Operations Management - Essay Example

Operations Management Table of Contents Concept of Operations management 3 Operations management in Toyota 3 Lean manufacturing 4 Six sigma 4 Kaizen 5 Theory of constrains 6 Just in time strategy 6 Hoshin Kanri 8 Value chain analysis 8 Capacity planning 8 Total quality management 9 Inventory control 10 Reference List 12 Concept of Operations management Operations management refers to a series of activities which an organization undertakes for designing, manufacturing and controlling the process of production of goods or services. The process involves allocation of resources and managing the supply chain effectively. In other words, it can be stated that operations management involves acquisition, development and proper utilization of resources in a manner such that valuable goods and services can be manufactured and delivered to the client. An effective operations management ensures profitability and safe production system. The production system must ensure that wastage of important resource is low. The operations strategies which are adopted by an organization must meet the goals of the firm as a whole. The objective of the operations management team of an organization is finding the right balance between the resource utilization and costs. Most manufacturing organizations follow the strategy of maximizing production by cutting down costs and wastage of resources. Based upon the needs of production, the management of an organization may follow different strategies of operation (Schwientek and Schmidt, 2008). Operations management is spread across different functional areas of a firm. The operational activities in relation to manufacturing include activities such as marketing and sales, production, research and development and customer support. Such activities are required to be integrated in a proper manner. Assessing the outcomes of the activities of different operational departments is done on the basis of quality management, speed of production, flexibility of operations and costs associated with manufacturing (Slack, Chambers and Johnston, 2013). Operations management in Toyota Toyota is considered to have one of the most efficient operations management systems globally. The company manufactures products only when orders for the same have been received. This just in time strategy of production facilitates minimization of wastage. The manufacturing operations are undertaken with an objective to minimize overburden and inconsistency. Managers carefully analyse resources and finished products requirement and include only those processes in manufacturing which adds value to the final product. Much importance is therefore given to the aspects of capacity planning and value chain analysis. Some of the key aspects of the operations management at Toyota are discussed in the following sections (Stevenson and Hojati, 2007). Lean manufacturing Toyota’s lean manufacturing systems are famous as Toyotaism. The lean strategies of the firm involves eliminating those processes, resources and assets which are considered superfluous and does not result in adding value to the end products of the organization. Lean manufacturing also incorporates including only those types of systems and processes which adds value to the final products and services as desired by the consumers. The purpose of the lean manufacturing system is delivering value which is equal to or is higher than the expectations of the consumers. Hence the system involves measuring the specific needs of the consumers and accordingly developing products and services. Production activities are mainly undertaken to meet specific needs of consumers. Toyota aims to develop automobiles which are of high quality and meets consumer expectations. If the products of Toyota fail to meet such requirement, it would become difficult for the company to generate revenue. Hence all production activities must be aligned and integrated in a manner such that target consumers remained satisfied. The operations system undertaken by the organization must be value and cost effective. The lean production system involves identifying processes that leads towards the generation of waste resources. Processes which do not add value to the products and increases the costs of operations must be eliminated. The cycle time variation technique in the lean manufacturing process of Toyota plays an important role in reducing time employed in production across a production line (Kleindorfer, Singhal and Wassenhove, 2005). Six sigma The six sigma system is another approach undertaken by Toyota for improving the efficiency of the production system. The six sigma technique was initially developed by Motorola. The six sigma approach aims to reduce errors existing in the production process and ensures that the final output is of very high quality. The six sigma process relies upon the specialization of different elements of the production process. The six sigma process focuses upon the activities performed by different employees. It is essential that employees perform their work diligently so that errors can be minimized. The objective of six sigma technique is to ensure that goods are developed with limited or no errors right from the initial stages of manufacturing. Most organizations are seen to assess the quality of the goods produced at the final stage, after the gods are produced. However, organizations which follow the six sigma concept include checking the quality of semi produced goods at regular intervals of the production system. One of the essential elements of six sigma is to inform and train employees adequately in respect of their roles and responsibilities. When employees are aware of the quality standards, errors can automatically be reduced. At Toyota it is seen that mangers impart training to the workers regarding different roles and responsibilities. When every employee suitably meets the roles and responsibilities associated with job and perform the same with utmost diligence then it becomes feasible to minimize the occurrence of errors (Benders and Morita, 2004). Kaizen Kaizen is a Japanese operations management concept. The concept focuses upon continuous improvement. Kaizen is closely associated with the lean system of manufacturing. Like the lean manufacturing system, Kaizen also concentrates upon eliminating wasteful resources and stems from the production system. The system involves closely monitoring different processes and roles performed by employees and removing those activities from the production system which do not add any value to the end products. Additionally the Kaizen concept also emphasizes upon continuously improving the production systems and techniques in order to attain cost effectiveness. Continuous improvement in the production process is only possible when employees are encouraged to innovate. Employees must be encouraged to give their opinions to the management in respect of improving the production system. Hence employee engagement is considered to be a part of the Kaizen concept. The Japanese believe in the idea that there exist no systems or processes which cannot be improved further. Hence managers must continuously seek improvement in the existing production systems so as to reap higher profits. Another important aspect to consider is that business environment is in a state of constant change. Technological up gradation, inclusion of more competitors, changes in the availability of resources and changes in legal factors all affect the manner in which organizations function in an organization. Organizations must consistently change the manner in which they function alongside of the changes in the external and the internal environment. The inclusion of such changes in the operational process of an organization leads to improvements. Continuous improvements make organizations effective and flexible. Through the implementation of the Kaizen concept, Toyota satisfies two important needs. Firstly the company monitors the changes in the external environment and accordingly makes changes in the internal systems. Secondly, the company vigorously engages itself in research and development to identify ways in which the production process can be improved. Due to the implementation of the kaizen system, Toyota has emerged as a flexible organization that can easily respond to changes. Companies which frequently upgrade or change the manner in which they function are seen to outperform those which remain rigid (Selladurai, 2004). Theory of constrains The theory of constrains is also an important technique which is followed by Toyota in its operations management process. The theory of constrains suggests that every firm is exposed to certain constrains which limit them from achieving their desired goals. It therefore becomes the responsibility of the operations mangers to identify these constrains and make changes in operations performed. Constrains faced by an organization can either be external or internal. Internal constrains refer to the lack of availability of resources, employees, equipment and changes in policies of the organization. External constrains refer to emergence of new technologies, competitors and demand fluctuations. The operational system of an organization must be capable enough to react to such constrains in a positive manner. The theory of constrains states that there are very limited issues which hamper productivity of a firm. Constrains are mainly seen to arise in the perspective of resource availability and allocation. Since business environment is in a state of constant change, emergence of constrains is a common phenomenon. It therefore becomes essential for an organization to identify issues existing in the external and internal environment. Firms are also exposed to certain types of unavoidable constrains such as the sudden break down of machines or loss large number of employees. It is essential that such constrains are forecasted and adequate measures are taken in order to meet them. Meeting such constrains in an effective manner leads to the overall improvement of an organization. Managers are seen to focus upon large constrain and then move on to the smaller constrains. Larger constrains have a significant impact upon productivity and therefore it require immediate addressing. Managers at Toyota have identified that only flexible organizations can effectively meet changes so as to remove constrain situations (Cachon and Terwiesch, 2009). Just in time strategy One of the significant aspects behind the success of Toyota is its just-in-time (JIT) inventory concept. Based upon the JIT concept, Toyota undertakes manufacturing of automobiles only when orders for the same have been obtained from the consumers. Resources are accumulated and began to be processes only when the orders placed by the consumers have been confirmed. The JIT inventory system is known to cut down costs significantly. Based upon the orders received, measures are taken in respect of accumulation of resources, technologies and processes for meeting the needs of the organization. Hence only that amount of raw materials and resources are brought onto the production floor which are required in the manufacturing process. Wastages can therefore be minimised to a very large extend. The JIT inventory concept also facilitates producing only that quantity of goods which are required by the consumers. Hence producing on a mass scale can be extensively avoided. The final products are not required to be kept in the facilities for long and are immediately moved out. Under the JIT in concept, automobile parts are only manufactured by Toyota when the requirements for the same arise on the factory floors. Automobile parts are very expensive and are produced using superior technology. The resources employed for manufacturing automobile parts might become wasteful if they are not utilized in the manufacturing process. Such wastages can be adequately avoided if the parts manufactured are used on time. Therefore JIT system of operation avoids entrapment of resources and finances in the manufacturing process for long (Jones and Robinson, 2012). Under the JIT concept, different models of inventory are handled and processed in the assembly line at the same time. Before the introduction of the JIT concept, the assembly line could include only one type of inventory processing model at a given time. Processing another model required remodelling. However due to the incorporation of the JIT, factory floors were capable of including back to back processes in the production system. Since the company only manufactures hat many products which are required, the room for errors are also minimized. Hence operations strategies such as six sigma get affected. However supporting a JIT system of production is not an easy system. Emergence of sudden constrains such as break down of machines requires immediate replacement. Since Toyota only manufactures limited number of spare parts, handling such constrains may be challenging. Therefore constrains arising on the factory floor are required to be avoided as far as possible so as to ensure that production is carried on without stoppage. The primary requirements for JIT concept to be effective are flexibility, high quality production systems, avoidance of errors and the implementation of disciplined behaviour. Although the JIT concept has helped Toyota to successfully implement efficiency and productivity within the organization, not all organizations are suited for this type of operational strategy. Organizations which manufacture products having huge and fluctuating demand conditions existing in the market are not able to undertake such strategies effectively (Rothenberg, Pil and Maxwell, 2001). Hoshin Kanri The concept of Hoshin Kanri is related to the deployment of goals. According to this concept all units of an organization are required to work towards the fulfilment of common goals and objectives. Individuals units of an organization are required to contribute towards the achievement of these goals. Therefore al efforts undertaken within an organization leads to the achievement of common purposes. Every manager in the organization is required achieving these goals partly. Collaborating individual efforts thereby leads to the achievement of the bigger organizations goals (Monden, 2011). Value chain analysis Toyota invests adequate effort and time in analyzing its value chain system. Value chain is a process whereby input are processed and converted into outputs by effectively adding value to the products being manufactured after the completion of each stage. Value is an important aspect of a product. They are the attributes which are present in a product thereby encouraging them to choose one product over another. It is essential for an organization to manufacture products and services which adequately meets the needs of consumers. The sequence of steps followed in a value chain process adds value to the products at every stage. The activities of these stages can be grouped together as primary and secondary activities. The primary activities directly influence the raw materials, semi finished materials and final products such as inbound logistics, marketing and sales. Secondary activities are not directly related to the production process but facilitate increasing the value of the products or services such are human resource management, infrastructural development and information system. Therefore it can be stated that value chin is a combination o activities which add value and usefulness to resources and convert raw materials into useful commodities which consumers can utilize directly. Value chain begins from the stage where materials are procured by the organization for production and ends with the consumption of finished goods by the consumers. One of the main objectives of the firm is to reduce the length of the value chain and ensure that the cost of adding value remain low (Chopra, Lovejoy and Yano, 2004). Capacity planning Capacity refers to the maximum amount of products which can be produced at a firm’s manufacturing facility. Efficient capacity planning is important so as to prevent resources from being under or over utilized. When resources are not used to their full capacity or are kept idle at the factory floor, then a significant portion of the revenue of the organization gets wasted. Since Toyota manly adheres to the just in time production system, only that amount of resources are brought to the shop floor which are required in the production system. Hence wastage of materials and parts can be kept at a minimum. In capacity planning, volume, variety, variation and visibility play an important role. Volume refers to the estimation of the exact amount of goods and services which are required to be manufactured. When an organization is involved in the manufacturing of diverse varieties of goods and services, then the requirement of raw materials also become diversified (Russell and Taylor, 2009). Variety also exists in the form of the different types of processes involved in the production process. At Toyota goods are aligned with the processes only when the production activities are actually begun. One the integral parts of capacity planning is to forecast demand. Since at Toyota raw materials and automobile parts are brought to the shop floor only when the orders are placed, therefore forecasting demand gets avoided. There is greater surety that the vehicles which are being manufactured will be sold off. However, firms which do not adopt the just in time inventory approach are required to produce according to the demand forecasts. Forecasting the demand situations in an uncertain business environment is perceived to be challenging. Organizations are required to strike a balance between consumer needs and capacity planning. Finance gets tied up unnecessarily if capacity planning is not done effectively. Often it is seen that firms are unable to effectively meet sudden surges of demand. Planning requires to be done in a manner that it is flexible to place, reschedule and restructure the orders which are placed with suppliers. Hence companies are required to enter into contract with suppliers which remain subject to changes. Factor5s which affect the capacity planning process are availability of resources, physical space, lead time requirements and efficiency of the system of production (Slack, Chambers and Johnston, 2013). Total quality management At Toyota quality of finished products plays an important role. If the automobile are not manufactured properly, accidents may be caused, endangering the lives of many. Hence much importance is given by the management teams and experts working at Toyota to implement systems that verify the accuracy of products which are being manufactured. Advanced software technologies detect errors in the manufactured parts when they move along the production line. The vehicles manufactured are also tested to ensure their functioning. Toyota is seen to foster a climate of quality consciousness within the organization. Employees are encouraged to be responsible towards their work and minimize errors. Special recognitions and rewards are provided to workers who perform their work with perfection. Total quality management (TQM) at Toyota consists of policies which embrace quality consciousness amongst employees. Employees of the organization work to achieve perfection and continuous improvements within the organization (A. Hill and T. Hill, 2012). The company follows the philosophy of getting things rightly done in the first time itself. When work is carried out diligently, corrective functions can be minimized. Hence the time required for correcting errors gets saved and can be invested into other productive functions. Toyota also employs a special team of experts who continuously monitor the manufacturing systems to develop ways by which the system can be improved further (Slack and Lewis, 2011). Hence the TQM system gets implemented in a manner such that the objective of continuous innovation also gets fulfilled. The company also understands the aspect that participation and team work are essential elements of total quality management. Quality control and assurance are also identified to be important parameters of the process of TQM. Control systems include inspection, sampling and testing procedures. Obtaining feedback from consumers regarding the quality of the products also plays an important role in TQM. Managers and administrators make use of such feedback obtain and implement new systems within the organization. TOM managers are also entrusted with the roles of assuring the quality of goods and services. Assurance of quality is established through the implementation of training and development of employees, maintenance of machines used in manufacturing systems and ensuring the quality of the raw materials supplied by raw materials. Toyota is also seen to indulge in conducting quality circles whereby employees are grouped together and discussions are held in respect of the quality of the products and devising methods by which the quality can be improved (Heizer and Render, 2014). Inventory control Inventory control is an integral part of the operations management policies of a company. There are essentially four types of inventory control systems namely; reorder level systems, periodic review system, economic order quantity and ABC system. In the reorder system, orders are placed when existing stock level reach a particular level. In the periodic review system, stick levels are verified periodically and accordingly orders are placed. Under the EOQ system, stock orders at particular quantities are placed at fixed intervals. The quantity to be ordered and time interval between each order are estimated in a manner such that costs of holding inventory and ordering are low. In the ABC system, stock is controlled on the basis of their importance in the production system. Stock which is graded as highly important are reviewed more often and accordingly orders are placed (Jones and Robinson, 2012). Reference List Benders, J. and Morita, M., 2004. Changes in Toyota Motors’ operations management. International Journal of Production Research, 42(3), pp. 433-444. Cachon, G. and Terwiesch, C., 2009. Matching supply with demand. Singapore: McGraw-Hill. Chopra, S., Lovejoy, W. and Yano, C., 2004. Five decades of operations management and the prospects ahead. Management Science, 50(1), pp. 8-14. Heizer, J. and Render, B., 2014. Operations Management: sustainability and supply chain management. Boston: Pearson. Hill, A. and Hill, T., 2012. Operations Management. Basingstoke: Palgrave Macmillan. Jones, P. and Robinson, P., 2012. Operations Management. Oxford : Oxford University Press. Kleindorfer, P. R., Singhal, K. and Wassenhove, L. N., 2005. Sustainable operations management. Production and operations management, 14(4), pp. 482-492. Monden, Y., 2011. Toyota production system: an integrated approach to just-in-time. Forida: CRC Press. Rothenberg, S., Pil, F. K. and Maxwell, J., 2001. Lean, green, and the quest for superior environmental performance. Production and Operations Management, 10(3), pp. 228-243. Russell, R.S and Taylor, B.W., 2009. Operations management: along the supply chain. New Jersey: Wiley. Schwientek, R. and Schmidt, A., 2008. Operations excellence: smart solutions for business success. Basingstoke: Palgrave Macmillan. Selladurai, R. S., 2004. Mass customization in operations management: oxymoron or reality? Omega, 32(4), pp. 295-300. Slack, N. and Lewis, M., 2011. Operations Strategy. Harlow: Prentice Hall. Slack, N., Chambers, S. and Johnston, R., 2013. Operations Management. Harlow: Prentice Hall. Stevenson, W. J. and Hojati, M., 2007. Operations management. Boston: McGraw-Hill/Irwin. Read More