The Worth of Operation Management - Case Study Example

Running Head: OPERATIONS MANAGEMENT Operations Management of Operations Management The worth that is added by operations management is elementary to most organisations. Operational activities are central to the provision of services and/or products. Every organisation provides a product and service combination. A meal in a restaurant, a visit to the hospital, buying a pair of Levi 501s, making a pair of Levi 501s, Woodstock Festival, insuring an automobile, staying in an hotel, going to the cinema, even the workings of a prison; all have operations activities and their management is central to the successful provision of products and services. Even Government departments can draw heavily upon operational initiatives and strategies when they talk about supply chain management, lean supply, just in time and total quality management. (Slack, 2004) Operations management is defined as the design, operation and improvement of the systems that create and deliver the firm’s primary product and service combinations. Each association that offers products or services has an operations activity. As far as the organisation structure is concerned, some firms will have a discrete operations function. This might be called a manufacturing department, an operations system, or have no identifiable name at all. However, like marketing and accounting, it is a fundamental function of the firm with professionally trained operations or production managers responsible for conversion of resources into the required product and service combinations. (Slack, 2004) In some organisations such managers will have different titles, a store manager for a retailer, administrative managers within a hospital or distribution managers in a logistics company. Planning Planning determines the nature of actions and responsibilities needed to achieve the assignment goal. It entails the development of alternate courses of action and the selection of the best action to achieve the objectives making up the goal. Planning determines what needs to be done, by whom, for whom, and when. Whether it is done for long-range (strategic) purposes or short-range (operational) purposes, planning should address the following components: Assignment goal and objectives. This involves the specification of what must be accomplished at each stage of the assignment. Technical and managerial approach. This involves the determination of the technical and managerial strategies to be employed in pursuing the assignment goal. Resource availability. This requires the allocation of resources for carrying out the actions needed to achieve the assignment goal. Assignment schedule. This involves a logical and time-based organisation of the tasks and milestones contained in the assignment. The schedule is typically influenced by resource limitations. Contingency plan and replanning. This involves the identification of auxiliary actions to be taken in case of unexpected developments in the assignment. Assignment policy. This involves specifying the general guidelines for carrying out tasks within the assignment. Assignment procedure. This involves specifying the detailed method for implementing a given policy relative to the tasks needed to achieve the assignment goal. Performance standard. This involves the establishment of a minimum acceptable level of quality for the products of the assignment. Tracking, reporting, and auditing. These involve keeping track of the assignment plans, evaluating tasks, and scrutinizing the records of the assignment. Strategic Levels of Planning Badiru (1991a) outlined the strategic levels of planning. Decisions involving strategic planning lay the foundation for successful implementation of assignments. Planning forms the basis for all actions. Strategic decisions may be divided into three strategy levels of supra level planning, macro level planning, and micro level planning: Supra Level Planning Planning at this level deals with the big picture of how the assignment fits the overall and long-range organisational goals. Questions faced at this level concern potential contributions of the assignment to the welfare of the organisation, effect on the depletion of company resources, required interfaces with other assignments within and outside the organisation, risk exposure, management support for the assignment, concurrent assignments, company culture, market share, shareholder expectations, and financial stability. Macro Level Planning Planning decisions at this level address the overall planning within the assignment boundary. The scope of the assignment and its operational interfaces should be addressed at this level. Questions faced at the macro level include goal definition, assignment scope, availability of qualified personnel, resource availability, assignment policies, communication interfaces, budget requirements, goal interactions, deadline, and conflict resolution strategies. Micro Level Planning This deals with detailed operational plans at the task levels of the assignment. Definite and explicit tactics for accomplishing specific assignment objectives are developed at the micro level. The concept of MBO (management by objective) may be particularly effective at this level. MBO permits each assignment member to plan his or own work at the micro level. Factors to be considered at the micro level of assignment decisions include scheduled time, training requirement, tools required, task procedures, reporting requirements, and quality requirements. Assignment decisions at the three levels defined above will involve numerous personnel within the organisation with various types and levels of expertise. In addition to the conventional roles of the assignment manager, specialized roles may be developed within the assignment scope. Such roles include the following: Technical Specialist: This person will have responsibility for addressing specific technical requirements of the assignment. In a large assignment, there will typically be several technical specialists working together to solve assignment problems. Operations Integrator: This person will be responsible for making sure that all operational components of the assignment interface correctly to satisfy assignment goals. This person should have good technical awareness and excellent interpersonal skills. Assignment Specialist: This person has specific expertise related to the specific goals and requirements of the assignment. Even though a technical specialist may also serve as a assignment specialist, the two roles should be distinguished. A general electrical engineer may be a technical specialist on the electronic design components of a assignment. However, if the specific setting of the electronics assignment is in the medical field, then an electrical engineer with expertise in medical operations may be needed to serve as the assignment specialist. Assignment organisation is a crucial component of assignment planning. Organizing a assignment involves determining the interfaces needed among personnel in order to assure a dedicated pursuit of the assignment goal. It involves the determination of what activities should be performed in what functional areas and under what supervisory hierarchy. Staffing is a component of organizing. Staffing is the process of defining the required personnel and the assignment of the personnel to appropriate functions with respect to the assignment goal. The staffing process may include hiring new people, reassignment of existing personnel, training or retraining, and realignment of responsibilities. The Triple C model presented by Badiru (1987) is particularly useful for organizing a assignment. The model states that implementing it within the integrated functions of can enhance assignment management: • Communication • Cooperation • Coordination The model facilitates a systematic approach to assignment planning, organizing, scheduling, and control. The Triple C principle is different from the 3C approach commonly used in the military. The military approach emphasizes personnel management in the hierarchy of command, control, and communication. This makes communication the last function. The Triple C, by contrast, suggests communication as the first and foremost function. Communication The communication function of assignment management involves making all those concerned aware of assignment requirements and progress. Those who will be affected by the assignment directly or indirectly, as participants or as recipients, should be informed as appropriate regarding the following: What is the assignment? Why is the assignment needed? Who is in charge of the assignment? What alternatives are available? What is the expected cost of the assignment? What penalties are associated with the assignment? Who will be affected by the failure of the assignment? What are the possible negative impacts of the assignment? What are the potential direct and indirect benefits? What precedents are available for the assignment? Who else already knows about the assignment? What personnel contribution is needed? When will the assignment be implemented? How will the assignment be organized? What is the assignment scope? The communication channel must be kept open throughout the assignment life cycle. In addition to in-house communication, external sources should also be consulted as appropriate. The assignment manager must: Exude commitment to the assignment Develop a communication responsibility matrix Facilitate multichannel communication interfaces Identify internal and external communication needs Resolve organisational and communication hierarchies Endorse both formal and informal communication links Cooperation The cooperation of the assignment personnel must be explicitly elicited. Merely signing off on or giving a nod to a assignment is not enough assurance of full cooperation. The participants in and customers of the assignment must be convinced of the merits of the assignment. Some of the factors that influence cooperation in a assignment environment include manpower requirements, resource requirements, budget limitations, past experiences, conflicting priorities, and lack of uniform organisational support. (Child, 1997) A structured approach to seeking cooperation should clarify the following: The rewards of cooperation What cooperative efforts are needed? The implications of lack of cooperation The criticality of cooperation to the assignment What time frame is involved for the assignment? The organisational impact of cooperation The precedents for future assignments A documentation of the prevailing level of cooperation is useful for winning further support for a assignment. Clarification of assignment priorities will facilitate personnel cooperation. Relative priorities of multiple assignments should be specified so that a assignment that is of high priority to the organisation is also of high priority to all groups within the organisation. Coordination After successfully initiating the communication and cooperation functions, the efforts of the assignment personnel must be coordinated. Coordination facilitates harmonious organisation of assignment efforts. The development of a responsibility chart can be very helpful at this stage. A responsibility chart is a matrix consisting of columns of individual or functional departments and rows of required actions. Cells within the matrix are filled with relationship codes that indicate who is responsible for what. (Pfeffer, 1978) The responsibility chart helps to avoid neglecting crucial communication requirements and obligations. It can help resolve questions such as: Who is to do what? Who is to inform whom of what? Whose approval is needed for what? Who is responsible for which results? What personnel interfaces are involved? What support is needed from whom and when? Management By Objective Management by objective (MBO) is the management concept whereby the worker is allowed to take responsibility for the design and performance of a task under general guidelines. It is a planning tool that gives each worker a chance to set his own objectives in achieving assignment goals. The worker can monitor his own progress and take corrective actions when needed without explicit management intervention. Self-motivated workers seem to be best suited for the application of the MBO concept. The advantages of MBO include: It encourages the worker to find better ways of performing the assigned tasks. It avoids over-supervision of self-motivated workers. It raises the awareness of the worker about organisational goals and expectations. It permits timely feedback on worker performance. However, MBO does have some disadvantages, which include possible abuse of the freedom to self-direct and possible disruption of overall assignment coordination. Management By Exception Management by exception (MBE) is an after-the-fact management approach to control. Contingency plans are not made and there is no strict monitoring of performance. Deviations from expectations are considered exceptions to the rule. When unacceptable deviations from plans occur, they are investigated, and only then is an action taken. The concept is also often referred to as management by crisis or crisis management. The irony of MBE is that managers that operate under crisis management are often recognized as superstars because they solve problems whenever they develop. On the other hand, managers that prevent problems may be viewed as inactive because they are rarely seen solving problems. (Hill, 2000) The major advantage of MBE is that it lessens the management workload. However, it is a risky concept to follow. Management should work toward avoiding problems rather than exposing the organisation to potentially expensive crisis management actions. A manager who operates under the notion of "if it is not broken, dont fix it" will never have the opportunity to improve the managerial process. (Kaplan, 2001a) Assignment Control Time, cost, and performance form the basis for the operating characteristics of a assignment. These factors help to determine the basis for assignment control. Assignment control is the process of reducing the deviation between actual performance and planned performance. Measurements are taken on each of the three assignment constraints of time, performance, and cost as shown in Figure a. Performance may be expressed in terms of quality, productivity, or any other measure of interest. Cost may be expressed in terms of resource expenditure or budget requirements. Schedule is typically expressed in terms of the timing of activities and the expected assignment duration. It is impossible to achieve an optimal simultaneous satisfaction of all three-assignment constraints. Consequently, it becomes necessary to compromise one constraint in favor of another. Figure b presents a model of the trade-offs between performance, time, and resource (cost). Better performance can be achieved if more time and resources are available for a assignment. If lower costs and tighter schedules are desired, then performance may have to be compromised and vice versa. From the point of view of the assignment manager, the assignment should be at the highest point along the performances axis. Of course, this represents an extreme case of getting something for nothing. From the point of view of the assignment personnel, the assignment should be at the point indicating highest performance, longest time, and most resources. This, of course, may be an unrealistic expectation since time and resources are typically in short supply. (Collins, 2001) Thus, a feasible trade-off strategy must be developed. Even though a box in Figure b represents the trade-off boundary, it is obvious that the surface of the box will not be flat. If a multifactor mathematical model is developed for the three factors the nature of the response surface will vary depending on the specific interactions of the factors for any given assignment. A hypothetical response surface is presented in Figure c. If we consider only two of the three constraints at a time, we can better study their respective relationships. Figure d shows some potential two-factor relationships. In plot (a), performance is modeled as the dependent variable, while cost is the independent variable. Performance increases as cost increases up to a point where performance levels off. If cost is allowed to continue to increase, performance eventually starts to drop. In plot (b), performance is modeled as being dependent on time. The more the time that is allowed for a assignment,, the higher the expected performance up to a point where performance levels off. In plot (c), cost depends on time. As assignment duration increases, cost increases. The increases in cost may be composed of labor cost raw material cost and/or cost associated with decreasing productivity. Note that there may be a fixed cost associated with a assignment even when a time schedule is not in effect. (Slack, 2004) Figure e shows an alternate time-cost trade-off relationship. In this case, the shorter the desired assignment duration, the higher the cost of the assignment. If more time is available for the assignment, then cost can be reduced. However, there is a limit to the possible reduction in cost. After some time, the cost function turns upward due to the increasing cost of keeping manpower and resources tied up on the assignment for a long period of time. The optimal duration of the assignment corresponds to the point where the lowest cost is realized. Some of the causes of control problems in assignment scheduling, performance, and cost are summarized below: Schedule Problems Performance Problems Cost Problem Bad time estimates Poor quality High labor cost Technical problems Poor mobility Inadequate budget Change of due dates Lack of training Poor cost reporting Precedence structure Poor functionality Effects of inflation Unreliable time estimates Maintenance problems High overhead cost Delay of critical activities Lack of clear objectives Increase in scope of work Schedule Control The Gantt charts developed in the scheduling phase of a assignment can serve as the yardstick for measuring assignment progress. Assignment status should be monitored frequently. A record should be maintained of the difference between the expected progress of an activity and its actual progress. This information should be conveyed to the appropriate personnel. The more milestones or control points there are in the assignment, the better the monitoring function. The larger number allows for more frequent and distinct avenues for monitoring the schedule. Thus, problems can be identified and controlled before they accumulate into a bigger problem. Some corrective actions that may be taken for schedule problems include: • Crashing tasks • Redesigning tasks • Revising milestones • Adjusting time estimates • Changing the scope of work • Combining related activities • Introduction of new technology • Eliminating unnecessary activities (Sousa, 2001) Performance Control Most assignment performance problems will not surface until after the assignment is completed. This makes performance control very difficult. However, every effort should be made to measure all the intermediate factors affecting the assignment. After-the-fact measurements generally do not facilitate good control. Some of the performance problems may be indicated by time and cost deviations. (Kaplan, 2001b) So, when schedule and cost problems exist, an analysis of how the problems may affect performance should be made. Since assignment performance requirements usually relate to the performance of the end products, controlling performance problems may necessitate the following: 1. Modifying policies and procedures 2. Introducing improved technology 3. Adjusting assignment specifications 4. Improving management control 5. Reviewing assignment priorities 6. Changing quality standards 7. Allocating more resources 8. Improving work ethics Cost Control Cost control has received extensive coverage in the literature. Numerous accounting and reporting systems have been developed over the years for assignment cost monitoring and control. Some of the strategies suitable for controlling assignment cost include: • Reducing labor costs • Using competitive bidding • Modification of work process • Adjusting work breakdown structure • Improving coordination of assignment functions • Improving cost estimation procedures • Using less expensive raw materials • Controlling inflationary trends • Cutting overhead costs The Triple C model can be implemented for assignment control purposes. In Figure f, the model shows the important interfaces between communication, cooperation, coordination, performance, cost, and schedule control. Appendices Figure a: Components Figure b: Performance-Time-Resource Trade-off Boundary Figure c: Performance-Time-Cost Response Surface Figure d: Potential Trade-off Relationships Figure e: Time-Cost Trade-off Example Figure f: Implementation of Triple C Model for Control Bibliography Badiru Adedeji B., (1991a), Project Management Tools for Engineering and Management Professionals, Industrial Engineering and Management Press, Norcross, GA. Badiru Adedeji B., (May 1987), "Communication, Cooperation, Coordination: The Triple C of Project Management," in Proceedings of 1987 IIE Spring Conference, Washington, DC, pp. 401-404. Child, J (1997), "Strategic choice in the analysis of action, structure, organisations and environment: retrospect and prospect", Organisation Studies, Vol. 18 No..1, pp.43-76.. Collins, J.C. (2001), Good to Great: Why Some Companies Make the Leap … and Others Dont, HarperCollins Publishers, New York, NY,. Hill T.J., (2000), Operations Management: Strategic Context and Managerial Analysis, London/Basingstoke: MacMillan. Kaplan, R.S., Norton, D.P. (2001a), "Transforming the balanced scorecard from performance measurement to strategic management: part I", Accounting Horizons, Vol. 15 No.1, pp.87-104. Kaplan, R.S., Norton, D.P. (2001b), "Transforming the balanced scorecard from performance measurement to strategic management: part II", Accounting Horizons, Vol. 15 No.2, pp.147-60. Pfeffer J., Salancik, G.R (1978), The External Control of Organisations. A Resource Dependence Perspective, Harper & Row, New York, NY., . Slack N., Chambers S. & Johnston R., (2004), Operations Management, 4th Edition, London: Pearson Education Limited. Sousa, R., Voss, C.A. (2001), "Quality management: universal or context dependent? An empirical investigation across the manufacturing strategy spectrum", Production and Operations Management, . Read More