Features of Operation Management - Coursework Example

Table of Content Executive summary Introduction ………………………………………………………….. 2 Operations management history………………………………………. 3-5 Operation management theories and applications……………………. 5-9 Conclusion ……………………………………………………………. 9-10 Works Cited Page……………………………………………………… 11 Executive Summary Operations management is an important discipline of study since its applications provide solutions that increase the productivity of a business operation. The first segment of this paper provides a historic background of how operations management evolved during the last 200 years. The biggest advancement in productions occurred after Fredrick Taylor invented scientific management at the turn of the 20th century. The discussion in this essay provides insight about different concepts and theories in operations management. Some of key concepts in operations management discussed in this paper are qualitative forecasting, operation designing, facilities layout, quality, supply chain, project management and maintenance. Introduction The 19th century is the era in which the way and production took place was radically changed by the industrial revolution. Production methods changed a lot during these times due to new technological advances that allow companies vastly increase its production capability due the insertion of machines into the production process. The changes created a new business discipline called operations management. Operations management is the design, execution and control of a firm’s operations that converts its resources into desired goods and services, and implements its business strategy (Business dictionary). This paper studies different aspects of operations management including its history and current global implications. Operations management history The first key innovation that transformed the way operations took place in the business world was the invention of the steam engine in 1785. This invention created machine power which allowed operations to take place in manufacturing factories. England was the place in which some of the first changes began to appear in its cottage industry. This industry began to replace people with machines, utilized water and mule power instead of human power and the actual nature production changed from cottage to factory (Uoguelph). Two instrumental figures in the early development of operations management were Eli Whitney and Fredrick Taylor. Eli Whitney in 1800 created interchangeable parts by standardizing parts through effective quality control (Heizer & Render). This technology was first showcased in the production of muskets. Whitley landed a 10,000 unit governmental contract at prices above market value to the characteristic of interchangeable parts of the muskets. The utilization of interchangeable parts provided the benefit of lowering the need for human labor. Mr. Whitney’s invention is also correlated with the creation of the machine tool industry. Fredrick Taylor changed the field of management with his revolutionary concepts called principles of scientific management. Taylor’s principles of management which were created in 1911 are listed below: Work follows the scientific laws, thus scientific methods can be used to analyze work Due to individual differences in the workers managers must match workers to their jobs and train them properly The use of employee self-interest as a motivating tool It is imperative to separate the responsibilities of workers and managers. (Uoguelph). One of the first American companies that applied the principles of management was Ford Corporation. The use of the Taylor’s principles allowed companies at the time to increased its productivity by an average of 400%, in the case of Ford the company was able to reduce its car assembly line on its Model T automobile to less than two hours of labor (Heizer, et al.). In the 1920s production management demonstrated that the function of human resources could provide valuable information to increase the productivity of firms. Psychological factors affected the human behavior of the workers. The first major study in this emerging field was the Hawthorn study performed from 1927 to 1932. The purpose of the study was to study the effect of lighting on productivity. The importance of the study is that researchers as a consequence of this experiment began to critically access which factors affect the productivity of a person in the workplace (Maslow). During the middle of the 20th century the field of operations management began to utilize operations research to learn more about the operation of a firm to find ways to improve it. This movement created a need for companies utilized information system in order since to large amounts of data and information analyzed. The birth of the computer in the 1980 is invention that radically changed the field of operations management. The computer provided a great analytical tool that truly allowed information to be analyzed properly. Managers had a tool that allowed them to store, retrieved and manipulate data in order to gain insight into the operation of a company. A lot of new office jobs were created during this era. A lot change came to the field of operations management with the appearance of the computer and operations management become more complex and valuable than ever. Operation management theories and applications Access to lots of historical data provides a database that can used by managers to predict future behavior based on historical patters. A technique that helps managers in their planning efforts is qualitative forecasting. Qualitative forecast is a valuable technique because it allows managers to forecast future behavior without the need of historical data. It uses the expert opinion and collective experience of a group panel along with rating scales to predict the future. The benefit of the use of this technique for managers is that it allows them to analyze the potential of new projects such as innovation initiatives. In the new global economy in the speed is critical for the success of products and services there a necessity for managers to be able to predict things without a historical data constraint. The globalization movement the world experienced during the last 20 years increased the amounts of products and services that came into the marketplace. The competitive environment made the designing process of product and services a critical success factor. The characteristics and functionality of products and services have to be aligned with the desires and needs of the customers. Paying attention to the business processes is also important since they determine the effectiveness of an operation. Dell Corporation is an example of a Corporation that changed the way the retail computer business with its innovative business model that eliminate a lot of wastage processes in the entire supply chain of the company. Globalization created many mega firms referred to as multinational companies which are businesses that operate in many countries. In this new era companies are constantly looking for new expansion opportunities which made facilities layout more important than ever. A facilities layout specifies the arrangement of processes, equipment, customer service arrangements and storage areas utilized by a company (Heizer, et al.). The professional that specialized in the optimization of facility layouts are industrial engineers. An optimal facilities layout plan reduces the fixed costs a company and increases the production output of a firm based on the company’s resources. Technology over the years has been the single most influential factor for production managers. The reason technology affects operations management so much is that it can make business and production processes obsolete instantly. Its implementation can also greatly improve business productivity. Machines have helped companies automate a lot business processes. New information technology changed the way customer services are handled in the 21st century. The internet allowed companies to improve its communication with customers. It also provided a new distribution channel. Quality is an aspect of operations management that can be used to firm to gain a competitive advantage. It is important because it can provide a wide array of benefits. These benefits include lower cost structure, greater market share, increase brand loyalty, and reduction is product liability. Total quality management is business philosophy geared at meeting and exceeding customer expectations by on process measurement and controls to achieve continuous improvements (Managementhelp). Statistics and quantitative analysis such as pareto charts, process charts, cause and effect diagrams and statistical process control are used by production managers to monitor quality protocols. Decisions about allocation of resources are part of production manager’s duties. A manager has to determine the best allocation combination in order to maximize shareholders wealth. Allocation of resources includes labor, materials, fixed assets and monetary decisions. Organization now a days are structure in way that firms many times do not in a centralized manner. It has become more practical to separate certain business work into separate projects. These projects are administered by project managers. Project management follows the same operation management principles, but it does so at a micro level and the day to day decision of the project manager only consider the repercussion for the project. The operations management of the overall company become easier to handle when there independent project managers guiding special efforts through the project mechanism. Project management allows companies to implement alternate production strategies without interring with its regular business. Operations management is a business function that interconnects all aspects of an operation. The reason this occurs is because operations management is responsible for the supply chain of a company. The supply chain is a network is a network of retailers, distribution, transporters, storage facilities and suppliers that participate in the production, delivery, and sale of a product to the customer (Kiezman). Supply chain management provides direction for this effort by dividing the chain into three steps: supply, manufacturing and distribution. Innovative supply change management was the secret ingredient of the business model used by Dell to the most profitable computer manufacturer during the last decade. This firm changed the way computers were distributed by eliminating the retailer and selling direct. Its production phase was also a bit different since the company utilized a matrix of multiple outsourcing contracts instead of manufacturing its computers in-house. Dell is one of the most successful virtual companies in the world that makes great use of ecommerce as its distribution channel. Ecommerce is the utilization of the World Wide Web and the internet in order to sale products and services to customers. Ecommerce has become a major force that is driving the global economy. Total ecommerce sales during 2007 excluding travel ticket sales were $131 billion dollars (Plunkett Research). Operation managers now have to develop business strategies that incorporate ecommerce. Most major retailers in the 21st century have online stores to supplement their income. There are logistics issues that operation managers must resolve in order to make an ecommerce strategy work. The computerized information system of a company has to be able to incorporate the real time sales data that occurs online on a 24/7 basis. Ecommerce is still in its birth stage and in the future operation management must emphasis this medium more. Companies such as EBay and Amazon.com have been extremely successful with ecommerce. EBay in 2007 obtained $8.46 billion in sales (Yahoo). Companies require maintenance of its infrastructure and operations in order to keep things running smoothly. Maintenance includes all activities involved in keeping a system’s equipment in working order (Heizer, et al.). Maintenance ensures the capability of a system is kept at optimal conditions. A production system must be reliable. Some of the ways maintenance is applied at a company to improve productivity are: reduction of errors, increasing speed of repairs, and through preventive maintenance tactics. The performance of a company depends on the effort of its human resources. The production manager has to provide a healthy and safe working environment to keep its employees motivated. The job requirement of the employee must be well designed so that the employees understand what is expected of them. Employee motivation is associated with the compensation plan and incentive system in place. Compensation plan are composed of a combination of financial and non financial rewards. Some of the most common financial rewards used in the industry are base pay, profit sharing, bonuses, and fringe benefits. Four techniques utilized by operation managers to improve the results of a business are just in time manufacturing, lean manufacturing, production planning and inventory management. Just in time manufacturing is an inventory technique that keeps the minimum inventory necessary to keep a perfect system running. By lowering the amount of inventory on hand a firm obtains storage savings and increases its cash flow. This technique is effective as long there are no inventory shortages at any point in time. It takes carefully planning and perfect timing to run a successful JIT system. Lean manufacturing is a system that eliminates waste in a system while at the same maintaining optimal quality standards. The company that began the lean production movement is the Japanese auto manufacturer Toyota. Production planning involves minimizing production time and costs, efficiently organize the use of resources, and maximize efficiency in the workplace (Productionplanning). Inventory management can help a company achieve the best results depending on the circumstances. If a company obtains a very low price quotation for an item it makes sense to realize a bulk purchase to capitalize on the lower price. Buying in large quantities also makes sense if there is a shortage of a particular material. Conclusion The business discipline of operations management has allowed the business world to evolve during the last 200 years. Innovation and technology are the factors that have influenced operation management the most. The complexity of operations management increased as the computing power increased. Operation management has become an instrumental tool that provides managers predictive power, the ability to optimize resources and the information needed to increase the profitability of a company. Works Cited Page Businessdictionary.com. 2008. “Operations management.” 26 September 2008. < http://www.businessdictionary.com/definition/operations-management.html> Heizer, J., Render, B. 1996. Production & Operations Management (4th ed.). New Jersey: Prentice Hall. Kiezman, S. 2008. “What is a Supply Chain?” 27 September 2008. < http://www.wisegeek.com/what-is-a-supply-chain.htm> Managementhelp.org. 2008. “Total Quality Management.” 27 September 2008. < http://www.managementhelp.org/quality/tqm/tqm.htm> Maslow, A. 2008. “Elton’s Mayo’s Hawthorne Experiments.” 27 September 2008 < http://accel-team.com/motivation/hawthorne_02.html> Plunkett Research. 2007. “Ecommerce & Internet Trends.” 27 September 2008. Productionplanning.com. 2008. “Welcome to Production.” 26 September 2008. < http://www.productionplanning.com/> Uoguelph.ca. 2008. “Operations Management: An Introduction.” 26 September 2008. < http://www.uoguelph.ca/~dsparlin/intro.htm> Yahoo.com. 2008. “EBay Inc.” Yahoo Finance. 27 September 2008. < http://finance.yahoo.com/q/ks?s=EBAY> Read More