Live from The Operations Room

3/1/2010 - Have you ever heard of the Underpants Gnomes? If you’ve seen them on South Park, then you know what operations management is all about, according to Professor Martin Lariviere.

“The Underpants Gnomes had a three-phase business plan,” Lariviere explained.

“Phase One: Collect underpants.

Phase Two: ?

Phase Three: Profit.”

Pointing at the obvious hole in the business plan, Lariviere addressed a laughing crowd of Kellogg students at Wieboldt Hall during “Operations Room Live!,” an in-person showcase of the engaging dialogue he shares with Professor Gad Allon on their blog, The Operations Room.

“Phase Two — this is where operations management comes in,” Lariviere said. “How do you set up your processes? Operations management is the management of business processes, i.e., a firm’s recurring activities. Different business strategies require different business processes. There’s no one way.”

Lariviere and Allon launched their blog in July 2009 as a forum to discuss current topics in operations management, focusing on strategic and tactical developments in the field. The pair hopes their blog entries will serve as a catalogue of knowledge on operations management that will be useful to the Kellogg community and anyone else interested in the subject matter.

Their clever takes on hot topics such as the state of customer-airline relations, Wal-Mart’s attempts to source more local produce (and move in on Whole Foods’ territory) or the supply-chain implications of legalized marijuana have made the blog a popular read.

“My first post talked about a guy who pulled a gun in a McDonald’s because he didn’t like the service,” Allon said. “There was a study about anger and services. Most people don’t pull a gun if they’re unsatisfied — they tell their friends. My way is to write a blog.”

One of the hottest topics recently has been the Toyota recall, Allon said.

“Should we blame lean operations?” he asked. “The Wall Street Journal thinks so. Toyota’s production system, where anyone can pull the cord to stop the line if there’s a problem is a good system, but no one at the top pulled the cord. In my opinion, their growth is to blame. Usually, you slowly improve the process, but their growth outpaced their ability to improve the process.”

While an analysis of sticky-accelerator complaints shows that Toyota’s incidents spiked from around 200 to 500 in one year, an overall, industry-wide analysis shows that many car companies have the same problem, including Ford, Allon said.

“If you take that evidence and normalize it by market share, Toyota drops to something like 15th,” he said. “Yet journalists are more consistently blaming Toyota. Toyota is charging a premium for their quality, though. Once they saw a huge increase in cases in one year, regardless of the market share, someone at Toyota should have pulled the cord.”

The site’s most popular posts have included a piece on a Wall Street Journal article about the Starbuck’s production system, one on whether or not the United States Postal Service is inefficient, and an entry on virtual pooling at Netflix, Allon noted. Sustainability and green operations are also popular searches on the site, Lariviere added, as the two talked about the various hot topics.

Ultimately, operations management comes down to one thing, Lariviere told the audience: “It’s going from ‘I’ve got this idea’ to actually making money.”