Hi all,

Please have a look on my blog which includes the individual assignment on Challenges brought to traditional industry due to innovative technology. Thanks a lot.
http://53970301.blogspot.hk/

Regards,

Ben Hon

(53970301)

Emerging Technologies and Logistics

Introduction

Leveraging technologies is the key for cost advantages and operational excellence in logistics industry. Refer to our last blog sharing, we have discussed about the conceptual framework of big data with focus on cargo consolidation in logistics industry. Now, we are going to discuss automation, virtual reality, mobile and cloud computing technologies.  With increasing decentralization and mobility, cloud computing provides a fundamental infrastructure that bring in all the emerging technologies of automation, visual reality, and mobile together. It enables more efficient and effective way of sharing of resource, computing capacity, and collaboration.

Before going to details of each aspects, let's have a quick look for a real example of CEVA, a logistics service provider, what is the capacities of her?

Automation

High manpower cost and service failure problem are two of the critical issues of most of the logistics services provider nowadays. In order to reduce human mistake and enhance the productivity of the operations. A lot of automation technologies has been developed in the logistics industry in order to strengthen the competitive advantages. For instance, to reduce picking error, logistics company introduce the concept of light picking for workers to follow. (for more information, refer to below video)

Moreover, electronic data interchange (EDI) is one of the most common automation interface which being used in logistics industry. By using EDI, logistics service provider can get or send data with customer's system automatically, this is a process of data exchange between computer to computer. As no manual input is needed, it can speed up the data processing time as well as eliminate the manual mistake.  (for more information, refer to below video)

Still, in logistics industry, more details operation procedures, automation technology is of the most important technologies which help the industry players to improve their performance.

Virtual Reality Technology

The VR technology provides an interacting environment for modeling and simulating operation activities by means of the 3-dimensional (3D) visualization in the computerized electronic system. As a result, this enables in controlling the logistics operation process and in making decisions effectively at the warehousing and the port container terminal.

VR technology integrates with the Augmented Reality (AR) by adding virtual layers of contextual information at the right place in the right time at the electronic devices. AR will provide new perspectives in visual analysis, logistics planning, process execution.

Mobile Technology

As the world is transforming into a knowledge based society, there is a cogent need for us to continue to renew our technology and skills. Given the plethora of data flow in the logistic industry, the introduction of mobile technology helps create a paperless environment as well as improving the accuracy of data. As a result, it will improve the productivity of the logistic industry in receiving more volumes of business and thus creates more business opportunity.

However, the emergence of data leakage and system break down may loom if the mobile technology needs to be sublimed or upgraded to the next version. Hence, the more sophisticated a mobile system, the higher the cost should the system breaks down in any circumstances. Therefore, the consistency and stability of the mobile system ensures the reliability of the business especially in the logistic industry.

Cloud Computing

Under globalization, deep industry expertise and leveraging technologies extensively are the keys for internal operation excellence and business service optimization in logistics companies. With increasing decentralization and mobility, the application of the emerging technologies, automation, virtual reality, mobile, and big data would have great impacts in the future logistics industry. Cloud computing provides opportunities of bringing in the emerging technologies at lower costs, because the cloud enables more efficient sharing of resources, more computing capacity and easier collaboration. The following video demonstrates a example of cloud-based visual collaborative work space.

The power of the cloud computing does not require the asset-heavy IT infrastructure and employed IT experts to maintain the software and hardware system. Instead, people use technology to create access to an abundant source to create a powerful new cost-effective logistics system.

Collaborative consumption is not only the key concept of cloud computing, but also has social, economic and environmental impacts in the logistics industry. With technologies being used, there is an evolving change in the logistics business model. It is important to understand how the challenges and opportunities may arise in the future. 

Last but not the least, should you want to know more the details of these emerging technology and logistics, please read the coming individual sharing which coming soon...

Consolidating your logistics by Big Data

Introduction: What are "logistics" & "freight forwarding"?

When we talk about "logistics", you may think of cargo movement. In fact, "logistics" is the process of planning, implementing, and controlling the effective and efficient flow of goods and services from the point of origin to the point of consumption for the purpose of conforming to customer requirements. (Kate, 2013) Therefore, the definition of "logistics" should including inbound, outbound, internal and external movements. For example, international transportation (freight forwarding), warehousing management, order fulfillment, inventory management, logistics network design etc, are some of the topics which under the scope of "logistics".

The freight forwarding industry sector is a subset of the logistics industry. It generally provides services that guarantee products getting to the proper destination by an agreed upon date, and in good condition. Freight forwarders usually work closely with shipping or airline companies as agent and their major customers are manufactures and traders. The key mission of freight forwarding service is to save the client’s time and provide reliable transportation of products at competitive rates. In responding to the changing markets, many freight forwarders also provide more value-added services such as warehousing, distribution and total logistics solutions. 

To understand the works of a freight forwarding company, you can refer to the below video for a basic idea.

Video 1# How Does A Freight Forwarding Company Work ??   (How to video, 2013)

Evolution of “Big Data”

To understand Big Data, you can refer to the below video: What is Big Data and how does it work? (Funk-e Studio, 2013)

Big data means the practice of collecting electronic information from huge sources and applying analytics to identify patterns, trends, and other intelligence. In general, the analysis could be something have happened but not easy to perceive, or something can be predicted and will happen in the future. Early in the 1900s, doing data analytics was very difficult. It required manually computing all the statistics. Everything was done by hand or by calculating machines. Then calculator came along in the 1970s and made it easier to utilize more data. But the volume manageable with a calculator is still small. In the 1980s, computers became the mainstream. Yet, they were still expensive to work with data at that time. As the decades have passed, the amount of data has grown as fast as the computing power of machines. Then, many new technologies, such as cloud computing, mobile and automation, has continued to advance at a pace that made the volume of data grow even faster every year. Many companies have taken harder look at the evolving role of technologies in their supply chains as a way to support better decision-making. It has been practical for the industry dealt with structured data captured in proprietary software system, such as CRM and ERP, in the past. But nowdays, the emerging technological disruption erupt unstructured data involving in huge volume, wide variety, and high velocity. IBM (Forbes, 2012) estimates that every day 2.5 quintillion bytes of data are created – so much that 90% of the data in the world today has been created in the last two years, and Zikopoulos et al. (Understand Big Data, 2012) expect data volumes to reach 35 zettabytes by 2020. Moreover, new big data sources are pushed further across the boundaries. Data can be generated terabytes to petabytes of data in days or weeks. According to Peter F. Drucker (HBR, 1998), among history-making innovation, those based on new knowledge, whether scientific, technical, or social - rank high. Safe and proper use of Big Data can facilitate discovery and support new knowledge. 

Hong Kong Freight Forwarding Industry Overview

In Hong Kong, the freight forwarding industry has benefited from Hong Kong’s world class infrastructure, business-friendly and open environment. Total freight movements increased by 9.3% year-on-year (YOY) to 244 million tonnes in the first nine months of 2014. Most of the larger freight forwarders have a wide network of overseas branches, and act as agents for international air and ocean liners. More than 70% of Hong Kong’s exports are sent to other Asian markets, with Western Europe and North America accounting for about 10% each. Western Europe and North America, as long-haul markets, tend to account for a bigger proportion of the total. (HKTDC Research, 2015) 

The services provided by the industry vary according to the sophistication of the freight forwarder. The larger freight forwarders usually offer a full range of logistics services. Their main customers are time-sensitive manufacturing, trading and retail sectors. Thus, larger firm concentrate on their core competency and reduce business cycle time. The smaller freight forwarders provide more basic and economical services. Thus, the smaller firms provide more flexibility and more personalized services. Generally speaking, the forwarding service performance is strongly associated with the reliability, efficiency and predictability of service delivery for customers. 

Challenges in Freight Forwarding Industry

As global supply chains become more and more complex, the freight forwarding industry is threatened by the following main factors: 

Keen competition

In certain extent, freight forwarders is only an agent of international transportation, they are not producing any products, so the development of a freight forwarding company really subject to the market movement. For example, if the production line of a customer move from South China to Vietnam, then it will cause a direct impact to the freight forwarder which doing business with that factory in South China. Of course, some of the international freight forwarder may able to secure the business because they may have branches in Vietnam.  However, somehow, from the customer point of view, it is very easy for them to find substitution in the market because it is no difference for the factory to use forwarder A or forwarder B for moving cargo from port to port. So, somehow, in freight industry "price is king". If a company has a better networking in particular market, that company maybe the dominant player in that market. For example, DHL and Schenker DB in European market, Expeditors in American market, Nippon in Japanese market, Toll Global Forwarding in Australian market etc. Under this keen competition on price, so some of the smaller freight forwarder may strengthen their services by providing certain kinds of value added services (such as labeling or pick and pack) to their customer before/ after shipping at their warehouse and even providing tailor made supply chain solution for their customer.

In addition, for the customer with very large cargo volume, they may even making duel with freighter directly, i.e. get space and equipment from shipping line or airline. For instance, Zara group, they always get space from airline directly because she can even arrange charter shipment from Spain to worldwide. Under this condition, freight forwarder id they can get cargo from these kind of big customer, the profit margin is very slim. So, most of the freight forwarder usually make use of big customer to secure space and get lower cost from carriers and then get more smaller shipments from different smaller customers to maximize their profit margin.

Fast changing market

On the other hand, freight forwarding industry has a very close binding on the international trading. For instance, the trading terms (Incoterms) between shipper and consignee change, it will totally affect the business environment of freight forwarding industry. Say, if freight forwarder A has a key customer in South China which doing business under trading terms CFR (i.e. Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the goods is not included.), under CFR condition this key customer will pay for the freight charge to forwarder A. However, if one day, the trading terms change from CFR to EXW (i.e. The seller makes the goods available at his/her premises. Buyer responsible to arrange pick up and freight) Under this situation, forwarder A may loss the customer suddenly because seller is no longer responsible to pay the freight and buyer can nominate another forwarder to arrange freight service on her behalf.

Furthermore, customer demand is related to consumer needs and government policy. If any changes, cargo volume may change suddenly. One of our group mates is working in logistics industry over a decade, he can see the change of market. For example, the popular of digital camera and the decline of film camera & photo related accessories. Free duty for importing red wine to Hong Kong, jet up a big volume in wine transportation. In short, a good market forecasting and strategy development plan is very important for freight forwarding industry. Otherwise, it is very easy to loss the market share.

The way to go..?

Under globalization, competitive advantage is very important for each individual forwarding company. There is emerging need for better leverage networks and new technologies to ensure that they meet the expanding needs of the customer's changing markets and competitions. With a technological assist, we can coordinate across time and space, resulting in higher productivity, faster cycle times, reduced facilities costs and greater freedom to structure work arrangements beneficial to both. (nGenera Corporation, 2009). Moreover, freight rates, more or less is transparent in the market. So, business strategy and direction is very critical on top of pricing. As mentioned, big cargo volume can help a forwarder to get a lower cost from shipping line and airline. However, smaller volume shipment should be the focus of all the market players. Yet, how to get clear picture of the market and cargo movement? Big data is one of the solutions.

Different Strategic Approaches and Potential Applications of Big Data

In respond to meet the challenges, on the one hand, freight forwarding companies in different size and cultures must consider a number of strategic fits and adopt different strategy to defend against competitive forces and gain market share. Some may adopt differentiation strategy to become a “one-stop-shop-provider” as a way to achieve differentiation advantage. Some may use cost leadership strategy to improve logistics process efficiencies and reduce unnecessary costs as a way to sustain a competitive advantage. Some may focus on developing core competencies that can act as an entry barrier. Others may adopt multiple generic strategies through creating different business units for each of them. On the other hand, Big Data represents a potential new source of competitive advantage for freight forwarders by harvesting data for insight into market trends, cost structures and market demand.

With the rise of smart technologies, professionals have started to collect all the data together to do analysis for freight forwarding industry. There is an emerging need for the companies constantly seeking opportunities for cost and service improvement through data mining and analytics. They can use Big Data to find answers that are more specific and significantly more useful. When freight forwarders handle millions of transactional data everyday, not only from a single computer system, but also many other sources on the internet, including content, weather, location, maps, voice video, and digital images, these data enable new capabilities to respond to fast-moving market conditions more intelligently. In fact, more and more IT companies are providing solutions to covert Big Data quickly into business intelligence. Through value creation and value extraction from Big Data, service providers can operate more efficiently and improve the scalability of their business. Different applications of Big Data technology have been adopted in the markets. For example, there are:

• Use Big Data analytic to drive value that aligns with core competencies and creates a competitive advantage, e.g. use data mining to segment different customers for better service personalization.
• Enable the organizational change to move towards fact-based decisions, adoption of new technologies, and embrace collaboration, e.g. bringing Big Data to cargo transport to improve capacity utilization by making it more efficient and environmentally friendly.
• Deliver faster  results by capitalizing in the ever-changing global market place, e.g. utilizing data analytics and building predictive model to deal with uncertain shipping situations.  

Case Study - Cargo Smart: Big Data and Freight Forwarding Industry

Cargo Smart

CargoSmart is a global software solutions company which providing global shipment management software to enable shippers, consignees, logistics service providers (including freight forwarders), and ocean carriers to improve planning and on-time deliveries. The data sources come from over 30 ocean carriers, CargoSmart leverages big data sources and a cloud-based platform to offer award-winning sailing schedules, visibility, documentation, contract management, compliance, and benchmarking solutions. Regarding on the Big Data, it is including 5500 vessels covering 90% of the world's ocean container traffic. Moreover, CargoSmart is providing a real-time big data processing for their customer and they are helping over 130,000 transportation and logistics professionals to increase delivery reliability, lower transportation costs, and streamline operations.

Application of Big Data in Freight Forwarding Industry

According to 2013 KPMG report, only 9% of logistics professionals have visibility into their supply chain because they are lack of access to quality data and still rely on manual data processing. Under this condition, many logistics professionals still under the condition of inefficient supply chain visibility. As a result, a big information gap formed and even caused inefficient processes. (Environmental Leader, 2013) Back to the success case of CargoSmart, some of the customers from CargoSmart make use of big data to analyze and act on any significant trends, opportunities and risks arising from events. So, if any freight forwarder able to spot out the cargo trends and opportunities, then eliminate the cargo risk impact, such forwarder should able to get a higher competitive advantage. Nevertheless, is it possible for freight forwarder to make use of big data in their consolidation planning and development?

Big Data helps forwarder to make better consolidation planning?

What is cargo consolidation?

First of all, cargo consolidation is when several small shipments, all being forwarded to the same region or location, are bundled and shipped together. This service can be beneficial both to the customer and to the freight forwarder. Consolidation is one of the common core functions which are highly associated with profitability and competitiveness in the industry.

How does cargo consolidation work?

Freight forwarder set up container freight station (CFS) in different location to keep different shipment from shippers/ consignee and then group related region/ location cargoes for container loading/ break bulk for inland feeder and delivery.

Strategic advantages to focus on improvement freight consolidation by Big Data

Cost competitive advantage: When the price competitiveness is strong in the market, the fundamental cost reduction relies heavily on cost control. Poor forwarding service not only affect profitability and competitiveness in the industry, but also raises the costs of trading and reduces the potential for global integration. There are several cost advantages to freight consolidation, both for the customer and the shipping company. First, consolidating small shipments lowers operation costs for the freight forwarder. Second, forwarding small shipments together lowers total shipping costs for the customers.

Differentiation advantage: According to Caplice (Logistics management, 2013), logistics manager are usually the last to know when supply chain problem occurs, but the first to respond when there’s a problem. Make use of big data may help to spot out the risk in advance.

SWOT Analysis: Make use of big data to have better consolidation development and planning

Strength

Cargo consolidation is one of the most important activities for freight forwarder to generate more income. So, the better consolidation efficiency and effectiveness, the more income can be generated. Make use of big data, forwarder can know the cargo trend and potential risk etc. Then, forwarder can have better consolidation development and planning.

Weaknesses

As mentioned above only 9% of logistics professionals have visibility into their supply chain because they are lack of access to quality data and still rely on manual data processing. Still, this is no doubt a fact in freight forwarding industry. First of all, not every forwarder is usual systematic way to handle shipment. Most of them are still using manual data processing. Thus, the data source in freight forwarding industry is not very good in quality at this moment. Freight forwarder may not easy to generate quality information for consolidation development and planning.

Opportunities

For sure, at this moment, only few logistics players in the market have visibility into their supply chain, in other word, if a company can get a better quality data source and make use of big data analysis in their company. She should able to get a higher competitive advantage compare with other forwarders. So far, DHL is one of the international freight forwarders that is using big data in her business sector.

Threat

The same, as only few logistics players in the market is making use of big data to enhance her visibility into their supply chain. In order word, any companies who are not doing freight forwarding business but she has business which may related to freight forwarding sector, then she may expand her business coverage to freight forwarding industry. For example, Maersk (Shipping line) build up a subsidiary company Damco (freight forwarding and logistics company) to take care the upstream needs. Under this situation, the competition of existing freight forwarders become more keen.

Conclusion

When we talk about "logistics", you may think of cargo movement. In micro view point, this is definitely correct. Yet, when we talk about "logistics", talk about "big data", have you think of globalization? That correct, under the impact of globalization, everything is possible because the boarder of each single industry is no longer separated. Of course, for freight forwarding companies, big data analysis may still very new at this moment. However, it is sure that with the popularity of different big data software come to the market, big data analysis will sooner or later can apply to the whole consolidation planning.

References

Environment Leader (2013). Big Data Improves Shipping Supply Chain Sustainability, Visibility. Retrieved April 13, 2015, from http://www.environmentalleader.com/2013/10/30/big-data-improves-shipping-supply-chain-sustainability-visibility/

Funk-e Studio (2013, November 12). What is Big Data and how does it work?  [Video file]. Retrieved from https://youtu.be/TzxmjbL-i4Y

Forbes (2012). Improving Decision Making in the World of Big Data Retreived April 13, 2015 from http://www.forbes.com/sites/etrade/2015/04/14/4-simple-steps-you-can-take-now-to-prepare-for-your-retirement/

HKTDC Research (2015) Freight Forwarding Industry in Hong Kong http://hong-kong-economy-research.hktdc.com/business-news/article/Hong-Kong-Industry-Profiles/Freight-Forwarding-Industry-in-Hong-Kong/hkip/en/1/1X000000/1X006NHM.htm

How to video (2013, September 8). How does a freight forwarding company work?? [Video file] Retrieved from https://youtu.be/1JdPUzRlIDI

Kate Vitasek (2013). Supply Chain Management Terms and Glossary. Retreived April 13, 2015 from https://cscmp.org/sites/default/files/user_uploads/resources/downloads/glossary-2013.pdf 

Logistics Management (2013). Transportation Network Optimization: New-age solutions for age-old pressures.

TIBCO (2015). CargoSmartUses Big Data to Transform Shipping. Retreived April 13, 2015 from http://www.cargosmarton.com/cargosmart-uses-big-data-to-transform-shipping/

Zikopoulos, P.C., Eaton, C., deRoos, D., Deutsch, T. and Lapis, G. (2012). Understanding Big Data. McGraw Hill, New York.

Peter F. Drucker (1998).Week 5 Reading: Optional HBR 1998 The disciplibe of innovation.pdf

nGenera Corporation(2009) Week 7 Reading: Building the Collaborative Enterprise: Ten Questions to Ask about Business Opportunities through Collaboration

Unmet Expectation: Failure of GM Wankel Rotary Engine Innovation (Ver2.0)



Introduction: General Motors & Wankel Rotary Engine

General Motors Company, commonly known as GM, is an American multinational corporation headquartered in Detroit, Michigan, that designs, manufactures, markets and distributes vehicles and vehicle parts and sells financial services. GM produces vehicles in 37 countries under thirteen brands. They led global vehicle sales for 77 consecutive years from 1931 through 2007, longer than any other automaker, and is currently among the world's largest automakers by vehicle unit sales.

The Wankel rotary engine is an innovation in automobile industry. It was started by Lawrence Hargrave who first developed a rotary engine in 1889 using compressed air, intending for it to be used in powered flight. In 1951, Felix Wankel (1902-1988), a German inventor began development of the Rotary Engine at NSU (NSU Motorenwerke AG), where he first conceived his Rotary Engine in 1954 (DKM 54, Drehkolbenmotor) and later the KKM57 (the Wankel rotary engine, Kreiskolbenmotor) in 1957. In the United States, in 1959 under license from NSU, Curtiss-Wright pionnered minor improvements in basic engine design. The design delivers smooth high rpm power from a compact, lightweight engine.

Unlike the conventional internal combustion engine with pistons that move up and down in cylinders, the Wankel has an equilateral triangular orbiting rotor with performs the functions of the combustion engine. The video shows Wankel rotary engine animation (Flyweightnate, 2007).

In concept, a rotary engine is simple. The following video shows how rotary engine works. (ADPTraining, 2011)

Technical Comparison: Reciprocating vs Rotary

Both the external and internal combustion engine use a piston housed in a cylinder which is attached to a connecting rod and then a crankshaft. The piston is forced down the cylinder which pushes on the connecting rod thereby turning the crankshaft. This type of engine is also referred to as a reciprocating engine because of the pistons up and down movement.

In contrast to this engine is the rotary engine which uses a triangular shaped rotor. The rotor is housed in an elliptical shaped chamber and connected to a central main shaft (crankshaft). As the rotor moves around the chamber it draws in an air/fuel mixture, compresses it, burns and then expels it. The movement of the rotor forces the main shaft to rotate.

Advantages

Disadvantages

1. has higher output for similar displacement and physical size. 2. it are considerably simpler and contain far fewer moving parts: A. savings in construction costs; B. much lighter in weight. 4. enhanced reliability by completer removal of this reciprocating stress on internal parts. Its' iron rotor with a housing made of aluminium have greater termal expansion that ensures less overheated. 5. more safety benefit in aircraft use since no valves can burn out. 6. more time to complete the combustion due to a 50% longer stroke duration

1. the fuel-air mixture cannot be pre-stored as there is no intake valve. 2. mover complicated fuel injection technologies. 3. The different in-take times would cause susceptible to pressure loss at low RPM situation. 4. has large fuel consumption because of the combustion chambers in a Wankel engine is quite large. 5. has lower thermal efficiency and less fuel economy. 6. more carbon monoxide and un-burnt hydrocarbons in a Wankel;s exhaust stream because the fuel may get too far from the flame front to fully burned during the combustion. 7. has high local temperature and un-equal thermal expansion because the rotor housing are constantly heated on one side and cooled on the other during combustion

 (Tab 1.1 Advantages and Disadvantages of Wankel Rotary Engines)

History of GM Wankel Rotary Engine Innovation 

In 1970, General Motors (GM) paid $50 million for initial licenses to produce their own version of the Wankel rotary engine. Initially, R&D of the engine was handled by special product development group at the GM Tech Centre. The Wankel engine has 40 per cent fewer parts and roughly one-third the bulk and weight of a comparable reciprocating engine. (Yoxon, 1999) It had been ever expected in the early 70s to revolutionize the automobile markets and to be one of the most unbelievable fantasies to hit the market. At that time, people appeared ready to go rotary. Investors interpreted clues of which major manufacturers were going up to. They speculated that GM would buy real estate and open a new rotary engine factory. The stocks of GM would have gone up. As many executive predicted, “In ten years, the entire auto industry will be 95 percent rotary.” (Hege, 2011)

In 1972, GM announced that R&D work on rotary engine has progressed to produce a Wankel-powered car. After the announcement, R&D of rotary engine was transferred to Chevrolet motor division with the optimistic target of introduction in 1973.

In August 1972, the Mddle East oil embargo in the autumn of 1973 focused attention on the rotary’s poor fuel economy relative to a comparably sized piston engine. GM engineers later discovered difficulty in meeting Federal emissions standards. (SCMP, 1977)

In 1974, prototypes of Wankel rotary engine were built, but the performance was not inspiring. The engine can not meet tough emission standard without a significant loss of fuel economy. In September, GM President Ed Cole postponed the Wankel engine, and he retired the same month. (Motor Trend, 1975) Pete Estes succeeded Ed Cole as GM President showed no interest in the Wankel and in definitely postponed introduction of the Wankel rotary engine.

Behind the Story: Why Wankel Rotary Engine Innovation Failed?

In 1968, President Nixon appointed a task force to study pollution problems and recommending appropriate action. In 1969, it was reported that no new reforms should take place, but greater effort should be made to enforce existing regulations. In July 1970, Nixon submitted to Congress his plans to enforce environmental policy. Under the Air Pollution Control Act of 1970, emissions standards for automotive exhaust were set to be reduced by 90% by the year of 1976 (Science, 1970) There is a environmental regulation that the United States Clean Air Act of 1970 in 1973 with a simple and inexpensive thermal reactor (an enlarged open chamber in the exhaust manifold) by enriching the air-fuel ratio to support complete combustion inside to deal with unburned hydrocarbons (HC). This raised fuel consumption.

At the same time, the oil Crisis of 1973 raised the price of gasoline. The Wankel engine has never reached production by the time the Pacer was to hit the showrooms. GM applied to have a year’s extension of the standards’ deadline. However, their car production lines could not be in compliance with the Act by 1975 with existing technology even though millions of research dollars had been spent. They complained that the standards were completely impractical. Wankel rotary engine had to be shelved indefinitely because it failed to meet Federal anti-pollution standards for 1975 due to the ever tightening standards of 1977. The reasons of failure were mainly attributed to the rising fuel crisis and concerns about emission legislation in the United States.

Many automakers, including Mercedes-Benz and GM, tried to commercialize the technology. Only Mazda succeeded. Its first rotary-powered production car was introduced in 1967. But the most successful was the Mazda RX- 7, which it introduced to the United States in 1978 and discontinued in 1995 because of declining sales. (Kelleher, 2004) Mazda improved the fuel efficiency of the Wankel rotary engine by 40% by the time of introduction of the RX-7 in 1978. Dose this mean that GM chose wrong Wankel? Not necessarily true. Just before Ed Cole retired from General Motors in 1974, he said in a news release, “Whatever you’ve seen or heard about the reason the GM rotary was delayed, it’s not the real reason.” Over 3 decades pasted, Ernie Brink, the former Mazda and Lexus Mechanic, explained the inherent problem of the rotary engine and came up with several solutions to improve fuel-efficient. (Autoline Network, 2012)

(Starting from 5:31 onward to end)

The Ladder of Inference: What go wrong in GM?

It can be said that the Wankel rotary engine is given to evolution, rather than revolution. Rotary engine was an innovative ideas to draw the attention of anyone, however, it can rarely succeed with only a few technocrats behind the scenes. A great invention does not promise huge financial success under the research and development laboratories and huge amount of investment. From the above story of the Wankel engine, the execute may has wishful thinking to rotary adoption in automobile industry. According to the ladder of inference, decision making and action need to be founded on reality. It was a typical mistake of making wrong assumption. The GM execute should not had jumped to a rash decision to fill a curious little market niche. The design was great, but falling in love with the great concept often does making it work. In assuming that they already knew enough about the Wankel, GM tried to make it schedule in their timetable with forecasting any unpredictable obstacles. When the press releases constantly said that the Wankel engine was going to be remarkable, the GM’s engines were struggling with problems of being delayed.  The R&D engineers worked to a deadline in order to meet to deadlines, they had to cobble up patchwork solutions to problem rather than taking the time to study the problems and produce well thought out solutions. (Ludvigsen, 1972) During the R&D work, they rejected proven material instead of less expensive one. (Hege, 2001)

Researchers said that GM might have been missing the chance and go it alone in the development process where Curtiss-Wright had already been spending huge efforts on pure research. However, it deeply rooted in the bad decision that the executives had been made. When GM publicly signed an agreement for rights to produce Wankel engines in any size, shape and number with $50 million paid and installments of $5 million each year, it seemed that they never did anything in a small way. It might be said GM is too optimistic in a sense of doing small thing in a big way. It turned out to be nightmares even under their great efforts on research and development on their own. 

PESTLE Analysis: What Factors resulted in innovation failure?

Environmental and Political Factor: For over hundred year of the Industrial Revolution, many wastes had been disposed conveniently and increasing numbers of automobiles had led to a serious air pollution problem. Especially, after World War II, the environment in the USA was becoming a big political issue. The environment in the United States was becoming a big political issue. The auto makers knew automobile gas emissions would severely affect their operations, but strict emissions regulations in the late 1960s were considered unjustifiably intrusive. GM claimed to have solved the fuel economy issue, but failed in obtaining acceptable exhaust emissions.

Legal Factor: At the time GM started the Wankel rotary engine development, local governments has began passing laws regulating the emissions of factories. And automotive exhaust became a subject of intense study for the purpose of initiating emissions standards for future cars.

Economic Factor: During the 1960s, the United States experienced its longest uninterrupted period of economic expansion in history. Then, the oil crisis of the 1970s had a tremendous political, social, and economic impact on the United States. Even though rotary engines was considered as a great innovative design that would bring to change the automobile market, the technological disadvantages of large fuel consumption failed to fulfill fuel-economy require. 

Social Factor: The GM’s move for rotary engine was seen as significant at that time because 1. It opened up the opportunities that huge investment would be spent for new machinery to build the new engine. 2. It opened up the field for new design of automobile since the Wankel need less room, shorter hoods and sloping front ends. There is no surprise that the world was overwhelmed by the high expectation of the Wankel engine at that time. However, unrealistic expectation always lead to unrealistic goal, where GM failed the innovation.

Technological Factor: From technical aspect, the failure was attributed to the shortage in new product body knowledge and inadequate collaborative development. GM probably could have saved a lot of time and money if they couldn’t go it alone in the development process where major companies like Curtiss-Wright had already been experienced so many pure research. As it was, GM’s spent less effort on research and more development. At the very beginning, the focus of GM’s rotary program was manufacture the engine rather than studying characteristics to fit into the fuel-economic political and environmental requirement. GM built the engine solely on product technological advantage as if it was a known property, without carefully considering technical synergy and environmental orientation. Hence, when problems arose, GM lacked of knowledge to solve them due to ignoring the technological disadvantages (Tab1.1) at the very beginning. 

Summary

GM's rotary engine is a good design, however as explained, the failure of GM Wankel Rotary Engine was a typical mistake of making wrong assumption. From product design to development, the company didn't understand very well about the market demand as well as the critical factors like environment and legal factor that mentioned above in the PESTLE analysis.

In addition, the failure of GM’s rotary engine was also attributed to the skyrocketing fuel price during the fuel crisis and the stringent environmental legislation at that era. Moreover, limitation on the design of rotary engine comparing with the traditional piston engine also placed some credits to lead to the failure of the engine. The intentional fuel consumption due to the greater sealing complexity led to high fuel consumption at low operating ranges. Given that the majority of vehicles which may be the target customers for rotary engine are traditional private or commercial cars, they might mainly operate at lower operating ranges unlike sports car. Hence the new design couldn't attract a surging demand. Basic economic knowledge suggests that if a product is unable to keep a sustainable demand in the market, it will be replaced or superseded by comparable product available in the market.

Market is ever changing and innovative idea is like an "engine" to keep a company moving forward. But, product without a clear target focus, just like a car without driver. If rotary engine can readjust the limitation on the design in order to fulfill the need of the majority of the target customers group, while at the same time put much emphasis on improving the research and development for the improvement in the emission problem, then it maybe able to regain the market share while at the same time complies with the relevant legislation with regard to the environmental issue.



 

References

ADPTraining (2011, February 3). MAZDA RX7 Rotary Engine, How It Works [Video file]. Retrieved from http://youtu.be/Z7kj9rOCgl

Autoline Network (2012, October 22). Rotary Engine Breakthroug? - Autoline Daily 997 [Video file]. Retrieved from http://youtu.be/GarCJ4zw_mk

Flyweightnate (2007, April 30). Wankel Engine animation [Video file]. Retrieved from http://www.youtube.be/mGOKklx2__w

Hege, J. B. (2001). The Wankel Rotary Engine: A History, McFarland & Company, Inc., Publishers.

Kelleher, J. B. (2004, September 12). Rotor-heads are wild about wankels. Retrieved March 10, 2015, from http://search.proquest.com/docview/273699346?accountid=10134

Ludvigsen, Karl (1975). GM’s Wankel: The $700 Million Miscalculation. Motor Trend, March, p. 53.

Motor Trend (1975, March). Motor Trend, 1975, v. 29, n. 3, pg. 53

SCMP (1977, April 13). GM puts brakes on US$100m engine: Detroit. South China Morning Post & the Hongkong Telegraph, p. 53.

Science (1970, July 17). Nixon Proposes NOAA and EPA. Science 169, p. 266.

Yoxon, G. , (1999). Rotary trivia: What goes round comes round. The Ottawa Citizen. Jul 16