Operations Management - Essay Example

Operations Management by Table of Contents Introduction………………………………………………………………………3 2. Main Bodyof Report………………………………………………………………4 Customer Description…………………………………………………………….4 Broad market Criteria…………………………………………………………….4 Operation Management Objectives……………………………………………….5 Operations Management Processes………………………………………………...6 3. Conclusion and Recommendations………………………………………………...10 4. References………………………………………………………………………….13 5. Appendix…………………………………………………………………………….15 Introduction Sky Mart is a large retail store that is considered to be one of the largest and most successful in the country. The retail store has several international subsidiaries, some using different brand names. The organization controls a total of fifteen subsidiaries. The store deals with a large variety of goods and products that are all closely related to each other in terms of use. The various available goods are grouped in different sections of each of the retails stores. Similar goods from different local manufacturers or those acquired through importation are stocked together by the retailer. The sales department is in charge of the stocking and operations management within the organization. The department’s contribution towards the growth of the company is very important. This is the department in charge of generating revenue. There is a significant amount of planning involved in the retail industry. The department is in charge of the customer as well as the company’s financial returns. The department contributes to the organization’s financial growth through planning and effective implementation of these plans. The methods used to reach the customer and promote sales are developed within this department. This involves a joint effort between the sales and marketing department. There is very close proximity between these two departments. The marketing department is charged with consumer attraction to the store, whereas the sales department is charged with the actual sale of products. The success and growth of an organization from a small scale regional retail store to a global corporation is attributed to the efficacy and efficiency of this department. The contribution of the work of this department is crucial for that success (Bradley, 1991). Main Body of Report Customer Description The description of customer is referred to a customer or consumer profile. Before the identification of the customer profile, the organization must differentiate the external and the internal customer. An internal customer is a customer who is involved with the process of making a product available to the end consumer. The internal customer is a member of the organization usually a company employee. An external customer is one who purchases the company products for personal use but is not part of the company. Both of these customers are important to the viability and growth of an organization. The internal customer contributes to the number of sales made by the organization, for example, company sales representatives and the external customer are essential to business success as they are source of revenue (Stevenson, 2005). The internal customer environment concept advocates that the operations management team at each micro operation should identify exactly who the internal customer is and the internal supplier, formally address them about what exactly they need and what they are capable of offering to the organization. This involves treating them as if they are independent external organizations. Broad Market Criteria Broad market criteria refer to the stock index that comprises a large number of securities and multiple industries. The aim of the criteria is to provide a general and widespread overview of the existing conditions in the market. The information is available to both external and internal customers in form of company publications and major newspapers. They provide useful information to the customers, for example, investors, shareholders and day to day customers. The organization publicly shows the broad market index for the benefit of these investors, the interested public and regulators. The broad market criteria show the upward and downward market trends at the time. Detailed analysis is necessary to identify the specific industries causing the changes in the market. As the organization compiles a broad market, it uses a variety of criteria to decide which industries or securities to include in the list. The organization also reevaluates these lists periodically with the de-listing and adding of other securities (Greasely, 2008). The broad market index offers both the external and internal consumers with an overview of the existing market trends. These market trends in the business sector may be used by investors and interested individuals in the public to make the choice between investing and pulling out. The market trends should seem to be at par with the organization’s objectives and general direction moving forward, this makes for a good investment. For the external consumer, the broad market index report will allow the customer to deduce whether or not the company keeps up with the market by conducting frequent analysis, which is also a good sign. Operations Management Objectives Operations management involves the precise running of the production and distribution processes of goods and services. The activities carried out in operations management include quality control, storage logistics, storage evaluation, inventory control and inspection and purchase management. The main focus is on the effectiveness and efficiency of the above processes. Other operational management issues include production scheduling and control, equipment maintenance, traffic and handling of materials. Tactical considerations in operations management include manufacturing equipment selection, maintenance and replacement, project management and plant structure and layout. Operations management objectives are based on the five main groups affected by the activities in operations management. To describe the objectives the organization must describe and understand the outcome expected from the internal and external customers. The first major category is the customer who is the most affected by a business organization. The second are suppliers, operations management affect the way in which the suppliers do their work and their general prosperity. The third category is the shareholder who is only likely to benefit from an organization if the operations are effective. The fourth category is the employee, who will benefit far more from a prosperous business rather than a failing one. The final category is the society or market, the business is expected by the society to pay attention to its environmental responsibility and contribution to economic growth. The main operations management objectives are quality, cost, speed, flexibility and dependability (Heizer, 2001). Product Quality is one of the most important operations objectives in an organization. In the business world, quality can be used interchangeably with conformance. The conformance to the consumer needs and wants. The Product describes the choice of either goods or services the organization is producing. The goods or services should be just as they are supposed to be to ensure consumer satisfaction. Error free products suggest that the consumer will have less to complain about thereby the product will bring in more revenue. In order to ensure product quality, factors affecting consumer response to goods should be analyzed for the company’s target market. These factors include the demographic, economic, cultural, technological, natural and political characteristics of the market. The objective of the organization is to meet the target market’s needs and desires. The production company should study the target market through research and trials so as to identify and attempt to fill the market niche (Bradley, 1991). Speed refers to the time of response. This is further described as the time between the request of the internal or external customer and the actual receipt of the product. Customers view speedy response as positive and this is more likely to ensure return business and subsequent customer loyalty. Studies show that it is possible and more acceptable to charge higher prices on goods that are delivered faster. This is seen in the postal service, the delivery services and transportation sector. This speed shows positive internal effects for the organization, these include reduction of storage costs, reduction of risks associated with inventory and storage. Flexibility is the ability of the company to change the operation process at any particular time. This is includes product flexibility, volume flexibility, mix flexibility and delivery flexibility. This objective allows a company to fix or tweak their product to completely fit the consumer. Mix flexibility allows a company to change an operation to produce a wide variety of products for the consumer to have a variety of choices. Product flexibility refers to the ability of the operation to develop new products while incorporating various new ideas which the consumer will find more attractive. Volume and delivery flexibility allow an organization to change the output level and the procedures used for delivery as a response to the changes in customer and product quantity. Flexibility impacts all the other operations objectives. The presence of these flexibilities will speed up the operations process thereby saving time and money. Dependability is the operations objective that ensures the consumer receives the goods or services on time. This is a very difficult practice to measure in the business practice. Constant lateness in goods or services delivery leads to the constant irritation of the consumer. This is especially true for internal customers. The dependability of a supplier is one of the most important considerations when renewing their contract. Dependability is aimed at ensuring the customer returns to the business. Highly dependable systems can increase the speed of the production process. Increased speed will save on valuable time which in turn saves money for the company. Cost is the price of the product. Cost structure differs among different organizations. All the operations objectives affect cost. The pricing strategy should take into consideration both the competition and the target consumers. The prices should neither be too low or too high. Prices that are too low will lead to poor profit returns for the company. Also, prices higher than the completion or above the economic capability of the target market may lead to the loss of potential clientele, therefore losses are incurred. The prices in a company must take into consideration the prices used by competitors so as to develop competitive advantage. This describes the process of giving a lower cost profile for goods or services with careful consideration of the competitor’s prices (Chapman, 1997). Operations Management Processes The company must carry out cost budgeting to estimate the cost of the production process. The estimation of cost will allow them to set out the necessary funds to complete production. Continuous evaluation of cost as the process is ongoing is a very important tool in operations management that will ensure the costs overruns are avoided and the organization is saving money wherever possible. Effective control of the costs incurred in operations management is achieved through various measures. Some of these include control of baseline and fixed costs, acknowledgment and planning for hidden and unexpected spending impacts and costs, understanding costs that arise during the production process, review of vendor and material characteristics and governance of the stakeholder’s decisions on investments and additions and the quantification of value of these additions before they are undertaken. Consumers buy goods and services with the main objective of achieving benefits from them. By increasing the value of a product, it will be viewed as a necessity by the target market and no longer as a commodity, as it can be set apart from the other products. This creates brand loyalty which has a positive effect on company profits. Sainsbury should look for additional functionalities of its products (Kotler, 1996). The operations management process for the organization began with the aim of producing goods that the consumer wanted; at the time and place they wanted them. The organization then focused its efforts on the development of appropriate pricing and on cost control. The company developed cost structures that allowed them to maintain low everyday prices, creating competitive advantage. The company then focused on the creation of an advanced, skilled and efficient operations management team to exploit and benefit from the competitive advantage created. Operations management processes center around purchasing and distribution. The operations will focus on planning, forecasting and management of the inventory. Forecasting is the estimation of customer demand for a particular product over a specified period of time. Forecasting is based on previous data, external sales and promotions, changes in competition and changes in market trends. The planning involves the estimation of demand and mirroring this on the inventory. Forecasts ensure the distribution centers and company warehouses have enough product but not too much. The operations management will also use forecast data to supply stores with a sufficient quantity of goods. This reduces inventory carrying cost and maintenance of customer satisfaction (Heizer, 2001). Operations management involves three main processes, these are, the material process, information process and the customer process. The materials process encompasses both the output and input materials. The physical inspection, inventory, storage and shipment of the raw materials and the finished product are the main activities in operations management. The information process involves all the activities involved with internal and external communication about the production process. This includes communication between the operations management and the employees on their performance or scheduling, the databases used for consumer information and online subscription, purchase and delivery records, provision of financial data to the public shareholders and the company databases in the local and national government. Any time lag in communication between the management and the operations slows down the decision making process and leads to a deficit. The customer process involves all the factors involved with consumer satisfaction as discussed above. They include provision of appropriate, quality goods and services in a reliable and timely fashion. Transformed resources in the operations department are the mixture of materials information and customers (Slack, 2004). Buffering is a very important process in operations management. The business environment is considered turbulent and the operations must adjust continually and appropriately. The operations management tries to minimize the effect of environmental disruption by insulating and buffering the operations processes and functions from the external business environment. This can be done through physical buffering which the use of inventory or stock as a buffer. The managers design a method to build up stock or store of inventory that will be able to absorb the initial stages following disruption of the supply chain. The other method is organizational buffering where the roles and responsibilities involved in acquiring inputs and the distribution of outputs to customers is given to several individuals within the company’s personnel (Slack, 2004). Conclusion and Recommendations Operations Management is a core function in any successful organization. The operations manager will plan, direct and coordinate the operations processes of a company effectively and efficiently. The resources available to a company, such as, money, time, machinery, facilities, employees, materials and information are to be used wisely. This ensures operations management remains a very important field. Effective management will provide the organization with sustainable competitive advantage. These advantages include low product costs, improved in store selection and variety, and reduced inventory costs and highly competitive pricing for the consumer. The operations management in a company entails the running of a business efficiently with a minimum use of resources. This is while still meeting and achieving the production requirements and sustainable improvements in the operations process. In order to ensure the operations management team is qualified, thorough background information should be obtained and analyzed by the executive management before hiring. The skills of the operation manager should involve strong leadership qualities, interpersonal communication skills and analytical and problem solving skills. This may be used as hiring qualifications or as criteria for continued training of employees. The operations management personnel should be familiar with computer technology, problem solving methods, quantitative methods, policy formulation, time management and inventory control. Consistent and frequent employee training is a measure that will ensure increased productivity (Reid, 2002). Cross docking is a technique used in the business world to develop and maintain low cost structures. This is a logistic technique that mainly involves replenishing inventory. The products are routed from the supplier to the company warehouse where they are shipped to stores immediately without sitting in inventory indefinitely. This strategy will reduce the organization’s costs and these saving may be beneficial to customers, with low competitive pricing. Distribution and transport management as well as cross docking will keep the company transport and inventory costs low and reduction of transport time will eliminate any inefficiencies (Fatseas & Williams, 2009). Establishment of a good relationship with suppliers and vendors is an important tool in effective business operations management. This begins with strategic sourcing to find products at the best possible prices from suppliers, vetting suppliers to see whether or not they are in a position to meet demand and the establishment of good rapport with these vendors. The company may offer the vendors long term and high volume purchase agreement in exchange for low prices. Companies have found that the implementation of operational studies and continued research on the topic will improve the process of operations. Gaining a better understanding of what they are doing and how it should be done will increase the likelihood the company will detect loopholes in their current methods and find out ways to rectify them. This method may increase production and revenue without the considerable rise in customer expenditure. Market segmentation is an important recommendation for companies interested in improving sales and consumer relations. The company is able to better understand the needs applicable to a specific consumer base. This strategy may be developed in the marketing department where the broad target market is segmented on the basis of several characteristics, such as, age, location or income and purchasing power. Many companies will tend to focus more on their relationship with the external consumer. Recommendations to focus equally on the internal and the external customer will lead to both a healthier work environment and revenue generation. Positive relationships among employees and between the employees and management are crucial for the proper functioning of operations. This may be facilitated by encouraging employees to treat each other with the same respect as external customers, team building exercises, appreciation of the employees work and creating a reward system. Encouraging employee feedback is also an important step (Waters, 1999). Business process reengineering is a radical process that advocates for that all resources available to an organization and all the activities necessary for end to end business to occur should be placed under the same department or unit. This entails reconfiguration of an organization whose operation management is not successful. All organizations must engage in operations management in order to ensure the decisions made about the production process are well executed. The benefits of this are impacts on production costs and revenue generation. This concept also applies to non-profit organization, for instance, the importance of operations management in the process of service provision to a community by its local government. References Chapman, J. M., & Shay, R. P. 1997. The Consumer Finance Industry: Its Costs and Regulation. Columbia University Press. Bradely, Frank. 1991. International Marketing Strategy. Prentice-Hall, London. Fatseas, V. A., & Williams, J. F. 2009. Cost management (2nd Ed.). McGraw-Hill, Australia. Greasley, Andrew. Operations Management. SAGE Publications. Heizer, Jay. 2001. Operations Management. Prentice Hall, London. Kotler, Philip. 1996. Principles of Marketing (3rd Ed). Prentice-Hall, London. Slack, Nigel. 2004. Introduction to Operations Management. Pearson Education Incorporated, Sydney. Stevenson, William. 2005. Operations Management. McGraw Hill. Reid, Dan. 2002. Overview of Operations Management. Wiley Publishers. Waters, C. 1999. Operations Management. Kogan Page Press. Appendix The paper describes the operations management processes involved in the running of a business. The operations processes are described and the various methods of buffering. Customer description and expectations are outlined as well as the market studies necessary for the successful management of the production process. The paper also focuses on the importance of effective and efficient running of the operations management. Organizations must engage in operations management in order to ensure the decisions made about the production process are well executed. The benefits of this are impacts on production costs and revenue generation. The paper also provides recommendations on how o improve operations management, such as, buffering and cross docking. Read More