Operations Management - Coursework Example

OPERATIONS MANAGEMENT By Operations management Question 1Discuss the importance of strategically integrating operations, finance, and marketing In modern hyper-competitive world, a company’s operations, finance, and marketing must be much at all levels from central operations to final execution. In functional departments like operation and finance, functions of marketing look alike. In general, these three entities are focused on markets and customers. Why the importance of integrating operations, finance, and marketing? Every business organization is mainly run for financial goals- making money. The financial performance of an organization is the outcome of the organization’s operations. Operations include all activities that an organization does to gain a competitive advantage over its competitors in the market. An organization uses operating performance to attract and retain customers and also serve them in a profitable manner (Hsu, Tan, Kannan &Keong Leong 2009, p. 835). Operations vary in different industries, but in general, they include things like on-time delivery, customer acquisition, running efficiently, and developing new products and services. According to Barney (1991, p. 56), the internal organization of resources in a firm is the determinant of the firm’s performance and strategy. Barney further defines resources as capabilities, assets, attributes, knowledge and information, and all things that are under control of the firm to enable it implement strategies that aid in improving effectiveness and efficiency. Porter (1996), on the other hand, asserts that the most essential resources are the ones that are hard to imitate, superior in use, more valuable, and difficult to substitute. According to the two authors, a firm’s competitive advantage resides on inherent heterogeneity of strategic resources that are controlled by the firm (Barney 1991, Porter, 1996). Therefore, failure to strategically integrate operations, finance, and marketing results in a weak and inconsistent company’s strategy, and its execution will be inefficient and flawed. In today’s world operation activities have become the dominant element in planning and management of production capacity (Stevens 2009, p. 5). Whether you are running a manufacturing firm or a service company, the organization deals with issues of what and the amount of production, and means of measuring performance. In many firms, operations are viewed as an identical partner with finance and marketing. The operations staff of an organization concerns with the planning and management of production capacity, accompanied by production facilities and equipment. Operations gives an organization that manufacture own products, additional importance, and its responsibilities scale up as an organization grows. It is essential to speak of operations because they primarily aid in achieving a firm’s strategic goals. Operations begin with formulation of an organization’s mission and vision that express the future and overall direction of the firm, identify products and customers, and describe ambitions for image, growth, and profitability (Kleindorfer, Singhal & Wassenhove 2005, p. 76). Therefore, in order for an organization to achieve a strategic growth, there is need of integrating its operations with finance and marketing. Finance, on the other hand, is the organization’s portion that concerns itself with keeping financial records. Decisions and accountability offer a reactive and proactive support for other departments of an organization as well as assisting them to identify means of raising profits and cutting costs. Operations involvement with managing inventory, setting up equipment, and measuring organizational performance integrally fits with the focus of accounting and finance on bottom line (Tatikonda & Montoya-Weiss 2001, p. 78). That similar intersection between fiscal policy and strategy involves personnel and staffing cost. Most small businesses find it advantageous to combine financial and accounting into one operation. Marketing, on the other side plays the role of translating the visions of operations into plans that meet the needs of customers and come up with the means of satisfying these needs (Thirumalai & Sinha 2005, p. 89). In some organizations, the departments of design, operate under marketing management control. This operates under the principle that it is marketing that determines the direction of the product, and design comes up with ways that quantify that idea. In other firms, design controls marketing direction (Christopher 2011, p. 34). Since operations are mainly focused on production capacity and capabilities, it directly connects with decisions and discussions about product direction, which are under marketing. In service firms or small companies, marketing holds the greatest prominence among the firm’s activities. Therefore, all aspects that are involved in running a firm should be integrated strategically with one another. It is important to strategically integrate operations, finance, and marketing because they all contribute towards the planning and profitability of a company. Because operations, oversee and strategic capacity and output, it forms and at the same time underlies financial and marketing decisions (Boyer & Hult 2005, p. 90). Instead of making operations help other departments, it can be set up to integrate with other functional areas such as marketing and finance. Operations constitute too many things from quantity to quality, thus contributing towards organization’s success. Question 2: Discuss how an operations capability can support and lead a business strategy. Operations capability in a business refers to materials, capacity, and expertise that an organization needs for it to perform its key functions. Organizations compete with other firms for revenue, customers, market share, and therefore, different organizations employ different tactics to achieve their business strategies. The process of reshaping and putting business strategies in action is the role of operations leaders in an organization (DiBella & Nevis 2008, p. 67). Operations capability is the ability of a business to successfully implement competitive business strategies that allow an organization to survive in the market and increase its value. Business strategies in order to be successful, they must take into account all the operations carried out in an organization. Operations capability is a very major component that enables an organization to remain financially growing and viable despite facing stiff competition in the market. If an organization is capable of carrying out all its operations, this definitely means that all the implemented business strategies within the organization will be successful. This is because operations capability is the key drive towards success of an organization and they are the backbone of an organization (Tan, Kannan &Narasimhan 2007, p. 5135). Employees in an organization also care about operations capability since they identify business that is stable and able to compete with other firms in the market. There are various business operations that contribute towards successful business strategies. Operations such as marketing, accounting, data storage, and customer relation all contribute towards ability of an organization to formulate and implement sound strategies. Other elements that contribute towards successful business strategies include organizational structure and human resources since leadership mechanisms and skills of employees all contribute towards business’ competitiveness. Products and services’ pricing is also part of sound business strategies with organizations that manipulate their prices in an appropriate manner to increase profits (Slack, Brandon-Jones, Johnston and Betts 2012, 98). All these operations enable a business to implement effective strategies, thus enjoying a competitive advantage. For example, the case of studies of Great Nuclear Fizzle illustrates several reasons why operations capability is so vital for an organization’s success. The case study shows that appropriate business strategy does not rely on focused factories and key manufacturing task but manufacturing strategy. For instance, the case explains why the attempt of copying manufacturing strategy of Toyota is very dangerous. If the Great Nuclear Fizzle Company had operations capability, it would not have faced the drawbacks it went through. Due to operations incapability, the company has faced several technological difficulties and resistance from the public during its transition to a large nuclear power industry. This transition has delayed for a long period being one of the company’s failures to deliver its operations as a nuclear power plant. TOC and Lean are compatible and this gives them the ability to support and lead business strategy. For instance, they both seek to reduce time waste (time from order reception to conversion into cash). They are both based on pull production, which begins with customers and ends by providing a coherent approach of dealing with an organization’s supply chain. TOC has a lot of benefits of critical chain, drum-buffer-rope, distribution solution, and the entire supply chain of an organization. The two approaches also help towards reduction of waste during the manufacturing process. TOC views waste as something that cannot help in the achievement of organizational goals. Lean on the other hand, defines wastes as things that add no value to the organization. The two also help to increase and maintain throughput by utilizing powerful tools that are best suited to this goal. Operations capability can support and lead business strategy in several ways, including management of resources such as workers, effectively gaining more advantage over competitors. Operations capability mainly focuses on the ability of a business to meet the demand of its customers. In addition, organizations employ unique operations capabilities, which enable them, prevent replication of capabilities used by competitors (Nath, Nachiappan & Ramanathan 2010, p. 319). Operations capability is anything that a company does effectively to improve its performance and differentiate it from its competitors in the market. This supports business strategy because it helps business owners gain competitive advantage by putting more focus on areas that the business excels. Operations capability provides an organization with various advantages such as competitive advantage, responsiveness and flexibility, knowledge workforce, and improved customer relationships thus supporting and leading business strategy. Operations capability enables firm’s management implement effective competitive strategies by creating new capabilities and developing the existing ones. An example of these capabilities is innovative designs. Secondly, being responsive and flexible means that an organization is able to change with the demands of its customers. Thirdly, knowledgeable workforce allows an organization to the skills of employees to achieve the goals and objectives of the business. Skilled employees also help the organization implement effective and appropriate business strategies. Lastly, good customer relationship helps an organization to have a competitive advantage and continued growth. Question 3: Discuss the means of enabling pull production and evaluate the design of a specific planning and control system. Pull production means “Make To Order” whereby goods are produced based on their actual demand. It is a production method whereby downstream production activities report their needs to the upstream production activities. The importance of pull production is that it helps in eliminating overproduction and also enables real time production (Koufteros, Nahm, Cheng & Lai 2007, p. 469). In pull production, goods are produced according to their actual demand (only producing what is required in the next work). One of the key tools that are commonly used in pull manufacturing is “Kanban”. Although the terms “Kanban” and “pull production” are interchangeably used, Kanban actually means a signal card manufacturing system. The system makes use of containers or cards to pull products or materials through the manufacturing system. This system uses a simple rule (Shah & Ward 2007, p. 786). Production or delivery is only carried out when an empty container or card is passed through the workstation. Means of enabling pull production The main aspects of pull production include organizing for flow, pull planning, organization for pull, and performance measures. Organization for flow focuses on defining material-flows, equipment, and products that are produced in a production being pulled by the demand of customers. This type of production focuses on delivering the products to the customers within the shortest time and at low production cost with high quality and consumer satisfaction. Planning in pull production is done using visual control. The planning team is expected to plan in order to bring the separation of MRP and daily planning functions. MRP System function-Reconciliation- is the process of scheduling and quality demand planning (Goldratt, Eshkoli and Brownleer 2009, p. 45). On the other hand, day-to-day planning-regulation- is the process of controlling sequences and regulating commands within the pull production system to make it capable to control “workable work” for every production cell and unit. MRP must make projections of long run and intermediate objectives of procurement to suppliers. On the other hand, day-to-day production requires real time POC (Plant Operations Control) system, which is preferably visual. Pull production requires rethinking of the manufacturing structure, roles, and responsibilities for every individual in the organization. There is need of forming production Units that operate as Flat Organization and Business Unit that helps those involved in the production process to understand the demands and needs of consumers and organize all products, resources, and capabilities to give support and improve value for customer expectations and needs. One of the means that brings success to pull production in an organization is team empowerment (Tai & Stephanopoulos 2013, p. 8). Lastly, performance measures in pull production are developed in a hierarchical manner that is cascaded downward and upward within an organization. The measures taken should be easy to understand, simple for administration, and enable the team members and management of the organization to make faster decisions and take sound and appropriate actions. Pull control system The inventory control system in a pull production starts with an order from a customer. With this strategy, organizations only produce the exact products that meet the actual demand of the customers. The advantage with this production strategy is that there is no need of producing excess goods for storage, and therefore, this helps to reduce inventory costs of storage. However, pull production has disadvantage that is, there is likeliness of running into ordering dilemmas. An example of such dilemmas is a supplier being unable to receive the shipment in time (Vaughan & Gardner 2009, p. 259). This makes the organization be viewed as unable to fulfil orders and highly contributes towards customer dissatisfaction. One of the most used pull inventory control system is JIT system (Just-In-Time). The main goal of this pull inventory control system is to keep an organization’s inventory levels at actual levels to meet the needs of all customers. The JIT control system eliminates resource wastage through reduction of storage space that is needed and the costs of storage. Although it is challenging to choose the appropriate production method, the type of product used depends on the type of products. For instance, products such as automobiles, cannot be produced using JIT production system (Koufteros 2009, p. 469). This is because production of such products is very complex and time consuming, and therefore, most large companies are currently using push-pull production systems. Design of a specific planning and control system Different departments work together during processing of raw materials to finished goods. The mode in which this department carries out the activities is very critical and this mechanism is referred to as production planning and control. The mechanism brings all production resources together for assessing of future demand and planning is therefore, carried out early in advance. The following figure is a design of production designing and control system cycle: In most organizations, the manufacturing departments make use of computerized systems with coded software such as FlexSim CT3 [2] and database to enhance production planning. Question 4: Discuss the circumstances best suited to Kanban and DBR pull systems. Both Kanban and DBR are very close “cousins”. Kanban refers to a visual signal used to cause an action. The term Kanban is used to mean a card that can be seen. Kanban is used visual stock management. It is often viewed as a key element in “Lean” production and probably the most widely used form of pull production. Simply described, a Kanban pull system controls the production system in an organization by manufacturing products according to the demand of customers, that is, when a product is required (Hopp 2008, p. 56). Kanban has several benefits in an organization’s production system. To begin with, Kanban reduces product and inventory obsolescence. Since goods are not produced until they are needed there is no need of a large storage space. If there is need of upgrading the design of a component or a product, this upgrade is included in final good ASAP. There is no need to produce excess components or products that might become obsolete. Secondly, Kanban reduces scrap and waste (Spearman, Woodruff &Hopp 2010, p. 879). With Kanban, components and products are only produced when there is demand from customers. This ensures that there is no overproduction. There is also no buying of raw materials until they are demanded thus reducing both storage costs and waste. Other benefits of Kanban production are that it provides production flexibility and increases output. There are several circumstances when Kanban is used. A good example of such circumstance is production of automobiles. All needed automobile parts ordered by customers come with Kanban card attached to it. Before installation of the requested part, the card is removed and sent back to the supply department for request of another part. Toyota is one of the automobile companies that make use of Kanban production. DBR (Drum Buffer Rope) is a metaphoric used to understand supply chain flow. This type of production was first applied in Ford Motor Company Limited. The production team of this company connected processes of production of automobiles using conveyer belts. Afterwards, the management introduced a rope known as Kanban (Gardiner, Blackstone Jr & Gardiner 2003, p. 78). These two concepts were implemented in the company and they brought a very great impact towards the economic growth of the firm. In some cases, there is a need to suspend work when a buffer reaches its limit point. If the drum beating is done following the speed of the first production, the interval with other productions gets wider and wider. The inventory, in this case will increase while throughput decreases. If the speed of last production is used to beat the drum, the level of inventory decreases while that of throughput increases since there is an increase in the speed of customer demand. The pull production system means beating the drum using the last process’s speed (Hill 2005, p. 76). This is because this speed corresponds to the demand-driven pull production supply chain management. There are circumstances when upstream production processes cannot manufacture the needed amount by the production bottleneck and the result has compromised overall output system. Therefore, there is need to have an inventory buffer that is the amount require for different customer demand (Jodlbauer & Huber 2008, p. 2179). This helps in leveling out variation. A buffer ensures that the constraints will not wait since waiting is a type waste. Likewise, if the upstream production process, manufacture more than the demand, it means that there is excess production. DBR is therefore used to help avoid all these scenarios, the Famine or the Feast by controlling the size of the batch and the inputs entering the buffer (Altendorfer & Huber 2008, p. 113). The rope is used as a tool to control and signal the upstream process when there is need of slowing down or when to increase the production rate. In terms of Lean Manufacturing, this process is known as Pull Scheduling. Question 5: Discuss the importance of postponement through configuration, packaging and distribution, making reference to the concept of an Order Penetration Point (OPP). Initially, companies used to manufacture each configuration of goods (sometimes thousands or even more variations). They used to push all their products to the market with a hope that they would sell. In modern world, firms are widely implementing a postponement strategy. In this strategy, the final product configuration is delayed until the last moment. The postponement strategy allows manufacturers to reduce inventory cost as well as providing more agile action to unpredictable demand of products. Essentially, this is to make more from what the customers are buying. Postponement strategies help to drive huge savings of supply chain, but not during the risk of low quality. Postponement strategy is mainly used in supply chains that employ the concept of Order Penetration Point (OPP). This refers to a production process stage where a manufacturer accepts the customers’ orders. When the manufacture accepts an order after final production, then the penetration point of the order resides between the shipment stage and final assembly. This is known as make-to-stock type of postponement strategy. This strategy is branded by manufacturer and production fabrication after receiving of the customers’ orders. Sensing the demand of customers is one thing and responding profitably is another thing, especially when a company offers an array of options or configurable last products (Pagh& Cooper 2008, p. 15). In certain companies, customers demand more personalized products that meet their needs and tastes. In such situation where there are many products and an array of options, companies easily risk produce more no selling products and less hot selling ones, for instance, fashion industry. While footwear or fashion products cannot be configured to meet customers’ desire in store, there are products such as mobile phones, medical devices, and computers that can be configured at their last stage or built to order. There are difficulties in option and product proliferation. With the difference in final product configuration, an organization’s supply chain and design strategy to become more critical to profitability. Designing postponement products and carrying out last stage configuration and completion that is close to the product demand is very important for profitability. Firms must produce and offer the right products to the customers at the right cost and time. Designing postponement products is very important and this means designing products to meet the needs and tastes of the customers thus being a core component that is sometimes known as platforms, whereby the configuration is easily carried out at the last time. In most cases, final configuration involves loading or even enabling certain firmware or software options. A few advantages of this production model include reducing wrong inventories, obsolete, expedited shipping costs, and mark down products (Alderson 2006, p. 110). The use of low manufacturing cost is more effective. In addition, more product choices are available to customers at a fair cost which does not increase. Apart from the above mentioned general benefits of postponement, outsourcing companies benefit a lot from the strategy since; (i) international markets are reached fast, with few capital and assets, (ii) richer customers are influenced for new goods, (iii) a firm can focus on product designing and innovation for supply, and (iv) there is enough time to focus on items of high intellectual property and not on mundane execution methods. Inventory postponement helps to reduce inventory through storage of only important products that can be joined during distribution to come up with multiple SKUs. Postponement also helps to avoid unprofitable clearance sales and write offs, when a company manufactures a large amount and non-selling products or when they have such products on retail shelves. Postponement also reduces labor costs through the movement of final products from the costly manufacturing environment. 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