How Effective Operation Management Is - Research Paper Example

Operation Management Executive summary The report aims to find out how an effective operation management model can help an organisation to solve its operational issues, especially related to quality control and inventory management. This report would study various theories propagated by experts on quality and inventory management and would try to establish whether these theories had been implemented by the company that has been taken for the case study. Further, it attempts to establish a benchmark for creating a successful operation management matrix in a given industry. In order to achieve these objectives, the report would discuss the meaning of operation management in detail and undertake a case study of an organisation that has successfully implemented quality and inventory management in its company to solve the operational issues. For this report, the business case of GR Thangamaligai (GRT), a leading jewellery store in Chennai has been selected, and the conclusions from the case study helped in establishing a success matrix for retail jewelers in India. The research further established that GRT can leverage the existing operation management model to realise its goals to expand its businesses in other parts of the company by employing innovative ideas and focusing on quality and inventory management. Introduction Meredith & Shafer believes, “Organisations exist to create value, and operations involves tasks that create value” (Meredith & Shafer 2007). Even experts such as Hammer maintain that through innovations in operation management, companies can gain tactical advantages over their competitors. Thus operation is defined as utilising strategic inputs to produce useful results that can add value to a company (Hammer 2004). Through this report, I would explore how an effective operation management model can help in the success of a company. The results of these research objectives would help in establishing benchmark for creating success matrix (Fitzsimmons 2001). For this particular research paper, I have chosen to study the operation management model followed by GR Thangamaligai or GRT, a leading jewellery store in Chennai, Tamil Nadu. However, in today’s changing retail scenario, GRT faces various new operational challenges, especially related to its inventory management and quality control. Due to the recent recession in the economy, the entire jewellery industry in India faced various issues. GRT also faced several problems due to the recessionary trend, which particularly focused on inventory management and quality control. Some of the problems faced by the company are as follows: Sourcing jewellery from regional makers: GRT is known for its variety of designs, which the company generally sources from different local jewellery makers of the country. However, due to recession, most these small local jewellery makers suffered heavy losses and many could not sustain their businesses. This also meant that GRT was not able to stock their stores with new designs and had to look for other partners. Rising gold prices: Due to the rise in gold prices, GRT like other prominent jewellery retailers came up with the concept of introducing gold jewellery pieces of lesser value. This meant that the retailer had to produce jewellery of lesser weight and carat, which often led to creating inferior quality products. In order to counter these issues, GRT adopted an operation management model and focused especially on the inventory management and quality control aspects. The innovative operation management model that GRT followed helped the company not just tide over the recession, but also added to its bottom line. (ICRA assigns 2009). In order to conduct research for my paper, I have undertaken a secondary search of available literature on the topic. Most of my data taken for this research are from secondary sources, published media reports and published research reports on the subject line. There are several advantages of collecting data through secondary research, which includes saving time, and collecting a large database (Babbie 2005). However, as secondary research totally relies on already published reports, it is imperative to collect the data from reliable sources and check the validity of the data. In order to evaluate the validity of the data researchers should examine the secondary data and ensure that it is appropriate for the purpose of their study (Denzin 2005). Literature Review Defining operation management Operation is often defined as activities that are associated with changing inputs into useful outputs that would create a meaningful and value-oriented result (Evan 2000). Meredith & Shafer shows that the actual nature of operations is defined in terms of inputs, outputs, transformation system and the method used for monitoring and control. Source: Meredith & Shafer Further, Meredith & Shafer (2007) said, “There is a preferred order in developing strength on various competitive dimensions.” Further, as per the Sand Cone model shown below, organisations need to develop the capacity to create quality products. Therefore, when the organisation develops its capabilities, it is able to take on its competitors easily. The sand cone model ( Adapted from Ferdows and De Meryer 1990,P 175 ) Also, experts highlight that operations play a very important role to help companies tide over competitions (Porter 1985, Zeithhaml 1990). Therefore, in order to gain an edge over the competition, it is imperative to understand the prevailing market trends, the evolution of methodologies to create stringent quality control checks, the effect of operational decisions on gaining over the competition and to study the supply chain carefully. Further, it is important to develop and implement a business strategy as per the business goals of the company (Wheelwright 1985, Kaplan 2000). The most crucial part of this research is to understand the quality management aspect of the company. Experts believe that quality management is an important part to create effective operations management, especially for undertaking continuous improvement. Further, recent developments in quality measures, such as Total Quality Management (TQM) and benchmarking, have also aided in the development of operations management (Wright 2004). Another issue that the paper would focus on is the integration of a proper inventory management system to counter the problems faced by the company. Experts opine that an effective inventory management system using methods like just-in-time inventory control can not just save money for the company but can also ensure that the consumers receive the products on time (Bowen 1990). GRT: A case study GRT is known for its original craft, intricate designs and high quality products, which makes the company one of the highest ranked destinations in the world of jewellery retail (ICRA assigns 2009). The major reason for the success of this pioneer jewellery retail is its management’s ability to introduce new and innovative concepts and ideas. GRT was one of the few stores that encouraged stocking both traditional and contemporary designs under the same roof (Slack 2004). Unlike most of the jewellery retailers in India who manufacture their own jewelry, GRT likes to experiment and source most of their merchandises. The company sources its products from different places and selects only the ones that has the best finish, design, and price and provide some regional flavour. This helps the company in not only providing quality products to its customers but also in selling a variety of designs (Waller 2003). The problems: However, due to the recent recession in the economy, GRT’s position in the market was compromised on these very two foundations on which the company was based upon. The quality of the company’s product witnessed a downfall, as the company attempted to produce gold products with lesser carat value and weight. This resulted in creating fragile pieces which often broke, or products that lost its sheen with time. GRT faced customer’s ire and lost many loyal consumers in the bargain. Further, the company was not able to source different designs and products from the local artisans on time as most of them were incurring losses and some even closed their businesses. This also affected the branding of the GRT, as the consumers were disappointed to find only old designs and many even switched their brand loyalty (Qureshi 2009). The solutions: The management decided to tackle both the issues together as quality control could also be addressed through an effective inventory management. The company implemented the most important TQM concept that is “quality at source”, wherein quality responsibility shifted from the quality control department to the workers or the source of product. Therefore, GRT put greater emphasis on sourcing of their products and ensured that only quality products are bought at the source. Further, the recession created newer opportunities for the company and it looked at sourcing products from the international markets where the jewellery prices had also gone down. In fact the company was the first one to leverage on its collaborations with well-know Italian designers and introduced imported Italian jewellery to the Indian consumers. Also, their Italian counterparts followed the quality concepts propagated by Philip Crosby and focused on producing products with “zero defects”, which means that these Italian products were without any defects. Further, the company also identified various big jewellery manufacturers in Gujarat who were facing the heat of downturn and had ready inventory for the international market that got cancelled. GRT utilised this opportunity and bought the ready bulk stock at lesser price. Tying up with local vendors also meant that the company was able to source high quality products at lesser cost. This is in direct collaboration with the theory proposed by Joseph Juran, who had suggested that organisations should minimise prevention and appraisal costs. Further it also applied the theory proposed by Lesley & Malcolm Munro-Faure who expressed that ' Quality is now defined by many companies as total conformance to requirements: these requirements are the total customer requirement, not just a product or service specification '. Therefore, GRT also revamped its supply chain management and implemented newer measures to check the quality of its products in the supply chain itself. It established a new quality check team within the supply chain that conduced sample testing of products before it reached the stores. Although, there are different approaches to apply quality checks, GRT implemented TQM, wherein the company first determined what the customers wanted, thereupon, developed various products that either met or exceeded customer expectations. The company focused on developing a system of production that only emphasised on doing the work perfectly at the first instance itself. The operation management model implemented by GRT has also provided it with an insight to forecast about the trends to be expected in the jewellery market. Realising the potential for good quality large stones, the company stocked all its stores with quality products, by highlighting on the certification received by each gemstone. The company especially focused on getting the gemstones ISO 9000 certified (Johnston 2005). The company’s way of staying ahead of its competition is best described by Mr G.R. Radhakrishnan, Director, GRT Thangamaligai, who empahsised that the company’s decision to market innovative designs every 15 days has helped it to tide over its competitors (Challapalli 2003). Recently, GRT has been assigned with LBBB rating by ICRA. The rating definitely reflects that GRT Group has an established market position, especially in the jewellery retail market of Tamil Nadu. Further, the rating also reflects on the effective sourcing method and incorporated operational nature of the organisation, which has helped the company in providing a moderate financial risk profile and cost advantages (ICRA assigns 2009). From a humble beginning in a store in Chennai, the company has now diversified in other geographies such as Bangalore and Hyderabad and plans to expand further. The operational management model of the company based on the management’s decision to incorporate innovative ideas, to look for newer vendor partners, to strengthen its supply chain and to focus on producing quality products at cheaper rates has helped the company in garnering such popularity in the South Indian market. Summary and conclusions Operation management is a process through which strategic inputs are utilised to produce useful results that can add value to a company. Through this report, I attempted to find out how an effective operation management model contributed to the success of a company by studying the issues faced by the leading jewellery store in Chennai, GR Thangamaligai. The research not just focused on the issues but also the solutions that GRT came up through the adaptation of various theories propagated by experts, which helped me in establishing benchmark for creating success matrix for retail jewelers in India. In today’s changing retail scenario, GRT faced various new operational challenges; however, the company took these challenges to its stride and created opportunities out of them. Some of the key recommendations that the research paper has arrived at are: Turning problems into opportunities: Just as GRT turned recession to its favour, retailers should also look at developing similar strategies to turn problems into new business opportunities. Strict quality control: With the company’s decision to source products from big vendors and international designers, GRT was saved the botheration of monitoring quality closely, as most of the big vendors and designers already had quality control methods like TQM in place. Companies should follow a similar quality control model to ensure maximum customer satisfaction. Revamped supply chain: Retailers should also revamp their supply chain and implement quality check process even in the supply chain. Thus, this research paper through the case study of GRT infers that in order to become successful in the jewellery retail market in India companies should focus on incorporating innovative ideas, following stringent quality control in the supply chain management itself and implementing newer inventory management techniques. References: Babbie, Earl R., 2005, The Basics of Social Research, Thomson Wadsworth, 174. Bowen, D. E., R. E. Chase, and T. G. Cummings & Associates, 1990, Service Management Effectiveness, San Francisco: Jossey-Bass. Challapalli, Sravanthi, 18 December 2003, ‘Traditional jewellers hold their own against branded players,’ Hindu Business Line, viewed 27 January 2010, . Crosby, Philip B., Quality is Free: The Art of Making Quality Certain, McGraw-Hill, 1979. Denzin, Norman K. & Lincoln, Yvonna S., 2005, Introduction: The discipline and practice of qualitative research, In N. K. Denzin & Y. S. Lincoln (Eds.), The Sage Handbook of Qualitative Research (3rd ed.), 1-32. Evans, P., and T. S. Wurster, 2000, Blown to Bits, Boston: HBS Press. Ferdows, K. and De Meyer, A., 1990, ‘Lasting improvements in manufacturing performance: in search of a new theory,’ Journal of Operations Management, 9(2): 168-184 Fitzsimmons, J. A., and M. J. Fitzsimmons, 2001, Service Management: Operations, Strategy, and Information Technology, New York: Irwin/McGraw-Hill. Hammer, M., April 2004, ‘Deep Change: How Operational Innovation Can Transform Your Company,” Harvard Business Review, pp. 85-93. ICRA assigns LBBB/A3+ ratings to the bank lines of G R Thanga Maligai, 18, November 2009, ICRA Limited. Johnston, R and Clark, G, 2005, Service Operations Management, FT Prentice Hall, 2nd Edition. Juran, Joseph M. & Godfrey, A. Blanford, Juran's Quality Handbook 5th edition, McGraw-Hill, Kaplan, R. S., and D. P. Norton, September-October 2000, ‘Having Trouble with Your Strategy? Then Map It,’ Harvard Business Review, pp. 167–176. Meredith, J R and Shafer, S M, 2007, Operations Management John Wiley, 3rd Edition. Munro-Faure, Lesley; Richard Teare, Malcolm Munro-Faure, Eberhard Scheuing and Bowen, John, 1998, ‘Improving Quality Through Teamwork,’ International Quality in Services Conference, Norwalk, CT. July. Published in proceedings. Porter, M. E., 1985, Competitive Advantage. New York: Free Press. Qureshi, Erum Ali, June 2009, ‘South India-Where Gold Reigns’, JCK, pp. 36-41. Slack. N, Chambers, S, and Johnston, R, 2004, Operations Management, FT Prentice Hall, 4th Edition. Waller, D L, 2003, Operations Management – A Supply Chain Approach, Thomson, 2nd Edition. Wheelwright, S. C., and R. H. Hayes, January–February 1985, ‘Competing Through Manufacturing, Harvard Business Review, pp. 99–109. Wright, J N and Race, P, 2004, The Management of Service Operations, Thomson, 2nd Edition. Zeithhaml, V. A., A. Parasuraman, and L. L. Berry, 1990, Delivering Quality Service and Balancing Customer Expectations, New York: The Free Press. Read More