Operations Rules Chapter 1: The Value of Operations
Pepsi Bottling Group approached the Massachusetts Institute of Technology (MIT) with a daunting challenge: consumer preference was shifting from carbonated drinks to noncarbonated drinks and from cans to bottles.
In his book, Operations Rules, MIT’s Dr. David Simchi-Levi develops the science of systemic operations optimization using newly developed tools like the Risk Exposure Index.
He offers a set of scientifically and empirically based rules that management can follow to achieve a quantum leap in operations performance.
Simchi-Levi’s rules - regarding such issues as channels, price, product characteristics, value-added service, procurement strategy, and information technology - transform operations and supply chain management from an undertaking based on gut feeling and anecdotes to a science.
The Value of Operations
In early 2005, Pepsi Bottling Group (PBG) approached the Massachusetts Institute of Technology (MIT) with a daunting challenge: consumer preference was shifting from carbonated drinks to noncarbonated drinks and from cans to bottles.
At that time, PBG produced these newly preferred products in a limited number of plants, resulting in half of the plants operating at capacity and leading to service problems during periods of peak demand.1 What did PBG do to address the problem?
Did it invest in more manufacturing capacity or outsourced production?
Not even close!
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