`INTRODUCTION An organization‟s operations function is concerned with getting things done; producing goods and/or services for customers. Organizations are social arrangements which pursue collective goals, control their own performances and have a boundary separating them from their environment. An organization consists of several departments. Each department has distinct roles and responsibilities but they all work towards achieving the same goals and objectives. For example, the Human Resource department is responsible for managing the human resources of the organization and the Finance department deals with the financial issues. And one of the most important departments of an organization is the Operations department. Operation department is one which deals with the production of goods or providing the services that consumers buy. Global view of operations There are many reasons why a domestic business operation will decide to change to some form ofinternational operation. Reasons to globalize Reduce costs (labour, taxes, tariffs, etc.) Improve supply chain Provide better goods and services Understand markets Learn to improve operations Attract and retain global talent Operations management Operation Management refers to all those chain of activities that convert inputs in the form of resources into output that usually take the form of goods and services. It helps to establish the level of quality as a product is manufactured or as a service is provided and it is responsible for the largest part of the company‟s human and capital assets. Tangible Reasons Intangible Reasons
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`INTRODUCTION
An organization‟s operations function is concerned with getting things done; producing goods and/or
services for customers.
Organizations are social arrangements which pursue collective goals, control their own performances and
have a boundary separating them from their environment. An organization consists of several
departments. Each department has distinct roles and responsibilities but they all work towards achieving
the same goals and objectives. For example, the Human Resource department is responsible for managing
the human resources of the organization and the Finance department deals with the financial issues. And
one of the most important departments of an organization is the Operations department.
Operation department is one which deals with the production of goods or providing the services that
consumers buy.
Global view of operations
There are many reasons why a domestic business operation will decide to change to some form of
international operation.
Reasons to globalize
Reduce costs (labour, taxes, tariffs, etc.)
Improve supply chain
Provide better goods and services
Understand markets
Learn to improve operations
Attract and retain global talent
Operations management
Operation Management refers to all those chain of activities that convert inputs in the form of resources
into output that usually take the form of goods and services. It helps to establish the level of quality as a
product is manufactured or as a service is provided and it is responsible for the largest part of the
company‟s human and capital assets.
Tangible
Reasons
Intangible
Reasons
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Furthermore, operations management determines to a great extent the ability of a company to have
sufficient products available to meet delivery commitments. As a whole, we can say that operations
management has as important influence on the cost, quality and availability of the company‟s goods and
services. Thus capabilities of operations must be fully evaluated when performing operational strategies.
OPERATIONS AND STRATEGY
Strategy
Strategy is an organization‟s action plan to achieve the mission. Each functional area has a strategy for
achieving its mission and for helping the organization reach the overall mission. These strategies exploit
opportunities and strengths, neutralize threats, and avoid weaknesses.
Firms achieve missions in 3 conceptual ways (Michael E.Porter: 2001):
(1) Differentiation
(2) Cost leadership
(3) Response
This means operation managers are called on to deliver goods and services that are
i. Better, or at least different
ii. Cheaper, and
iii. More responsive
Operations managers translate these strategic concepts into tangible tasks to be accomplished. Any one or
combination of these 3 strategic concepts can generate a system that has a unique advantage over
competitors.
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STRATEGIC OM DECISIONS
Differentiation, low cost, and response can be achieved when managers make effective decision in ten
areas of OM. These are collectively known as operations decisions. The 10 decisions of OM that support
missions and implement strategies follow:
Operations decisions Services
Services Design Is not tangible. A new range of product attributes- a
smile.
Quality Many subjective quality standards.
Process and Quality Design Customer may be directly involved in the process.
Location Selection May need to be near customer.
Layout Design Can enhance product as well as production.
Human Resources and Job Design Direct workforce usually needs to be able to
interact well with customer.
Labour standards vary depending on customer
requirements.
Inventory Most services cannot be stored, so other ways must
be found to accommodate changes in demand.
Scheduling Often concerned with meeting the customer‟s
immediate schedule with human resources.
Maintenance Maintenance is often “repair” and takes place at the
customer‟s site.
ACHIEVING COMPETITIVE ADVANTAGE THROUGH OPERATIONS
Competitive advantage implies the creation of a system that has unique advantage over competitors. This
idea is to create customer value in an efficient and sustainable way.
Competing on differentiation
Differentiation is concerned with providing uniqueness. A firm‟s opportunities for creating uniqueness
are not located within a particular function or activity but can arise in virtually everything that the firm
does. Moreover, because most products include some service, and most service include some products,
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the opportunities for creating this uniqueness are limited only by imagination. Indeed, differentiation
should be thought of as going beyond both physical characteristics and service attributes to encompass
everything about service that influences the value that the customers derive from it. Therefore, effective
operation managers assist in defining everything about a service that will influence the potential value to
the customer. Such services can manifest themselves through convenience (location of distribution
centres or stores), training, product delivery and installation, or repair and maintenance services.
In the service sector, one option for extending products differentiation is through an experience.
Differentiation by experience in services is a manifestation of the growing „experience economy‟ (James
H.Gilmore: 1999).
Competing on cost
Identifying the optimum size (and investment) allows firms to spread overhead costs, providing a cost
advantage. It includes transportation of goods, reduced warehousing costs and direct shipment from
manufacturers resulting in high inventory turnover rand made it a low-cost leader.
Low-cost leadership entails achieving maximum value as defined by your customer. It requires examining
each of the 10 operations management decisions in a relentless effort to drive down costs while meeting
customer expectations of value. A low-cost strategy does not imply low value or low quality. (Franz
Colruyt: 2003)
Competing on response
Response refers to set of values related to rapid, flexible and reliable performance.
Response is often thought of as:
(1) Flexible response, but it also refers to reliable and quick response. Indeed, we define response as
including the entire range of values related to timely product development and delivery, as well as
reliable scheduling and flexible performance. Flexible response may be thought of as the ability
to match changes in a marketplace where design, innovations and volumes fluctuate substantially.
(2) Reliability of scheduling
(3) Quickness
According to Professor Richard D‟Aveni, author of hyper competition,
“In the future, there will be just 2 kinds of firms: those who disrupt their markets and those who do not
survive the assaults”
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PERFORMANCE OBJECTIVES
Strategy in a business organization is essentially about how the organization seeks to survive and prosper
within its environment over the long-term. The decisions and actions taken within its operations have a
direct impact on the basis on which an organization is able to do this. The way in which an organization
secures, deploys and utilizes its resources will determine the extent to which it can successfully pursue
specific performance objectives.
Performance objectives are cascaded through the organization and are translated into the measurable
terms that become part of the operating goals for production related as well as service related department
and their managers. There are five basic performance objectives which apply to all types of operation.
Slack et al. (2004) argue that there are five operations performance objectives.
(1) Quality
According to Schroeder, quality is an objective means the quality of the product or service as
perceived by the customer. Quality is the value of the product, its prestige, and its perceived
usefulness. This definition includes not only conformance to specifications, but the design of
the product as well. Typical quality measures include customer satisfaction as measured by
surveys or consumer tests, the amount of rework or scrap created as part of the production
process, and measures of warranty or return of the product. Quality, of course, should be
measured relative to the competition and can be an important point of differentiation.
There are two dimensions of quality:
External
Internal
External quality
External quality is an important aspect of customer satisfaction or dissatisfaction (Slack: 1993).
It involves making sure that product or services meet the requirements of the customers.
Internal quality
According to Chambers, good quality does not only mean achieving customer satisfaction but
also to achieve high performance design. High performance design means that the operation
function will be designed to focus on aspects of quality such as superior features, high durability
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and excellent customer service. The organization should also engage in process quality. It deals
with designing a process to produce error-free products or delivering the service this includes
focusing on equipment, workers, materials and every other aspect of the operation to make sure
it works the way it is supposed to. Furthermore, process quality also includes some features that
are desirable in delivering efficient and effective services. These features are:
Skilled workers
Motivation of pride of workmanship
Effective communication of standards or jobs requirements
Quality inside the operation will also help to reduce cost (Harland: 1993). The fewer the
mistakes each micro operation or unit makes in the operation, the less time it will need to spend
correcting these mistakes and the less confusion and irritation will be spread. Also quality helps
too increase dependability (Harrison: 1993).
Each operation has different meaning of quality.
Inside a supermarket, quality may means:
Goods are in good condition
Cost
Speed Dependability
Flexibility
Quality
Error-free
products and
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The store is clean and tidy
Décor is attractive and appropriate
Staff are courteous, friendly and helpful
(2) Speed
Speed refers to the elapsed time between customers requesting for products and services and
receiving them. Speedy delivery of goods or services is essential in an organisation as the faster
customers can have the product or the service, the more likely they are to buy it, or the more they
will pay for it, or the more benefit they will receive. (Nigel Slack, 1995; Stuart Chambers:1998)
Speed is one of the most important competitive priorities today. Organizations are competing to
deliver high-quality products or services in as short time as possible. Customers do not want to
wait and organisations that can meet their need for fast service are becoming leaders in the
industries.
Making time a competitive priority means to focus on time-related issues such as rapid delivery
and on-time delivery. On-time delivery refers to how quickly and order is received and on-time
delivery refers to how often deliveries are made on time.
Speed for supermarkets means:
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Dependability saves time
Dependability saves money: ineffective use of time will consulate extra cost
Dependability gives stability: the disruption caused to operations by a lack of
dependability goes beyond time and cost. It affects the „quality‟ of the operation‟s time. If
everything in an operation is always perfectly dependable, a level of trust will have built
up between the different parts of operation. There will be no „surprises‟ and everything
will be predictable. Under such circumstances, each part of the operation can concentrate
on improving its own area of responsibility without having its attention continually
diverted by a lack of dependable service from other parts.
The features that manufacturing operations might provide and its applicability to service
Ferdows and de Meyer (1990) argue that certain operational capabilities enhance one another, enabling
operations excellence to be built in a cumulative fashion. In their „sandcone‟ model of operations
excellence (see Figure 2.1), they maintain that there is an ideal sequence in which operational capabilities
should be developed. The starting point, the base of the sandcone is excellence in quality. On this should
be built excellence in dependability, then flexibility (which they take to include speed), then cost. They
emphasize that efforts to further enhance quality should continue whilst commencing efforts to build
dependability. Similarly, actions on quality and dependability need to continue whilst building flexibility.
Finally efforts to reduce costs take place alongside continuing efforts to improve quality, dependability
and flexibility. They claim that operational capabilities developed in this way are more likely to endure
than individual capabilities developed at the expense of others.
STRATEGIC IMPORTANCE OF LAYOUT
Layout is one of the key decisions that determine the long – run efficiency of operations. Layout has
numerous strategic implications because it establishes an organization‟s competitive priorities in regard to
capacity, processes, flexibility, and cost, as well as quality of work life, customer contact and image. An
effective layout can help an organization achieve a strategy that supports differentiation, low cost orresponse. The objective of layouts strategy is to develop an economic layout that will meet the firm‟s
competitive requirements. In all cases, layout design must consider how to achieve:
(1) Higher utilization of space, equipment and people
(2) Improve flow of information, materials or people