The Nature and Importance of Operation Management
The Nature and Importance of Operation Management and its Key Elements WH Smith is a British retailer, well-known and publically-quoted book retailer, and newsagent and entertainment product in the UK. Recently it was reported how Kate Swann, the former CEO for the last 10 years, has turned the company around from ? 135m losses to ? 106m profit in a decade (Holland). The reason behind this profit is the right decision of Kate Swann. Now let’s see what she did to make WH Smith profitable (Creevy). 1. 1 Operation Management and its Importance In recent years, the scope of operation management has broadened considerably.
Production concepts and techniques are applied to wide range of activities and situations outside manufacturing; that is, in service, such as health care, food service, recreation, banking, hotel management, retail sales etc. the operational function consists of all activities directly related to producing goods or providing services. Operation is a function or system that transforms inputs into outputs of greater value. To ensure that the desire output is obtained, measurements are taken at various points in the transformation process and then compared with previously established standards to determine whether corrective action is needed.
The essence of the operations function is to add value during the transformation process. Operation management designs the system and controls it; this includes arranging facilities, scheduling tasks, developing procedures for inventory acquisition and turnover, as well as providing corrective actions to insure that changes are made whenever it is necessary to do so (Harris, 1990, (Reprint from 1913)). So, it is easily untestable the importance of the operation management in an organization. The importance operation management is given below: 1. 1.
Understanding Tactical Purposes: As a book retailer must clearly understand the goals of the organization. Make a clear vision how company will achieve the customer satisfaction. This also involves translating these goals in the operation functions. The functions of operation are: objective, quality, speed, flexibility, dependability and cost. 1. 1. 2 Constructing an Operations Strategy: There are numerous decision making involves in operating product development department. Therefore, it is quite difficult to have clear cut guidelines with the long term goals.
Scheming the Operations Products, Service and Process: Scheming or designing involves the physical form of the product. This phase elaborate the shape of the product and composition of its service and process. 1. 1. 4 Planning and Controlling: Planning and controlling includes what the resources collected from the customer (which are collected from the customer, like their choices, demand, expectations) should be doing. Making sure collected resources are implemented in the plan. 1. 1. 5 Enlightening the Performance of Operation:
To satisfy the customer expectations, it is mandatory to continuously monitor and improve the overall fixtures of the product. 1. 2 Key Elements of Operation Management There are three vital elements of operation management. Those are discussed below: 1. 2. 1 Customer A manager will be able to describe the customer accurately, if he or she has the accurate knowledge about the customer. The information that helps a manager to design and run the operation management system is what the customer wants, how much they are able to pay and what is their consideration level.
This information actually helps the manager to identify order winners, order qualifiers and order losers. This benefits the manager to run the operation management systems smoothly. Order winners and order qualifiers are from the basic of the customers’ expectations. Order losers can be finding out by finding the gap between firm delivers and customer expectation. 1. 2. 2 Process Every operation management system consists of process. Inputs, transformation activities and outputs are drawn together by process. It identifies the when and what amount of resource is needed for activities.
Capacity Capacity means the capability of the firm in terms of production. How much out put a firm can produce with a given amount of time. Capacity is the combination of equipment, workflows and skill level of employees. It determines what firm can do effectively and efficiently and what cannot. 1. 3 Need to Produce Safely; on Time; to Cost; to Quality and within the Law In production, there are some issue is related in which safety is the key one. In current global business, buyers are giving highest most importance on safety.
Buyers investigate the protection of the production plant of the factory from where they will produce their product. If there is not enough precaution is taken, than accident may take place. This may lead to some life cost and may have effect on the end user of the product (customer). Therefore, safety in production is very vital and required from every single perspective of the business. Timing in the production is another vital issue to concern about. If product cannot deliver on time, than buyer or customer may reject to buy the product or they may impose penalty.
Demand for the product may decrease due to delay in the production process, even company may lose existing market share. The third significant factor for production is cost. Enough knowledge about cost management is a competitive advantage for a company. A company may become the leader of the industry by producing the product with minimum cost (Creevy). To survive in the competition, a production company should maintain the quality according to the market standard. Therefore, quality is the last but not the least key factor for production. There is always a high demand for the quality product in the market.
Customer is always ready to pay higher for the product with the highest quality. Production is a kind of business, and business cannot be done without maintaining the law. Illegal operation is not considered as a business. Hence, law has equal significance comparable to other factors of production. 1. 4 The Role of Operation Management in Achieving Strategic Objectives There are some similarities or dependency between strategic planning and operation management. In strategic planning most of the decision depends on operation management and operation management also follow strategic management criteria in some circumstances.
Management team of strategic management relies on the information of the operation management. Before taking any strategic policy they have to consider the current situation of the operation management. In the initial stage, by implementing strategic management Theory Company fixed its strategy. Than after the strategic decision company operate the strategic management according to strategy. However, to revise or to make change in strategy company needs the information of strategic management (Edwards, 1983). In this case, Kate Swann took the strategy to remove low margin product.
To take this strategic decision Kate uses the operation management information. 1. 5 Systems Diagram of WH Smith Operation Process A business process can be described by System Diagram. A basic system diagram for WH Smith is given below: The given figure is a very basic business diagram for a retail book seller. We can get the knowledge of every single business step by this diagram. Management can get idea about the complexity of the business and overall procedure of the business (Ford, 1926). Chapter 2 – Relationship between Operation Management and Strategic Planning 2.
The ‘Three Es’ in WH Smith In business three E are related. This three E are Economy, Efficiency, and Effectiveness (Taylor, 1911). These three E has significant impact on business organization. In an organization these Es’ describe almost everything. Their impacts in an organization are: 2. 1. 1 Economy In business organization economy means the economic in budget. By this an organization can get to know the production cost that they need to produce their product. To being economic in production cost is a competitive advantage for an organization.
An organization will be able to sell product at bottom price of the market, if they can produce it at the low-slung cost, which is economic cost. The organization holds the economic cost, always leads the market, and has the highest market share. 2. 1. 2 Efficiency Be efficient in the steps of the business operation play a vital role for an organization. That’s why all the organization seeks efficiency in their operation. The activities done by the organization is structured or not also falls in this group. Organization can finds out the efficiency by calculating output/input ratio.
Every organization looks to reach the top of the efficiency. This will provide them the maximum output with minimum input. 2. 1. 3 Effectiveness Effectiveness is related to the decision making procedure of an organization. Organization progress depends on how effectively a decision is taken and implemented. 2. 2 Tension between Cost Minimization and Quality Maximization Quality maximization and cost minimization are always opposite to each other. However, maintaining quality is always important for an organization to keep current market share (Gazette).
It is every organizations goal to provide highest quality product by incurring lowest cost. If an organization can do that, they can dictate the whole industry. However this is not an easy task to provide highest quality product with lowest cost. to reach that level a company may require experience and technology. In addition, demand for that product is a must. Without these three components, it is quite impossible for an organization to produce and sell product with lowest cost and maximum quality. If the demand is high an organization gets the advantage of economic of scale, which allows them to produce quality product.
Therefore, they easily get the price advantage in the industry. 2. 3 Importance of the Five Performance Objectives that Reinforce Operation Management To progress in business, an organization needs to follow five performance objectives (Womack, 1990). Because five key performance objective are the key to the success. Performance objectives are described in below: 2. 3. 1 Quality: Quality is ranked as the first performance objective among the five objectives. Quality performance includes doing the right thing, mistake free, be right at the initial stage of every time, fit for resolution.
Actually it measures the standard of the product that the company intended to produce. 2. 3. 2 Speed: How much time the company requires to complete the production process is called the speed. Speed illustrates the efficiency of the service system n. This is the efficiency of the operation of the company production or service system. This performance objective consists of the idea of decreasing lead time, minimizing the lag time etc. 2. 3. 3 Dependability: The third performance objective is dependability. It is also equaled important like others for an organization.
Here dependability means, gaining the dependability of the customer towards the company. Keeping promises, doing the right things at the right time are the belongings in this objective. 2. 3. 4 Flexibility: Flexibility ranked as the fourth one, among the five objectives. Here flexibility means flexibility to change in the final product according to customer demand. There are other criteria for that like: to maintain with company vision, to launch new product in the market etc. 2. 3. 5 Cost: Cost is the last performance objective, which are the key to business success.
These describe the importance of producing a product with cheaper cost than the competitor, and offer the lowest price of the market for the customer. These are the main concern in this section. Chapter 3 – How to Organize a Typical Production Process 3. 1 Explain the Need for Operational Planning and Control Planning is a formal approved document used to guide both business operation and control. The initial uses of the plan are to manuscript planning, expectations and decisions; provide communication within stakeholders, and document permit possibility, cost and schedule baselines. Operation plan may be short and exhaustive.
Occasionally folks mixed up the operation plan with schedule. However, it’s more than scheduling. Therefore, it is easily untestable the importance of planning in the operation. Monitoring and controlling procedure supervises all the activity and metrics essential to ensure that the accepted and official operation is within possibility, on period, and economical hence the operation precede with minimum risk (Taylor, 1911). This procedure makes a comparison between the genuine performance and planed performance. If there is any major problem exists, than taking corrective action is also a vital function of this process.
Controlling is performed from the starting of the operation to end 3. 2 Linear Programming Linear programming techniques consist of a sequence of steps that will lead to an optimal solution to problems, in cases where an optimum exists. It is a mathematical technique for determining the optimal allocation of resources and obtaining a particular objective. It is the precise term which let us to catch out the minimum cost and maximize profit, this is a mathematical way which company typically use in their manufacture system to find out the way to minimize cost and maximize their profit.
The working processes of linear programing are: Objective Function: Mathematical statement of profit or cost for a given solution. This is the first step of linear programming. Decision Variables: Amount of either inputs or outputs. Feasible Solution Space: The set of all feasible combination of decision variables as defined by the constraints. Constraints: Limitation that restrict the available alternatives. Parameters: Numerical Values. After this entire graph the inequalities to determine organize of the pinnacles of the region.
Than each point of the function should be evaluate. The biggest and least of those values are the maximum and minimum values of the function, correspondingly. 3. 3 Evaluate Critical Path Analysis and Network Planning Critical path is the longest path of a project. This is the minimum amount of time needed for the conclusion of the project. The tasks along this path must be enhanced in order to hurry up the project. On the other hand, if this activities delay it would increase the project duration. That’s why it is always important identifying the critical path.
There is no lag time in critical path. Critical paths float time is zero (0). Float is the extra time available to start that task without hampering the completion period. Network planning is also important for the operation management of an organization. Company can plan their whole work reporting schedule (who will report whom, who is responsible for what) by network plan. It is quite impossible to operate all the process of an organization without having network plan. Therefore, affective network plan will act as a key to the success of a company.
If network plan applied, than every employee are aware about his or her responsibility. Because its ensure flow of information, communication, data flow easily. . Chapter 4 – Apply Relevant Techniques to the Production of an Operational Plan for a typical Business 4. 1 A Set of Clearly Defined Operational Outcomes There are various types of operation outcomes. These operation outcome is used minimize the wastage and the lag time of the operation. It resolves all the things that includes in operational outcomes. Outcomes can be anything.
Company mission, goals and vision fixed these operational outcomes. Operational outcomes play a vital role for the organization. Organizations operational outcomes are given below: 1. To reduce the manufacture rate by 2%. 2. To maximize the production by 3%. 3. To diminish the wastage by 2% All of these operational outcomes are the mark for approaching financial year. Therefore, company has to attain altogether of these within following one year. 4. 2 How Quality could be Defined and Maintained Quality initiates by defining the quality principles that will be used in the operation of the company.
It is one of the significant issues for a company. These quality principles will come from the beneficiaries, stakeholders, and from the organization, finding of the quality standards will benefit to assure a successful operation outcomes, which may be will accepted by the stakeholders. There are numerous ways to maintain quality. From all of the quality management process, Total Quality Management or TQM is the most well-known and used system. Therefor company may go for TQM to maintain the quality of their product.