Business Functions and Process - Literature review Example

Business functions and process Table of Contents Introduction 3 Operations Management Tools 4 Lean manufacturing concept 4 Total Quality Management 5Six Sigma 6 Value Stream Mapping 7 Business process reengineering 8 Business Process Management 9 Conclusion 10 Reference List 11 Introduction Operations management can be defined as the process of administrating business activities in order to enhance operational efficiency within an organization. Operational management strategies are aimed towards converting labour and materials into services and goods at an optimal level of efficiency with the sole motive of maximizing organizational value (Brown, et al., 2005). The application of operations management in the manufacturing industry is termed as manufacturing operations management (MOM), which involves supervision of an end-to-end manufacturing mechanism with a primary motive of achieving efficiency. Several operations management software have been developed, which can merge different production processes such as sequencing, quality management, asset management, non-conformance management and so on and so forth (Cole, 2003). The relevance of operations management in the manufacturing industry lies in the fact that it enables the manager to plan, organize, lead and control all related operations. It is vital to a manufacturing organization’s manager for two specific reasons. Firstly, it enables the organizational management to enhance productivity, which in turn improves financial health of the organization. Secondly, it helps the manager to meet needs and demands of customers on a priority basis (Slack, Chambers and Johnston, 2007). The enhancements that are done in a service or product before they are made available to customers are termed as value added. Value can be added to a product through four essential elements: Time: Efficient planning and programming of the construction and design of a product or service is pivotal to its timely delivery. By doing timely delivery of a product and services through implementation of effective operational management strategies, a company is able to add value (May, 2013). Quality: Quality control and management is one of the most crucial activities that falls under the category of operations management strategies. Appropriate controls and procedures ensure conformity with specifications, which in turn enhances quality of the product and hence, value is added (Johnston, 1999). Cost: By implementing cost efficient strategies, companies are able to bring down cost of operations. This in turn enables them to sell products at a lower price, which helps to attract more customers and widen their customer base. At the same time, the company is able to add value to products by lowering the price as well as generate significant profits (Sass, Semykina and Harris, 2014). Service: The service provided by companies is a key determinant of value that is added to a product. A better service quality will increase value that is added to a particular product or service in general. Operations Management Tools Lean manufacturing concept The concept of lean manufacturing is very similar to the production system in Toyota Motor Corporation. Lean manufacturing process involves a cluster of tools, which allows officials to identify and eliminate wastes. Companies following the lean manufacturing concept attempts to avoid holding excess inventory and any associated holding cost. Toyota applies the lean manufacturing concept in order to enhance quality of their product by bringing down the cost and time required for production. Examples of lean manufacturing practices that are employed frequently in organizations are Value Stream Mapping, Six Sigma, Kanban and so on and so forth. These lean manufacturing concepts have enabled companies like, Toyota, Ford, Intel and several others to recuperate the work flow by continuously reducing any form of disproportion in the production process (Kilpatrick, 2003). Production levelling and pull control are two techniques that guides the work flow appropriately. These techniques are designed in such a way that they eliminate any non-value adding factors from the production mechanism. Wastes that accumulate as a result of excess inventory holding as well as overproduction are a non-value adding factor (Panneerselvam, 2005). According to Taiichi Ohno, the pioneer behind development of Toyota Production System stated that wastes accounts of close to 95% of costs incurred by companies following a non-lean production mechanism. Intel follows the lean manufacturing concept and attempts to reduce waste by doing production according to demands placed by customers (Reyner and Fleming, 2004). This is the concept of pull production process. The time and resources that are allocated behind excess production can be reverted towards meeting customers’ demands (Intel Corporation, 2012). The lean system enables companies to transport materials on schedule at the right location, which in turn renders production process efficient (Hoppman and Spearman, 2011). A fast production process allows the company to do a thorough quality check of manufactured products in order to assure that they comply with set standards. In that way, companies are able to add value to the products. Total Quality Management Total quality management (TQM) refers to a structure of management that is implemented incessantly in order to bring about improvement in several areas and layers of operations conducted within an organization. This form of management is employed very frequently, enabling the management to identify underlying strengths and weaknesses inherent to the organization (Fabnoun, 2002). TQM, which is an inclusive management approach aimed towards satisfying needs and demands of customers, includes components such as, customer satisfaction, continuous improvement, top management responsibility and empowerment. The process of TQM ensures that all above mentioned criteria are satisfied as they are critical to an organization’s success (Talha, 2004). TQM involves certain control processes that are designed in order to enhance quality of products or services of a particular organization. The fundamental organizational objective is to add value to products and services whereby organization can enhance its brand image and gain competitive advantage. In order to be able to do so, organizations by means of their TQM approach at first, set standards of performance by conveying the goals and objectives clearly. Thereafter, all necessary resources (inputs) are provided to workers in order to help them to comply with the set standards. Following that, performances are measured on the basis of predetermined benchmark. The performance measurement data are thoroughly evaluated using the statistical process control in accordance with documented standards. Appropriate steps are then taken to address the areas of improvement. These processes are applied in almost every organization as the steps involved are most suitable approaches for the management to adopt in order to learn about ways in which quality of products and services can be improved, which in turn will allow them to add value (Fabnoun, 2002). Figure 1: TQM flowchart (Source: Fabnoun, 2002) Six Sigma Six sigma was developed by Bill Smith, who worked as a reliability engineer at Motorola (Brady and Allen, 2006). The term six sigma is used to define a statistical quantification of defect rate existing within a system. Fortified by statistical methods, its presents a systematic and structured approach in order to bring upon improvement in work process, thereby reducing “defect rate of 3.4 defects for every million opportunities” (Pepper and Spedding, 2009, p. 142). Six sigma is known for structuring the work process improvement by providing comprehensive outline of “Deming’s plan-do-check-act cycle” to user by directing the plan through a cycle of five stages known as “define-measure-analyse-improve control (DMAIC)” (Pepper and Spedding, 2009, p. 142). Each of the five stages comprise a cluster of equivalent tools and methods like, response surface methodology, statistical process control and experiment designs, that serve as an effective assistance technique, enabling the user to assess and improve pivotal work processes as well as bring the system under control (Keller, 2005). The implementation of six sigma has been witnessed in variety of industries. General Electric and Motorola are among the most renowned companies who have actively implemented the six sigma concept. Apart from that, implementation of six sigma has also proven to be successful in accounting practices, services sector and construction industry (Antony, 2006). As a quality management tool, six sigma has brought several positive elements that ensure incessant improvement, irrespective of application or industry. Factors such as, open communication and management commitment, are pivotal to an effective six sigma process, which attempts to bring about unbroken improvement in the work flow process. It also provides the organizational management with a lucid focus on financial returns in a disciplined manner. Six sigma establishes an infrastructure based on championship combined with a training method, which introduces belt qualifications within a firm in order to guide the way for improvement in making decisions that are data-driven (Antony, 2004). Value Stream Mapping Value Stream mapping (VSM) is a pivotal lean manufacturing tool that serves as a good initiation point for an organization that aims to be lean. VSM is a mechanism of mapping information and material flow within an organization visually in order to prepare future state map, which includes enhanced techniques and performance (H. Singh and A. Singh, 2013). The process of VSM involves two flows. One is the transfer of resources from supplier to the customer. The other is flow of coeducation from the customer to the supplier. VSM is an effective tool that enables the user to summarize, present and communicate crucial aspects of a work flow process within an organization. By doing so, organization is able to identify loopholes that are present within the work flow process (Taylor, 2005). According to Liker and Wu (2000), VSM is a manufacturing philosophy that allows organizations to deliver superior quality product on schedule and at a lower cost. It also facilitates systematic elimination of waste by every member associated with an organization from all areas of value stream. The underlying rationale behind VSM being called a lean process is the fact that it uses very few resources, which are required to perform a service or manufacture a product. VSM techniques also help companies to minimize cycle times, lead times as well as the work in process inventory. This in turn assists companies to reduce their inventory storage area as well as production staff by 38 and 50% respectively (Chowdary and George, 2011). It has also been found that organizations have achieved considerable improvement in their performance and been largely successful in meeting rising demand of customers without use of additional resources. Business process reengineering Business process reengineering (BPR) involves the process of discovering ways in which an organization operates its business activities. Following that, BPR enables a company to redesign activities in such a way that eliminates any redundant or wasted effort in order to enhance efficiency of the work process. This also provides a company with ways to implement process changes and serves as an efficient foundation over which competitive advantage can be attained. The fundamental of a company’s BPR mechanism is to devise new strategies of scheduling task, organize people and remodel the IT systems in a way, where business processes conducted guide the way to achieve organizational objectives (Chen, 2001). In contemporary business environment, BPR has become one of the favoured mechanisms of dealing with the swift changes in field of business process and technology. This process has also empowered companies to achieve advanced performance in several parameters that include customer service, delivery times and quality of products (Ranganathan and Dhaliwal, 2001). Ford Motors was able to gain knowledge regarding BPR from their Japanese partner, Mazda and was successful in bringing down its account payable workforce from 500 in 1980s to 125 in 1990 (Alter, 2002). With the help of BPR, Bell Atlantic was able to trim down the time to set up modern "telecommunication circuits from 15 days to 3 days", which in turn helped them to minimize cost of labour "from US$ 88 to 6 million" (Hesson, Al-Ameed and Samaka, 2007, p. 349). Motorola was also successful in implementing BPR when they experienced longer cycle times and higher percentages of defect. The company was able to remodel its parts as well as the tooling mechanism and simultaneously upgrade manufacturing equipment. By doing so, the management was able to bring down the production cost as well as time of production. However, over the past few years, efficiency of BPR has gone through consistent scrutiny and has continued to be a constant source of debate for empirical research scholars. It has been often regarded as a complex mechanism that has a high rate of failure (Abdolvand, Albadvi and Ferdowsi, 2008). Business Process Management Business processes are considered critical assets and managing them is one of the most crucial activities performed within organizations. An effective business process management (BPM) strategy offers a company with opportunities to improve their market share, enhance performance and managerial decision making. In fact, an effective strategy is considered one of the key differentiating factors in this contemporary business environment (Seethamraju, 2012). BPM involves several approaches of managing the work flow process (business activities) within an organization. Some of those approaches are TQM, business process reengineering, six sigma and lean manufacturing, which have already been analyzed in previous sections. BPM is more of a practice based concept that does not have any academic foundation. There is no conventional framework or definition of this approach. In this global competitive environment, relevance of BPM lies in the fact that it serves as a link between business strategies and information technology, that enables companies to implement strategies in order to execute their business processes efficiently and consistently. It allows them to comply with all codes of standard performance and thus, attain a higher level of customer satisfaction by adding value to products and services. By implementing an effective business process management strategy, organizations are able to improve internal transparency and visibility as well as bring down costs and resource necessities. This in turn leads to improved business performance and compliance (Seethamraju, 2012). There is no perfect operational management tool that can guarantee outright success to an organization. Each and every one of the tools that have been explained in previous sections has their own unique attributes, which can be applied in organizations according to their suitability and work type. The one thing proven in majority of the empirical researches done in this field is that if these operational management tools are employed effectively with appropriate strategies, it can add significant value to the company. By implementing effective operational management strategies, organizations can add value to their products and services by ensuring superior quality and timely delivery. This in turn enables them to meet needs and demands of customers consistently, thereby attaining a higher customer satisfaction level. Consequently, value is also added to the organization, in terms of enhanced brand image and increasing profitability. Organizations are able to distinguish themselves from their competitors by implementing innovative operational management strategies, which enable them to attain significant competitive advantage in this competitive environment. Conclusion Operational management tools have proven to be immensely successful for organizations over last four decades. They have enabled organizations to enhance operational efficiency and meet customers’ demands consistently by offering them superior quality products and services and doing delivery on a timely basis. No one operational management tool can be regarded as a perfect tool that suits every organization. Their design and implementation depends on the organizational objective as well as nature of operations performed within the organization. Several empirical research scholars have explained the various aspects of operational management tools. Panneerselvam (2005) has done a detailed study of lean manufacturing concept and has explained the importance of this tool in terms of ensuring operational efficiency. Fabnoun (2002) has explored the field of total quality management and has described ways in which this approach helps a company to enhance quality of products and services, thereby adding value to both the deliverables as well as to the company. Six sigma is another effective operational management technique that has been discussed in details by Pepper and Spedding (2009). The authors have set forth the examples of renowned companies such as, Motorola and General Electric, who were active implementers of this technique. By doing so, companies were able to make the work flow process efficient. Value stream mapping, business process reengineering and business process management was explained by Chowdary and George (2011), Chen (2001) and Seethamraju (2012) respectively. No conclusive evidences were provided in these researches that suggested superiority of one particular operational management technique over the other. Each of the techniques has its own specific attributes. One thing that the researcher is able to determine is that these techniques are interrelated and although they are associated with certain complexities, they still contribute significantly towards adding value to organizations. Reference List Abdolvand, N., Albadvi, A. and Ferdowsi, Z., 2008. Assessing readiness for business process reengineering. Business Process Management Journal, 14(4), pp. 497-511. Antony, J., 2004. Some pros and cons of six sigma: an academic perspective. The TQM Magazine, 16(4), pp. 303-306. Antony, J., 2006. Six sigma for service processes. Business Process Management, 12(2), pp. 234-248. Brady J.E. and Allen, T.T., 2006. Six sigma literature: a review and agenda for future research. Quality and Reliability Engineering International, 22, pp. 335-367. 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Transforming Intel’s Supply Chain to Meet Market Challenges. [pdf] Intel Corporation. Available at: [Accessed 8 May 2014]. Johnston, R., 1999. Service operations management: return to roots. International Journal of Operations & Production Management, 19(2), pp. 104-124. Keller, P., 2005. Six Sigma Demystified. New York: McGraw-Hill. Kilpatrick, J., 2003. Lean Principles. [pdf] Manufacturing Extension Partnership. Available at: [Accessed 8 May 2014]. Liker, J. K. and Wu, Y.C., 2000. Japanese automakers, US suppliers and supply-chain superiority. Sloan Management Review, 42(1), pp. 81-93. May, A. J., 2013. Using a ‘value-added’ approach for contextual design of geographic information. Applied Ergonomics, 44, pp. 895-908. Panneerselvam, R., 2005. Production and operations management. New Delhi: Prentice Hall India Private Limited. Pepper, M. P. J. and Spedding, T. A., 2009. The evolution of lean Six Sigma. International Journal of Quality & Reliability Management, 27(2), pp. Ranganathan, C. and Dhaliwal, J., 2001. A survey of business process reengineering practices in Singapore. Information & Management, 39, pp. 125-134. Reyner, A., and Fleming, K., 2004. Product & Production Leveling. [pdf] MIT. Available at: [Accessed 8 May 2014]. Sass, T. R., Semykina, A. and Harris, D. N., 2014. Value-added models and the measurement of teacher productivity. Economics of Education Review, 38, pp. 9-23. Seethamraju, R., 2012. Business process management: A missing link in business education. Business Process Management Journal, 18(3), pp. 532-547. Singh, H. and Singh, A., 2013. Application of lean manufacturing using value stream mapping in an auto-parts manufacturing unit. Journal of Advances in Management Research, 10(1), pp. 72-84. Slack, N., Chambers, S. and Johnston, R., 2007. Operations Management. New York: Prentice Hall. Talha, M., 2004. Total quality management. 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