of food that passes through. For Glover and her group, it was a matter

of developing a way to use this space more efficiently to get more food out the door to

people in need.

“It really was an effort to make sure that we’re getting or keeping the refrigerated and

freezer goods in the best quality possible,” Glover stated.

In this case, lean was used in conjunction with the Toyota Production System. Glov-er’s team wanted to use these tools to figure out the issues, define a plan and implement

improvements, as shown in Figure 1.

“Specifically going through the problem-solving steps of TPS ... thinking about how

do we find the business’ needs? How do we break down the problems and set a measure-

able target and get to the root cause?”

Focusing on reducing order fulfil lment lead-time in the warehouse, the team used a

number of tools to analyze and understand the current fulfillment process. For example,

the team identified food items that had been placed in the dock area several hours prior

to scheduled delivery. The result was that refrigerated items were out of cold storage for

quite a long time. To ameliorate this, the food bank used insulation blankets to keep

foods cold. But this created potential issues with food safety and quality.

Ending hunger with lean

Solutions in practicecase study




The team analyzed these con-

ditions and discovered that im-

provement efforts could target

order picking and conveying by

reducing cycle time and stan-

dardizing work processes. With

this knowledge, the team began

picking cooler/freezer portions

in sequential order as opposed

to bulk order picking. The result

was that refrigerated and frozen

items were only placed on the

dock when the delivering agency

arrived to pick up the goods.

This reduced congestion on

the shipping dock and increased

overall productivity in the load-

ing dock area.

“Before, we were having to

pick refrigerated and freezer goods 24 hours in advance, and

by the end we were down to four hours,” Glover said. “I think

what’s really been powerful is that we got a quantitative, tan-gible improvement out of the effort.”

The lead-time to fulfill an order also declined dramatical ly,

from three hours to 20 minutes. And training warehouse em-

ployees in lean and TPS gave those workers a set of tools and

techniques that led to solutions with the warehouse and dock-

ing issues.

“TPS focuses on the philosophy of the customer first, that

people are the most valuable resource, continuous improve-

ment and also managerial roles,” Glover said. “TPS has been

helpful because of the collective philosophy managerial role

and the technical tools.”

There are challenges in adapting lean to nonprofit settings,

Glover said. For example, compared to a for-profit corpora-

tion, a nonprofit often has more stakeholders, making it nec-essary to use basic instead of more complex lean techniques.

But, as the results from The Greater Boston Food Bank

project show, the end result is worth the effort.

— Ashly irk

If you have been involved in implementing a project and can share

details, we’d like to interview you for a case study. Contact Web Managing

Editor Ashlyn Kirk at (770) 449-0461, ext. 119, or [email protected].

Spread the news

FIGURE 1

Targeting the root of the problemUsing lean and TPS, a team at Babson College went through these problem-solving steps to set a measurable target. The team then

determined how to implement a strategy for improvement and sustain it at The Greater Boston Food Bank.

Phase 2(Dec. 2013-Feb. 2014)

Phase 1(July 2013-Nov. 2014)

Analyzing thecurrent condition

Definingtarget condition

Defining strategyfor improvement

Futureimprovements

• Business need• Process walk-through• Process flow diagram• Pareto chart• Genchi genbutsu• Spaghetti diagram

• Process flow diagram

• Brainstorming• Employee training-by-doing• KPIs• Kaizen event – 6 steps to kaizen• TSSC TPS workshop• Update meetings

• 5S process• Standard work development (TCT)• Baseline standardization

mailto:[email protected]



Inside IISE Journalsresearch

Worry-free selection of thebest simulated systemIndustrial engineers build simulations to

design and improve manufacturing, sup-

ply chain, service and healthcare systems.

Selection of the “best” simulated system

is one of the most basic problems in sim-

ulation output analysis.

The stochastic simulation communityhas embraced the statistical methods of

ranking and selection as the go-to tool

for selecting the best from a fixed num-

ber of alternate system designs, and sev-

eral commercial simulation products fea-

ture ranking-and-selection procedures.

These procedures were derived under

strong assumptions about the simula-

tion output data, e.g., that they are nor-

mally distributed, or at least that they

come from the same distribution family.

Unfortunately, reality does not always

cooperate, and the simulation output

data may be highly non-normal (e.g.,

time-to-failure distributions of com-

plex systems). There has been no direct

approach for such settings other thantrying to transform the output data to

achieve normality.

Even the assumption of common dis-

tribution family may fail, such as when

the alternatives under consideration in-

volve distinct technologies: manual vs.

automated, in-house vs. outsourced, or

synthetic vs. biological. Further, differ-

ent ranking-and-selection procedures

are needed depending upon whether the

industrial engineer wants to select thebest mean performance, best variance of

performance or best percentile of perfor-

mance. Of course, users apply whatever

procedure they have available, and the

result can be incorrect selection and an

inferior system design.

In “General-Purpose Ranking and

Selection for Computer Simulation,”

professors Soonhui Lee from Hankuk

University of Foreign Studies and Barry

L. Nelson from Northwestern Univer-

sity provided a new approach to rank-

ing and selection that is free of nearly all

distributional or performance-measure

assumptions. Their procedures work for

all of the standard performance measures

considered in IE contexts, and discrete-or continuous-valued output data from

almost arbitrary distributions that need

not even be the same for each simulated

alternative.

They achieve this generality by sub-

stituting intense computation via boot-

strapping in place of strong distr ibutional

information. Their paper shows that

the new procedures achieve the desired

probability of correctly selecting the best

system without any special tailoring oradjustments in problems that defeat ex-

isting procedures

CONTACT: Soonhui Lee; [email protected];

+82-2-2173-2334; College of Business, Hankuk

University of Foreign Studies, Cyber Building 513,

107 Imun-ro, Dongdaemun-gu, Seoul, 02450, Korea

Learning brand loyaltyfrom sales dataWhen a variety of products with differ-

ent brands and different features is sold

This month we highlight two articles

providing improved methods for

industrial engineering decisions.

The first article looks at the problem

of using simulation to select the

best system design alternative. A

method for ranking and selection

is developed that does not requirenormality assumptions. The second

article examines consumer choice

behavior. Knowing if consumers

choose the brand first and the

product type second or vice versa

can help retailers predict demand

and set more profitable inventory

strategies. These articles will

appear in the June 2016 issue of IIE

Transactions (Volume 48, No. 6).

Barry L. Nelson (left) of Northwestern University and Soonhui Lee of Hankuk University

of Foreign Studies developed new ranking-and-selection procedures for computer

simulation that work for all of the typical performance measures and output data.

mailto:[email protected]://www.iise.org/ISEmagazinehttp://www.iise.org/isemagazine



in a traditional department store setting,

consumer choice seems to occur hierar-

chically. If consumers have strong brand

loyalty, they choose a brand first and

then a product type within that brand

(e.g., ice creams). This purchase pattern

is called the brand-primary process.If not, consumers choose the type

first and then a brand, which is called

the type-primary process (e.g., regular

coffee vs. decaffeinated coffee). If hier-

archical choice behavior exits, it affects

the stock-out-based substitution pattern.

Thus, it is important to take into ac-

count that behavior in the demand esti-

mation process.

Professors Haengju Lee and Yong-

soon Eun at Daegu Gyeongbuk Instituteof Science and Technology (DGIST)

in Korea addressed this problem in the

paper “Estimating Primary Demand for

a Heterogeneous-Groups Product Cat-

egory under Hierarchical Consumer

Choice Model.” The authors employ the

nested multinomial logit model (i.e., a

widely employed discrete choice model)

for the hierarchical choice. The expecta-

tion-maximization algorithm is applied

to estimate the primary demand (i.e.,

the true demand before the stock-out-

based substitution effect occurs), while

treating the observed sales data as an

incomplete observation of that demand.

The estimation requires only realistic

data: observed sales, product availability

and market share information. If thereis no knowledge about the choice hier-

archy, the hidden choice structure can

be revealed by applying the proposed

method to both the brand-primary

model and the type-primary model.

The one with the higher likelihood is

chosen as the demand structure.

The proposed procedure is tested on

simulated data sets to show how it ef-

fectively reveals the hidden hierarchical

demand structure and demand parame-ters. The authors show numerically why

more accurate demand estimation is im-

portant for optimal product assortment

and inventory management. Specifical-

ly, by modeling the demand hierarchy

accurately, retailers can have its assort-

ment plan with less diversity (i.e., fewer

available products) by using the strong

substitution within the product group.

This means that the total expected reve-

nue decreases with less diversity, but the

inventory cost decreases more (i.e., the

cost saving outweighs the revenue loss).

CONTACT: Haengju Lee; [email protected];

+82-53-785-6307; Room 409, Building E3, Yong-

soon Eun; [email protected]; +82-53-785-6300;

Room 102, Building E3, Department of Informa-

tion and Communication Engineering, DGIST,333 Techno Jungang Daero, Hyeonpung-Myeon,

Dalseong-Gun, Daegu, 711-873, Korea

Ro ald Aski s a professor a d director of

the School of Computi g, I formatics a d

Decisio ystems E gi eeri g at Arizo a

State U iversity. He is editor-i -chief of IIE

Transactions a d a fellow of IISE.

Haengju Lee (left) and Yongsoon Eun studied consumer choice for determining optimal inventory levels.

IIE Transactions is IISE’s flagship research

journal and is published monthly. It aims

to foster exchange among researchers and

practitioners in the industrial engineering

community by publishing papers that are

grounded in science and mathematics and

motivated by engineering applications.

To subscribe, call (800) 494-0460 or

(770) 449-0460.

About the journal

mailto:[email protected]:[email protected]



Commercial and nonprofit organiza-

tions make decisions every day. These

decisions have a cost associated withthem that can affect the organization’s

financial health, whether measured by

profits or a surplus from expenditures.

As industrial and systems engineers,

working with cost models helps us to

manage the profitability of operations

and projects. These models can be-

come unyielding as they become more

complex and exceed the manipula-

tion techniques of Microsoft Excel and

other spreadsheet-based technologies.

That’s why 3C Software has developed

ImpactECS, an enterprise-level cost-

ing and profitability software for use inprocess manufacturers, distributors and

service companies.

What makes ImpactECS ideal for the

costing, accounting and finance profes-

sionals (ISEs are included in these cat-

egories) are the modular components

designed to establish enterprise-level

costing and profit management systems.

The modeling can be done by the pro-

fessional independent of the information

technology department’s involvement.

The costing professional uses Im-

pactECS’ costing modules to work on

activity-based costing, cost-to-serve,net landed cost, process costing and rate

building, product and shared services

costing and chargebacks. The financial

and supply chain analysts use the soft-

ware to work on budgeting and fore-

casting, inventory valuation, planning

and scenario analysis, pricing analytics,

profitability, stock-keeping unit (SKU)

rationalization, supply chain analysis and

variance analysis.

With this modular approach, the ac-

tools & techn logies

What do your decisions cost?

By Daren Maynard

Daren Maynard is an adjunct lecturer at the University of theWest Indies-St. Augustine and is a member of IISE's YoungProfessionals group.

3C Software’s

ImpactECS is

an enterprise-

level costing and

profitability software

ideal for process

manufacturers,

distributors and

service companies.




counting professional also gets audit

capabilities to comply with audit rules,

such as the Sarbanes-Oxley regulations.The familiar Windows environment

(C++ engine, ASP.Net web interface,

Windows graphical user interface)

makes adoption easier. The compatible

SQL and Oracle databases open the in-

tegration to other enterprise resource

planning, data warehousing and business

intelligence tools that use SQL or Oracle

as their database languages. ImpactECS

integrates Microsoft, Oracle and SAP

products to synergize their respective

enterprise information systems.

Common language and calculation

models can be established across subsid-iaries and divisional units to ensure uni-

formity across the enterprise. The soft-

ware comes with secured databases and

user-determined access to the models,

engine and other functionalities. This

is critical, especially with a web-access

client user where a secured connection

must be made to ensure data integrity.

The software has two user interfaces

– desktop client or web access client –

which are supported by the backend

enterprise database server. The server

does the calculations, processing and

algorithmic operations for the finance,accounting and cost systems (FACS).

The client interfaces using graphic user

interfaces (GUI) to permit the users to

build cost models, perform analyses, run

queries and generate reports. While Ex-

cel may not be able to handle the com-

plexity and demands of the FACS mod-

els, it can be used to review and analyze

the data. So ImpactECS comes with its

Excel add-in just to benefit from Excel’s

features and familiar ity for the user.

Walther Trowal’s “trowalplast HDC” plastic media

is ideal for grinding and surface smoothing of

metal work pieces, especially die castings. The plastic

carrier filled with zirconium silicate combines the

advantages of lightweight plastic media with the highdensity of the abrasive filler material, yielding metal

removal rates comparable to ceramic media. The HDC is

effective in all types of mass finishing equipment.

TOOLS TO TRY

The new Cranfield Precision TTG machine, unlike con-

ventional machine tool platforms, coordinates two rotary

axes and a short linear axis in a “Twin Turret” design.

This offers two main advantages: stiffness, as the new

machine base is effectively two rotary, highly damped

hydrostatic bearings that resist machining forces, and

thermal stability, as the design enables a simple noncon-

tacting labyrinth seal, making the machine base almost

immune to distortions.

Î

Muller’s new

Raptor HPL

semi-automatic

turntable wrapping

machine can

wrap up to 35

loads per hour

and can create

customized wrap

patterns for each

application. In addition, patented strain-gauge technology

enables electronic film feed and corner compensation. A

motorized power pre-stretch system with adjustable film

tension control guarantees optimal film usage. Film

tension control ensures superior load containment

and helps eliminate film breaks and product

damage.

Î

Keytroller’s CYBERWATCH SAT is a satellite wireless

hour, alarm and location meter designed to help monitor

and track equipment location in remote job sites such

as mines, logging sites, drilling rigs, offshore oil rigs

and international ships – places that often lack Wi-Fi

connectivity. CYBERWATCH SAT uses the Iridium network

and transmits up to six-hour meter readings

and six alarm readings with

GPS location, once

per day. Operators

also can connect their

smartphones to the

device and use it as a

hub communicator.

Î

Î

http://asp.net/



The IIE Annual Conference and Expo always has been a

great deal for attendees, but this year all the content wouldn’t

fit into the normal schedule.

So people who come a day early get the chance to visit theAmazon Fulfillment Center in San Bernardino, California, a

key cog in the online merchandiser’s drive to dominate In-

ternet retailing.

The conference is scheduled for May 21-24 at the Disney-

land Resort Hotel in Anaheim, California. But the Amazon

tour wil l be held 1 p.m. to 5 p.m. May 20. Other visits include

facility tours to The Home Depot Distribution Center, Boe-

ing’s Huntington Beach facility and Fruth Custom Plastics

Inc.’s plastic extrusion/packing and manufacturing plant.

The tours cost an extra $40 for members, $50 for non-

members. Check out the Facility Tours tab under Programsat www.iise.org/a al for more details, including dress codes,

for each tour.

Below are more highlights of the conference:

Friday, May 20Facility tour – Amazon Fulfillment Center: Amazon

has been making history since it opened its virtual doors in

1995. Join your colleagues between 1 p.m. and 5 p.m. and

visit the online giant’s fulfillment center in San Bernardino.

Saturday, May 21

• Doctoral colloquium: This al l-day event is designed for

doctoral candidates expecting to graduate by spring 2017.

Panels of experts will lead discussions on topics that include

the job search, life in academia and industry, the tenure

process, teaching, research and professional services. At-

tendees must be nominated and pre-register.

• New faculty colloquium: This all-day event is for new

faculty, specifically junior faculty within their first three

years on a tenure track. Information provided will help

participants navigate the challenges of an academic career.

Participants can ask questions, network with peers and

interact with senior-level professors. Attendees must be

nominated and pre-register.

• Pre-conference workshops: “Strategic Lean Six Sig-

ma Implementation using Hoshin Kanri,” “Error Proof – How to Understand and Minimize Daily Human Er-

rors” and “The Sevens (A Collection of Quality-Related,

Problem-Solving Tools Frequently Used by Industrial En-

gineers to Assist Their Internal and External Clients),” all

from 8 a.m. to 5 p.m.

• Networking reception: Attendees receive a complimen-

tary ticket for this reception, which is scheduled from 6

p.m. to 7:30 p.m. Any additional guest tickets should be

bought during conference registration.

Sunday, May 22

• First-time attendee orientation: For those who never

have been to the world’s premier industrial and systems

engineering conference, this session, scheduled from 7:15

a.m. to 7:45 a.m., will educate them.

• Keynote presentation – Brian Betts: Betts, vice presi-

dent of operations planning and insights with Walt Disney

Parks & Resorts, will speak from 9:30 a.m. to 10:45 a.m.

www.iise.org/a ual/Betts

• Student networking mixer: From 5 p.m. to 6:30 p.m.,

sponsored by Flexsim and the Healthcare Systems Engi-

neering Institute at Northeastern University

Come sooner, get moreAmazon facility tour kicks off Annual Conference a day early

the instituteKeeping pace with IISE

Walt Disney Parks and

Resorts Vice President

of Operations Planning

and Insights Brian

Betts, posing here with

Mickey Mouse at Walt

Disney World, is one of

three keynote speakers

scheduled for the IIE

Annual Conference.

http://www.iise.org/ahttp://www.iise.org/ahttp://www.iise.org/ISEmagazinehttp://www.iise.org/isemagazine



• Welcome reception: Network and mingle with ex-

hibitors and peers from 6:15 p.m. to 8 p.m. in the ex-

hibit hall. Conference attendees receive one ticket. Any

additional tickets should be bought during conference

registration.

• ABET workshop: The IISE Accreditation Advisory

Council again will sponsor this workshop from 1 p.m. to

5 p.m. to help industrial engineering and industrial en-gineering technology department chairs and assessment

coordinators prepare for upcoming ABET accreditation

visits. The session can accommodate up to 40 people, and

pre-registration is required. To pre-register, email Bonnie

Cameron at [email protected].

Monday, May 23

• Keynote presentation – Phil Kaminsky: Kaminsky,

professor and chair of industrial engineering and opera-

tions research at the University of California, Berkeley,

will speak from 9:30 a.m. to 10:45 a.m. www.iise.org/a al/Kami sky

• Exhibit hall: Exhibitors wil l be on hand to give attendees

a chance to learn about useful products and services. The

hall will be open from 10:45 a.m. to 4 p.m.

• Facility tour – The Home Depot Distribution Cen-

ter: The 8:30 a.m. to 11:30 a.m. tour will highlight one of

Home Depot’s reconfigured distribution centers. The rapid

deployment centers are a relatively new distribution con-

cept designed to get merchandise onto store shelves faster.

• Faci

Documents

671872 MAY 2016 Selected Pages