Operation management - Essay Example

? This report explores the importance of strategic operations management in manufacturing and non-manufacturing firms and establishes the fact that an operations strategy that is in line with the business strategy which addresses competition by stressing to evaluate key performance objectives as per customer preferences can be sustainable. Table of Contents 1. Introduction 2. Defining Operations Management 3. Strategy in Operations 4. Importance of operations strategy a. Competitive advantage b. Effective resource allocation c. Lean management d. Supply chain Management 5. Frameworks and methodologies 6. Implementing operations strategy and measuring outcomes 7. Sustainability 8. Conclusion and Recommendations 9. References 1. Introduction The field of Operations Management (OM) concerns effective management of operations of a firm at three different levels: day-to-day, process improvement and strategic change within business operations (Dr. Greswell, 2007). Although OM is usually thought to be concerned with day-to-day operations of a limited number of resources and functionalities of a business, it is still an all encompassing field of study and more so in today’s fast paced business environment that demands that businesses brace up their operations strategies to face the highly competitive marketplace. While short-term goals of a business are important to be achieved in terms of efficiency and increased productivity, it is the business’s ability to achieve these results in the long-term that determines its success in the market, making it imperative that it tie its short-term efforts strategically for sustainability and profitability. Technological advancements and innovative approaches to business have constantly changed the face of the market for any business across the world, opening new avenues and options for implementing change in the way business is done. The sole focus being to increase productivity and reduce cost to attain a competitive advantage for survival in the long run. Different methodologies have been available through sets of frameworks for implementing the change strategically for operations of a firm and these will be explored and in the report. Research methodologies that are a best fit for implementing operations strategy will also be studied while exploring the concepts of soft systems methods like lean management, Six Sigma, etc. that help understand the relevance and success of operations strategy in OM. Further, the process of OM itself will be understood with reference to the various development stages of a business in any market. 2. Defining Operations Management “OM is defined as the process of design, planning, controlling and executing operations in manufacturing and service industries” (Will et al., 2002). The management of a firm’s operations can be found to deal with a wide variety of activities including the design and management of products, services, processes and supply chains through acquisitions, development and utilization of resources at strategic, tactical and operational levels to deliver value to customer while increasing profitability for all the stakeholders of the business. OM encompasses tactical issues ranging from plant layout and structure, project management methods to equipment selection and replacement, operational issues like inventory management, process and production scheduling and controlling, quality control, and policies related to equipment handling and maintenance, etc. (MIT Sloan, 2011). 3. Strategy in Operations An operations strategy reflects what a firm does in the market and is one of the functional strategies of a firm that reflects its decisions which determine the direction of its operations. As the term operations refers to activities or functions of the firm that relate to the producing of products and services, operations strategy is well concerned with the long-term management of resources that are required to produce these products and services (Slack et al., 2010). 4. Importance of operations strategy a. Competitive advantage- Business operations have five performance objectives: cost, quality, speed, dependability and flexibility which can be achieved through effective trade-off. Excellence in any of these performance factors can give a competitive advantage to the firm. For this reason, businesses implement a business strategy based on any or all of these performance objectives and its success depend on the ability of operations to achieve excellence in the performance objectives that the customers too value. Operations strategy is concerned with mapping of the customer preferences of the objectives and the operations’ excellence (Website 1). It is unlikely that firms concentrate on all of the five performance objectives simultaneously at any time, but usually trade-off by focusing to achieve excellence in a single task/goal of performance objectives. This is what gives them a competitive advantage in the market, and a business’s focus may change with changes in the market. It can be observed that firms that use operations as a ‘formidable weapon’ for competitive advantage exhibit an attitude that implements an operations-based strategy (Website 1). A good example of such an attitude was exhibited by Wal-Mart in the 90’s when its sales surpassed that of Kmart to gain a formidable advantage in the retail discount market (Website 2). An operations strategy in place in a firm helps achieve a competitive advantage based on the four stage model by Hayes and Wheelright and to varied extents depending on its attitude towards operations-based strategy and choice of performance objective. As per this model, firms implementing a business strategy that is derived based on a strategy for operations excellence and which implements best practices of the industry, has many chances of gaining a competitive advantage. However, sustainability is again a concern in the long run and continuous improvements in its operations through effective resource allocation and gaining the ability to develop new capabilities is crucial to remain competitive (Website 1). b. Effective resource allocation- The operations strategy of a firm is concerned about determining and developing the resources for the long-term that have a high degree with the business strategy (Inman, 2011). Resource-based view (RBV) is a key term in strategic management and concerns the efficient management of available resources for competitive advantage. As per RBV, it is seen that superior performance of the objectives can be gained not through an effective positioning in the market but through the way a firm deploys, acquires, or even develops its resources strategically. This can be seen as the operations-led perspective that is one of the four perspectives of an operations strategy (Website 1). Six resource categories: tangible resources, knowledge resources skills and experience, systems and procedural resources, cultural resources and values, network resources and resources important for change evaluated against three criteria: value, sustainability and versatility are determined for their level of importance as they become the sources of competitive advantage for a firm. c. Lean production- With the operations strategy, the concept of lean management along with other concepts like Six Sigma, supply chain management, etc. To survive in the international marketplace, firms have to focus and manage change in operations and it is evident that soft operations technologies like lean management and Six Sigma, etc. have been able to transform businesses to compete internationally. Lean management is now an essential concept in implementing operations strategy. Lean management is concerned with the elimination of waste to improve the manufacturing processes in a firm. It is seen that an integrated approach to implementing operations strategy is considered, with best practices like SCM and Six Sigma also being implemented along with lean management concept (Website 2). d. Supply Chain Management (SCM)- Value creating processes are vertically integrated for increased co-ordination and concerns itself with the management of inventory and also the change process. Satisfaction of customer demand is at the centre in SCM that enables collaboration between the different companies. SCM deals with the strategic orientation of operations and close co-ordination and integration of the operation processes within the firm and with other companies that are responsible for satisfying customer demand while creating value to the customer. This process or concept involves information sharing among the partner companies and much depends on the quality of information shared and time is of essence in the process (Demeter and Gelei, 2004). This requires that multiple organizations collaborate and interact at various levels to manage resources and skills over the lifetime of a project within a framework for operations. 5. Frameworks and methodologies A firm prioritizes and utilizes its resources through a framework of operations strategy. Different frameworks for implementing operations strategies exist in the form of three stage model for implementing SCM, lean management for reducing waste and Six Sigma concept for quality of products and services. Figure 1 below represents a general framework for implementing operations strategy, of which the SCM, lean management and Six Sigma concepts are part. Figure 1: Operations strategy process framework. Source: (Website 3). Three stage model for SCM includes intra-functional, inter-functional and inter-organizational co-ordination to achieve strategic, operational and transactional partnering for co-ordination (Figure 2) (Demeter and Gelei, 2004). Figure 2: Developmental stages in SCM for operations. Source: (Demeter and Gelei, 2004). The strategic role and orientation combined together increase the competitiveness of the firm and the extent of co-ordination between the firms determines the type of relationship and the degree of control a manager has to co-ordinate. However, four dimensions are crucial to the success of SCM: strategic role, level of co-ordination, process view and type of relationship. Also, firms can operate based on three operations models: transaction dominated companies, internally integrated companies and externally integrated companies. The framework for the three stages of operations model with the basic elements as the four dimensions is represented in Figure 3 (Demeter and Gelei, 2004): Figure 3: SCM framework for operations strategy. Source: (Demeter and Gelei, 2004). Six Sigma concept is implemented within the framework of operations strategy in non-manufacturing organizations with a culture of continuous improvement of processes. This concept uses several tools like sunset / sunrise meetings, problem solving sessions and quality circles, and the sustaining aspect of 5S ‘Sort, Set in order, Shine, Standardise, Sustain kaizen and improvement blitzes events, creative thinking, soft systems thinking, process mapping, cause-effect matrix, measurement system analysis, failure modes and effect analysis (FMEA), multi-vari study, design of experiments and control plans within the framework of a ‘creative web’ of three levels: day-to-day, process innovation events and strategic operational changes with the framework operations linked according to DMAIC (define, measure, analyze, improve, control) framework. However, the road map for the implementation of the framework ensures proper integration of a broad range of operations while customized to the specific business goals and objectives, characteristics of culture, nature of processes, and background and skills of employees; and the existing infrastructure and management systems (Wee, 2009). The 5S model of lean management is implemented in a cyclic methodology to reduce workplace waste and optimize productivity. It introduces workplace organization through the stages of 5S process: Sort, Set in Order, Shine, Standardize and Sustain, where sustain stage is key to the process implementation. Firms need to maintain smooth and efficient work flows by effectively organizing and maintaining the working conditions. While the Sort stage identifies unnecessary items in the day-to-day operations, the next stage, straighten, creates efficient storage of the usable items for easy access, sweep stage involves cleaning and fixing clutter for sustaining new improvements, standardize stage deals with the standardization of the best practices in the first three stages for repeatability and the last stage, sustain, deals with changing needs and management of these needs through continuous improvements (Classof1, 2011). Operations Research (OR)- Research methodologies for operations management include two of the common methodologies: empirical and axiomatic research and descriptive and normative research. OR is based on quantitative research oriented towards solving real-life problems in OM than creating scientific knowledge. OR is considered as a branch of applied mathematics, statistics and computing science rather than engineering science. OR deals with the technique oriented model for solving real-life problems to implement solutions for OM that are derived from OR. This method of OR is said to be an approach that is based on rational knowledge as objective models that can explain the behaviour of operations to capture problems faced by managers in the process of decision-making. Quantitative research for operations involves defining relationships between the variables under study. It is noted that the relationships are casual and quantitative and the models can predict future states (Will et al., 2002). Further, the case/field empirical research methods that involves a theory building process for OR are preferred to develop new operations management theories as the tools employed include both quantitative and qualitative approaches and use multiple tools and methods for collecting data. Also, a direct observer who does not have any experimental controls or influences collects data in a single and natural setting in the temporal and contextual aspects of the operations research setting (Meredith, 1998). 6. Implementing operations strategy and measuring outcomes The problems in OM are expressed in terms of real-life situations that are then solved through developing activity models relevant to the situations and which tend to the three distinctive creative levels of operations. Day-to-day activity model are developed to tackle problems arising on the daily basis. Creative tools for this include: Brainstorming, Lateral thinking, Mind mapping, Simple process map, The 5 whys, Force field analysis, Pareto charts, Histograms, Statistical Process Control charts, Analytical trouble shooting, Visual performance measures, and Short interval control chart. Further, for a process change, or a step change requiring process innovation, creative tools like Comprehensive process map of value and non value adding activities, and paperwork trails, Brainstorming issues, alternatives, waste, Lateral thinking and Mind mapping, The 5 whys, Statistical Process Control charts, Pareto charts / Histograms of demand, output, down time, quality yield, rejects, Visual performance measures, Tact time and lead time, Visual layout and flow, Line balance chart and rebalancing, and Affinity diagrams are used to address the problem in a systematic way (Dr. Greswell, 2007). Strategic thinking in operations is also required when realigning strategic operations for introducing strategic changes to meet external and competitive problems. Creative tools like TRIZ, Synectics, Scenario planning, Soft systems thinking, Market gap analysis, Brainstorming, De Bono s 6 hats and Process modelling and redesign are utilized in two stages where in stage 1, at the point of entry of change, the operations strategy is realized by the team of managers and at stage 2, the team can reflect and question the current problematic situation to analyse the operations organisation by collecting data from key stakeholders and debate contentious issues to produce a shared understanding of the current situation. Further, a cyclic process is established where the expected outcomes are linked to the firm’s business strategy based on which an operations strategy is developed. This operations strategy then is used to develop objectives for performance and define the different roles of the concerned managers represented in Figure 4 (Dr. Greswell, 2007). Figure 4: Strategic thinking in operations. Source: (Dr. Greswell, 2007). 7. Sustainability While a business undergoes transformation through changing its operations strategy, value needs to be added to the customer through cost leadership, differentiation or market segmentation. Functional strategies supporting the firm’s business strategy should include operations strategy that enables the firm to achieve the performance goals that the customer requires in the current situation. Only when the transformation is creating additional value to customer, does the change process get established to pave the way for new and more efficient strategies for operations on a continuous basis. The transformation process is represented in Figure 5 below: Figure 5: Maximizing value added in operations. Source: (Website 3: sample_ch2.pdf). Also, the best practices implemented along with operations strategy can help achieve the desired sustainable operations strategy. 8. Conclusion and Recommendations Operations strategy concerns an important part of operations management for any business, manufacturing or non-manufacturing. Short-term goals of a firm are to be tied to strategic long-term goals for sustainability and profitability. Operations management deals with tactical and strategic issues related to day-to-day and long-term innovative approaches to a business. Operation strategy concerns long-term innovation in the design and development of new products and services that create added value to the customers. It also involves different approaches to research, identify, develop and sustain new solutions to day-to-day problems of business. A mix of best practices of the industry and a strategic approach to operations is the highest level of implementing operations strategy in any business to gain a competitive advantage in the marketplace. Further, it can be observed that a range of frameworks and methodologies can be implemented as an integrated approach to implementing operations strategy. A mix of concepts like lean management, Six Sigma and Supply Chain Management are necessary for firms to achieve a competitive advantage in today’s technologically advanced market place. Soft systems strategic thinking is required to tap the potential of lean and other concepts in the workplace. A range of activities are also available to define the operations strategies being implemented as activity models are developed based on a series of measurement criteria. Sustainable efforts to create added customer value should be the focus of any operations strategy as it is the case with Wal-Mart as mentioned in a previous section. 9. References Classof1. 2011. 5S Methodology. Available online: http://classof1.com/homework_answers/operations_management/5s_methodology/. Accessed on 18 November 2011. Demeter, K and Gelei, A. 2004. Supply chain management framework: dimensions and development stages. Budapest University of Economic Sciences and Public Administration. Dr. Greswell, T. 2007. A typology of creative tools and techniques for Operations Managers. University of Portsmouth. Inman, R.A. 2011. Operations Strategy. Reference for Business: Encyclopedia of Business, 2nd ed. Meredith, J. 1998. Building operations management theory through case and field research. Journal of Operations Management: 16. Elsevier Science B.V. MIT Sloan. 2011. What is Operations Management? MIT SLOAN SCHOOL OF MANAGEMENT. Available online: Accessed on 16th November 2011. Slack, N. et al. 2010. Operations Management: Chapter 3- Operations strategy. Pearson Education. Website 1: http://cws.cengage.co.uk/barnes/students/sample_ch/ch2.pdf Website 2: http://media.wiley.com/product_data/excerpt/31/EHEP0003/EHEP000331-2.pdf Website 3: http://highered.mcgraw-hill.com/sites/dl/free/0070922837/158533/sample_ch2.pdf Wee, S.K. 2009. Operations Management Methodologies (such as Six Sigma) for the Broader Business Context. ACG. Will, J. et al. 2002. Modelling and Simulation: Operations management research methodologies using quantitative modelling. International Journal of Operations & Production Management. Vol. 22, No. 2. DOI: 10.1108/0144357021041 4338 Read More