Contribution of Operations Management - Book Report/Review Example

Running Head: OPERATIONS MANAGEMENT Operations Management of the of the Operations Management IntroductionAlthough Hayes and Wheelwright originally coined the term 'world class manufacturing', the global manufacturing surroundings has undergone many changes since their work. In the study, we seek to determine whether the practices which they described are still relevant in today's manufacturing surroundings. This paper reports on research aimed at operationalising the Hayes and Wheelwright four-stage model describing the strategic role of operations management. Operational activities are central to the provision of services and/or goods. Every organization provides a product and service combination. A meal in a restaurant, a visit to the hospital, buying a pair of Levi 501s, making a pair of Levi 501s, Woodstock Festival, insuring an automobile, staying in an hotel, going to the cinema, even the workings of a prison; all have operations activities and their management is central to the successful provision of goods and services. Even Government departments can draw heavily upon operational initiatives and strategies when they talk about supply chain management, lean supply, just in time and total quality management. Contribution Of Operations Management Operations management has its origins in the study of 'production' or 'manufacturing management'. These terms still very much apply to manufacturing organizations that will have distinct operational activities that convert say, beans and rich tomato sauce into cans of baked beans to be sold by a retailer. Thus, we can initially think of operations management as being part of a distinct function producing a product and service combination, just as we have marketing and accounting functions in many organizations. Our first definition of operations management is therefore: Definition 1 The design, operation and improvement of the systems that create and deliver the firm's primary product and service combinations. Every organization that offers goods or services has an operations activity. As far as the organization structure is concerned, some firms will have a discrete operations function. This might be called a manufacturing department, an operations system, or have no identifiable name at all. However, like marketing and accounting, it is a fundamental function of the firm with professionally trained operations or production managers responsible for conversion of resources into the required product and service combinations. In some organizations such managers will have different titles, a store manager for a retailer, administrative managers within a hospital or distribution managers in a logistics company. This first definition tends to be rather narrow as it applies to core conversion processes (mostly manufacturing). We need therefore to widen the definition of operations management to a second level: Definition 2 The design, operation and improvement of the internal and external systems, resources and technologies that create and deliver the firm's primary product and service combinations. This definition expands the operations management concept beyond just internal production or manufacturing. Now it will encompass other activities such as purchasing, distribution, product and process design, etc. Further, there will also be external managerial responsibilities at a supply network level, covering a number of interconnections between external firms. Increasingly, however, modern economies are built around services and experiences, and here operations management is no less important. As Slack et al. (2001) point out, there should be a broader viewpoint that will take into account all activities throughout the firm that have any connection with delivery of a service on a day-to-day, 'make it happen' basis. This brings us to the third definition of operations management: Definition 3 The design, operation and improvement of the internal and external systems, resources and technologies that create product and service combinations in any type of organization. This definition has subtly changed from the second. It now includes both manufacturing and non-manufacturing firms (the service sector - whether profit or non-profit making) and more importantly, covers operational activities and systems throughout the organization, whether performed by an individual, group, unit or department. For example, a marketing or sales function can also be viewed as an operational activity - this also gives us the notion of internal consumers and suppliers. All activities in an organization will create a product and service combination (the latter might include information) supplied to either an internal or external consumer. Similarly, other internal/external suppliers will also support these activities. We can now see that the broad definition of operations management covers the main activities throughout a firm and its supply network contributing to the delivery of a product and service. These activities and their various interfaces can best be viewed as a number of consumer/supplier linkages. World-class manufacturing (WCM) Hayes and Wheelwright (1984) proposed that manufacturing's strategic role and integration with corporate and business strategy falls along a continuum that can be portrayed in four stages. In the tint stage, the manufacturing function is viewed as a potential detriment to the firm, or as neutral at best. Tight controls over all manufacturing functions are deemed essential. Stage two firms still view manufacturing as a detriment or as neutral, however, they have an external focus, looking to industry standards and the advice of consultants as guidelines in managing the manufacturing function. Stage three firms have developed their manufacturing functions and incorporate the capabilities of manufacturing into their strategic plans. Finally, the manufacturing function is the very strength of the firm in stage 4 firms and forms their basis for competition. Hayes and Wheelwright (1984) first used the term "world class manufacturing" to describe stage four firms, identifiable by their ability to develop and use their manufacturing capability as the key to attaining and sustaining a global competitive advantage. Since then, the concept has been elaborated by others, particularly Schonberger (1986, 1991), as attaining sustainable global competitive advantages through the continuous improvement of manufacturing capability The capabilities that have to be developed to compete in export markets globally or the level of performance that is exhibited by top manufacturers in the world. These rather unhelpful and tautological definitions have plagued this approach and by necessity link it to any operations strategy that is currently successful or in vogue (lean production for example). Hayes et al. (1988) describe key attributes of WCM as: Becoming the best competitor; Growing more rapidly and being more profitable than competitors; Hiring and retaining the best people; Developing top-notch engineering staff; Being able to respond quickly and decisively to changing market conditions; Adopting a product and process engineering approach which maximizes the performance of both; Continually improving - kaizen (see p. 83). (See Hayes and Wheelwright, 1984; Schonberger, 1986; Hayes et al., 1988; Giffi et al., 1990) Supply System Behaviour Analyses of: Product Stream Value Flows. Highly complex and dynamic. Such an approach requires the appreciation of supply system architecture and the intricacy of that architecture (length of pipeline, stages, firm sizes, product complexity and dynamism, information availability, customer demands, etc.); power of the participants (strengths/sizes/financial capabilities of the entities in the pipeline will have a marked impact on the way it operates) and integration of the supply system (data/information availability, technology, strategies used and culture). Vertical Integration. As suggested by Hayes and Wheelwright (1984), consideration of vertical integration strategies of pipeline members. This includes: direction of any expansion (upstream and downstream); extent of the process span required (number of supply system activities undertaken by firms) and the balance of the vertically integrated stages (capacity and operating behaviour) whether fully balanced or partially balanced. Between 1910 and 1921 Ford fully exploited experience benefits associated with volume, by modernising plants, vertically integrating to reduce purchasing costs, eliminating model changes and by increasing the division of labour. Costs were cut by three quarters as US market share increased from 10 to 55% (Abernathy and Wayne, 1974). This more 'scientific' approach to management, based on the division of manufacturing skills and routinisation of complex tasks, was further developed during the early 1920s by Alfred Sloan at General Motors. The US competitive lead, encouraged by a substantial home market, continued until almost 1955. The development of competition over this period was dominated by adjustments taking place in other countries as they sought to deal with this competitive gap. The US also led in commercial vehicles, but the UK position here was stronger. In 1955 the US produced 1,250,000 commercial vehicles compared to 340,000 in the UK and only 49,000 in Japan. Faced with so large a competitive gap all major European countries and also Japan responded with high tariffs and other protective measures. Even Britain sustained a 33.3% tariff (originally introduced as a wartime measure in World War I) up until 1960. In addition, it introduced a horsepower tax disadvantageous to the US and steep tariffs were extended to tyres and other components. Both Ford and General Motors responded by establishing manufacturing operations in Britain and Germany between 1925 and 1934; but stronger protectionism in Japan went further and prevented such moves. The US presence in Europe spurred efforts to bridge the gap with world 'best practice', both as regards new technology and new managerial approaches. US multinationals were also an important influence in the supplier sector, for example Champion (spark plugs), Timken (tapered roller bearings), Borg Warner (gearboxes), and Cummins (engines). Since the introduction of Ford's Model T volume has been an important factor shaping competition. Specialist manufacturers of highly differentiated products (e.g. Morgan, Lotus and, on a larger scale, Mercedes) have been less affected than 'volume producers' who represent the bulk of the market. However, even volume producers have always had to balance the pursuit of scale economies associated with volume against the need to preserve flexibility, both in terms of marketing and manufacturing policies. In 1927 the insensitivity of Ford's extreme volume orientated approach to a changed pattern of market demand led to a one year close-down as the company was finally forced into retooling for a completely new model, and a total reversal in the market share position against General Motors (Abernathy and Wayne, 1974). Recent research has highlighted the danger of downplaying the strategic importance of manufacturing considerations (Hill, 1983; Hayes and Wheelwright, 1985). Conclusion The results indicated that Hayes and Wheelwright's practices were related to competitive performance, and that the addition of new manufacturing practices resulted in further improvements in competitive performance. Hayes and Wheelwright (1984) wrote that firms could be classified into four stages of manufacturing strategy: Stage 1: Internally neutral. Production simply makes the product and ships it. Stage 2: Externally neutral. Manufacturing merely meets the standards set by competition. Stage 3: Internally supportive. Manufacturing attempts to become unique from its competition. Stage 4: Externally supportive. Manufacturing pursues uniqueness on a global scale, becoming a world-class competitor. Thus, Hayes and Wheelwright's practices are robust and have provided a foundation for the use of new manufacturing practices. In addition, there was strong support for the notion that the use of world class manufacturing practices, alone and in combination with new manufacturing practices, leads to the achievement of simultaneous competitive advantages, supporting the synergies perspective. References Abernathy, W.J. and Wayne, K. (1974) 'Limits of the learning curve', Harvard Business Review, Sept/Oct 1974, 109 Giffi C.A., Roth A.V. and Seal G.M. (1990) Competing in World Class Markets: America's 21st Century Challenge, Business One Irwin, Homewood, IL Hayes R.H. and Wheelwright S.C. (1984) Restoring our Competitive Edge, John Wiley & Sons Inc., New York Hayes R.H., Wheelwright S.C. and Clark K.B. (1988) Dynamic Manufacturing, The Free Press, New York Hayes, R.H. and Wheelwright, S.C. (1985) 'Competing through manufacturing', Harvard Business Review, 85(1), 99-109. Hill, T. (1983) Production/Operations Management, Prentice Hall International, Englewood, NJ Schonberger R.J. (1986) World Class Manufacturing: The Lessons of Simplicity Applied, Free Press, New York Schonberger, R. J. 1991. Building a Chair of Customers: Linking Business Functions to Create the World Class Company. New York: The Free Press. Slack N., Chambers S. and Johnston R. (2001) Operations Management, Financial Times and Prentice Hall, Harlow, UK Read More