Operations Design - Assignment Example

Operations Design Table of Contents Introduction 3 Automobile Industry 3 Airline Industry 6 Conclusion 9 References 10 Introduction In todaysglobalised competitive business scenario operational efficiency is one of the most important factors in order to gain competitive advantage. Every single business organization specially those who belong to manufacturing and service industry, is focusing on operational efficiency. Operations management generally involves design as well as the management of various products, services, processes and supply chains. Operations management is also associated with the process of acquiring, developing and utilizing various resources which are required for delivering the products and services to the customers. Operations management is used in both strategic and tactical level. It is involved in various strategic issues like the deciding the location and size of manufacturing plants, determining the structure of telecommunication and service networks and developing the supply chains. Various tactical issues where operation management is involved are layout and structure of the plant, methods of project management and selection as well as replacement of equipment. Apart from strategic and tactical issues there are various operational issues like scheduling and controlling of production, inventory management, controlling quality, materials and traffic controlling and maintenance of equipment (MIT Sloan School of Management, n.d.) There is extensive practice of operations management in the airline and the automobile industry. In both the industry long term success depend on proper size, layout, structure of manufacturing plants, efficient and cost effective supply chains, proper quality and inventory control, assembly system and equipment maintenance. Most of the recent problems in these two industry are associated with these above mentioned issues. To address these issues various programs like ERP (Enterprise Resource Planning), TQM (Total Quality Management), BPR (Business Process Re engineering) etc. are developed and implemented. Automobile Industry Success in automobile industry is hugely depends on how the organization manage the entire operation. Since automobile industry is a part of manufacturing industry, factors like size, layout and location of the plant, efficiency of supply and assembly line, methods of controlling quality and inventory are crucial. Every single automobile company which wants to stay ahead in the business needs to focus on these issues. Recent problems that developed in the automobile industry are also related to these issues. Since the end of 2008 global automobile industry has been facing huge challenges because of global financial meltdown. This financial turmoil has resulted to huge fall in overall demand of car all across the world. As a result of this fall in demand car manufacturers have been facing huge losses. Even auto giants like Toyota, General Motors, Ford, Chrysler has been struggling to make profit. To deal with the problem companies are trying to minimize their cost of operation so that loss of sales can be compensated. They are adopting new strategies to make their operations more cost, time and labor effective. Many companies have even stopped production in some their plant which has resulted to employee reduction. They are trying to come up with technologies that would make the assembly and supply line more cost and time efficient. Even before this financial crisis automobile manufacturers have always been tried to come out new innovative operations strategies to increase their overall efficiency and reduce the cost of operation. Presently most of the car manufacturers are focusing on the small car market in the developing nations. But to manufacturer small cars companies need to have maximum possible operational efficiency. Organizations have implemented various programs like ERP, TQM, BPR in order to enhance their operational efficiency. Generally in automobile industry three most important issues are exquisite production, channel management and logistics management. Efficient cost management methods are important in order to improve these three aspects and to enhance the efficiency of the cost management method ERP is implemented. ERP stands for Enterprise Resource Plan and it integrates three major enterprise resources. These are capital, material and information. ERP is nothing but a advanced management information system. The main purposes of ERP implementation are enhancing the efficiency of production, decreasing the cost and gaining competitive advantages. ERP is mainly for production planning system, whereas cost management is the major component for financial management. But proper plan and cost over cost must be there to have efficient production planning system. This is the main reason for ERP implementation as cost management powered by ERP system provides required information that help organization to make strategic decision. Quality is another important aspect in the operations of automobile industry. Global automobile industry is highly competitive in nature and the recent global financial turmoil has made this competition more intensive. As a result all the auto giants mainly focus on the quality of the product in order to gain competitive advantage. Organizations normally have advanced quality control system to improve the existing quality of the final product. Today most of the automobile companies rely on the total quality management to ensure that the high quality is maintained in the final product. Toyota, one of the largest automobile companies in the world, has implemented total quality management successfully. TQM in Toyota was actually a part of JIT model which was basically a manage4technology strategy model. Toyota motors found that the main reason of the defects in product was wear which was the result of accumulation of chips and dirt. This wear was actually in the machines. The main reason of this wear was the workers were following basic American practice that was they were running the machines until they broke. Engineers were called only after the machines were broken. This wear and poor maintenance of the machines led to sharp fall in productivity which forced Toyota to change its policy regarding maintaining of machines quality of the product. Company gradually started to change its policies implemented Total Quality Management. Another recently developed concept in the field of operations is Business Process Reengineering. The concept came in the market in early 1990. It was broadly discussed by James Champy and Michael Hammer in the book called ‘Reengineering the Corporation. Business Process Reengineering is all about reorganizing and redesigning an organization with the objective of improving the quality of service and lowering the cost. According to Champy and Hammer information technology is the main driver for redesigning and reorganizing. BPR is a widely used tool in global automobile industry. When Indian auto giant Mahindra and Mahindra decided to implement Business Process Reengineering in their plant, workers went to strike. But as a reply to this company’s officers started to work on shop floors just to prove that BPR is actually beneficial for the organization. It was found that after implementing business process reengineering 35 engines were produced by 100 officers and this was much better than the result produced by the workers prior to BPR days (ICMR Center for Management Research, n.d.). Business Process Reengineering is also implemented in Ford motor company also. Invoices of ford motor are not reconciled with what is shipped any more. Ford even stopped paying their suppliers for the parts before their use in production. As a result of this suppliers were under pressure to supply quality products in time (Greenberg, L. n.d.). Airline Industry Airline industry is a manpower and capital intensive industry. It is a huge industry where large aircrafts are manufactured and operated with complete efficiency so that the best possible service is provided to the customers. Operational efficiency is the key for such an industry. Today most of the renowned airlines in the world are using advanced programs that increase their overall operational efficiency. Six sigma is one of most widely used processes in airline industry in order to improve the quality. Six Sigma refers to the number of defects found in organizational performance. As per as six sigma rule, apart from specification of customer any other type of disputes are considered as defect. Six Sigma is considered as a trade mark or registered service mark. Rate of defects coming out of organizational process should not be more than 3.4 per million opportunities in order to achieve ‘six sigma’ service mark. In airline industry there are many organizations are using six sigma. Three major fortune 500 airline companies namely Southwest Airlines, Delta Airlines, US Airways group, are using six sigma. Six Sigma came in Boeing, one of the largest aircraft manufacturers in the world, in the late 90s. Six Sigma is not mandatory at Boeing. In the year of 1999 it actually became a part of Boeing’s operation and now it is one most important part of the production system at Boeing. In the annual report of Boeing Six Sigma is not mentioned by its name, it is complemented with lean initiatives. In 2004 annual report of Boeing it has been found that almost 210 million dollars cost were reduced by these lean initiatives along with six sigma. According to Boeing frontiers, a monthly newsletter of Boeing, Six Sigma is one of the key elements for Boeing in order to gain competitive advantage. It is major element in Boeing’s production system. It is also stated in Boeing frontiers that since 1999 commercial airplanes of Boeing have participated in various pilot projects where six sigma principles have been used. Applying Six Sigma principles is data-driven way of managing various business processes as well as the variation in manufacturing and this has resulted to change in business metrics and culture. Company provides special training on Six Sigma to some selected experts who receive certificates. There are two different certificates, green belts and black belts. These are given based on the level of projects and training received. According to Boeing Frontiers there are almost 300 experts who are trained as green belts and around 60 experts who are trained as black belts. These experts are working in dozens of projects on commercial airplanes (Marx, July 11 2005). Today’s airline industry is a big user of ERP system. Almost all the leading airlines have implemented enterprise resource planning in their business process. Like any other big airlines Lufthansa airlines has also implemented ERP in their system. ERP is implemented in Lufthansa’s various processes like overhaul and maintenance repair, logistics and cargo, revenue accounting and airline financials. Different ERP solutions are there for each of these processes. For overhaul and maintenance repair there are MRO platform, for logistics and cargo there are Air cargo platform and for revenue accounting there are Sirax. www.airlineinformation.org/.../LSY_AirlinePortfolio_fin_V2.pdf Japan Airlines International is also experimenting with ERP system. On November 28, 2008 Japan Airlines launched the ‘JAl Mighty’ which is a new enterprise resource planning system for maintaining aviation. Main objectives of launching this system is to manage the quality control, maintenance planning and parts inventory for around 460 engines, 160 aircrafts and almost 500,000 parts. According to the company this is the largest enterprise resource planning system in the world of aviation. According to Japan Airlines International’s website there are almost 17 airlines where SAP ERP is implemented for aviation maintenance. Recently British Airways also found to be interested in implementing a company wide enterprise resource planning (ERP) system, although the company already has standalone ERP systems in its human resource and engineering departments. According to CIO Paul Coby main reason of this company wide implementation is to increase its efficiency level and reach to the maximum level. Company found this implementation important because the profit margins were getting tighter and tighter day by day. Total Quality Management is another program that is widely used in order to improve operational efficiency. British Airways implemented Total Quality Management in early 1990 and by 1999, company started to feel its benefits. As a result of this TQM program communication among the staffs and between management and staff improved. It helped in reducing time that was lost because of illness of any staff. The turnaround times during maintenance and servicing also reduced because of the implementation of Total Quality Management. It also increased efficiency in all the departments and reduced the cost associated with shortage of equipment and parts (Rawlins, 2008). Total Quality Management is not only used in Airlines Company but it is also used in aerospace maintenance companies around the world. In aerospace maintenance company TQM is used to improve the maintenance and repair turn times of blade section that is there in the turbines of the aircraft engine (Emerald, n.d.). Business Process Reengineering is also widely used in airline industry. Since in the airline industry business processes and operations are heavily complex in nature, it is important to implement BPR system. BPR technique is widely used in handling the airlines cargo. Conclusion Both automobile and airlines industry are highly complex in nature and handle this complexity both the industry have developed and implemented various programs that have reduced this complexity and increased operational efficiency. This increased operational efficiency and reduced complexity has helped the industry in providing better customer service. These programs have also helped automobile and airlines companies to reduce operational cost as well as time and to increase organizational productivity by reducing the number of errors. Various programs like business process reengineering, total quality management, six sigma are implemented in automobile and airline industry worldwide with the objective of maximizing operational efficiency so that competitive advantage could be gained. Since the external business environment for airlines as well as automobile companies is getting more and more competitive and profit margin is getting reduced it is crucial to have proper system in place to reduce the cost and increase the efficiency. Finally it can be stated that both the industry has developed and implemented different programs to improve operational efficiency in the recent past and have to keep doing that in future with more visible effort to stay in the competition. References Emerald, No Date, Implementing TQM in an aerospace maintenance company, [online] Available at: http://www.emeraldinsight.com/Insight/viewContentItem.do?contentType=Article&hdAction=lnkpdf&contentId=843155 [Accessed on November 11, 2009]. Greenberg, L. No Date, Business Process Reengineering: Constantly Adapting to Change, Earthrenewal.org, [online] Available at: http://earthrenewal.org/bpr.htm [Accessed on November 11, 2009]. Japan Airlines, November 28, 2008, JAL Mighty, New ERP System for Aviation Maintenance Goes Live, [online] Available at: http://press.jal.co.jp/en/release/200811/001066.html [Accessed on November 11, 2009]. ICMR Center for Management Research, No Date, Mahindra & Mahindra: Implementing BPR, [online] Available at: http://www.icmrindia.org/casestudies/catalogue/Operations/Mahindra-Implementing%20BPR-Operations%20Case%20Studies.htm#About_BPR [Accessed on November 11, 2009]. MIT Sloan School of Management, No Date, What is Operations Management?, Operations Management, [online] Available at: http://mitsloan.mit.edu/omg/om-definition.php [Accessed on November 11, 2009]. Marx, M. July 11 2005, Boeing, Sixsigmaompanies.com, [online] Available at: http://www.sixsigmacompanies.com/archive/boeing.html [Accessed on November 11, 2009]. Rawlins, A. 2008, Total Quality Management (TQM), AuthorHouse Read More