Operations Management - Nestle UK Chocolate Factory - Case Study Example

Operation management: Operations management is the process that combines and transforms several resources used in the production subsystem of the organization to value added services and product in a controlled manner depending on the organization’s policies. It is therefore the part of an organization concerned with the transformation of a variety of inputs into the necessary services or products with the requisite quality level (Chris, 2001). Operations management is concerned with creation of services and products upon which all rely. All organizations produce a mixture of services and products, whether it is a small or large organization, manufacturing or service, profit making or not, private or public. Happily, many companies now know the importance of operations. They have realized that effective operations management has the potential to advance both efficiency as well as customer service (Andrew, 2007). All managers manage processes and serve customers. This makes part of their activities to be operations. Operations management is very exciting. Being at the centre of so many changes touching the business world which includes changes in customer preference, changes in networks supply brought about by technologies based on internet, changes in what people want to do at work, how employees want to work, where one wants to work, and so on. It is now when operations management is more topical and more at the heart of business as well as cultural shifts (Andrew, 2007). Operations management is demanding. Operation managers have the task of promoting the creativity that allows organizations to respond to the many changes. They must find the answers to challenges in technology and environment, the pressures of being socially responsible, the increase in globalization of markets and finally, the difficult-to define parts of knowledge management (David, Alison & Tarek, 2005). When one person works on his/her own, there is need for organization to ensure that the activity is effectively done. So when two or more people work together in performing an activity, there has to be some kind of organization. This is particularly when an organization consists several thousands of managers and employees. Four basic issues need to be addressed in relation to the design of the organization (Galloway, 1996). • The hierarchy nature • The extent of centralization • The degree of formalization • The complexity level. The hierarchy of the organization establishes the organization’s basic shape. It gives direction on how many layers there are in between the chief executive officer (CEO) that heads the organization, and those working on at the bottom. An example is the ‘tall’ organization that has many layers, whereas a ‘fl at’ organization is one with few layers of management between the workforce and the CEO. Tall organizations also have a tendency to have narrow ‘spans of control’, this is to say that a small number of employees report to the manager over them. This was the shape of early industrial organizations since they were modeled on the only form of organization that as present at that time. With time, this trend has been for organizations in the commercial sector to reduce the number of levels and make the spans of control for managers wide in order to make the organization flat (Interbrand, 2010). The degree of centralization in an organization deals with how power is distributed in an organization. A highly centralized organization has power held at the centre. In this set up, all decisions on policy as well as procedure are made by the CEO or senior managers at head office. This is opposed to a decentralized organization that sees relatively low-level manager delegated authority to make decisions in addition to taking action (Jae & Joel, 1999). The third matter in organizational design is formalization. This is how work is organized and how open and firm this is. Organizations that are formal have a large number of policies, rules and procedures that are usually written down in performance standards manuals or some other documentation form. Finally, complexity submits to the number of subunits in the organization and the difference in degree between them. Some organizations have a high standardization degree because they make one product or deliver a service that is simple, hence they are not complicated. On the other hand, other organizations may make a broad variety of products and engage in service delivery to many different customers in several locations. These four issues make organizations to take a number of different forms (Mahadevan, 2009). Organizational forms Organizations are in five basic forms; simple, divisional, conglomerate, and functional and hybrid. The e simple form of organization is characteristically how most small and medium-sized enterprises (SMEs) are based. In such organizations the original founder is usually in charge of every facets of the business. Functional organizations are separated into several areas of management activity, Sales and Marketing, typically Operations, Human Resources, and Accounting and Finance. When organizations grow, the CEO is not able to do everything, so he/she employs specialists in these functional parts to manage those facets of the business. Divisional organizations can either be organized around categories of products, customer markets, or world regions. This leads to each division having its own resources as well as functional organization (Michael & Michael 2003). Conglomerate organizations consist of a variety of different businesses, with or without similarities between them. Hybrid organizations, which are sometimes known as matrix structures, are organizations that intentionally mix the four organizational forms described above. This form was adopted in the 1990s by some of the major petrol companies like BP adopted this form. This makes them both regional divisions as well as functional departments (Mishra, 2009). Services versus manufacturing For the past 30 years, a dispute has been there as to whether service industries are basically different from manufacturing. This is significant because if they differ, then operations managers have to differently manage service operations from the way in which they manage manufacturing operations. A comparison and contrast of two such organizations is handled below. For the service operation management, we consider the Heathrow International Airport (service operation) and for the manufacturing operation we shall consider Nestlé UK Chocolate Factory (Naisbitt, 1987). Heathrow Airport management Heathrow Airport Holdings Ltd., was formerly known as BAA Limited, is the Spanish-owned operator that operates five British airports. It is one of the largest transport companies in the world. It resulted from the privatization of the British Airports Authority, which now is owned by a consortium led by Ferrovial, a Spanish firm that specializes in the design, financing, construction, operation and maintenance of transport and services infrastructure. Its head office is located in The Compass Centre on the grounds of London Heathrow Airport in the London Borough of Hillingdon. This company makes money by charging landing fees to airlines in addition to from ancillary operations in those airports such as property and retail. It owns and runs four airports in the UK. The company garnered disapproval for its handling of Heathrow, specifically its principal placement of shops rather than additional security aisles. After a lot of criticism for this, BAA did away with some shops to offer extra security lanes (Peter & Peter 2012). BAA employs about 5,500 people at Heathrow. Out of these 70% deal in security roles, 25% in operations, customer services and maintenance and 5% in head office functions. At Heathrow, the percentage of female employees that work for BAA has been consistent in recent years at 40%, while the proportion of employees that aren’t white and other ethnic backgrounds grew from 33% in 2006 to 40% in 2009. The percentage of permanent employees that leave BAA at Heathrow during the year has gone down from 11% in 2006 to 7.7% in 2009 (Wilson, 1990). Employment conditions The employees at BAA get an employment package that involves a mixture of elements and a salary, this package includes: • A bonus scheme that is based on company profit as well as personal performance • A subsidized medical cover • Holiday pay of 24 days per year Other benefits are a child care contribution, interest free travel loans, cycle to work scheme, free long term parking at the airports as well as a company pension scheme. There are about 5,000 Heathrow employees who will benefit from the BAA pension scheme, with over 2,800 pensioners who previously worked at Heathrow. Just like other large companies, BAA has lately closed its concluding salary pension scheme to new members that offers a competitive distinct personal scheme of contribution to the new employees. Training The year 2009 saw 79% of BAA’s employees at Heathrow get training. This is an increase from 65% in 2006. Roles related to security are critical for the success of Heathrow. Management for training for these roles is achieved using a competency framework that covers both interpersonal skills and technical security skills. Intensive induction as well as refresher training handles task based training like the use of security screening equipment plus searching processes, and trainings in the customer service like management of conflict management in addition to understanding experiences of passengers (Peter & Peter 2012). Maintenance management The operation manager has to look into maintenance management in order to keep the organization growing. In this modern industry, equipment and machinery are a very significant part of the sum productive effort. Their idleness or downtime therefore becomes very expensive (Peter & Peter 2012). The main objectives of this task are; 1. To realize minimum breakdown and to keep the company in good working condition at the least possible cost. 2. To keep the planes and other facilities in a condition that allows them to be used at their most favorable capacity without disruption. 3. To ensure the availability of the airplanes, buildings as well as services needed by other sections of the factory for the routine of their functions at best return on investment. Nestlé UK Chocolate Factory Nestlé UK Chocolate Factory is headquartered in Vevey, Switzerland. It is the world’s largest food company. Their products include baby food, breakfast cereals, bottled water, coffee, dairy products, confectionery, pet foods, ice cream and snacks. As a major buyer Nestlé looks for close participation in the supply chain as possible, to ensure fairness and quality (Mishra, 2009). Chain of production The supply chain is the succession of activities plus processes needed to change raw materials and components to consumer services and goods and to deliver them to the consumer. The chain is complicated for cocoa, and it varies from one country to the next. Nevertheless, a characteristic pattern would go through the following stages. Primary producers; the first stage is the growing of the cocoa beans. In many cases the small scale farmers live some distance from the market. They rely on people operating in the service sector of the economy to gather, buy and transport the cocoa to warehouses. These export warehouses in a country like Ivory Coast, are located near one of the countrys ports, San Pedro (Mishra, 2009). At this point, companies like Nestlé play a significant role in the supply chain by examination of the consignments for quality. Nestlé may purchase directly from the export warehouse, or may opt to approach intermediary suppliers that buy cocoa beans bulkily from across the world and do shipment to the confectionery manufacturers. Nestlé UK Chocolate comes at the secondary stage of production. It brings together the sugar, cocoa and other raw materials to come up with the chocolate products that are known so well; it convert the cocoa beans into bars of chocolate bars and other finished products. The last stage in the production chain is the selling to final consumers. In the same way Nestlé buys in bulk from the exporters and suppliers, retailers purchase in bulk from Nestlé (Mishra, 2009). To achieve all this Nestlé UK Chocolate has to exercise Materials management. This is the aspect of management function that is primarily concerned with the attainment, control as well as use of materials required and flow of goods and services that are connected with the process of production having some predetermined objectives in view. The main objectives the operation managers has to take care of are The minimization of material cost. Purchasing, receiving, transportation and storing of materials efficiently. Cutting down costs through standardization, simplification value analysis and import substitution, etc. Tracing new sources of supply and developing cordial relations with them so as to ensure continuous supply with reasonable rates. Reducing investment that is tied in the inventories for use in more productive purposes Developing high inventory ratios in the turnover. The company has to look into quality control as well. This is the maintaining of a desired level of quality in the chocolate product. It is a systematic control of many factors that affect the product quality. Quality control aims at avoidance of defects at the starting place, depends on effective feedback system and counteractive action procedure. It ensures customer satisfaction with company’s product to build customer confidence, goodwill and reputation of manufacturer (Interbrand, 2010). Conclusion Large companies meet customer needs with a wide choice of different types of products and services to meet a variety of needs. Nestlé is involved at all stages of the production chain. It gets to know as a lot of people as possible in the supply chain, offering the growers technical advice, giving intermediaries advice on quality issues, and researching the market to know what the consumer wants (Interbrand, 2010). Large organizations like Heathrow Airport are able to pass on to us the payback of economies of scale, coupled with their experience of offering high quality travel services over many years. As a result, we consumers enjoy the services built around air travel that is well endowed with security and safety (Chris, 2001). References Andrew G., 2007. Operations Management SAGE Course Companions series Sage Course Companions: Knowledge and Skills for Success. New York: SAGE. Chris V., 2001. Operations Management Studies in Economics and Business. London: Heinemann David M, Alison B, Tarek T., 2005. Operations Management: A Strategic Approach Published in association with The Open University. New York: SAGE. Galloway R L. 1996. Operations Management: The Basics Basics of Business SeriesR. Les Galloway: Cengage Learning EMEA. Interbrand. 2010. Best Global Brands 2010. Interbrand Report Jae K S, Jae K. S, Joel G. S. 1999. Operations Management Barrons Business Review Series Business review series: Chicago: Barrons Educational Series Langeard, E., Bateson, J., Lovelock, C., and Eiglier, P. 1981. Marketing of Services: New Insights from Consumers and Managers, Report No. 81–104, Cambridge: Marketing Sciences Institute. Mahadevan B. (2009) Operation Management: Theory and Practice. New Delhi: Pearson Education India. Mahadevan B., (2010) Operations Management: Theory and Practice. New Delhi: Pearson Education India. Michael A L., Michael L. N., (2003) Operations Management: Critical Perspectives on Business and Management Critical Perspectives on Business and Management Series; Taylor & Francis Group. Mishra D. K., (2009) Operations Management: Critical Perspectives on Business; Global India Publications. Naisbitt, J. (1987) Megatrends: Ten New Directions Transforming Our Lives, Warner Books: New York Peter J. Peter R. (2012) Operations Management; Oxford University Press Sasser, W.E., Wyckoff, D.D., and Olsen, M. (1978) The Management of Service Operations, Free Press: Boston, MA Wilson, B. (1990) Systems: concepts, methodologies, and applications (2nd ed.), John Wiley: New York Read More