Importance of Operations Management to Industry - Coursework Example

Operations Management Student’s Name: Course Code: Lecture’s Name: Date of Submission: Operations Management 1.0 Introduction There are various functional areas in a business that that holistically constitutes the process of value creation and basis of operation. These include marketing, finance/ accounting, procurement, human resource and operations/ production (Micu et al., 2012, p.244-249). According to Joglekar & Lévesque (2013, p.1322), Production Management entails various components and sets that interacts to churn out outputs out of inputs leading to value creation. However, the ultimate concern about all these activities is their importance to an industry. By utilizing various industrial case examples, the discourse assesses the significance of Operations Management to industry. The paper argues that Operations Management function occupies a significant position in value creation, and competitive strategy through cost reduction and differentiation thereby acting as one of the source for competitive strategies for an industry. The paper narrows down to three domains and points out that operations management is important in aspects such as supply chain management, environment & ethic and product development & process selection. 2.0 Importance of Operations Management to Industry Operations Management occupies an integral position and functional areas in business or industry as it offers a platform for value creation by integrating various activities so as to enhance competitive strategy of a firm by aiding in reduction of cost of production & operation, improvement of quality, addressing changes in demand and delivery speed among others (Horváthová & Davidová, 2011, p.9). In generic view, Corrêa (2013, p.5); Kleindorfer, Singhal & Wassenhove (2005, p.482-483) discusses importance of Operations Management to industry by examining possible areas of application how they contribute to value creation and competitive advantage. To mention a few, they observe that Operations Management is significant in industry since it aids in performance evaluation & productivity; inventory management; work organization & reward systems; operations strategy & competitiveness; product development & process selection; project management; efficiency & cost reduction; production scheduling; quality management; plant layout; ethics & environment; supply chain management and forecasting among others. 2.1 Role in Supply Chain Management Kleindorfer, Singhal & Wassenhove (2005, p.483) observes that operations management has evolved over the years to move out of the restricted view of cost reduction to embracing of customer and closer inspection of assets. Corrêa (2013, p.5) notes that Operations Management has an impact on how supply chain management is conducted in an industry since it is significant part on how goods are produced and delivered to the ultimate consume. Therefore, it is one of the principal areas of decision making in Operations Management. For instance, he notes that it has redefined supply chain management to new levels such as us collaborative planning in supply chains; organization clustering; appropriate models to make or buy decision and supply chain management. Supply chain is one of the activities an industry engages in so to create value by converting input to output through industrial logistics network in procurement of materials, value addition, and distribution of the final products to clients (Cousins, Lawson & Squire, 2006, p.757). The nexus between operations management and supply chain management is embodied in a case example of Wal-Mart that has integrated database management, information technology and logistics so as to create value for customers. Ketchen et al. (2008, p.365) indicates that Wal-Mart has the most developed supply chain management system ever owned by a private company. However, the question is not about the magnitude and advancement of the supply system, but on the contribution of the system - which is one of the domains within Operations Management - to competitive strategy in regard to value creation, cost reduction and differentiation by empowering a firm to efficiently integrate suppliers, manufacturers, warehouses, and stores so that merchandise is produced and distributed at the right quantities to the right location and at the right time (Simchi-Levi, Kaminsky & Simchi-Levi, 2004, p.2). For instance, to address the needs of their customers, Wal-Mart has centralized real-time retail system which is able to take real time records of all stores. The outcome of investing is such super system is the ability of that system to develop a collaborative engagement where suppliers and manufactures are notified of sales and thus, they are in a position to know the flow of the stock and when it is necessary to supply fresh stock for the retail giant (Heying, 2009, p.237). Moreover, Wal-Mart has invested in a system known as forecast and replenishing strategy (CPRF) which allows the firm to share information on daily sales, inventory and promotions with her suppliers on real time inventories. The last is the vendor managed inventory (VMI) that equally empowers suppliers to monitor inventory at each distribution centre (Safizadeh, Ritzman and Wood, 2002, p.1577). Apart from enhanced supply, the platform allows Wal-Mart to control how the products they are being supplied with are manufactured so as to meet the need of their clients. Closely, it allows them to forecast on production volume where the required product is not over or under produced so as not to create artificial shortage or oversupply (Bicheno & Elliot, 2003, p.25). The role of this superior supply system is exemplified from the fact that Wal-Mart has the capacity to re-stock items in its stores’ shelf immediately passed through the POS system as sold. It takes 2 days turn-around time to replenish stock items on shelves directly from the –manufacturer (Chandran, 2003, p.4). 2.2 Role in Product Development and Process Selection Corrêa (2013, p.5) observes that product development and process selection constitutes one of the domains within operations management. According to him, the critical aspects in regard to the above is the involvement of suppliers and co-design techniques at the earliest opportune time possible; contracting or outsourcing processes & materials and technology/ knowledge-based product development techniques. As part of operations management, product development and process selection Crawford (1972, p.50-) proposes that issues such as technology & market mix; market width; degree of innovation/ limitation; price & quality range; particular promotional requirements and inside vs. outside facilities should be considered. The essence of his argument is that these are priming factor among many that influence the process of product formulation. As an example, one of the companies that depict a high level of how they manage the operational process of formulating a product so as to meet their goal of being low price firm is IKEA which deals with household items. The firm has adopted a holistic approach of integrating the whole process from a systems view perspective as opposed to isolated occurrence where product is developed a piecemeal thereby not attaining the required end result of value creation. The firm claims that it has been able to reduce its final selling price by 20% in the last four years and sell their products at 30 to 50% below their competitors. The whole of these benefits is anchored on their product development process that takes into consideration of five important steps. The first is the setting of expected retail price, choosing the right manufacture to actualize the desired price targets & quality, designing the product, shipping and selling (p.116-117). For instance, before embarking on the whole processes of churning out a new product, they deliberately set out the price they expect the product to be sold so as to be in tandem with their organization’s aspirations. They then engage within their networks the most suitable manufacturer who can produce the product at the required price while ensuring quality standards are adhered to. Secondly, they choose the manufacture that actualizes the dream. Here their focus is not on just churning out a product, but to produce a product that is well designed on as to take care of ease of packaging, transportation and environmental sustainability. The fourth step relates to logistics and shipping to various destinations. Their focus in this regard is to formulate products that easy to transport both for the firm and the consumers so as to reduce transportation cost by designing and packaging them in appropriate manner. For instance they have obsession of making things flat so as to ease transportation cost which can then be transferred to consumers (p.116-117). 2.3 Role in Environment & Ethics The issue of product and process sustainability has gained prominence in all aspects of a firms operation. This is anchored on the realization that existence of human being is not only tied to economic success, but also on how humanity value their environment for ;present and future generation. Anchored on natural capitalism the concept advocates for businesses not to value the value derived from natural resources alone, but also the eco-system services that they render to humanity and the large system which business should aim to compensate for (Aras and Crowther, 2008, p.281). Corrêa (2013, p.5) indicates that this is a significant theme within operations management since it greatly informs the process of production and operation and how the same can be properly aligned so as to adhere to environmental principles of sustainable development. This shows the importance of operations management in regard to ethical business approaches and sustainability. The whole process of sustainability is anchored on the ethical principle of non-consequentialism as embodied in deontological expectations where firms/ industries as moral agents are expected to engage in good behaviors that are in line with societal; expectations (Farrell, Fraedrich & Farrell, 2011, p.128). The importance of operations management in this regard is anchored on the fact that failure to adhere to these expectations a firm is likely to incur legal fines, boycott and negative reputation that is likely to erode the brand awareness and equity therefore leading to reduced competitiveness and sales and hence, defeating the ultimate focus of operations management (Williams and Adams, 2013, p.456; Yoo, Donthu, & Lee 2000, p.195). One of the companies that in their operations management depict high levels in regard to environmental sustainability is McDonald Australia. The firm appreciates the fact they contribute towards environmental issues. According to them, these include energy use and green gas emission, water consumption and waste generation. However, their ultimate focus in their operation is to manage energy utilization as it is one of the contributors towards production of carbon dioxide which is one of the greenhouse gases contributing to global warming. In their effort to account for their carbon emissions, the company was the first quick service restaurant to ratify Green House Challenge Cooperative Agreement. Moreover, they participate in Energy Efficiency Opportunities Program that obliges them to initiate energy efficiency measures. At the same time they adhere to Greenhouse Gas Emission Reporting Act (McDonald Australia, 2010, p.20-21). 3.0 Conclusion The ultimate premise of the discourse was to establish the importance of operations management to industry. The paper appreciates the fact operations management has a significant position to an industry in relation numerous factors such as supply chain management; product development & process selection; forecast, efficiency & cost reduction and production scheduling. Nevertheless, the paper reduced the focus to three themes which are product development & process selection, supply chain management and environment & ethics. The paper established that operations management is integral in effective management of supply network so as to enhance value creation and competitiveness of affirm by reducing cost of operation and enhancing quality of product delivered in time. Secondly, the paper found out that operations management is critical in development of customer oriented product that captures the intents and needs of the customer and lastly, the paper established that operations management is significant in addressing issues of ethics and environmental sustainability in industrial operations thereby addressing the whole issue of institutional accountability, corporate governance & social responsibility. References Aras, G and Crowther, D 2009, Corporate sustainability reporting: a study in disingenuity, Bicheno, J and Elliot, B 2003, Operations Management, New Jersey, John Wiley and Sons Inc. Corrêa, H. L. (2013, Changes in the role of production and operations management in the new economy. Journal of Operations and Supply Chain Management, 1(1), 1-11. Cousins, P. D., Lawson, B & Squire, B 2006, Supply chain management theory and practice: the emergence of an academic discipline, International journal of operations and production management, 26(7). Crawford, C 1972, Strategies for new product development, Business Horizons, 15(6), 49- 58. Ferrell, O. C., Fraedrich, J & Ferrell, L 2011, Business ethics: ethical decision making and cases, 8th edn, South-Western Cengage, USA. Heying, A 2009, A Case Study of Wal-Mart’s Green Supply Chain Management, Retrieved on 20 March, 2014: http://www.apicsterragrande.org/Wal-Mart%20Sustainability.pdf. Horváthová, P & Davidová, M 2011, Operations Management as Practice of Organizations' Strategic Management in Relation to the Environment, International Proceedings of Economics Development & Research, 11. Joglekar, N & Lévesque, M 2013, The role of operations management across the entrepreneurial value chain, Production and Operations Management, 22(6), 1321-1335. 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Employee disclosures from a stakeholder accountability perspective, Accounting, Auditing & Accountability Journal, 26 (3), 449- 495. Yoo, B., Donthu, N & Lee, S 2000, An examination of selected marketing mix elements and brand equity, Journal of the Academy of Marketing Science, 28(2), 195-211. Read More