Empirical Difference between Operations Management and Strategy - Wal-Mart - Case Study Example

Operations Management Contents Operations Management 3 Operations Strategy 3 Empirical Difference between Operations Management and Strategy 3 Inventory Management 5 Application of Inventory Management 6 Empirical Analysis 8 Reference List 9 Operations Management Operations management is a special segment of management dealing with the designing, overseeing and controlling process involved in production related activities of a company. In the current epoch, companies are expanding the scale and scope of their operations in foreign markets, after saturation of domestic demand. With increasing scale of operations practiced by the multinational companies, the importance of operations management is significantly growing in the modern business world (Wan and Hoskisson, 2003). Redesigning the goods and service manufacturing process is also considered to be a part of operations management. The productive resources of a company are always scarce in amount (Henry, 2008). Only with the help of operations management, a company can allocate its productive resources in the most optimal manner (Slack, Jones and Johnston, 2014). With the essence of superior operations, an organization can not only lower the cost of its manufacturing but also provide better quality products and services to the prospective consumers in the market (Weber, 2007). Operational management process of a company includes all strategic, tactical and operational level aspects of business. Operations Strategy Profit or non profit making organizations always rely on certain specific processes, through which they are able to deliver useful products or services to the prospective clientele in the market. These unique processes are the specific operations of a company. An operational strategy provides the generalized direction that hand outs the framework for accomplishing all the doable functions of an organization. It refers to a specific pattern of decisions that help to improve the long term capabilities of a company (Wan and Hoskisson, 2003). The operational strategies of a company are formulated after reconciliation with the market requirements. It is a basic tool that defines the process through which a company manufacture products and services for its customers. Empirical Difference between Operations Management and Strategy There are several intrinsic differences between the concept of operational strategy and management. These differences can be evaluated in terms of four primal dimensions namely, time scale, level of aggregation, level of analysis and the extent of abstraction. Time Scale The operations management process of a company describes its short term to medium term management operations. This process elaborates the minute, hour or month specific activities of a company. The impact of such management decisions is often felt after several years of decision making process but in most of the cases its affect is felt within a short span of time. Operations management decisions helps a company react efficiently and effectively, with respect to the demands placed by the consumers in the market (Wan and Hoskisson, 2003). During natural calamities such as wars and floods, the demand placed for necessary food products increases in the market. When the companies engaging in selling such items effectively increases their production and retailing scale with respect to the increasing demand in the market, then it is a part of their operations management practices in business. On the other hand, operational strategies of the companies focus on its long term business activities. Unlike operations management, the operational strategies of a company ensures that the organization possesses adequate resources and capabilities to satisfy the requisites of the market in the long run (Slack, Jones and Johnston, 2014). For instance, the demand for smartphones is significantly increasing in the global forum. The multinational electronic product manufacturing companies such as Apple, Samsung and Nokia, are allocating greater funds for inventing more attractive smartphone features and models for the consumers (Hughes, 2013). This strategic function conducted by the companies is a type of operational strategy. Level of Aggregation Operation management related activities of a company are detailed in nature. Under this regime, the specific resources possessed by a company are connected with the respective products and services traded by it. For instance, the specific skills of customer relationship that an organization should acquire are detailed under the context of its operations management. When a particular business branch of Apple Inc. provides special knowledge enhancement training to its workforce, then it is a type of its operations management function (Hughes, 2013). On the other hand, operations strategies of a company are generally not descriptive or detailed in nature. The process accumulates the different productive resources of a company into one overall level of usage. When the large supermarket stores such as WalMart tries to enumerate the aggregate requirements of its human resources, then it is a type of operational strategy determined by the organization (Banjo, 2013). Thus the level of aggregation involved in operations management is always less than the same occupied in the operational strategies of different companies. Level of Abstraction Operations management of a company deals with the determination of the immediate tangible and recognizable resources. When a retailing company evaluates the ways through which it can efficiently place orders to suppliers, then it is a type of its operational management function. Such systems, processes, flow of information and physical inventory dealings of a company can always be observed in reality. Many pharmaceutical companies of the developed countries are now conducting their innovation related activities in the less developed countries of the world, for experiencing lower costs of innovation. This process is popularly known as ‘reverse innovation’ and is a categorized under the operations management practices of the companies (Hughes, 2013).These firms transfers the productive innovation oriented resources in their respective research hubs in developing nations. However the operational strategies of a company deal with the abstract issues in business. Decisions regarding strategic alliances of an organization or joint venture business initiatives of a company are type’s operational strategies. Such aspects are not tangible in nature and are more closely related with the intrinsic philosophy of a company (Weber, 2007). Thus the attribute of abstraction existent in the concept of operational strategy is more than its persistence in the notion of operational management. For instance, the Australian aviation company, Qantas Airlines has entered into a strategic business alliance with the most popular global aviation giant Emirates Airlines. Qantas had initiated the proposal for the alliance for fulfilling the requisites of its own business transformation plan (Gazzar, 2014). The alliance was introduced by the company for lowering its business loss, expanding scale of operations and enhancing the brand value in the market (Weber, 2007). This strategic decision undertaken by the company is a type of its operational strategy. Through the alliance, the company has changed its operational style but the strategic change cannot be tangibly quantified. Level of Analysis The effect created by the operational management decisions of companies is localized. When a retailing store in the market determines the ways through which it will manage its inventory with the help of its own resource and capabilities, then it becomes a subject matter of operations management. However the concept of operations strategy is more detailed in nature. With the help of operational strategy, a company tries to widen the effectiveness of its inventory management system. Thus the extent of detailed business development analysis involved in operational strategies is more than the same in operational management. When a company evaluates the entire network involved in its raw material supply and builds up its business strategies on basis of it, then it is a type of its operational strategy. In order to experience economies of scale in manufacturing, companies often expand the extent of its upstream and downstream vertical integration process (Slack, Jones and Johnston, 2014). Through horizontal integration, a company needs to procure its semi finished product parts from third party business firms in the market. However with the essence of increased vertical integration, an organization can cut down the costs of third party payments. Increasing the extent of vertical integration is a type of operational strategy of an organization. Inventory Management Inventories occupy the most strategic status in the framework of working capital possessed by most corporate organizations. It is considered to be the largest current asset component for most of the companies. Efficient management of inventory lowers several strategic operational problems of an organization. Inventory of a company includes the stock of its tangible goods and furniture. The stock of finished goods included in the inventory is the finally produced products of an organization. However inventories of manufacturing companies include stock of finished as well as partly finished products. The store of raw materials possessed by a firm is often valued under its aggregate inventory worth. Thus the gross value of inventories forms the current assets of a company. Management or maintenance of inventory indirectly involves large financial fund dealings. Application of Inventory Management The extent of business complexity has considerably increased in the current era. Companies try to enhance core competencies in business by lowering its operational cost and increasing their business efficiency. In the competitive business world, the role of inventory management has become indispensible and more valuable. Research reports shows that companies of Japan provide significantly high value to matters relating to inventory management. These companies try to lower the idle stock of inputs and outputs in business by accurately forecasting the future business demands for various inputs. A company is claimed to possess a very efficient inventory management system, if it can produce only the exact quantity of output that is sold out or demanded in the market. This implies that companies always try to lower the value of its inventories. A low value of inventory indirectly implies that most of the products produced by a company are sold in the market. Procession of a large stock or value of inventory increases the operational cost of a company. This is because; a company needs to pay an interest on the stock of goods stored in its inventory. Even so, a company needs to bear the cost of maintaining a proper storage warehouse for the excessive unsold stock of goods. Some companies also maintain some insurance over the stock of goods processed by them. Due to certain adverse uncertainties, the stock of inventories possessed by a company gets damaged (Bowman and Ambrosini, 2003). Such crisis situations enhance the operational management costs of the companies. The above review ensures that inventory management is a crucial aspect of operations management and a company should always try to maintain a low value of inventory, for avoiding the cost of inventory maintenance. Companies of the current era introduce strategic inventory management tools through which they become more efficient in business and enhance their profitability. Overtime, development of science of technology has helped to improve the technological knowhow’s of the companies. Modern organizations improve their operational efficiency with the use of innovative technologies in business (Tashakkori and Creswell, 2007). Innovative technologies not only help to improve the product quality and features of companies but also assists in making their operational process more proficient in nature. Application of technical inventory management tools has helped to improve the operational management processes of the companies. Tracking inventory is considered to be one of the most important tasks of business management or administration. This function is practiced by companies with the help of certain hardware or software tools (Reading, 2002). Giant companies prepare their own inventory management application tools. However some tools are openly available for all the companies. Openbravo It is the most commonly used inventory management tool available in the market. It is considered to be one of the leading ERP (enterprise resource planning) tools available in the market. Openbravo is a strong inventory management tool that records data about product ties and flows with respect to the ERP solution at every aspect. This software helps a company manage the vendors of its business and facilitates in tracking its inventory movement (Svensson, 2005). New product introduction processes of the companies are often accelerated with the help of this software. vtiger It is a special type of CRM (customer relationship management) software, that helps a company manage its entire business sales cycle (Witcher and Chau, 2010). The software tracks the pre and post sales activities of an organization and ultimately evaluates the product flowing procedure of a company. Specialized inventory management functions such as sales quotes, purchase orders, sales orders, price books and invoices are prepared with the help of this application software (Witcher and Chau, 2010). Partkeepr This application software is primarily used to track and manage the inventory of electronic products. It is a very small and compact tool and does not include the entire customer relationship or enterprise resource planning model of a company. However the tool is useful for tracking and storing or electronic parts. The software is stores with the help of JavaScript and uses MySQL as the basic database (Witcher and Chau, 2010). . inFLOW This tool does not include any web based component and comprises of its own client usable database. The tool can track and record information for more than 10000 pieces of a company’s inventory. It contains additional features such as barcode scanner, multiple unit measurement recorder and full product progress recorder (Srivastava and Rego, 2011). ABC Inventory This is considered to be the best inventory solution for all the small and medium sized companies. It is a free subset of Almyta Control System and is a type of standalone solution (McEachern, 2012). The above review elaborates about some freely available inventory management applications of companies. Technological innovations have prepared superior software solutions with the help of which companies can efficiently manage their inventories in business. Accurate inventory management helps to lower the accounting mistakes of companies. Inventory related accounting errors creates two types of losses. It declines the value of a company’s inventory and also diminishes its business profitability (McDaniel and Gates, 1998). The productive resources of a company are always scarce. In order to attain optimality in business, companies needs to maximize their output subject to minimization of resource use or maximize profit subject to minimization of cost. Such optimal outcomes can be experienced by companies with the essence of accurate inventory management system. Empirical Analysis In 2013, the operational executives of WalMart claimed that the company was experiencing an inventory management problem. From the sales of 2013, the giant retailing firm made a loss of $ 3 billion (Rosenblum, 2014). The loss was incurred by the company for experiencing an out of stock merchandize, but it was recorded that the inventory of the company had grown at a faster rate than the volume of its sales. Market researchers stated that the significant volume of loss was faced by the company for low market demand, poor weather and underestimated rise in tax rates (Rosenblum, 2014). However the chief officials of the company claimed that poor inventory management was also a bid cause for the loss incurred by the firm. Some thoughtful employees of the company perceived that an improvement in the state of technology and processes (relating to inventory management) could help to eradicate such problems faced by the company. Finally the company decided to resolve the problem by increasing the payroll hours in its warehouse stores and introducing more efficient customized technologies for inventory management. The specialized technology inventory management technology introduced by the company was known as Radio Frequency Identification (Rosenblum, 2014). The company used the technology to improve its supply chain management process. The above case empirically proves that giant multinational companies rely on superior inventory management applications for improving the quality of its operations management. However these applications must be constantly upgraded by the companies. Reference List Banjo, S., 2013. WalMart retools international strategy. The Wall Street Journal, 15 October. Bowman, C. and Ambrosini, V., 2003. How the Resource‐based and the Dynamic Capability Views of the Firm Inform Corporate‐level Strategy. British Journal of Management, 14(4), pp. 289-303. Gazzar, S. E., 2014. Struggling qantas reaffirms tie-up with emirates airline. [online] Available at: [Accessed 31 August 2014]. Henry, A., 2008.Understanding strategic management. Oxford: Oxford University Press. Hughes, N., 2013. Apples research & development costs ballooned 32% in 2013 to $4.5B. [online] Available at: [Accessed 31 August 2014]. McDaniel, C. D. and Gates, R. H., 1998. Marketing research essentials. Ohio: Taylor & Francis. McEachern, W. A., 2012. Economics: A contemporary introduction, 10th Ed. Connecticut: Cengage Learning. Reading, C., 2002. Strategic business plan. London: Kogan Page Limited. Rosenblum, P., 2014. How Wal-Mart could solve its inventory problem and improve earnings. [online] Available at: [Accessed 31 August 2014]. Slack, N., Jones, A. B. and Johnston, R., 2014. Operations management. New York: McGraw-Hill. Srivastava, T. N. and Rego, S., 2011. Business research methodology. New Delhi: Tata McGraw-Hill Education. Svensson, G., 2005. 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