Analysis of Sonys Operation Management - Research Paper Example

Contents Introduction 2 Aims and Objectives of the report 2 Operation problem at Sony 3 Literature review 4 Process design 5 Nature of demand 5 Degree of vertical integration 6 Flexibility 6 Degree of automation 7 Quality 7 Supply chain management 7 Analysis of Sony’s operation management 11 Process design 12 Nature of demand 12 Flexibility 13 Quality 13 Improving Process Design: 13 Supply chain management 15 Recommendation 17 CONCLUSION 19 Introduction In today’s competitive environment organizations are expected to deliver more products with less resources i.e. achieving higher level of productivity with fewer of the resources available. In order to do so, organizations have relied upon the use of operation management as it is the major strategic source to gain competitive advantage over other rival organizations in the market. According to Pettersen, (2009), and Omachonu, & Ross, (2004) producing more with less available resources i.e. operational efficiency is a major competitive weapon for organizations in today rapidly changing industry. Operation management could be defined as a process that involves the transformation of raw materials into value added products in a systematic and organized manner. In simpler words, operation management is a process that deals with the design and management of products, processes, services and supply chain in order to deliver the final products to the customers. Such a process helps in the accomplishment of customer’s needs and wants that leads to enhanced customer satisfaction. According to Näslund, (2008) without operation management an organization would not be able to control its delivery of the products to the final customers. In addition, the organization would lack the ability to produce the best product with the use of limited resources. Aims and Objectives of the report The aims and objectives of this report are to analyze the operation management of an organization, Sony and the problems associated with the operation management of the particular organization. The theory related to operation problems that are being faced by the organization have also been elaborated and identified in the report. In addition to this, the application of the theory in the organization has also been discussed. Similarly, recommendations have also been provided according to the problems identified in the earlier stages of the report. Operation problem at Sony Sony has been one of the leading organizations over the years; however the company has been going through tough periods in the last few years. With its headquarters in Tokyo, Japan the company focuses on a number of services; games, electronic products, entertainment and financial services. However the company is also been involved in the telecom equipment and computer hardware as well. The revenues of the company along with the operating profits and net profits have declined in the year 2012. Thus the financial statements of the company are also highlighting the declining phase of the company and operations management at Sony has been one of the main problems that have resulted in this decline. Sony is currently having difficulties in managing its operations. The operation problems that Sony is currently facing include lack of process design and reduction in supply chain management. Sony Corporation is turning into a ghost in Japan and the rest of the world due to these mentioned problems. One of the core problems that led to such downfall of the organization was the lack of process design (i.e. innovation) through which the company could differentiate its products in the market. In addition, because of the lack of appropriate management of operations at Sony, the organization has not been able to make any improvements since 2008 and this has lead to its downfall in the recent years. Furthermore, the company was not able to earn any profit since the same year. According to New York Times, the company’s worth has declined to a great extent due to the lack of operation management. It was reported in the article that the Sony’s worth was just one-ninth of Samsung and one-thirtieth of Apple and this is an alarming sign for the management of the company. Due to such decline in the worth of the organization, Sony has even lost its dealer stores i.e. stores that are specializing in having the products of Sony have been drastically reduced. Such a decline of the company has been associated with the image of Japan as the company has become a shadow of itself in the electronic market as compared to earlier years. The lack of changes in the process design at Sony has been the greatest mistake of the organization which has led the company to face net loss of $5.7 billion. Due to lack of process design (i.e. innovation) the company was not able to adopt the realities of the global market. With its foundation in the electronics market, the company had the right tools to develop a version of iPod but due to the lack of appropriate operations management the company failed. In 2001, Apple introduced its first version of iPod in the market. With such disastrous operations management, the company lost its competitive edge in the market along with its ability to charge premium price in the electronics market. Literature review The concept of operations management has been regarded as a source of competitive advantage. As identified by Armistead, and Clark, (1994) operation management helps the organization to achieve its desired goals and objectives which eventually becomes the key to enhanced organizational performance. By managing the operations at an organization appropriately, the organization can not only enhance its performance but such right management of operations can become a competitive advantage for the organization. The two aspects that have been particularly highlighted in operation management related to Sony Corporation are as follows; Process design Process design includes all the decisions regarding the processes involved in the conversion of raw materials into finished goods. The decisions that are taken into consideration for the conversion includes the selection of the process, choice of technology to be used, process flow analysis and finally the layout of the facilities. For an effective process design, it is important to analyze the work flow i.e. conversion of raw material into finished products. Some of the factors that could affect the process design decision have been presented below in the figure; Nature of demand It is quite essential for an organization to produce such products that are frequently required by the customers to fulfill their needs and demands. In order to produce such product, it becomes essential to schedule the production of the product in such a way that the consumers could be provided with the product they require. The production is scheduled as per the the estimated future demand level. Some of the major factors that should be considered for estimating the future demand level includes seasonability and growth trend (Simha, and Word, 2009). Degree of vertical integration Degree of vertical integration indicates the extent of the production and distribution chain under the influence of the organization. In addition, it also indicated that which products or parts of products could be produced internally. There are two types of vertical integration i.e. forward integration and backward integration (Khan, Christopher, & Burnes, 2008). Forward integration indicates the acquiring of distribution channels to provide the market with the products. In addition, the backward integration indicates the expansion towards the suppliers. Both the types of expansion can help an organization to improve its performance in the market along with the increasing level of profits. Flexibility Flexibility in the process design indicates the response of the organization to the changes in consumer preference or market conditions (Zeithaml, Parasuraman, Berry, 1990). Organizations that are flexible have greater advantage in the market as such organization is capable to increase the market share by responding quickly to the market conditions. Flexibility of an organization could be classified into product/service flexibility and volume flexibility. Product flexibility is regarding the shifting from one product to another in order to meet the demands of the customers. On the other hand, volume flexibility is regarding the changes in volume to respond to the external changes. Degree of automation The degree of automation is regarding the use of technology in the production process. This decision has been avoided by many organizations in the past due to high costs associated with the automation. With the passage of time, it has been realized that the automation can become one of the weapon of competitive advantage for an organization due to which most of the organizations in the marketplace are now turning to automation of the processes. Although the process it quite expensive but it reduces the cost associated with labor and others. Quality Quality is another major weapon to gain competitive advantage in the marketplace. Level of quality also affects the process design of the products and services. In order to gain superior quality, the level of automation should be high. This high level of automation ensures that the products would be of high quality and could meet the demands and wants of the customers in the market. Supply chain management To have a clear understanding regarding the supply chain management, Stevenson, & Hojati, (2002) proposed a broad definition. The definition proposed by Stevenson, & Hojati, (2002) states that supply chain management is a systematic process that highly focuses on the coordination between different business functions in a particular company and other businesses for the accomplishment of desired goals and objectives (Stadtler, 2005). In addition, the aim of such management is to promote the relationship between the suppliers and the organization to allow the organization to enhance its long-term performance. According to Ketchen, & Hult, (2007) the purpose or the basic objective of supply chain management is to enhance the performance of the organization in order to add the maximum value at the least possible cost. In simpler words, the purpose of supply chain management is to maximize the cooperation between all the parties to maximize the productivity of the organization and to deliver maximum benefits to all the parties involved in the transformation of raw materials into intermediate goods (Charvet, Cooper, & Gardner, 2008). As identified Dawson, (2000) the core objective of supply chain management is to provide the organization with an opportunity to enhance its competitive advantage in the market along with reduction in cost without compromising the satisfaction level of customers. With such effective supply chain management, an organization would be provided with a strategic weapon to eliminate all flaws in the delivering of goods to customers in the market. Furthermore, with an effective supply chain an organization is provided with an ability to understand the environmental barriers that could reduce the productivity and the performance of the organization which will eventually reduce the competitive advantage of the organization (Ganesan, George, Jap, Palmatier, & Weitz, 2009). Similarly, according to Fernie, (2009) the objective of supply chain management is to increase the sales of the products to the customers while reducing the expenses associated with the inventory and the operations of the organization. For an organization to remain ahead of competition in the competitive environment, it has become essential for an organization to manage its supply chain effectively. Managing supply chain has become a need of organizations to increase their performance and productivity as it involves costs associated with information being conveyed, warehousing, transportation, transfer of funds and so on. If supply chain is not managed properly, an organization might have to incur heavy costs. As identified by Simchi-Levi, Kaminsky, &Simchi-levi, (2007) it is quite essential for an organization to manage its supply chain management as it reduces the costs associated with inventory management to great extent. In addition, management of supply chain also reduces the wastage of organization’s time and energy. In addition, it has also been identified that management of supply chain helps an organization to tackle economic fluctuations by altering inventory investment as stated by Schonberger, & Knod, (1991). Six Stages to manage supply chain Six stages have been identified in order to manage supply chain appropriately for the organizations. These stages have been discussed in detail below; Plan Plan is the foremost stage in the supply chain management. As identified by Schemenner, (1984) in this stage strategic plans are formulated and developed in such a way that the whole organization would be provided with the benefits. In order to do so, SCOR model was proposed by Schoenherr, (2009). So that the managers would be provided with assistance in strategic decision making. Analyze The second stage focuses on analyzing all the factors that are involved in the supply chain. With the identification of all the factors, an organization is provided with an opportunity to enhance its performance by handling all the factors effectively and efficiently. A new approach was proposed by Gaur, Raman, & Swaminathan, (2009) in order to be more effective in understanding the uncertainties that could influence the supply chain. Such an approach was aimed towards finding and analyzing the exact problems encountered in the supply chain management and according to the problems, provided the organization with appropriate tools to address it. Develop This stage of managing supply chain is regarding the identification of reliable suppliers in the market. In addition, this stage also includes the development of mutual trusts and coordination among the suppliers and the organization. Furthermore, the supply chain management concepts are applied accordingly in this stage for the development of payment methods, shipping and delivering of goods and services to the customers at the right time and place to fulfill their needs and demands. Integrate The next stage in the management of supply chain is regarding the integration of all activities included in supply chain. The activities that are integrated include outsourcing, procurement, production scheduling, order processing and others. Gaur, Raman, & Swaminathan, (2009) proposed a model that indicates the importance of communication between partners involved in supply chain. Deliver In this stage of supply chain management, the orders from the customers are received and upon the orders of the customers the delivery is planned accordingly (Gaur, Raman, & Swaminathan, 2009). Return The final stage of supply chain management is regarding the return management. In this stage, the organization addresses the problems associated with the returns, reverse logistics and gate keeping (Gaur, Raman, & Swaminathan, 2009). Analysis of Sony’s operation management Sony was once a synonymous of Japan but with the passage of time, the image of the company has drastically faded in the recent years. The same could be said for the country, the company was constantly being associated with. The decline on Sony in recent years was still a mystery but by observing the operation management of the company it became quite obvious that the company’s decline was due to poor operation management i.e. supply chain management and process design. Due to lack of operation management, the company reported a net loss of Y455 billion which is approximately equal to $5.7 billion. By considering such a heavy loss, it has been predicted that the company would not be able to survive in the long run and therefore serious changes have to be made in the operations of the company. In addition, the company has also been called a living zombie due to its dire situation in the marketplace. By analyzing the two most critical factors in operation management i.e. process design and supply chain management, it could be said that the company could regain its image globally. The factors that led the company to such condition are as follows; Process design It had already been identified that lack of process design i.e. innovation was the core reason for the company to be in such situation in the international market. The process design and business process management is highly important for the organizations as it directly influences the overall performance and growth of the organizations as highlighted by Zairi (1997). It has been observed in the case of Sony that due to inability of the organization to provide the customers with innovative products to satisfy their desired needs and wants. Due to such inability the loyal customers started shifting from Sony to other competitors in the market. This eventually influenced the sales and market share of the company. So it is high time that the Sony needs to concentration on process design as it is one of the most critical aspects of operations management. Some of the factors that the company has been not able to handle in the process design and that are needed to be improved have been discussed below; Nature of demand Sony has consistently failed to meet the demands of the customers. The products offered by the company are outdated due to which the company’s sales figure has declined to a great extent. It was observed that due to lack on innovation in the organization, the company was unable to provide its customers with innovative products. An example of such failure could be observed in the year 2001 when Apple launched its iPod in the market. Sony was at its peak in earlier years but was consistently ignoring the demands of the customers. In simpler words, the company was focusing much on production approach. In its peak years, Sony had all the resources available but due to lack of innovation the company was unable to create a version of iPod. Thus it highlights one of the major weaknesses of Sony that led to such high losses. Flexibility Due to lack of proper operations management at Sony, the company lost its edge to provide the customers with the products they require to satisfy their needs and demands. The only good thing about Sony in recent years was its production of Television sets but that the company lost its edge in this particular sector as well. The customers now prefer Samsung over Sony due to its low costs. Even the loyal customers are shifting to other brands in the market as the company is consistently failing to provide them with innovative products in the market. Quality Sony has always been associated with high quality products and it is still the same. Even though Sony has lost its charm in the market but the customers still think that the products offered by Sony are sustainable and the company is quite reliable as compared to others in the market. An example of quality products offered by Sony is PlayStations. Even though Microsoft and Xbox are some of the most popular brands in the gaming industry, customers prefer PlayStations over Xbox and Microsoft due to its reliability and high quality. Improving Process Design: In order to improve the overall process design the company should incorporate the system approach and business process management technique. According to this technique the organization is believed to be constituent of different processes used for converting the inputs into outputs (Zairi, 1997). This approach is further explained in the figure below: (Barlow, 2005) This approach will allow the company to come up with effective and sustainable process design with considerable focus on products and other associated elements. Along with this the company should also work on implementing effective and efficient quality management system. The existing framework of overall quality management systems of Sony is presented in the image below: In this similar manner the process designs can also be improved with the help of customers’ feedback. The company should incorporate the feedback of the customers in the overall process of designing and improving the processes so that the customers are satisfied with the end products. The framework for using the feedback of the customers is given in the image below: Supply chain management Lack of operation management not only had an impact on the sales of the company but the company now faces disruption in the supply chain management. Company had stopped placing its products in small retail stores in Japan. In earlier years, Sony was the most popular brand in the international market along with the local market of Japan but it has been observed that with such disastrous situation of the company, Sony has pulled back its products from the local retail stores in Japan. Such discrepancies in the supply chain in Japan indicates that Sony is trying to promote the brand in the international market but with such pulling back of products from the local market, the company has lost its local loyal customers which accounted for almost 30 percent of the sales. In earlier years, it has been observed that the company had over 2000 suppliers but with the passage of time, the company had reduced the number of suppliers to only 1200 (Ferrari, 2009). The company is trying to overcome the issues and challenges associated with its supply chain. For this purpose the company is working on improving the overall integration of the all phases involved in the supply chain namely; procurement, inventory management, distribution, and retailing. The basic structure of the supply chain of Sony is presented in the image below: (Sony, 2012) The company is working hard to come up with sustainable suppliers’ management and procurement strategies. The management of the company makes sure that all suppliers are working in compliance to the regulations and standards set by Sony. Along with this an important concept is of green or sustainable supply chain. The management of the company is working to reduce the overall carbon dioxide emission across its whole product life cycle and supply chain. The impact of the overall product life cycle and supply chain of the company on the environment is presented in the image below: (Sony, n.d.) Recommendation By considering the current situation of the company due to its lack of operation management, some recommendations are presented for the company to regain its market share and its image in the market. Some of the recommendations for the company regarding operation management are as follows; a) In order to enhance its sales and market share, Sony should enhance its suppliers in Japan. This would allow the company to regain its loyal customers which would eventually help the company to regain its strength in Japanese markets. b) With enormous power due to its high quality products, Sony has an opportunity to introduce new products in the foreign markets. This would not only help the company in regaining the trust of the customers but will also help in establishing its brand image in the international market. c) The company to rethink its operational strategies. By doing so, the organization would be able to understand the needs of the customers and would be provided with an opportunity to provide the customers with the products to satisfy their needs accordingly. d) Sony should focus more on innovative and sustainable products rather than low quality products as done by others in the market. In Television market, the company should provide the customers with slimmer and high quality television sets to attract the customers at first sight. Sony has always been associated with high quality due to which the customers would definitely prefer Sony over any other brand in the market. e) Sony should focus a lot more on technological innovation and should focus higher on e-retailers as well as other retailers in the market. This would encourage the online shoppers along with traditional shoppers to Sony’s retail outlets. Moreover, innovation would allow the company to come up with more products and with more quality products; Sony would be able to make a mark in the industry again. f) The company should bring changes in the design process to attract more of the customers in the market. The changes in the process design would help the company to provide the customers with products according to their needs. g) Te company should focus on incorporating the feedback of the customers in order to come up with more effective and efficient process designs leading to creating competitive advantage for the company h) Along with this the company should work on building strong and sustainable suppliers relations in order to increase the efficiency and responsiveness of the supply chain. This in turn will allow the company to cater to the changing needs and demands of the customers in better manner. CONCLUSION By considering the current situation of Sony, it could be said that the core reason behind such situation of the company is its incapability to manage its operations accurately. Lack of process design was one of the core reasons for the failure of the organization which ultimately led the organization to such dire situation. Due to lack of innovation, the organization ignored some of the most crucial opportunities in the marketplace and as the competitors took advantage of the opportunity it provided them with several benefits. Increase in market share and sales are some of the benefits that the competitors had by taking full advantage of the opportunity. Therefore it is high time for Sony Corporation to come up with more innovative products so that it would be able to improve its market share and retain its position in the market again. This can be further supported by the extensive literature and research on the operations management which highlight the increasing important of business process management and supply chain management. It has become vital for the organizations to come up with effective and efficient operations management strategies and giving important to business process management and supply chain management; same is asserted by the case of Sony as analyzed in this report. 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