CASE Uber vs Cabs To operate a cab, you need to acquire a medallion. Medallions in New York City, just like prime real estate, are rare and pricey. At peak times, a medallion with the right to operate a cab in that city went for over $1 million. Given the success of ride-hailing companies, these prices have come down significantly. In 2017 this price was $350k per vehicle. Even after this large price drop for a medallion, each taxi that you see in New York has almost as much capital tied up in it as a Rolls-Royce Phantom. Because of these high capital costs, there exists high pressure to get as much passenger transportation out of each vehicle as possible. But, of course, there are only 24 hours in a day. Moreover, industry data shows that taxis face various types of inefficiencies, reducing the amount of time they can create value: The first inefficiency arises when the taxi is not on the road. Even if you have multiple driver shifts per day for a vehicle, there are moments in the day when it sits in the garage or on the parking lot. This could be because of maintenance or because the demand is too low to justify paying a driver. At peak times (Thursday night), some 12,000 of the 13,437 medallion equipped taxis in New York City are in use. However, Monday morning at 3 a.m., this number is dramatically smaller. On average, a taxi is in use about 70 percent of the time; that is, 30 percent of the time, a taxi is not on the road. Even more painful are the moments when the car is on the road, but without a passenger. In this case, the cab owner or operator is incurring the capital cost for the medallion and is incurring the labor cost for the driver. How often does this happen? From all the time a taxi in New York is on the road, only half of the time it is occupied by a passenger. Finally, other inefficiencies arise for the taxi at the time of payment. Though some taxis also now allow for payment through an app, most payments still require the time of the driver, during which the taxi vehicle is in idle mode. To get a sense of how the expensive resource in the form of the taxi is used, sketch out an OEE chart capturing how the available time of a taxi vehicle is spent on value-added activities (driving with a paying customer in the seat) vs. other activities. For this, start out with one bar to the left capturing the 24 hours in the day. Then, step-by-step, visualize the inefficiencies until on the very right of the chart the value-added time is shown. This allows you to estimate the OEE. Finally, discuss how this OEE chart would differ for a ride-hailing company like Uber and Lyft. What inefficiencies have these companies overcome? And, how has this improved efficiency impacted the customer utility? CASE Uber vs Cabs To operate a cab, you need to acquire a medallion. Medallions in New York City, just like prime real estate, are rare and pricey. At peak times, a medallion with the right to operate a cab in that city went for over $1 million. Given the success of ride-hailing companies, these prices have come down significantly. In 2017 this price was $350k per vehicle. Even after this large price drop for a medallion, each taxi that you see in New York has almost as much capital tied up in it as a Rolls-Royce Phantom. Because of these high capital costs, there exists high pressure to get as much passenger transportation out of each vehicle as possible. But, of course, there are only 24 hours in a day. Moreover, industry data shows that taxis face various types of inefficiencies, reducing the amount of time they can create value: The first inefficiency arises when the taxi is not on the road. Even if you have multiple driver shifts per day for a vehicle, there are moments in the day when it sits in the garage or on the parking lot. This could be because of maintenance or because the demand is too low to justify paying a driver. At peak times (Thursday night), some 12,000 of the 13,437 medallion equipped taxis in New York City are in use. However, Monday morning at 3 a.m., this number is dramatically smaller. On average, a taxi is in use about 70 percent of the time; that is, 30 percent of the time, a taxi is not on the road. Even more painful are the moments when the car is on the road, but without a passenger. In this case, the cab owner or operator is incurring the capital cost for the medallion and is incurring the labor cost for the driver. How often does this happen? From all the time a taxi in New York is on the road, only half of the time it is occupied by a passenger. Finally, other inefficiencies arise for the taxi at the time of payment. Though some taxis also now allow for payment through an app, most payments still require the time of the driver, during which the taxi vehicle is in idle mode. To get a sense of how the expensive resource in the form of the taxi is used, sketch out an OEE chart capturing how the available time of a taxi vehicle is spent on value-added activities (driving with a paying customer in the seat) vs. other activities. For this, start out with one bar to the left capturing the 24 hours in the day. Then, step-by-step, visualize the inefficiencies until on the very right of the chart the value-added time is shown. This allows you to estimate the OEE. Finally, discuss how this OEE chart would differ for a ride-hailing company like Uber and Lyft. What inefficiencies have these companies overcome? And, how has this improved efficiency impacted the customer utility