Operation Management: Productivity and Efficiency

Introduction

In the past, production was associated with manufacturing. However, business processes have changed significantly in the last two decades (Neely, 1993). Consequently, service provisions have grown in Canada due to developments in Internet services. Today, Canada depends on a service economy i.e., an economy dominated by the service sector.

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Production entails product and service development by utilizing factors of production, such as labor, land, capital, knowledge, and management among others. Operations management (OM) is the proficient transformation of such inputs into outputs to meet needs of customers.

Operations management involves a transformation process. The transformation process is the technical aspects, particularly in manufacturing, where conversions of resources into outputs take place. Gauging every process of operational efficiency requires constant evaluation and provisions of feedback.

The process results in addition of value. There is a cost difference between inputs and outputs. Operations management is an imperative activity in organization because of its focus on value addition during transformation processes.

Rationale

Operations management has a wide range of scopes with different but interrelated activities. Although activities in organizations may vary, typical ones include capacity planning, forecasting, managing schedules, quality assurance, decision-making, managing employees and inventories among many others.

Operations management ensures efficiency in processes of organizational operations. Many organizations have noted that any failure to manage operations in their departments could result in serious financial consequences. Every organization handles different forms of activities in operations departments.

There are at least two major reasons that make operations management critical to any organization. First, operations management boosts organizational productivity, which enhances its financial health. Second, operations management helps firms to focus on dynamic, unique needs of the clients. There are also other operational aspects, which employees should understand. For instance, operations management helps employees to understand different operation settings, its roles, and its relationship with other activities within an organization. Operations management may also affect employees and society, create challenges, and other issues during management of people and other resources.

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Improving productivity and efficiency

Operations management is a method of enhancing efficiency in an organization. Productivity relates to the ratio of output to input. It shows efficiency of employees in utilizing organizational scarce resources for production of goods and services. High rations indicate greater levels of efficiency in an organization. A look at the airline industry indicates that operations management is applicable in several activities for efficiency.

  • Forecasting helps the industry to approximate the possible number of seats in demand, weather patterns, and possible changes in the landing conditions.
  • Capacity planning helps airline companies to sustain their cash flow and focus on revenue growth. Thus, airline companies can be able to estimate their profits or losses.
  • Airline firms must maintain their schedules. Operations management could help them to enhance efficiency in this activity.
  • Operations management helps firms to maintain their inventories for customers.
  • Customers demand high quality services and products, particularly with regard to safety in the airline industry. Hence, quality assurance is a critical area of focus in operations management.
  • Operations management aids in employees training and motivation. This allows such employees to enhance service provisions and product development.

Operations management and information systems

Information systems have become critical tools, which managers deploy in decision-making to influence operations management. Information systems could be used to inform decisions in costs, product development, process flexibility, quality, and customer satisfaction among others (Setia and Patel, 2013). Information systems provide a major advantage in operations management during operational decisions. Operations management affects achievement of organizational strategic goals and objectives. Several operations management decisions are diverse with many alternatives, which affect revenues and profits in different ways. Thus, information systems help operations managers to make well-informed decisions.

Firms have relied on operations management principles to build strategic business systems. For instance, UPS has used operations management strategic business systems to promote efficient parcel delivery. It has eliminated last-minute dispatch and over-dispatch of parcels.

Therefore, organizations can use operations management as strategic business management systems for developing long-term plans. This ensures effective utilization of organizational resources supported with a high degree of compatibility with strategic long-term objectives and resources. Operations strategies focus on critical issues on how a firm can apply its resources to achieve business target.

Issues of resource allocation for growth are important for organizations. Operations management tools like decision support systems can address issues concerning effective allocation of resources in an organization. Such tools account for technologies required, technical expertise, and engagement of outside vendors.

Most organizations have adopted the concept of strategic business units (SBUs) to run their operations. SBUs operate like independent businesses, but rely on OM for defining strategies. Decisions at this level involve strategic planning. Such decisions cover different planning activities. The material requirements planning (MRP) systems help operations managers to use tools that allow them to identify required parts and materials at a certain location.

Strategic decisions influence several other decisions, which are technical planning within an organization. Tactical planning aims to enhance efficiency by focusing on the right elements of production. Organizations should focus on developing quality products, management of the supply chain, satisfying customers’ needs, and the size of the workforce among others.

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Operations management allows manager to focus on global aspects of their operations. Global inventory management systems (GIMS) offer platforms for tracking and predicting movement of cargos anywhere in the supply chain.

Operational planning and control (OP&C) ensures that organizations handle their daily operations at work, schedules, inventory, and management processes efficiently. OP&C systems allow managers to control individual items within an inventory. The system is responsible for accuracy, analysis of performance, and generation of material requirements for purchase. Managers can control current inventory and order status, cost accounting, sales forecasts and customers orders, manufacturing capacity, and introduction of new products.

OP&C systems consist of other sub-systems, such as transportation planning and distribution management. Transportation planning systems show the movement of cargo for effective delivery of services at lower costs. Distribution management systems help managers track materials from the manufacturer, distributors to the customer. They allow managers to choose the best options, which enhance efficiency and save costs.

Competitive Operations Management Strategy

Companies develop a competitive operations management strategy through value creation on goods and services to their customers. In this regard, organizations select competitive priorities to support specific strategy (Chase, Jacobs and Aquilano, 2007). Organizations have identified five key areas for creating competitive priorities.

Cost

Low costs lead to fierce competition in an industry. Hence, there are high rates of failures in such industries. However, organizations must leverage costs to create competitive advantage for profitability and success.

Quality

Firms focus on product quality and process quality. High quality products are sold at high prices, but organizations must have their product levels for serving specific needs of customers (Coltman and Devinney, 2013). Process quality must ensure that products are free from errors. Organizations have adopted different quality control tools, such as six sigma, ISOs, and Capability Maturity Model Integration (CMMI) for best practices.

Delivery

Delivery speed determines costs and efficiency of services that a company offers. Fast delivery attracts premium prices.

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Flexibility

This is the ability of an organization to provide different products and services to its customers. It also reflects how fast an organization can transform its processes. Customers perceive product variety as the hallmark of quality.

Service

Today, products tend to be almost similar in terms of features and price. As a result, companies focus on excellent customer service to differentiate themselves.

Operations management and the supply chain

Operations management focuses on all activities and parties involved in the production process. This represents organizational supply chain for enhancing visibility and responsiveness in a competitive global market (Williams, Roh, Tokar, and Swink, 2013).

Discussion with a focus on learning outcomes

Operations management course allows learners to understand the production process i.e., turning an input into an output with benefits to end-users. Practices in operations management differ from strategic to daily activities of controlling business processes.

  • The course should allow learners to define operations and operations management. This is the fundamental step in learning different aspects of OM because it presents a general overview of the concept.
  • It presents roles and responsibilities of operations managers based on the organizational structure. Operations managers must understand that they are responsible for operational excellence by using different quality assurance tools and other models for enhancing efficiency. In this context, operations managers should understand transformation models within a business context. The use of organizational resources (inputs) for expected outputs defines the core role of OM in an organization.
  • Operations management introduces learners to software platforms and information systems, which are useful in efficient management of business processes and creation of competitive advantage, such as operational planning and control (OP&C), global inventory management systems (GIMS), material requirements planning (MRP) systems, and other quality management tools. At the same time, learners understand the fundamental concept of strategic business units in large organizations.
  • Operations managers must understand that applications of operations management and its activities differ from one organization to another. However, managers must ensure that operations management activities produce the desired results in terms of efficiency, service delivery, flexibility, cost saving, and quality.

References

Chase, B., Jacobs, R., and Aquilano, J. (2007). Operations Management for Competitive Advantage (11th ed.). New York: McGraw-Hill. Web.

Coltman, T., and Devinney, T. (2013). Modeling the operational capabilities for customized and commoditized services. Journal of Operations Management, 31(7-8), 555–566. Web.

Neely, A. (1993). Production/Operations Management Research Process and Content During the 1980s. Web.

Setia, P., and Patel, P. (2013). How information systems help create OM capabilities: Consequents and antecedents of operational absorptive capacity. Journal of Operations Management, 31(6), 409–431. Web.

Williams, B., Roh, J., Tokar, T., and Swink, M. (2013). Leveraging supply chain visibility for responsiveness: The moderating role of internal integration. Journal of Operations Management, 31(7-8), 543–554. Web.

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