OPERATIONS MANAGEMENT

Feb 19, 2016 | 0 comments

Feb 19, 2016 | Miscellaneous | 0 comments

 OPERATIONS MANAGEMENT

 

TABLE OF CONTENTS

OPERATIONS MANAGEMENT. 4

Introduction. 4

Role Of Operations Management In Strategy. 5

Cost management 5

Goods or service quality. 5

Improving innovation. 6

Ensuring excellent customer care. 6

Toyota Operation And Production Process. 6

The Three E’s. 8

Economies. 8

Efficiency. 8

Effectiveness. 9

Cost Minimization Versus Quality Maximization. 10

Performance Objectives. 11

Cost 11

Quality. 11

Dependability. 12

Speed. 12

Flexibility. 12

Linear Programming. 12

Critical Path Analysis. 13

Operational Planning. 14

Application of the operational management 14

Network Plan For Toyota. 16

Quality Management And Operations In Toyota. 17

REFERENCES. 18

 

OPERATIONS MANAGEMENT

Introduction

Operations management gives managers the opportunity to apply a specific set of techniques to analyze any aspect of the organization’s production system thus increasing efficiency. Operations management covers the importance of using fewer resources thus reducing the cost in order to increase efficiency and profits.  For an operations manager, the process involves converting the input of resources (from the raw materials needed to produce goods to service labor) into the outputs (profits and goods for sale).  An important milestone in history occurred when researchers when beyond the study of how managers can influence organizational behavior to consider how the managers can use the external environment to influence the production and delivery process.

There is a common misconception that the operations management plays a role or is important only in the manufacturing industry. However, management of operations involves taking into consideration every step of service or goods provision. As such, it is important even to the service provider industry. In such industry, the managers are tasked with evaluating each step of service provision to ensure that it maximizes on efficiency. In the service industry especially, efficiency is vital for companies that would like to set themselves apart from other service providers. Each step needs to reduce not just the cost but also the time between the order of service and delivery of the same. (Held 2003) indicates that operations management covers the day to day running of the hotel. In essence hotel operations management focuses on the use of rigorous techniques to help the managers maximize on the application of available resources and produce ideal goods and services hence  increasing the market share as well as direct profits from the same.  This system transforms the way managers handle acquisitions of inputs as well as disposal of the finished products.

Role of Operations Management In Strategy

Cost management: efficiency in itself is the measure of the amount of inputs required to produce a given amount of product and/or services.  The fewer the inputs that are required to produce a particular product, the higher the efficiency and the lower the cost of outputs. In essence, the organization in itself becomes more efficient and profitable in terms of income, which is the main goal of strategic management. For example in 1990, Japanese automobile industry in applying operations management principles to its strategy reduced the average employee hours required to make a car, from 25 as reported in the American industry to 16.8. The result was a lower purchase cost of Japanese cars which American rivals are still having a hard time duplicating, (Heizer and Reiner 2001).

Goods or service quality:  one of the goals of strategic management is production of goods and services that are reliable. This is the only way to create and maintain a niche in the market. Providing high quality products creates a brand name reputation for the organization. In turn this enhanced reputation allows the organization to charge a higher price. Operations management not only focuses on cutting the cost of production, but also ensuring the system produces the most quality goods and services for the client.  Considering the automobile example, the Toyota Company has enjoyed an efficiency based cost advantage over the American and European competitors. However, it is the high quality products by the company that has ensured the company earns more money. Customers are willing to pay a premium price for products whose quality is assured.

Improving innovation:  anything new or better about the way an organization operates is the result of creativity and innovation.  Innovation leads to advances in the kinds of products, production processes, management systems and strategies of the organization. Successful innovation gives organizations competitive advantage. Once again Toyota has enjoyed a number of critical and vital innovations in the automobile industry. Each of these innovations has helped the company achieve superior quality and productivity, the foundation upon which the competitive advantage of the company is built.

Ensuring excellent customer care: an organization that connects with its clients and customers tries to satisfy their needs and ensure that they get exactly what they want from the company. An organization whose strategy ensures that treats customers better than the rivals provides a valuable service for which customers are almost always willing to pay a higher price, (Slack et al 2010).

In ensuring that the process adds value and lowers the cost of production, operation managers need to find ways of ensuring superior quality while at the same time ensuring efficiency.

Toyota Operation and Production Process

The Toyota process of manufacturing is based on the most unique and generic lean manufacturing process. The Toyota production systems bring together the management, build relationships between the suppliers and customers and in turn ensure timely production for the competitive market. The main goals of the TPS are reduction in time for production, reduction of waste in the process of production and improvement of reliability.

Production: on this aspect the focus of the company for the past decade has been the reduction of waste. The automobile raw materials in themselves are costly therefore wastage would lead to a high cost of production which in turn translates to high cost of products.

Time: before the beginning of the new millennium, Toyota managed to cut the amount of time spent by an employee in building a car from 25 to 16.8, (Chopra and Meindl 2007). This has translated to higher production at lower costs.

Transportation: another aspect of the production process that has drawn concern is transportation from the industry to the final consumer. By ensuring transportation and shipping is done in bulk and within the local manufacturing plants, costs are reduced greatly and efficiency of delivery to the consumer is achieved.

Defective products: perhaps the greatest concern for companies is the need to improve and ensure consistency and reliability of products and services.  Although Toyota maintains a lean processing advantage, the main competitive advantage comes from the ability of the process to ensure reliability of the quality of the products.

The just in time production system was discovered and implemented in the early 1960’s. Over time, the company has centered on ensuring improvement of the same system of production. Simply put, the system reduces the time it takes from manufacture to final sale through innovative systems. () highlights the importance of continued inventory of the processes on a regular basis. At Toyota, it is believed that sitting inventory is wastage that is costing the company income. The system of production focuses on ensuring that raw materials are available at the right place and time for production. At the same time, products need to be available at the right place, time and at the right cost to capture a ready market.  The quick response allows the company to continue as the leader in the automobile industry despite other European and American companies making concerted efforts to catch up.

The Three E’s

All amount of planning and strategizing is directed towards ensuring effectiveness and efficiency in the system of production.  All this needs to be achieved while maintaining the economics that is cost of production at its lowest. The organization is focused at providing the services and goods that customers desire at a price that is attractive to the customers.

Economies: are the cost advantages that are associated with operations in a business. Economies are a result of factors such as manufacturing products in very large quantities, buying supplies and raw materials in bulk and making more effective use of resources that competitors. This means fully utilizing the skills of employees and the knowledge they pose to reduce the cost of production. (Bhadur 2008) states that managers must decide the feasibility of all alternative production processes that is whether such alternatives can be achieved while maintaining or increasing the profit level as is the goal of performing business. Managers often perform an analysis to determine which of the alternatives has the best net financial pay off.

Efficiency: efficiency measures how well resources available to the company are used to achieve the goals of the same organization. Organizations can only be efficient when managers reduce the amount of resources inputted to the production process (for example labor and raw materials).  Efficiency also speaks to the time needed to produce a given or desired output of goods and services.  For example, there has been an increased concern by consumers over healthy diets. In response McDonald, the most popular French fries outlet has developed a more efficient fryer that not only reduces the amount of oil used to cook the fries but also ensures faster production and cooking of the fries. The responsibility in operations management is to ensure that an organization and all the members of the organization perform efficiently on all activities that are required to provide goods and services to customers.

Effectiveness:   is the measure of appropriateness of the goals and strategies that managers have selected for the organization to pursue and the degree to which the organizations have succeeded in applying and achieving the same. It is important to not only set the right goals but also to strategize ideal ways to meet the same goals. For example, operations managers could easily advice on a new goals directed at diversification in order to expand and increase the target market. According to (Stevenson 2005),the goals of an organization can only be effective if they create a constant flow of innovative ideas which meet the needs of the immediate consumers directly and faster. Effective managers have perfected the art of selecting and choosing the right organizational goals and posses the right skills to utilize the resources efficiently. High performing organizations are often simultaneously effective and efficient.        

 

 

 

 

 

 

LOW EFFICIENCY/ HIGH EFFECTIVENESS

Manager chooses the right goals to pursue but lacks the skills to utilize resources to achieve these goals. Result: a product that customers want but is too expensive to buy.

HIGH EFFICIENCY/ HIGH EFFECTIVENESS

Manager chooses the right goals to pursue and has the skills to make good use of resources to achieve these goals. Result: a product which customers want at a price they can afford

LOW EFFICIENCY/ LOW EFFECTIVENESS

Manager chooses wrong goals to pursue and makes poor use of resources. Result: product that customers do not want.

 

HIGH EFFICIENCY/ LOW EFFECTIVENESS

Manager chooses inappropriate goals but possesses the skills to use the right resources to pursue these goals. Result: a high quality product that customers do not want

 

Cost Minimization versus Quality Maximization

The debate on cost versus quality is one that has been in existence for generations. Traditional researchers have often stated that when companies focus more on low quality, they are most likely to compromise the quality of the product. Modern researchers however, believe that low costs can be achieved without compromising the quality of the products simply through a system of value addition.  The different functions and activities that an organization puts together and uses to acquire inputs are focused towards lower costs while the [process of conversion of the inputs into outputs are focused on generating high quality products.  Given that satisfying customer demands is central to the survival of an organization, an important balance must be created between cost and quality.

According to (Greasley 2008) many companies focus on low cost production at any cost. This strategy has a major drawback, the top among them being that technological advances may allow rivals to be able to produce goods at lower costs but with higher quality. In addition, rivals could easily mimic the low cost strategy thereby making the competitive advantage very short-lived. Further, a company that is so focused on lowering costs  become fixated on lowering costs that the same company fails to pick up on significant changes as growing preference for added quality or service, subtle shifts in how buyers use the product and thus get left behind as buyer interests swings to quality, performance and other such features.

Performance Objectives

Cost:  researchers have found that cost objectives speak to the variations in unit cost as brought about by the amount of products produced and the nature of process employed.  When a company is engaged in large scale production, they have a stronger bargaining front. They are able to demand low costs in terms of raw materials and services they require in the process of production. This in turn translates to higher efficiency which follows through to lower costs in the sale of the products.

Quality: operations management is all about increasing the level of quality. Quality is one aspect of the production process that is relied upon to create an ideal brand name. Achieving the high quality of products lowers the operating costs; this is because there is less time and energy spent on the discarded products or in fixing mistakes.

Dependability: highly efficient operations systems are reliable and dependable. This means that the products indeed do the work that they were designed for and therefore directly meet the customer demands and requirements.

Speed:  today, companies can win or lose the competitive advantage depending on their speed that is, how fast they are bringing new products into the market. The idea is for the managers to anticipate the customer needs and create products and services quickly which solve the needs before the rivals.

Flexibility: in order to create new and improved products meeting the demands of consumers, companies need to be agile.  (Rusell and taylor 2001) state that the process of innovation and change encourages an organization to develop better and more ideal ways to produce and provide goods.

Linear Programming

Linear programming is a system through which managers employ particular sequences that will lead to optimal solutions. In such a case, the mangers are aware that an optimal solution exists to the problems facing production.  The manager is either focused on maximizing the quality or minimizing the costs. The manager therefore employs the decision making variables to ensure that they reach an optimum solution.  (Robbins and Coulter 2009) indicate that linear programming has the advantages of employing not just the strategies and positive variables but also including the constraint variables which could easily affect the process of production.

Perhaps the greatest challenge in applying linear programming is that the manager must have the mathematical knowledge and skills to apply the same. A lack of application skills only leads to jumbled equations and numbers.

Critical Path Analysis

Critical path analysis is a technique that schedules the critics activities which must be completed in order for the organization to reach its goals and targets of production. Majority of the people imagine that critical analysis is a form of narrative or explanatory technique. (Griffin 2005) states that many managers fail when they ignite the importance of mathematical formulas and steps in the analysis of the critical path. The mathematical formulas are ideal in understanding the activities in order of priority and how such activities relate to each other in the production process.  The essential steps in applying the critical path analysis include:

  • Generating a list of all the activities required to complete the process of production
  • With each activity listed, there must include a duration within which the activities need to be completed. This improves efficiency in the production process.
  • The relationship between the activities and how they each depend on each other.
  • Logical end results that will in turn become the milestones for the production process.

A production process can have several different critical paths that come from the dependencies. The idea for operations manager to identify the shortest path with the least costs for production. Critical path analysis allows the user to select the most profitable and ideal end process. The results of the process allows managers to make priority of the right activities which will reduce the wastage of resources. The analysis can also identify crash activities which are activities whose time can be significantly reduced and speedily completed without compromising on the quality.

Operational Planning

Operational planning is the process through which tactical strategies and goals are turned into applicable activities. In an operational plan, the organization can easily identify and put down the steps that will be included in the production process to meet its strategic goals, the costs of the same and the milestones for each step. (KRAJEWSKI and Ritzman 2002) shows that unlike popular belief, operational plans are not separate but draw inspiration directly from the strategic plan. The operation plan is the strategic plan translated into something workable and applicable. Like the plan it contains clear objectives, the activities associated with each objectives the ways to maintain highs standards and the desired outcomes or results to come from each activity.

(Render and Stair 1997) cite that monitoring the activities is vital to ensure that the operation plan remains in positive progress. Monitoring also ensures that any challenges are quickly dealt with.

Application of the operational management

Operational outcomes for the Toyota Company

  • To become a global authority on scientific and advanced technology pertaining to automobile industry. The automobile industry continues to change; advancements in technology are quickly changing the needs and desires of the consumers. Toyota intends to remain at the top of the industry by taking charge of new innovations and spearheading the research in the industry.
  • To ensure timely delivery of high quality products. Perhaps the most important aspect of the Toyota Company is the high quality products that the company has been known for in the past. However, even with a quality product, if such product cannot reach the consumer in good time then the process has been for naught.
  • To remain a price setter in the industry, ensuring cost effective processes of production. In the current global economy, consumers are generally more concerned with the cost of a product. The company aims to ensure that products are not only quality but also affordable for the average consumer.

 

 

 

 

 

 

 

Network Plan For Toyota

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quality Management And Operations In Toyota.

Toyota is driven by speed and flexibility that is cost efficient and flexible production lines that can switch between multiple car models to meet changes in customer demand. The quality management techniques of the company have ensured that for decades the company has remained at the top of the industry. By 2010, the company enjoyed at least 15% of all global automobile sales a number that keeps rising despite efforts by large rivals.   The management philosophy of the company is directed at continuously ensuring and finding methods through which the efficiency of production can be improved in order to reduce costs while at the same time increasing quality.

In the 1990’s quality management of the company Toyota led to various visits by researchers and entrepreneurs to understand the nature of such management from Europe and America. The Japanese company has continuously re-invented its management leaving the rivals trailing behind and scrambling to catch up.

REFERENCES

Bhadur, R. (2008). Production And Operation Management. Jaipur, India, Book Enclave

Chopra, S., & Meindl, P. (2007). Supply Chain Management: Strategy, Planning, And Operation. Upper Saddle River, N.J., Pearson Prentice Hall.

Greasley, A. (2008). Operations Management. Los Angeles, Sage Publications.

Griffin, R. W. (2005). Management. Boston, Houghton Mifflin Co.

Held, G. (2003). Ethernet Networks Design, Implementation, Operation, Management. London, Wiley

Heizer, J. H., & Render, B. (2001). Operations Management. Upper Saddle River, N.J., Prentice Hall.

Render, B., & Stair, R. M. (1997). Quantitative Analysis For Management. Upper Saddle River, Nj, Prentice Hall.

Robbins, S. P., & Coulter, M. K. (2009). Management. Upper Saddle River, N.J., Pearson Prentice Hall.

Russell, R. S., & Taylor, B. W. (2000). Operations Management: Multimedia Version. Upper Saddle River, N.J., Prentice Hall.

Slack, N., Chambers, S., & Johnston, R. (2010). Operations Management. Harlow, England, Financial Times Prentice Hall.

Stevenson, W. J. (2005). Operations Management. Boston, Mcgraw-Hill.