The current paper describes and critically demonstrates the importance of sound operations management to organisations for efficiency and strategic purposes. It also shows how improvements of operations are important in maintaining quality and remaining competitive in a globalised environment. Relevant examples in the manufacturing industry and goods and service delivery have been applied.
Operation management entails the designing, overseeing, and controlling of production process in an organization (Rao 2010). It is used by organisations to ensure that the available resources are effectively used to realize customer satisfaction. Increase in competition has compelled organisation to adopt operation management as a way of creating competitive advantage. Moreover, operation management is undertaken to enhance efficiency during the production process or delivery of goods and services. With the assistance of an operation manager, organisations maximise production using the available resources (Voss 1995). Intense competition and discerning consumers have left manufacturing organisation with no option but to adopt some of available operation management practices such as computer integrated manufacturing (CIM), flexible manufacturing systems (FMS), total quality management (TQM, and just-in-time (JIT) (Neely 1993). Given that operation function is the organisation’s part concerned with goods and service delivery or production, it means that all organisations carry out operation management.
Concept of operation management
Operation management is a transformation process which entails “a draft of operations system, planning and control, and improvement activities that are necessary for production and providing of goods and services to customers” (Horváthová & Davidová 2011, p. 8). This means that operation management is a set of activities which enhance efficiency, competitive advantage, realisation of strategic business objectives, and customer satisfaction. The diagram below depicts the transformation process of operation management as provided by Horváthová and Davidová (2011).
The importance of good operation management
A good operations management is used by organisations to ensure the success and strategic positioning in domestic and global markets. Successful organisations such as Toyota Motor Corporation, Tesco or Barclays Bank have adopted operation management for strategic positioning purposes. Generally, operation management entails activities which are related to market opportunity with respect to adding value and performance of an organisation. The use of Just-in-time method of production by Tesco and Toyota Motor Corporation has enhanced efficiency in distribution process. For example, other than using the JIT strategy, Tesco has also opened more distribution centres thus creating a strategic position. This has resulted differentiation from other competitors in the industry such as Sainsbury, Kwicksave, and Asda among others. To differentiate itself, the retailer embarked on online shopping (ecommerce) with the objective of maximising its profits and attracting customer segments which has remained untapped. It also engaged in diversification process such as the introduction of petrol pumps in its shops as part of the cost-price strategy. This has not only created a competitive edge but has also resulted to customer satisfaction through value creation (Roth & Menor 2003)
As part of strategic positioning, operation management strategies such as the use of JIT eliminate waste as well as the need to store voluminous raw materials and products. In other words, the adoption of operation management not only reduces costs but also saves time (Boughen 2008). JIT results to flexibility and responsiveness to customers demand. In other words, it becomes easier and quicker to respond to the demand of customers. A good example is Dell Corporation which has over the years increased its operational capabilities through the use of warehouse space to house more production lines rather than storing raw materials and products (Aghezzaf 2005). As a result, Dell is strategically placed in the market. In addition, the use of JIT has increased efficiency and the speed to respond to customer demands. On the other hand, a company like Toyota Corporation has concentrated on quality, cost and flexibility to strategically position itself in the market (Lowson 2002).
Based on the description of operation management, organisations use different strategies to enhance service and product delivery. For instance, organisations use diversification, market development, product development, and market penetration strategies to strategically position in the industry (Lester 2009).
With reference to Barclays Bank, the financial and banking institution has heavily invested into different markets in the globe which makes it strategically positioned. Through diversification, market development, and product development, the bank has achieved enormous market growth and increased service and product delivery, Moreover, the banking institution has several branches, services, and products which are consumer oriented. A company like Toyota produces its products based on the demand of consumers in that particular market. For example, the company has been successful by producing consumer focused car brands in different markets. For instance, in its operation management, Toyota Corporation produces and markets Corolla and Prius for medium income earners, Scion for low income earners, and Lexuses for high income earners. Through these marketing strategies, the company has been able to reach out to all customers in the automotive industry. Therefore, Toyota has not only adopted the Ansoff’s matrix but has also been used JIT for strategic positioning. As a result, the company has become successful and a market leader. Tesco has over the years placed itself strategically in the market through the use of differentiation strategy. For example, the current different strategy is reflected on the company’s investment into personal finance, telecommunication, and non-food products (Vaara 2002).
Consumers are attracted to quality products and services. Therefore, to realise quality products and services, organisations have embarked on the use Total Quality Management (TQM) as part of operation management. Through TQM, organisations involve all its employees and production or service and product delivery processes to maximise on efficiency. In service industry such as banking, quality is measured in terms of responsiveness to needs of customer, consistency, timeliness, courtesy, and other tangible factors. In manufacturing and production sector, quality is measured in terms of serviceability, features, durability, reliability, and performance. The major principles emphasized by TQM are continuous improvement, customer satisfaction, and employee involvement. Organizations like Barclays and Toyota have always ensured employee involvement, customer satisfaction, and continuous improvement (Ohno 1988). For example, Barclays has over 15 products which are geared towards customer satisfaction. On the other hand, Toyota uses lean principle to enable continuous improvement which is geared towards customer satisfaction (Ohno 1978).
Supply chain management determines when goods or services are manufactured and delivered to the end consumer. Organisations employ potential supply chain management systems which are based on innovative and technology based supply chains. With reference to Tesco, the retailer has adopted potential supply chain which is based on innovative initiatives such as lean management, tracking devices such as RFIDS, point of sale (POS), automated warehouses, centralized ordering, electronic data interchange, and scanning (Tesco 2011). All these activities are geared towards the creation of a competitive advantage through strategic positioning. Moreover, the use of technology in its supply chain, Tesco has increased efficiency and achieved customer orientation. Moreover, the use of innovative supply chain creates consumer value hence customer satisfaction (Tesco 2011). In addition, efficiency in supply chain has increased the level of services and products delivery. Cost leadership approach has also worked well for Tesco. The company has over the years introduced its own brand and outsourced its human resource as a way of cutting down costs and increasing efficiency (Johnson, Scholes & Whittington 2008). This has enabled the retailer in the provision of low costs products to its consumers. Through price check strategies, the company has strategically positioned itself in the market as a low price retailer hence its success (Johnson, Melin & Whittington 2003).
The importance of operations management to complete in a globalised world
Operation management is used by organisation to create a competitive advantage over its competitors. When company that has a competitive advantage, it means that the company has created an operational system which gives the company a unique advantage over its competitors (Heizer & Render 2007). This is achieved through low cost, differentiation, quality, and response strategies. Therefore, it is the obligation of an operational manager in an organisation to create a competitive advantage in both domestic and global environments. Subsequently, the complexity to realise a competitive edge over competitors is developed. In the global scene, an organisation creates a competitive advantage when it produces output which is not only unique but also delivered to its customers in a unique way. The main objective is to “distinguish the offering of the organization in any way that the customer perceives as adding value” (Heizer & Render 2007, p. 30). Organisations often become low cost leader with the aim of creating a competitive advantage. In this case scenario, an organisation examines the ten operations management decisions in such a manner that it drives down costs while at the same time meeting the expectations of the customer (Linnell 2008). The diagram below represents operation management process as used in the healthcare sector to create value thus creating a competitive advantage over competitors.
Flexibility, quality, time, and cost are the major capabilities which provide an organisation with a competitive edge (Porter 2009). This gives the organisation the chance and opportunity to effectively and efficiently compete in globalised markets. With reference to Toyota Motor Corporation, the vehicle manufacturer has adopted operation management to create competitive advantage in global markets (Voss 1995). For example, the major objective of Toyota Motor Corporation is to produce high quality products which meet the demand of customers around the globe. As a result, the company has become competitive in globalised markets. Through quality management, the organisation is able to ensure that its products not only meet the expectations of the Japanese market but also that of global market. The major advantages of ensuring quality through operations management with respect to globalized market competitiveness are that it results to improved customer service reduced costs, and increased dependability (Lowson 2002).
By implementing operation management, an organisation is able to produce quality products with reduced costs. Given the high level of competition in global markets, organisations opt to use cost leadership strategy which creates a competitive advantage. With respect to Toyota Motor Corporation, the company faces numerous competitions from international players which are price oriented (Tariq 2011). From a marketing perspective, consumers are attracted by high quality products which a low priced. To achieve these consumers’ expectations, manufacturing companies such as Toyota Motor Corporations are forced to produce low priced but high quality products. This has assisted the organisation in creating a competitive edge by adopting operation management to vehicles which meet global competition standards. In addition, instead of exporting its products to Europe or U.S, the organisation has setup operation and production plants in these markets to ensure cost proximity. As noted by Lowson (2002), cost as a factor of production should be managed effectively during manufacturing to enable a company increase its profits and deter other companies from entering the market,
Good operation management gives room for speed and flexibility which are essential prerequisites in service and product delivery. Flexibility is the ability to provide a wider range of services or products to the targeted customer and be in a position to change the specified goods based on customer’s demand and expectations (Lowson 2002). When an organisations use simplified machines and innovative technologies, they are able to deliver goods on the required time. Toyota Motor Corporation has adopted the philosophy of product and volume flexibility in its production and supply chain (Elnadi 2009). This means that the organisation can produce products and deliver them in given time and by meeting the market demand. When there are seasonal changes, the organisation is flexible to produce a volume which is a reflection of the market. For example, product flexibility has been achieved by Toyota through production of wide range of products in the market. For example, the corolla and prius which are designed for medium earners, the iQ, Aygo and Scion for low income earners, and land cruisers and Lexuses for high income earners who need luxury cars. This way, the automaker through its operation management has controlled the automaker market in global markets.
As part of operation management, Toyota Corporation has employed lean philosophy which has created a competitive edge through creation of dependability (Ohno 1988). General Motors has also depended on operation management to increase speed and produce vehicles in faster and more efficiently through the use of computer-aided systems (ICMR 2002). When products are efficiently manufactured, the organisation shrinks the product life cycle. This means that the end products can be made available to the consumer in a short time frame. One of the main operation management strategies used by Toyota to enhance globalized world competition is the just-in-time (JIT) production method (Neely 1993). Under lean philosophy, employees are involved in the production process because they are considered to be the major organizational asset. Tariq (2011) observe that through the lean philosophy, an organisation is able to reduce wastes, reduce costs, and process products faster thus creating a globalised competitive edge. Through lean and JIT principles, Toyota Corporation is able to meet the demand of its global consumers instantaneously (Slack, Chambers, & Johnston 2007). The efficiency and quality of the company relies on the collaboration of all employees, managers, and operation processes which are part of the operation management. Competiveness of Toyota’s supply chain has enabled the company to achieve efficiency in production and distribution (Elnadi 2009).
Were living in a globalised world where consumers needs and expectations influence the global market. Therefore, organisations have to use operational management to create a competitive edge over other players in various industries. An organisation like Toyota Motor Corporation uses the Lean Systems, the JIT, and the Toyota Production Systems for growth and competition (Ohno 1988; Ohno 1978). For example, these three operational management systems have been implemented to create a sustainable competitive advantage and increased profitability in Toyota Corporation (Heizer & Render 2010). Through JIT, the company reduces the number of inventories. The implication made is that the use of operations management practice such as JIT, Toyota produces what is required in the market and when it is demanded. Subsequently, the organisation has been able to eliminate any production problems.
Moreover, this has necessitated the company to not only eliminate excess inventory but to also produce quality products, eliminate excess production, enhance efficient scheduling and layout as well as address supplier issues (Ohno 1988: Tariq 2011). When value is created through lean production a competitive advantage is created. This is because value creation in products and services delivered results to customer satisfaction which is a positive competition attribute.
A company which eliminates wastes creates through the use of operational management creates a competitive edge over its competitors. Waste in this case has been described as any activity or process which fails to add value during service and product delivery or during production/manufacturing process. The major wastes which have been identified by Toyota Motor Corporation are defectives, over processing, motion, inventory, transportation, waiting time while on queues, and overproduction (Ohno 1978). By eliminating wastes, the operation manager makes sure that the available resources are efficiently used to meet the demands and the expectation of the consumers. Through the 5s (simplify, sweep, standardize, segregate, and self-discipline) strategy the company has created continuous improvement (Heizer & Render 2010). The lean philosophy has not only been adopted by Toyota Motor Corporation but also by its suppliers and distributors (Ohno 1978). Under the TPS, the organisation has established a culture of continuous improvement where its products are continuously improved to enable the company compete in globalized markets. Therefore, organisations use operation management to protect their distinctive competencies and sustain growth based on these competencies thus enabling them gain more competitive advantage over its competitors and rivals.
Concept of operation management
Based on the research analysis, it can be concluded that operations management is important in creating strategic positioning and success of an organisation. In addition, it results to efficiency and customer satisfaction. For instance, through the use of just-in-time approach, organisations realize efficiency through cut down of costs, increased flexibility, reduced space, and response to the demand and expectation of customers. Moreover, use of total quality management increases the quality of products hence strategic positioning. With respect to creation of competitive advantage in globalised markets, organisations use operations management to cut costs, produce quality goods and services, enhance flexibility, increase speed in service and product delivery and enhance dependability. Company like Toyota Motor Corporation depends high on lean philosophy which is based on the JIT production approach. Through operation management, the organisation reduces wastes and eliminates inventories. In other words, the organisation is able to produce based on the quantity of demand in the market. It can be concluded that organisations employ operation management to defend their distinctive competencies so as to enhance growth and gain competitive advantage over its competitors and rivals.
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