The rapid globalization rate has contributed to the high competition in the manufacturing industry as well as other sectors of the economy. This has therefore led to the adoption of operations management as well as supply chain management as some of the systems that lead to the success of the business especially in beating up the high competition. The main idea of operations and supply chain management is that of advancing the production and management processes so as to achieve organisational goals with minimal resources (Mark, 2004, p.337). This paper is therefore an analysis of how operations and supply chain management improves the businesses’ processes as well as their application in decision making in a bid to achieve the set goals and objectives f the business enterprise.
Though its application has ventured into the business world in the recent past, the notion operations management was developed in the eighteenth century as a manufacturing management (Mark, 2004, p.337). It therefore began as manufacturing management after which it developed into operations management following the advancements of technological knowhow. Operations management is therefore the absolute control of the use of resources and other raw materials so as to convert them into more valuable products. In a nutshell, it entails management of products, processes and their designs, services as well as supply chains which form some of the components of the operations management. Thus, operations management is majorly focused on providing the customer with the highest quality product at the lowest cost. At the same time, the business enterprise benefits from effective use of resources while incurring high profits.
Components of Operations Management
Operations management according to lay men is the management of all the processes taking place in an organisation. This is an indication that the components of the operations management will be dependent on the operations of the organisation. Below is a list of some of the common components of operations management that will be found in most enterprises;
- Quality management
- Supply chain management
- Distribution channels
- Logistics and Transportation management
- Enterprise resource planning
- Product and Service management
- Configuration management
- Inventory management
All the aforementioned components of operations management are all geared to effectiveness of the organization so as to achieve organizational goals. As a matter of fact they work interchangeably with other major decision areas such as human resources, accounting department among others for efficiency of the production.
Concepts of process improvement and reengineering in operations management
Business process reengineering entails the management of both operations and processes of the business enterprise. This therefore means that reengineering and operations management have some degree of correlation. Processes reengineering is based on the principle of proper documentation and process maintenance as well as putting effort into design so as to achieve effectiveness in the business enterprise. In fact, process reengineering has a great contribution to the operations management of any organization. It does this by focusing on the simple and easily understood process designs as well as by lifting up processes to the pivot of the management’s attention.
As mentioned above that the two are correlated, it is evident that the operations management discipline also facilitates the reengineering process in a number of ways. For example, the fact that the process reengineering misses out some systematic reasoning on its design and recommendations as well as other key design levers that are essential for flow management of protocols hence the working of the reengineering principles. The Operations management comes to its aid by developing a set of designed principles and evaluation tools for the processes that facilitate the upgrading of the process reengineering. In contributing to the achievement of organizational goals in the line of operation management, process reengineering is a downsizing and cost cutting tool.
The Impact of the application of operations management in business enterprises
The application of operations management in most organisations has resulted into many positive impacts on the businesses although some negative effects have been felt as well. To begin with is the fact that Production in manufacturing industries is now an organized activity where each and every sector of the factory has its own specialists. As a result, every sub system has an objective which it works towards achieving. This has ensured efficiency in productivity with quality production of products in the long-run. Since the subsections operate together with the whole of the organization, it becomes easier to get feedback from all the sections concerning the activities involved.
This in turn has enabled the organizations to control and make necessary adjustments on the system performance. The system of classifying productions has also made it possible for manufacturers to produce a given quantity of products for specific customers at a fixed cost and time which is beneficial to both the business and the customer. Detailed planning of required materials has helped in determining the essential requirements of each product and consequently, priorities of orders by customers.
One of the major impacts of operations management is mass production whereby the manufacturing system operates in large volumes in terms of inputs as well as outputs (Demon, 2005, p. 1). This has mainly been made possible by the advancements of machinery where the machinery is arranged in a layout which allows automatic process of production. This has also enabled standardization of products to ensure quality maintenance. Mass production has been applied in many factories today especially those that involve large volume of productions within shorter periods of time. However, for mass production to be cost effective, flow of raw materials should be continuous to ease the process of controlling and planning the production operations.
Mass production has also been beneficial in capacity utilization as machines are always outlined in a balanced manner. This has enabled businesses to utilize only a limited space but produce large volumes of products leading to increased profits. Only a few skilled operators are required to operate the machines and this has impacted businesses by reducing expenditures on salaries and wages. The cost of manufacturing a unit of products has reduced compared to production of small volumes of products. Basically, the major impacts of the development of operations management have been felt through mass production in many manufacturing businesses which is a very cost effective way of production.
Another significant impact of the development of operations management in manufacturing businesses is the continuous production of products facilitated by the sequential arrangement of machines as well as other production equipments. This has made the production process faster than it was before. In addition to this, it has helped many manufacturing businesses to meet their customers’ requirements and orders in time. However, the production process is not flexible, something that has made manufacturing businesses unable to accommodate changes in product manufacture especially on quantity.
These operations developments have as well enabled businesses to provide quality products to their customers through the standardization of products. Manufacturing businesses have been enabled to satisfy the needs of their customers by producing quality products depending on the cost of production of a particular product. This way, customers get satisfied and the business obtains comfortable profits.
Through operations management, businesses have been able to make use of right quantity production to prevent capital build up as well as shortage of products which would otherwise lead to lose of customers (Demon, 2005, p. 1). In addition, planned production of goods has enabled many manufacturing businesses to deliver their products in time to their customers since all the involved processes are in place at all times. Through production planning, manufacturing businesses have been in a better position to pre-determine the production cost prior to the actual manufacturing process.
This has helped the businesses’ managements to make suitable decisions after comparing the cost of production to the expected inflow. Planning activities have also helped business to set goals and objectives with which to work on towards quality production. The operations development has promoted organization activities in businesses which have in return played a key role in achieving the set goals and objectives by specifying the role of every individual as well as determining authority and the responsibilities involved.
With the increasing competition in businesses especially in manufacturing firms, operations management has impacted the global business environment. Manufacturing products (both goods and services) are now being delivered to distant locations because of the competitiveness of the products which have resulted from the advancements of the operations management. As a result, international manufacturing has been practiced by many businesses due to the globalization of the operations with many local manufacturing businesses producing goods specifically for the international markets rather than selling them locally. The chains of supplies have as well been affected with many businesses obtaining their economic inputs form all over the globe. Due to the ramifications involved in the manufacturing industry nowadays, specialized chains of supply for inputs have been developed to meet the ever rising demand for such services.
Many businesses have now embraced the basic dimension of satisfying customers’ needs considering the competitive markets. This has resulted to understanding the values of customers and therefore putting into considerations the specific needs and preferences of customers. This understanding has on the other hand promoted the manufacture of products or provision of service that makes the most of the customers’ needs. Another very key concern that businesses are now working on is the minimization of costs and utilization of resources with the objective of making maximum profits. Many businesses have also changed from the traditional ways of mass production to the approaches of producing goods on-demand.
Application of Decision making tools in Operation management
Operation management is a form of decision making tools given the fact that it helps in the achievement of organisational goals and objectives. For one, operation management involves the process of evaluating what course of action to take given a certain task. The management has the obligation of weighing the available alternatives to come up with the best option of all. Before arriving at the final decision, the management will have undergone series of analysis on the pros and cons of each available option.
Operations management is part and parcel of the decision tree of any business enterprise. In this, it plays the vital role of considering choices on the basis of possible risks and outcomes (Demon, 2005, p. 1). For example, in the manufacture of tea, a manufacturer has options of up to four different manufacturing processes which lead to different quality teas. These teas will definitely have different markets. Thus in this case, in a company producing for local consumption of middle level income will not opt to produce the very high quality tea that involves high risks during production while being very costly to produce. Therefore to avoid such instances, the operations manager has to wisely make a decision on which process to use based on their final consumers while at the same time considering the possible risks of the selected process.
Other important decisions based in operations management are those concerning the cost benefit analysis of different structure of supply chains. It is important to analyse instances of early differentiation and late differentiations in the supply chains thus ensuring effective supply. The organisation should ensure that the demand of products in the market balances with the supply so as to avoid instances of surplus commodities or deficits which affect the markets interplay.
Supply chain management as a component of operation management
As mentioned above, operations management is a very diversified with as many components as the organisation can hold. Among the main components of operations management is supply chain management which essentially entails the control of resources such as materials information as well as finances from the producer down to the consumer (Mark, 2004, p. 340). As the name suggests, it is a chain consisting of the supplier, manufacturer, wholesaler, retailer and then the consumer. Because of the long chain of supply, the supply chain management works to ensure that all flows have been integrated and coordinated. The main goal of supply chain management with regard to operations management is that of reducing the level of inventory to be as minimal as possible assuming that products will be available on demand.
So as to effectively achieve this objective, a variety of software systems with different capacities have been developed to assist in this process. In a nut shell, the supply chain management is grouped into three main flows of the chain. These are the product flow, information flow and the finances flow. To begin with is the product flow which entails the transfer of commodities from the supplier to the final consumer (, 2004, p. 340). In case the customer is not satisfied the same channel is used during the return of the commodity to from the consumer to the supplier or producer. The information flow on the other hand includes the transmission of the placed orders to the final state of delivery. Last but not least is the financial flow which involves payment schedules, consignments, and the terms of credit as well as the ownership agreements of the commodities.
Supply chain management is very important in any form of business organisation as it helps in the achievement of organizational goals through the principle of operation management. Supply chain management aims at achieving the following five performance outputs in order of importance;
- Quality- Through supply chain management an organisation will be able to provide the market with high quality commodities. The quality will also be consistent thus gaining trust from their customers. Quality is achieved through the continuous checking of the flow throughout the chain.
- Time- Provision of products and services on or in time is the best thing that a business enterprise would do to its customers. Since the chain of products is properly managed, they will be provided at the right time.
- Continuity of supply- This entails keeping the distribution of the products throughout in the market such that consumers do not have deficits. This is possibly obtained as a result of constant checks of the supply chain (Jacob, 2001, p.107).
- Technology- Introduction of the latest technology in terms of processing machines or even packaging materials is easily achieved through close monitoring of the supply chain. Comparison could also be made with other related products to identify any new technologies.
- Quantity- during monitoring of the supply chain, the management is able to notice the periods of deficits and those of surplus hence regulating production especially in terms of reducing inventory such that there is reasonable amount in the stock.
From the above discussion, it can be concluded that operations management is an important sector of any business enterprise that wants to beat up the global competition. This is because the efficient and effective utilization of the organizational resources is bestowed in the hands of the operations management. Its role of management in production has as well promoted organization, planning and effective control of all production activities especially with the introduction of specialization and division of labour (Jacob, 2001, p. 213).
The operations management system has the obligation of making sure that the constraints match up with the requirements of the organization. In the case of high constraints, the operations management should make the decision of increasing them. For instance, in the case of a hospital with limited resources, the management could opt to employ more staff or even increase the capacity of facilities such as beds and equipments. It has also been seen that operations management plays a great role in decision making whereby the operational mangers are faced with the task of making choices.
On the other hand, supply chain management which is among the many components of operational management is an essential sector of most organisations despite their size or sphere (Jacob, 2001, p. 209). Since the main reason of enterprising is to provide the customers with high quality products or services, in the right form, at the right time and on a routinely programme it is the duty of supply chain management to ensure facilitation of the aforementioned qualities.
Thus, it is evident that operations management and supply chain management have to work hand in hand to ensure the success of the business enterprise. This therefore mans that both departments should have good and constant communication to ensure achievement of organizational goals at the minimal effort and cost. In the instance that the two departments are not in good terms, there will be a problem affecting the whole organisation. Therefore for the objectives to be achieved, the management should be very careful in effective planning and organization of the production activities thus ensuring smooth running of a business enterprise.
Demon, D, (2005), Operations Management. Web.
Jacob, B. (2001). Operations Management for a Competitive Advantage. Ninth Edition, McGraw-Irwin.
Mark, R. (2004). A Framework for Operation Management: The Value Chain. International Journal of Operations and Production Management. Vol. 3, pp. 337-345.