Importance of Operations Management in Business Operations - Term Paper Example

Importance of Operations Management in Business Operations Executive Summary This paper has discussed the concept of operations management and its importance in today’s business organizations. The paper has two main sections: the literature review section and a case study. The first section is a critical analysis of the current literature on the topic and has explored among other things the significance of operations management and its historical development. Another issue that has been discussed in this section is the future of operations management in today’s business world. The case study section has reviewed the application of operations management at the Vodafone Germany. The paper has found that operations management is an essential managerial tool used by companies to design and align business processes with market needs. The paper concludes by noting that operations management will be critical to the survival of many business organizations. The process will also impact significantly in the manner in which businesses interact with each other in the future. Table of Contents Executive Summary 1 Background to the Topic 2 Introduction 3 Literature Review 4 a)Definition and Significance of Operations Management 4 b)Role of Operations Management 5 c)Historical Developments in Operations Management 6 d)Current Trends in Operations Management 8 Applications of Operations Management: Case Study of Vodafone Germany 9 The Future of Operations Management 10 Conclusion 10 References 12 Vodafone Inc. 2011, Vodafone, Retrieve 27 March from: 13 Background to the Topic Every business organization is managed through three important and interrelated functions: marketing, finance and operations management. Other functions such as human resources, accounting, engineering and purchasing, are subordinate to the three major functions. The marketing function is responsible for understanding customer needs and generating customer demands while the finance function is responsible for managing an organization’s cash flows, capital investments and current assets. In between these two functions lies the operations management. Primarily, the operations management is a core business function which plans, organizes, controls and coordinates an organization’s resources to produce the required goods and services. To a great extent, operations management is a managerial function and involves managing people, technology, equipment, information and other resources. All organizations have the operations management function. Ideally, all other organizational functions are there to support the operations management function. Companies use operations management to add value to inputs during the transformation process. This helps companies produce high quality products and gain competitive advantages in the production and marketing processes. Introduction Today’s businesses are operating in very competitive environments than was the case a few years ago. To survive competition, businesses must remain focused on efficiency, quality, international perspectives, customer relationships and time-based competition. The Internet and other advances in the field of technology require appropriate responsiveness and flexibility. This new focus in business operations has cast new light as regards the significance of operations management in organizations. This is because it is only through operations management that companies can achieve the competitiveness required to survive in the highly dynamic, modern markets. In their book, Dennis and Ajit (2003) have reckoned that some of the world’s most successful companies such as McDonalds and Wal-Mart have attained world class status because of their unwavering focus on operations management. Accordingly, these companies have developed unique and highly sophisticated operations management processes, which have kept them ahead of other companies in their respective industries. Essentially, operations management has become a key managerial function for organizations to reckon with in the 21st Century DiVincenzo, 2006). Literature Review a) Definition and Significance of Operations Management Operations management is an integrated business approach that focuses on careful management of business processes to produce and distribute products (Klassen & Whybarl, 2005). Primarily, operations management activities relate to product creation, development, production and distribution. Related activities include inventory control, managing purchases, overseeing storage and logistics, quality control and evaluation of processes. According to Dennis and Ajit (2003), a great deal of focus on operations management is on efficiency and effectiveness of business processes. As such, operations management often includes substantial analysis of internal and external business processes. Undoubtedly, the nature of the operations management process and how it is carried out in organizations depends on the nature of product in the organization. b) Role of Operations Management The main purpose of operations management in organizations is to transform inputs into finished services and goods. The main inputs include human resources, facilities, processes, technology and information. According to White and Fortune (2002) operations management is responsible for orchestrating the resources an organization needs to produce its products and services and meet customer needs. This includes designing the product and the production process, deciding on the resources that are needed, arranging schedules, managing inventory, controlling quality and designing the marketing criterion (Skinner, 2002). In the operations management process, performance information and customer feedback are used continually to adjust inputs, the transformation process and the characteristics of outputs. Effective management of operations has led to success of many organizations. For instance, by 1994, Dell Inc. managed its operations like other companies in the industry. The company developed new business models, which completely changed the role of operations management. These changes enabled the company to delivery high quality, customized products to customers at reduced costs. In his analysis, DiVincenzo (2006) has noted that operations management can create a highly competitive world for businesses. The recognition of the importance of operations management has become increasingly intense as customers demand high quality products and services. White and Fortune (2002) have in their book asserted that operations management helps organizations deliver the objective outcomes stipulated in the overall business strategy and in line with the market needs that the organization attempts to satisfy. At its best, operations management creates more than just a mere reinforcement of the business strategy. The process can be articulated to bring competitive advantages, which in turn provide new business opportunities, capabilities and strategies. In modern business organizations, operations management plays a key role in aligning the organization’s current objectives with the dynamic nature of future competitions (Thoms & Pinto, 2001). Accordingly, operations managers are routinely concerned with the management of the organization’s resources to position the business at par with market competition. Therefore, operations managers have a variety of missions to accomplish, from making strategic decisions about the production processes to the daily management of staff and production. Globalization has increasingly put pressure on businesses to be as competitive as other businesses, which may be located anywhere in the world. If businesses and their operations are not competitive, they may not, in fact, survive for long in most industries. It is, therefore, no longer enough to do things as better as the local industry practice, but business operations must be good in the world standards (Skinner, 2002). Indeed, operations management is an ideal tool, which organizations use to design and embrace world class business processes and hence compete effectively in the global business arena. c) Historical Developments in Operations Management Operations management as a concept is probably as old as time. Important organizational efforts such as the building of the Great Wall of China, organization of the first Olympic Games and construction of the Egyptian pyramids were products of carefully planned and executed operations management programs (Berry & Cooper, 2004). However, operations management came into the limelight as a formal field of study in early 1950s. At around this time, scholars began to realize that all operations processes faced similar problems regardless of the industry in which an organization operate. A number of events which occurred before and after this period helped shape the nature of operations management. These events include the Industrial Revolution, the emergence of the Scientific Management concept, the Human Relations Movement and the Computer Age (DiVincenzo, 2006). The Industrial Revolution dramatically changed the way industrial goods were produced. Before the revolution, goods were hand-produce by skilled craftspeople in their homes and shops. Each product was unique. The development of a number of inventions in the 18th century changed all this. For instance, the steam engine could provide enough power to replace human labor in textile mills and other plants. Gradually, the concept of the ‘factory’ emerged as did the concept of division of labor. The two concepts substantially reinvented the production process and helped the world move from one-time production to volume production (Berry & Cooper, 2004). The Scientific Management was a management approach promoted by Fredrick Taylor. The approach sought to increase industrial productivity and was based on the premises that workers are motivated by money. The approach also advocated for separation of management and labor functions in organizations. Ideally, the Scientific Management and the Human Relations Movement concept provided a solid foundation for the management of modern organizations (Copacino & Jonathan, 2001). In the 1970s, the use of computers became widespread. Computers facilitated large scale data processing with applications in such crucial areas as forecasting, inventory management and scheduling. The advent of the Internet in the early 1990s and the exponential growth in computing capabilities have impacted remarkably in operations management. Total Quality Management is another important development in operations management. As customers demanded high quality products and services, companies were forced to improve the quality in order to retain competitive advantages. Accordingly, the ISO 9000 was developed. This is a set of quality standards that all manufacturers must meet. d) Current Trends in Operations Management According to Morden (2007) the 21st century has witnessed a range of economic, political and social developments which have changed the traditional perceptions and approaches to operations management. These developments include the emergence of such concepts as globalization, time-based competition, electronic commerce, customer relationship management, environmental issues, and product reengineering and Corporate Social Responsibility. Ideally, each of these developments has had an impact on operations management. For instance, process reengineering, which is the redesigning of a company’s products to improve quality and efficiency, and to reduce costs is directly related to operations management as it is concerned with the design and development of products (Thoms & Pinto, 2001). Time-based competition is an operations approach that advocates for development of new products and services faster than the competitors. This means that the products get to the market first and meet customer’s demands. According to Beach, Muhlemann, Price and Sharp, (2000) time-based competition is a revolution in the operations management and requires redesigning the operations process for speed. Today’s operations managers need to think about the impact of globalization and the global marketplace in order to plan effectively. A key issue here is the ability to meet customer needs and get the right product to diverse markets. Environmental issues and corporate social responsibilities have increased emphasis on the need for companies to respond to environmental and social needs of the community. Accordingly, operations managers have to consider such important concepts as waste reductions, recycling and reuse of products. Moreover, organizations have to work in and create atmospheres that are friendly to the host communities in which they operate (Copacino & Jonathan, 2001). The electronic commerce has become an important business facet with side applications across industries. Companies are redesigning their businesses so that they can be marketed and sold over the internet. All these new concepts have not only changed the traditional role and position of operations management, but have also brought about new opportunities for the operations management process (Beach, Muhlemann, Price & Sharp, 2000). Applications of Operations Management: Case Study of Vodafone Germany Vodafone Germany is the largest and one of the most modern telecommunications companies in Europe. Based in Dusseldorf, the company has articulated core operations management practices to become a one stop innovative and integrated technology firm. The company has a wide and well diversified portfolio including mobile communications, internet, fixed network telephony and broadband services for private and business customers. Continuous product redesign and development, numerous investments in new products and services and adoption of modern networks and technologies have made the company a leader in the telecommunications market (Vodafone, 2011). To maintain high quality standards and offer state-of-the-art products and services, Vodafone consolidated the operation managements of its fixed line and mobile networks. To improve operating costs, the company saw it necessary to cut software licensing fees and investments in new monitoring programs while improving the overall effectiveness and performance of its operations management. In early 2000s, the company launched a modern and superior operations management program. The primary purpose of this program was to enable the company reduce operation costs and unify all operations systems. This operations management initiative substantially ignited the company’s fortunes in the industry and today, Vodafone Germany is an indispensable market player in the European telecommunications industry (Vodafone, 2011). The Future of Operations Management The future focus of operations management will be shaped by important issues facing industries at the organizational level. Most prominent of these issues include the adoption of e-business technologies in operations management, production planning, supply chain management, development of information-based business strategies and risk and environmental management (Beach, Muhlemann, Price & Sharp, 2000). Future operations management processes will also have to embrace a number of organizational management philosophies such as mass customization, lean production and agile manufacturing, all of which have direct impacts on product design, development and distribution. With the advent of the internet and the emergence of globalization, operations management will soon propel organizations beyond existing technologies and also provide opportunities for development of new business technologies. Conclusion Operations management focuses on effective and efficient management of resources, processes, information and techniques used to production of goods and services. Operations management professionals help organizations not only manage their capital resources, but also the human and information resources that they need to deliver products. The primary concern of operations management is in the design and development of core business practices and activities that produce high quality goods and services capable of withstanding strong market competition. Business operations are of central importance to any organization and as such, the field continues to be of significant opportunities. Although its recognition as a formal discipline occurred only recently, operations management has been in existence over the ages. Gradually, the concept has been redefined and shaped by major historical events and inventions to become a core component of organizational management. Today, businesses engage the most modern operations management processes to not only produce customer friendly products, but also align their operations with current developments in the industry. References Berry, W & Cooper, M. 2004, ‘Manufacturing Flexibility: Methods for Measuring the Impact of Product Variety on Performance in Process Industries,’ Journal of Operations Management, vol. 17, no. 1, pp. 163–178. Beach, R., Muhlemann, D., Price, A. and Sharp, J. 2000, ‘Manufacturing Operations and Strategic Flexibility: Survey and Cases,’ International Journal of Operations and Production Management, vol. 20, no. 1, pp. 7–30. Copacino, W. C., and Jonathan L.S. 2001, ‘How to Become a Supply Chain Master,’ Supply Chain Management Review, vol. 3, no. 1, pp. 24–35. Dennis, M. and Ajit, K. 2003, ‘Service Management: Building Profits After the Sale,’ Supply Chain Management Review, vol. 1, no. 1, pp. 42–48. DiVincenzo, T 2006, Project Managers Stay in Charge and Out front. Occupational Outlook Quarterly, vol. 50, no. 2, pp. 19-25. Klassen, R.D., and Whybarl, D. 2005, ‘Environmental Management in Operations: The Selection of Environmental Technologies,’ Decision Sciences, vol. 30, no. 3, pp. 601–631. Skinner, W. 2002, ‘Manufacturing Strategy on the ‘S’ Curve,’ Production and Operations Management, Spring, vol. 2, no. 1, pp. 3–14. Thoms, P, and Pinto, J. K. 2001, ‘Project Leadership: A Question of Timing,’ Project Management Journal, vol. 30, no. 1, pp. 19-26. White, D. and Fortune, J. 2002, ‘Current Practice in Project Management-An Empirical study,’ International Journal of Project Management, Vol. 20, No. 1, pp.1-11. Vodafone Inc. 2011, Vodafone, Retrieve 27 March from: http://www.vodafone.com/content/index/media/local_press_releases/germany.html Read More