Operational Management - Essay Example

Operational Management Operational Management Introduction: Service operations management refers to the responsibilities, decisions and activities undertaken by the managers of the service industry. The most challenging aspect of managing in the service industry is processing customers. Customer experience is an integral part of the service industry which is in many services provided customer’s physical presence is important to receive the services. There is no one specific definition of services, from a customer point of view a service is a combination of customer experience and his perception of the outcome of that particular service. The customer puts in its time, efforts and financial cost to avail the services. In most of the services obtained there are two aspects service experience and service outcome. Both of which should be managed for customer satisfaction. The most significant difference between service and manufacturing industry is that at the of a relationship with manufacturing industry the customer gets a physical tangible product, while in the service industry the customer gets an intangible outcome. (JOHNSTON & CLARK. 2008) Manufacturing and Service Industries: Service industry is different from a lot of aspects from manufacturing industry which are the reasons why operational management in service and manufacturing industry differ. In manufacturing a job is undertaken to add value to a physical component and in service industry the activity involves people. These differences include inventorying of physical goods; including the processing of these inventories in manufacturing industry while the planning in services industries focuses more on capacity utilization and yield management. Secondly manufacturing functions usually has fixed resources while the resources in the services industry changes over time and are not constant. Thirdly revenue management is crucial in services industry as refusing a customer to provide services is a more common practice than unable to provide a product in the manufacturing industry. These all differences affect the planning, scheduling and management of the operations and make the operations of both the industries different from each other. However, there are certain similarities found between the manufacturing and services industry and there is a certain level of similarity in there planning and management. Interval scheduling, reservation models and timetabling are all concepts which are similar in both the industries. (PINEDO. 2009) The sales and services industry is different from that of manufacturing. In the sales the transaction is between an employee and a customer for sales or services while in the manufacturing there is an interaction between technology and worker to produce a product. In the service sector the employee or the service provider is the shaper of the customer relations and loyalty unlike the manufacturing business where the customer loyalty and relations are built up by the product itself. (BATT. 2000) The greatest difference that is there between the service and manufacturing operation is that of the customer’s involvement. In service operation the customer himself becomes part of the whole process and becomes essential to the process. This will also cause the service to become less consistent as the customer will behave in different ways unlike the manufacturing process where same process is performed consistently. Even in services there are classifications that involve high level of customer interaction and some involve low level of it. The higher the customer interaction in providing certain services, for e.g. in businesses where the core process is performed in the presence of the customer like health care services education etc, the more the emphasis is given on the contact staff, instantaneous demand and difficulty of storage etc. The scope of operational efficiency decreases if the customer involvement is high. On the other hand in the manufacturing operations there is high level on consistency and no variability as the entire processes are standard. (LEWIS & SLACK .2003) In a manufacturing business employees are trained for many years to get trained and perform the jobs that involve high level of technology. In a service organization usually there isn’t a lot of involvement of technology; even if there is a need of training it depends upon the complexity of service i.e. the lower is the complexity of service the easier it gets to train the employees thorough on the job training. Similarly the repetitiveness of services and customer loyalty can also be factors affecting the need of training and dealing with customers incorporating technology. (LEWIS & SLACK .2003) In a service business, many service providers are able to select their own customers by means of pricing and advertising strategies and in most cases it is very easy to refuse a customer for the provision of services. However in a manufacturing business the product provider comparatively doesn’t have enough liberty to choose his own customer because of various factors like involvement of intermediatery in selling a product to final customer etc. (LEWIS & SLACK .2003) Service operations have unique characteristics that are quite different from manufacturing operations. Besides customer direct involvement and participation the service business can also be differentiated on the basis of perishability, inseparability of production and consumption, heterogeneity, labour intensity etc. The final product of the service can’t be seen and touch as a manufacturing product can be. This is the reason why the services businesses have no or very less inventory to deal with. As discussed above too services have heterogeneity which makes services lack consistency whenever provided. One of the biggest problems that a service business faces and the manufacturing doesn’t is the perishability of services, as they can’t be stored; it causes the problem of capacity utilization, management of demand, and planning and scheduling labour. As mentioned above too services are more labour driven and are deprived of technological benefits. (FROHLICH & WESTBROOK. 2002) Many manufacturing concepts and techniques like benchmarking, JIT, TQM, resource planning, capacity utilization, total production planning technique and processing layouts can be used in the service industry for operations management. Resource planning: Resource planning basically deals with assessing the production capacity required to meet the demands. In any business whether manufacturing or services organization developing feasible operations schedules and planning in a way that maximizes capacity utilization and meet delivery due dates while minimizing the waste of resources can be challenging job. In today’s complex supply chain and close associations with the buyers to meet customers demand on time while incurring lowest cost possible, the integration of various business segments and procedures is extremely important for service and manufacturing organizations both. Usually services businesses can not inventory their services and they lack a formal system of resource planning as manufacturing businesses do. Therefore a service business often relies on reservations and backlogs or queues to manage its resources and ensure effective capacity utilization. However apart from inventorying pure services, a service business also involves some other sort of resources for which resource planning systems can be used. (WISNER, LEONG & TAN .2012) Resource planning is an essential aspect of any organization. Like manufacturing organizations service organizations have to plan for the resources too. Almost every service provider one way or the other has to manage inventory. ERP is a system that was basically implemented in manufacturing industry but now it is the most widely used system in the service industry too. In a service organization too there is a need to post entries and data from different sections of the organization, which may differ from each other. At times one department in the organization needs to view the same data or information in different perspective. A centralized system integrated within the organization helps in many ways. For e.g. health service providers like doctors, dentists etc can link their inventory system to patient’s bills so that whenever a drug is sold to a patient it automatically updates the inventory and adds the cost to the bills of patients which can improve efficiency by reducing duplication of work, is more accurate and cost effective too. If the system is expanded and is integrated with outsiders like suppliers, inventory management can be timelier and reordering from a supplier can be made easier. Further in a service organization the employees on front desk face many enquiries regarding the services etc. With the implementation of ERPs the management, employees and customers can get answers about the important products or service information quickly and correctly. (TAN ET AL. 2010) MRP (Material Requirement Planning) has the same importance in certain services business too that an ERP has. However, there are many critics of the opinion, for e.g. in a hospital business different surgeries would require supplies. Unfortunately so many types of surgeries would require different supplies and procedures and an attempt to set up MRP system for it would lead to total futility. MRP is usually suitable for the assembly businesses. (YOUNG .2009) Lean production and JIT System: Another concept of lean production is usually related to manufacturing industry where emphasis is given on small batches, single inventory and JIT system with outstanding coordination with the supply chain. However the same concept can be applied to the services industry. In the service sector there are usually no or very less factory costs, therefore it is often assumed that lean production concept can be implemented in manufacturing industry only. However, that is not the case. Taking the example of the health sector a hospital conducted a research which showed that out of the total costs only 16% were directly attributable labor costs while the rest were the overheads which were non value added to the customers but they were charged for those. Customers usually don’t want to pay for the non-value added activities, but they can’t choose to pay for the value added activity only as they have to pay a fixed price. To manage operations effectively and higher customer satisfaction with long term success it is necessary to focus on value addition processes and reduce ‘waste’- the concept around which lean production revolves. (BLACK. 2008) Like a manufacturing organization, a service organization should even focus on becoming lean by reducing lead time that is the time between the customer’s order and the delivery. Secondly the cycle time must be reduced that is the time in which a standard task is done excluding the queue time. Thirdly the time to provide a service should be worked. The organization needs to establish standard work and the sequence and standard time to complete a job should be predefined. Additionally step by step and continuous improvements in the processes can benefit the service organization by the lean concept in the same way as it does it in a manufacturing organization. (BLACK. 2008) JIT (Just-In-Time) is another concept which is merely confined to the manufacturing sector; however it’s a concept that is now used widely in the service industry too. JIT focuses on efficient use of resources with minimizing the cost and an outstanding coordination with the supply chain to deliver the best service to the customers. IN the service sector JIT could be used in simplifying production processes, improving quality of service being provided and reducing inventories of supplies. JIT has been applied by many companies all over the world, these include, Hewlett Packard (HP) implementation of the JIT system helped it to reduce receivable balances and lead time in its operations. In Eastman Kodak it helped in reducing costs and improving customer satisfaction etc. (CEM CANEL ET AL.2000) Conclusion: Most of the researches regarding the execution of processes and managing the operations are done on the manufacturing industry, however the services industry constitutes larger portion of total industries. The concepts and ideas used to understand and improve the operations of a manufacturing company can be implemented in the service organization too. Both the industries sell an end product to the customers and have processes which have the potential to improve for higher customer satisfaction. With the implementation of manufacturing processes improvement concepts and theories the services industry has greatly benefited too Bibliography BATT, R. L. (2000). Managing customer services human resource practices, turnover, and sales growth. Ithaca, N.Y., Center for Advanced Human Resource Studies, Cornell University. http://catalog.hathitrust.org/api/volumes/oclc/51593364.html. BLACK, J. R. (2008). Lean production: implementing a world-class system. New York, NY, Industrial Press. CEM CANEL, DREW ROSEN, & ELIZABETH A. ANDERSON. (2000). Just-in-time is not just for manufacturing: a service perspective. Industrial Management & Data Systems. 100. FROHLICH, M. T., & WESTBROOK, R. (2002). Demand chain management in manufacturing and services: web-based integration, drivers and performance. JOURNAL OF OPERATIONS MANAGEMENT. 20, 729-745. JOHNSTON, R., & CLARK, G. (2008). Service operations management: improving service delivery. Harlow, Essex, England, Financial Times/Prentice Hall. LEWIS, M., & SLACK, N. (2003). Operations management: critical perspectives on business and management. London, Routledge. PINEDO, M. L. (2009). Planning and Scheduling in Manufacturing and Services. New York, NY, Springer-Verlag New York. http://dx.doi.org/10.1007/978-1-4419-0910-7. TAN, J. K. H., PAYTON, F. C., & TAN, J. K. H. (2010). Adaptive health management information systems: concepts, cases, and practical applications. Sudbury, Mass, Jones and Bartlett Publishers. WISNER, J. D., LEONG, G. K., & TAN, K.-C. (2012). Supply chain management: a balanced approach. [Mason, Ohio], South-Western/Cengage Learning. YOUNG, S. T. (2009). Essentials of operations management. 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