Operations management is an area in the organization through which value addition takes place. This value-addition can be in the production and distribution of goods and services are given that the equally valuable organizational resources are used both effectively and efficiently. Therefore, in other words, operations management deals with the planning, controlling, organizing, coordinating, and enacting all the respective activities of an organization.
The company must give immense importance to the field of operations management since it accommodates the capacity to affect all the areas of the business and has a direct effect on the company’s profitability or other goals. A delicate balance should be created in the sense that resources should be utilized efficiently i.e. using minimum resources and at the same time being effective i.e. meeting customer requirements in terms of product quality and service.
Companies can achieve this in various ways. These processes of operations management are very popular amongst businesses and organizations today. These include purchase management, inventory management, quality control, storage management, logistics, supply chain, and frequent evaluation of the business operations and processes.
These have different categories in the organizations based on the different levels i.e. strategic, operational, and tactical. At the strategic level e.g. the size and location of manufacturing plants are decided, at the tactical plant layout and structure and the operational level things like inventory management and quality control are implemented and assessed.
The amount of importance a company gives to each varies depending on the type of operations a business undertakes, but it is essential to understand that ignorance of inefficiency in any of the fields can lead to numerous losses for the business in terms of profits, market share, etc.
Operations Management Problem
The company I am working at is facing a serious problem which although not prominent enough is capable of causing extensive internal damage to the organization’s health. Although quality management has been part of the organization’s operations management strategies, it has been an important source of concern for the company’s managers especially the operations manager.
Since the organization is unable to produce high-quality value-added products it is unable to come at par with its competitors who are taking away the market share from the firm’s hand. The quality of a service or product that a company produces enables the company to achieve manufacturing excellence which gives it an edge over competitors. In this case, however, the company has failed to undertake continuous improvement over time and thus lags behind the competitors in terms of quality. It has even failed to incorporate Total Quality Management (TQM) in its processes therefore although some processes are excellently handled others are ancient and dilapidated. Therefore the processes are unable to complement each other. The managers are probably shying away from investing in quality improvement mainly because they think it might put a dent in the productivity of the company. This delay in quality improvement has also been causing the firm extra costs in terms of repairing defective items returned by customers, the cost of maintenance, the time involved, and most importantly the cost of unsatisfied customers who may not return.
The failure to do this has led to several other problems for the company in various departments. Since quality is worked upon by all the different departments in a company if one sector fails to work on quality the whole system, which is strongly interlinked, fails to function effectively. This can lead to numerous losses for a company. Since the customer wants the product or service to be reliable, convenient, comfortable, etc therefore a company cannot afford to compromise on quality at all. Quality problems have affected the company as a whole. We will analyze the effect on the different sectors of the company including financial, customer services, internal operations that include management, marketing, operations, quality, and processes.
The finance department has to face a lot of trouble because of the lack in the company’s quality of operations and processes. The company has been operating using outdated infrastructure and thus its information systems are ancient and incapable of competing with the faster systems of competitors. The old systems and procedures have made it difficult for the finance department to operate effectively. E.g. the department is inefficient in recovering receivables from credit sales. The department has not been able to perform well in monetary terms as well. Since the lack of quality has been reducing sales, the debt burden is rising and savings and revenue are declining extensively. Moreover, the budgets are also very tight for the company. The resources it has are limited and the cash budgets operate at very strict levels. Therefore, quality has harmed the finance side of the company and it is little the finance department can do to correct this unless considerable investment is made(Powell,1995).
The purpose to provide a product or service to a customer is to satisfy his/her needs and wants. However, his cannot be achieved if the customer is not satisfied with the products and services which is exactly the case with our company. The company has been receiving lots of feedback from its customers but all of the feedback is negative. The customers are not happy with the quality of the products provided by the company. They are demanding refunds and the company is thereby losing out on market share. The company, through its brand, promises to fulfill customer wants therefore it is the utmost responsibility of the company to meet these customer wants.
Customer relationship management is also not being acted upon. There is a lack of customer relationship management software to analyze customer needs, wants and acquire knowledge about customers.
The company, as is evident, has been suffering from the lack of quality and improvement in processes and operations. Financially the company is performing below satisfactory levels and valued customers have started to switch to competitors’ products and services offerings. Other than this, the company has been dented internally as well due to a lack of total quality management. We shall now analyze the effect on the internal operations of the company(Powell,1995).
Given the lack of quality infrastructure, procedures, and processes in the company, it is almost impossible for management to function efficiently. The management has been unable to coordinate work activities to ensure that they are completed efficiently and effectively. The management is probably able to operate efficiently given the scarce resources but it is not operating effectively, i.e. ensuring that customers, employees, and all those involved are satisfied. This is primarily because the company has been unable to make continuous improvements at the company and its internal operations.
The marketing department is also facing a dilemma because of this problem. Marketing aims at promoting a product or service through a brand image. However, as is the case here, the competitors have stronger brands and have an upper hand over our company. The marketing department cannot make false promises to customers knowing that the quality of products and services is going down the drain. Therefore, unless a quality breakthrough is made, the marketing department would have to halt operations in the sense that new advertisements or sales promotions should not be undertaken(Powell,1995).
The business operations exist primarily to create value for a company’s stakeholders. The business operations procedures extract value from the assets of a company. Unfortunately, in our case, this is not possible. The business operations have been unable to generate a recurring stream of income; they have failed to improve the value of the production, and lastly have failed to safeguard the value of the business. There is no control or monitoring of the business processes and procedures resulting in declining quality levels. Lastly, the business processes should be subjected to continuous improvement if the business wants to remain in the competition, however; continuous improvement in this sector in our company has been non-existent(Powell,1995).
This sector is the heart of the problem. There is a strong link between the product quality and the derived quality from a product by a consumer. The company has no quality control systems in place to assess quality levels across the board. Throughout operations management, quality has been the center stage. It provides dependability which in turn supports speed and efficiency which in turn gives way to flexibility which in turn leads to reduced costs and production and distribution effectiveness. In our company, however, quality remains a term that is yet to be discovered and implemented. No modern quality techniques are applied to engineering, manufacturing, and assembling processes in the company. This inevitably results in poor-quality products and services for customers.
The company faces a domino effect in the field of processes. Processes can be divided into three fields and none of these are up to the quality standards set by the competitors. Management processes are very half-hearted and unorganized, operational processes lack appropriate infrastructure, technology, and information systems to improve quality. Lastly, the support processes are also backward in terms of quality. The outcome of these business processes is a poor quality product and service which is despised by customers(Monks,1982).
The problem faced by the company is vast and it has widespread effects throughout the organization. Keeping this in mind, the company must arrange for some heavy initial investment to reap future profits. The company would undertake various steps to improve quality levels across the board. These include Total Quality Management (TQM), planning for quality, organizing and leading for quality, controlling for quality, and quality goals which include ISO 9000 and Six Sigma. These are discussed in detail in the following pages and their effects on different business aspects discussed earlier are also highlighted(Collier& Evans,2007).
Total Quality Management (TQM)
The role of TQM is to streamline the entire manufacturing and distribution process to the highest level of quality possible. The company should encourage and provide an incentive for its employees to participate in the improvement of quality. The importance of this continuous improvement should be highlighted to employees. Quality teams should be created specifically with the task of improving quality across all levels i.e. strategic, tactical, and operational. Training and technological improvement budgets should be increased. Financing should be arranged, although costs will be higher initially, they would soon be recovered. Coordination amongst departments should be encouraged to enhance manufacturing and operational quality and productivity. This money spent on quality would decrease wasteful expenses such as repair costs, refunds to customers, etc discussed earlier. To undertake total quality management, the company must first plan for quality, then organize and lead for quality, and lastly control for quality(Saraph,1988).
Planning for Quality
The first step to improve quality comes with planning. Quality improvement goals must be in place, moreover, strategies and plans to help achieve these goals should also be outlined. The goals will enable employees to have a clear vision of where they have to be whilst the strategies and plans would guide them towards the goals.
Organizing and Leading
The employees are the ones that carry out the quality initiatives therefore managers should organize and lead them efficiently. Cross-functional work teams with a certain goal in mind should be formed to improve quality levels across the board. Employees must be well-trained, flexible, and empowered. Empowerment of employees helps boost their confidence and encourages them to work towards their goals. All levels must be strongly interlinked and no communication barriers should exist(Powell,1995).
The company must also monitor and evaluate the progress of quality improvement. Standards for inventory control, defect rate allowance, raw material procurement should be established and all other operations management areas should also be monitored and controlled to ensure quality. Statistical quality control applications should be installed to control quality(Jay,2001).
The company should highlight its quality commitments to its customers to restore confidence in the company’s products and services. E.g. ISO 9000 is a series of international quality management standards and is given high regard by individuals and businesses worldwide. They help set guidelines for processes to ensure that they meet customer requirements. These standards cover the entire organization from the tiniest process to the biggest operations. Six Sigma is also another quality standard which the company should implement. Hereby no more than e.g. 3.4 defects per million units are allowed resulting in extraordinary quality.
These goals, planning, control measures, coordination, leading, and quality management will bring the company out of the crisis it currently faces. Profits would rise, customers would be more satisfied, processes would improve and quality would increase three folds.
- Collier, D., Evans, J.,(2007).Operations Management – Goods, Services and Value Chains.Thomson South-Western.
- Jay, H.H. (2001). Operations Management. 6th edition illustrated. Prentice Hall.
- Saraph, J.V. (1988). An Instrument for Measuring the Critical Factors of Quality Management. Decision Sciences, Volume 20, pages 810-829.
- Monks, J. G. (1982). Operations Management – Theory and Problems. Illustrated. University of Michigan: Prentice Hall.
- Powell, T.C. (1995). Total Quality Management as Competitive Advantage: A Review and Empirical Study, Strategic Management Journal, Vol. 16, pp. 15-37.