Features of Service Operations Management - Essay Example

Service Operations Management Introduction Every organisation provides services product or service in some form or other. Operations management and operations strategy add value to such services and products. Organisations adopted different types of strategies to grow in a business. These could involve trying out different types of market-product combination. Operations management is in general concerned with the management of people, processes, technology and other resources in order to produce goods and services. It also involves interrelated activities, crossing functional boundaries with inputs and outputs. Businesses can opt to stay in current markets, move on to new domestic markets or venture out to new foreign markets. Depending upon the markets and strategic tie-ups, the enterprises then have to decide whether to continue with existing products or develop new ones. Organizations prepare strategies for long term survival and consistent growth. Operational management encompasses the contribution of all concerned stakeholders in order to achieve the objectives. Now organizations are supposed to have multiple objectives, monetary as well as non-monetary. They are supposed to have flexibility to meet changing external and internal demands. This paper is an effort to study the role of operational management, how the operational strategies keep changing as the organisation grows and how operational management strategies can addresses the speed to market of new products and services and the responsiveness to the demands of customers. Operations and the Organisation The operations system of an organisation is essentially the part that produces the organisations' products. In some organisations the product happen to be physical goods (like TV refrigerator, soft-drinks etc), while in others it is service (insurance, health care, travel, tourism, hotel etc.). The products and services belong to various categories and fields, but all such diverse organisations have one thing in common within their operations systems, that is, the conversion process (Everett E Adam et al, 1995). There are some inputs into the process and after the conversion process, there are some outputs. The quality of these outputs depends upon the how the organisation manages its operations. Traditionally, a conversion process that includes manufacturing (or production) yields a tangible output, while a conversion process that includes service yields an intangible output. But in today's business there is no such dividing line, because the horizon of 'services' has been widened. At times, both of them are interdependent and appear to be overlapping in nature. Manufacturing organisation requires the services like transportation, communication, promotion etc. to procure the supply of materials, manager the supply and distribution channels, be in touch with the customers and suppliers, plan marketing communication strategies, manage the financial accounts of the company etc. Similarly many services organisations depend upon the manufacturing sector for the business. Services too are undergoing a transformation from the traditional concept of a service transaction to one of an experience (A. Fitzsimmons, Mona J. Fitzsimmons, 2005). For the operations management the general goal is to create some kind of value-added product or service, so that the outputs are worth more to consumers than just the sum of the individual inputs. Services oriented businesses now try to do the value addition by way of providing a valuable experience while dealing with them. For example the retail showrooms like Tesco, Asda, Woolworth, Wal-Mart etc. all take pride in the fact that they provide their customers a big operating space, whole range of products and a wonderful shopping experience. From a humble beginning these stores have grown up owing to sound strategic moves and operational management. It was in the year 1919 that Jack Cohen founded Tesco, when he began to sell surplus groceries from a stall in the East End of London (Tesco, 2006). In those days his first day's profit was 1 and total sales of 4. Frank Woolworth (Woolworth, 2006) started his retail career as a sales assistant in the Augsbury and Moore Dry Goods Store in Watertown, New York in 1873. This young boy was desperately in need of a job and the co-owner William Moore took pity on the young farm boy and accepted his offer to work 'free of charge' on a three month trial in the store. In 1879 Frank persuaded William Moore to back him in opening a store of his own. There's no looking back since then. These stores started off with providing goods for sale procured from manufacturers, but today a number of items are available in these stores having a brand identity of their own. These stores started off as 'retail stores'. Gradually they grew to become 'super stores'. Today they are known as 'hyper stores' owing to the gigantic size of these stores with exponential increase in the numbers both domestically and internationally. Today have become Multinationals with stores in many countries besides their country of origin. In a very general sense, we can define a 'system' as a collection of objects related by regular interaction and interdependence. An organisation is like a system where regular interaction and interdependence is the key for an output. How effectively this interaction and interdependence is managed, depends on how the organisation manages its operational requirements. No commercial venture likes to remain stagnant, therefore planning for growth is key element of any ongoing business enterprise. Production organisations have to deal with different types of changes as the organisation grows. Some such changes are; Changes in production technology and product feature and design Changes in quality requirement of customer (development of quality standards over the years is an example) Changes in communication technology Availability of alternatives Changes in marketing methods and demand patterns Similarly a service organisation needs to fine tune its strategies over time in order to grow. Some of the changes that affect the growth of a services organisation are; Changes in the way services are delivered Changes in technology Changes in customer preferences Competitor's strength Availability of alternative services Changes in communication technology Changes in the rules of the game There's no shelf life for a service, it is a perishable commodity, for example an empty room in a hotel consumes all the resources but generates no revenue. At times hotel industry therefore settles down at negotiated room rentals. A vacant airlines seat is good for nothing. Therefore airlines industry has now started auctioning the airline seats. Some such services display cyclic demand patterns over periods of time, which calls for operational flexibility on the part of management. Flexibility in itself can be of various types like; Product and service combination flexibility, Functional flexibility, Numerical flexibility, Financial flexibility, Technological flexibility etc. Roadmap for Growth Some of the crucial factors which need to be taken into account for successful business and survival in a services industry are; Customer focus and quality: Sensitivity towards customers needs means agreeing to provide the customer with quality service. Improvement in quality must be taken as a means of bringing in product differentiation. Moreover, a services industry gives no room for quality control intervention once it reaches the customer, as services are produced and consumed simultaneously. Company must also understand the needs of a customer and 'must not' underestimate this needs. Competitor Analysis: From the strategic planning point of view, competitor analysis is very important for any company's long-term survival. Today before finalizing its own strategy a company tries to study the strategies of its rival. Competitor analysis has several important roles in operational management and planning. It helps the company in understanding the relative competitive advantages/ disadvantages as compared to rivals. It helps in generating broad understanding about the functioning of competitors, so that future plans could be planned out accordingly. Strategic planning also helps in forecasting the Return on Investments and in making SWOT analysis of the company. In case it's a new entry for the company the barriers to entry are also studied using detailed competitor analysis. Sound Marketing Strategy: A services company is supposed to market itself as well as its services. In order that the company keeps getting good orders, it'll have to keep track of sound marketing communication techniques and the marketing mix components like Product, Price, Place and Promotion. Stakeholder Management: Any business operates within a complex system of interests and influences. While identifying the stakeholders the company must look beyond the formal structure of the organization. Therefore it is required to have a look at informal and indirect relationships too. The company management has to make a balancing assessment and evaluate all such external forces in order to adjust them in line with company's objectives. For any services organisation the stakeholders include employees, NGOs, the government, suppliers, customers, investors, financers etc. and to determine the extent to which they could and would exert their influence. Innovation: Rapid advancements in IT and Engineering have not only resulted in improvements in the features and quality of service but it has also made the services more customer oriented. For example, Wireless fidelity or Wi-Fi is a communication technique extensively used by many companies for being 'always in touch' with clients, employees, service providers etc. The service oriented industries in particular are the one's reaping maximum benefit out of this technique. It is the technology which enables streaming media, e-mail access, real-time messaging etc. This helps in making the hospitality industry more hospitable and caring. For a hospitality industry what matters the most is continuous and consistent look-after of the customers by the company. Hospitality industry resorts to Revenue Management (RM) which is a scientific technique combining Operations Research, Statistics and Customer Relationship Management (CRM). The internet that has now emerged as a powerful companion of business. The infrastructure has acquired a business character, a transcontinental personality and a vending framework of wide-ranging, business, educational, scientific and personal data. Now its use covers real-time computer conferencing, audio broadcasting, video broadcasting, real time telephony and of course real-time business. Now, with a personalized e-business solution, a company can customize the online experience for every visitor who comes to its internet, extranet, or intranet site. Similarly for a supermarket chain, introduction of bar coded tags on the products means quick and less error prone services. Therefore the key components of operational management strategy are; Leadership: Leadership is required not only in being the top revenue earner, but the one who foresees and analyses the emerging market scenario and customer preferences. This helps the company in seeking distinction and the opportunity to improve clients' capabilities as well as its own. Adaptability: The Company will have to keep an eye on innovation and adaptability to the emerging situations and customer convenience. Availability: The service must be available to the customer where he needs it the most. This calls for managing the operations in such a manner that optimum number of clients are served. Customer Focus: Quality, satisfaction, personalization and dependability for the customer are key factors for him to return the second time. Integrity: Company will earn the trust of everyone if it works with a promise of being truthful and candid, and delivers on the commitments. Conclusion Operational processes are the way in which work gets done within an organization, to produce goods and services. Because of the simultaneity nature of services, managing the operations effectively and efficiently is more challenging for a services industry. Availability of a number of alternatives and competitors makes the task more challenging. As a result the customer is an advantageous position with reducing costs and increasing features. The service provider is there to serve him at his own convenience. References: 1. James A. Fitzsimmons, Mona J. Fitzsimmons, (January 2005), 'Service Management Operations: Operations, Strategy, And Information Technology', McGraw-Hill/ Irwin, NY. 2. Frans A.J. Ruffini et al (2000), 'Organisation design in operations management', International Journal of Operations & Production Management, Vol. 20 No. 7, MCB University Press. 3. Colin Armistead and Simon Machin, 'Implications of business process management for operations management', International Journal of Operations & Production Management, Vol. 17 No. 9, 1997, MCB University Press. 4. Everett E. Adam, Jr and Ronald J. Ebert (1995) Production and Operations Management (5th Ed), Prentice Hall 5. Paul Connolly and Laura Colin Klein, 'Planning for Growth', The Grantsmanship centre Magazine, available online at http://www.tccgrp.com/pdfs/per_art_planning.pdf 6. Woolworths, www.woolworths.co.uk/ 7. Tesco, www.tesco.com/ 8. Read More