The Concept of Operations Management - Term Paper Example

Operations Management Abstract We will attempt to show how operations management and it components are vital to any company. Answering questions pertinent to the concept of operations management we will examine the issues arising out of these questions. Looking at the definition of Just-in-Time; we will argue if this definition fully describes the system and if this definition can be improved. How a product is designed and whether simultaneous development or in other words concurrent engineering lends to a successful design. We will also consider the argument that higher quality comes at higher cost. We will explain and establish personal views on these questions and attempt to show how these are relevant in a modern context. Explaining how manufacturing has benefited from the innovative application of such principles. Overview of Operations Management Optimally managing a set of processes in an organization, to create a product or deliver a service constitutes operations management. It covers almost all activities in a company including inventory and logistics and ensures that processes are efficient and effective. Definition of Just-in-Time and its Constraints The definition “Just-in-Time (JIT) is a system for controlling stocks” is only one among several used to define this system. Whether or not this definition manages to covers the varied scope and objectives of JIT is what we will attempt to answer. Created by Taiichi Ohno of Toyota Motor Corporation of Japan, the Just-in-Time inventory system is partially based on the ideas of Henry Ford. “Our finished inventory is all in transit. So is most of our raw material inventory. When production stands at 8,000 a day, this means that our various factories manufacture and ship enough to make 8,000 complete cars. We know just how many machines and employees it will take to reach a given figure at a given time, and how to take care of seasonal demands without the danger of becoming overstocked. A thirty-day supply of any one material is the maximum carried by a department . . . The average department inventory is less than ten days’ supply” (Henry Ford). Inventory for a manufacturer usually consists of raw materials, work in progress components and finished goods. As a system, Just-in-Time (JIT) governs how and when raw materials and components are procured from a vendor or supplier. Raw materials are procured when re-order levels are reached, limiting capital expenditure and amount of warehouse space used. Ultimately, this results in finished goods reaching wholesalers and retailers in time eliminating the need for warehouses. The core strategy of JIT is the optimum utilization of inventory and elimination of waste in order to increase the return on investment. Excessive inventory is seen as an effect of bad management practices. JIT has graduated over the years into a whole philosophy, to be adopted and followed by an entire company. Ideas contributing to this philosophy come from various fields including behavioral science, industrial engineering, statistics and production management. The Just-in-Time system can be applied to a number of work processes, ranging from manufacturing to non-manufacturing and people. Effective scheduling of work hours and training employees in multiple skills is how people are optimally used by the JIT system. Under this system, employees with multiple skills can be shifted to different jobs during periods of peak demand. The benefits of this system are wide ranging and this has resulted in JIT achieving international recognition. While the broad application of this system has inherent drawbacks and benefits and continue to be researched the core principle is sound. How this system adapts to meet the needs of various non-manufacturing sectors and deals with the problems of demand and supply is something left to be seen. The JIT system started on a promising note, with several companies’ returns on investment increasing manifold. Currently, the definition of Just-in-Time seems adequate. Recent developments such as rising fuel prices have questioned the adequacy of this system and whether this system was indeed used by the oil industry. Future changes to this definition hinge on the optimum use of the system and whether the system can answer the needs of modern business. Designing a Product – Benefits of Simultaneous Development Product design can be broadly classified as the creating of an idea, screening and developing of the concept, and ultimately executing a service or creating a prototype. While this is a broad classification, product design also deals with various pertinent factors such as marketing, sales, ergonomics, usability, industry standards and materials. Successful designs are based on a variety of factors and reasons. Why concurrent engineering is useful in successful product design is the question we are trying to answer in this section. First consider the stages involved in designing a product, these are listed below. Design Brief The design brief is a statement which defines the projects direction and what the ultimate service or product is going to be. A design brief might read something like “we aim to design and create an electric car”. Product Design Specification (PDS) Probably the most significant stage of the design process, this stage involves listing the problem the product or service aims to address. Understanding the problem or need is paramount and this document is usually compiled after researching and considering all applicable points and discoveries. Concept Design and Evaluation In this stage, referring to the PDS the product designer produces a number of workable concept designs. These designs are basic outlines providing the key components and their arrangement in a product or service. Concept designs may be sketches or drawings and details are kept to the minimum. These concept designs are then evaluated and the most appropriate one is lined up for detail development. Detail Design Detail design, involves detailing the concept design and readying it for manufacture with appropriate measurements and specifications. Creating prototypes are a vital part of this stage; a prototype helps test the practicality of providing or manufacturing a service or product. Traditionally, product design proceeded in a sequential fashion, ultimately leading to manufacturing. This process contains inherent flaws, such as having to go back to the previous stage to correct mistakes, resulting in expensive and overdue products. Realizing that these flaws were lowering their return on investment companies have started adopting several new approaches to product design. Concurrent engineering otherwise known as simultaneous development is one such approach. Under this approach product design and manufacturing process development happen concurrently and are integrated. A cross functional team is constituted to handle this integrated process. Simultaneous development incorporates all the essentials of the product life cycle from conception through disposal. Even consumer centric issues such as cost, quality and maintenance are considered from the beginning. The factors which determine the success of a product are many some of them are cost, functionality, durability etc., and the success of a product in the marketplace cannot be guaranteed. Design and manufacturing engineers working together help minimize the number of flaws a design has. Recognizing and rectifying design inadequacies in a timely manner not only serves a design well but leads to a well manufactured product. Concurrent engineering as explained in the above mentioned reasons can help guarantee the success of a design and the resulting product. Higher Quality at Higher Costs Quality and its relationship to cost. This is a conundrum which continues to be of great importance, especially in the consumer centric society of today. Does higher quality inevitably come at a higher cost? This is the question we are going to try answer in the next few paragraphs. In the long run, companies do not benefit by comprising on quality in relation to cost. Lower quality products and services riding on lower costs might do well in the short run but ultimately lose to higher quality ones. “Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A product is not quality because it is hard to make and costs a lot of money, as manufacturers typically believe. This is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality.” (Peter F Drucker) This would hold true in an ideal world, but since no such thing exists, we are left to contemplate if higher quality especially in manufacturing necessitates higher costs. Companies are quite aware that the age old notion of higher quality demanding higher price still holds true among most consumers. Consumers rely on this notion when they are faced with uncertainty regarding a product or service. In such situations, the price/ quality relationship kicks in consumers select the relatively higher priced option. Higher costs for superior quality are sometimes advantageous both to the customer and the manufacturer, especially in the case of new products which offer superior features when compared to existing products. Such products even at a higher cost provide greater value to a customer and satisfy his needs in a better manner. These are the products which lend value to the notion that higher quality demands higher cost. In such cases, manufacturers usually recognize the need for their product, develop and price them accordingly, knowing that once the quality and value of their product is recognized, price will not be governing factor in consumer’s minds. Industry is constantly being asked to achieve seemingly conflicting goals, ensure the high quality of their products while keeping costs at the minimum. Resolving these conflicting and highly interdependent issues may seem futile but a structured approach towards cost and quality can help. Case in point, the advent of cheap Chinese manufacturing and labor has resulted in major clothing lines relocating manufacturing units to China. In this case quality has not been compromised and manufacturing costs have been reduced. Ultimately, the customer has benefited getting the same quality at a lower price. Learning that they can win in this ultimate balancing act of quality and price, manufacturers en masse have set up units in China or have outsourced their manufacturing to China. Hence in the current global economic scenario, where outsourcing manufacturing to China is the norm, cutting costs has not necessarily meant reduced quality of raw materials and end products. Works Cited Ford, Henry - Today and Tomorrow: http://www.productivitypress.com/client/client_pages/pressprJan03-1.cfm Drucker, Peter F. - http://thinkexist.com/quotations/quality/ Read More