The operations management functions within a facilities service
The field of Operations emerged in the 1800’s but with each decade has grown and developed into the technologically advanced field it is today, committed to producing innovative quality products and services. According to many great researchers in past decades, Operations Management is “the set of activities that creates value in the form of goods and services by transforming inputs into outputs.”
The purpose of this report is to examine the operations management functions within a facilities service of two companies which are supplying service-based and manufacturing based services to the Commercial and Residential sector of business in today’s time.
I have learned and examine that the functions of operations management and coordinating the work of others are crucial in defining management. Additionally, it involves getting efficient and effective results. Efficiency is getting the most done with the fewest number of inputs. Organisations work with scarce resources: money, people, time, and equipment. However, it’s not enough to just be efficient; management is also about being effective. Effectiveness is “doing the right thing.” Thus, they should entail various skills in order to lead, influence, communicate, supervise, coach, and evaluate employees’ performances. Moreover, the ability to build teams and the ability to work with others are the most vital human skills that managers need to cultivate so that they could successfully attain their goals and that of their organization.
The first few sections will comprise of my review which will establish that I have an understanding of Operations Management and its role within an organisation. This will be followed by case study reviews of service and manufacturing based companies which I have worked on.
What is Operations Management?
In the traditional sense, the term “Operations Management” has been used to refer to the commercial activities involved in the four general functions:
Planning – This function includes identifying goals, objectives, methods, resources needed to carry out methods, responsibilities and dates for completion of tasks. Examples of planning are strategic planning, business planning, project planning, staffing planning, advertising and promotions planning.
Organizing resources – This management activity aims to achieve the goals in an optimum fashion. Examples are organizing new departments, human resources, office and file systems, re-organizing businesses, etc.
Leading – This includes the setting of direction for the organization, groups and individuals and also influence people to follow that direction. Examples are establishing strategic direction (vision, values, mission and / or goals) and championing methods of organizational performance management to pursue that direction.
Controlling, or coordinating - The organization's systems, processes and structures to reach effectively and efficiently reach goals and objectives. This includes on-going collection of feedback, and monitoring and adjustment of systems, processes and structures accordingly. Examples include use of financial controls, policies and procedures, performance management processes, measures to avoid risks.
SEVICE BASED ORGANISATION:-
The Royal Mail Group is one of the UK’s largest companies responsible for the universal mail collection and delivery service in the UK, handling on average 82 million letters, cards and packages every day, rising to 135 million on peak days. After over 360 years of providing service at a sustainable level, there must be efficient management of the operation’s functions to improve profitability with annual sales revenues in 2003 of 8.3 billion. Royal Mail, hereafter referred to as (RM) boasts to have utilized centuries of innovation making their business what it is today. One can only wonder how RM sustains this level of competence over its competitors.
Planning and performance
Initially as an organization RM accepted responsibility to formulate a vision or mission on which the goals are based to understand what it wants to achieve. By doing so, creating a strategy through analysing the current situation in the environment facilitates the accomplishment of their goals which guides the operations. The success of a company requires that work be performed in several activities or functions, with the operations function being central to the organization. However RM admits on their website, that to compete successfully in the open market they need fair regulatory regime and the ability to invest in the modernisation of their business. With continuous improvements in performance, RM operations managers can notably achieve this success while making a difference in their customer service product.
The role of operations manager.
Firstly Harrison (1996) suggests that “the role of an operations manager can be classified into 3 responsibilities which are process design, work planning and implementation. However many functions inside the RM Group can be related to the operations manager’s role, we should mention that the RM operations manager coordinates the whole system. In order to do these entire tasks the operations manager breaks down the total task into subsystems to be able to control the whole, this would be the transformation process, as mentioned in question 1 which involves taking inputs and converting them into outputs. Moreover operations managers should be concerned with both the technology of the transformation process and the methodology of managing the process (Monks, 1982). In the case of RM the inputs are: finance, information, staff (FT, PT, temporary), equipment’s, buildings (post offices), transport and mail itself. If we discuss the transformation process, it includes activities like managing, planning, budgeting, controlling, continuous improvement, quality control, packaging and delivering or distribution. Despite this difficult process, RM’s operations manager is responsible for providing the service of delivering mail. Moreover RM delivers a great amount of letters, packages and cards every day, on average 82 million, and 135 million on peak days.
In every company the operations manager should be able to make the right decision at the right time, this can only be done if the operations manager is involved in the day by day or weekly planning to meet RM objectives. RM operations managers made such a decision in 1999, when the company invested £200 million in a high-tech sorting process, which means that now enables 90% of mail to be handled automatically. It helps RM’s operations mangers to coordinate, control and implement the relevant activities in order to meet budgeted output, for example, their next-day delivery targets for first and second-class mail as well as handling volumes at peak times such as Christmas. According to the case study, in 2002 the next-day delivery for first class mail was 92.3% while second-class mail targets were achieved at 92.3% of time. We can see that the operations manager is not only the manager of technology but of product and process as Harrison (1996) mentions. On the other hand Hill (2000) states that the operations manager needs not to understand the technology itself as the level of technology involved and, more importantly the business trade-offs that can be delivered by the technology in use or being purposed.
Furthermore the operations manager is responsible for managing the cost centre, both the work flow and money flow, for instance from the mid-1970s until the end of the last century, the RM operated profitably and contributed over £2.5 billion to the UK government funds in that period. But according to the case study it incurred pre-tax losses in the last two years, thus in order to increase profitability operations mangers at RM would have had to make sure that the operations budgets and output levels are met to sustain their cost structure.
The features within Royal Mail.
The task of the operations manager can’t be emphasized enough, it is extremely critical to the function of the organization that they clearly understand the overall objectives of the organization which are usually related to quality, speed, dependability, flexibility and cost. But on the other hand, Martinich (1997) believes that there is more to it, he suggests that “to be an effective operations manager, it is important to be sensitive to the physical and psychological characteristics of employees and to interact well with people on a personal basis.” Within RM, various characteristics reflect how the management try to handle their task as operations management.
• Managing the work and money flow
-Money flow is tied to work flow so, operations had to control the increasing amount of daily mail they handled to increase productivity which would then have a positive influence on profit for RM.
• Linking the thinking and doing of the organization
-Integrating strategy with the implementation was clearly evident at RM as the mangers focused on the aim of keeping costs down and actually getting mail delivered quickly.
• Managing complexity
-Deciding how much workers would be needed to carry out the additional influx of work at Christmas time and how much they should be paid to create appreciation is a complex task and RM has shown their ability to formulate interrelationships with their human resource investments whether be permanent or temporary.
• Managing technology
-Current and advanced technology is the centre of performing at sustainable levels and competing effectively in any industry and with a decrease in profits RM was able to pinpoint where they were lacking and bought a high-tech integrated mail sorting processor to enable them to handle more mail automatically.
• Designing the end service and resulting delivery process
-RM concern with how they deliver the service is crucial to customer satisfaction, this includes motivating and training staff that are directly and indirectly in contact with customer which would allow the operations manager to monitor and control the progress in achieving RM’s objectives.
What constitutes the operation plan for Royal Mail –
Schroeder (2007) claims that “the corporate strategy defines what business the company is pursuing,” nevertheless a corporation’s operation strategy is based on their vision or mission, which is then guided by a business strategy and how they will accomplish the goals through consistent decision patterns, for example see Figure 1 in the Appendices. It is evident that Royal Mail has utilized Michael Porter’s theory of Generic strategy within their operations to gain competitive advantage, whereby applying cost leadership, differentiation, cost focus and differentiation focus in certain areas, for example
1. Cost Leadership
• Labour force
• Access to raw materials
• Unique design in how it presents its prompt services
• Improved technology which helps to provide outstanding service over its competitors
• In the economy, Royal mail plays a major role in paying taxes
• Royal Mail is different with the services they provide form the others doing the same business
- delivery service
- postal services
- marketing service- provision of direct mail
- online shopping
• The delivery system is seen as fast and cover large areas throughout the UK.
3. Cost Focus
• Royal Mail seeks a cost advantage by targeting a segment of the market through emphasizing the cheaper and more enjoyable way to do business with Royal Mail and its associated services i.e. online n logistics services
4. Differentiation Focus
• Since Royal Mail has fewer competitors; it focuses on trying to satisfy the needs of its existing customers in their market segmentation.
Additionally, Royal Mail Group Plc., parent company of RM, Post office Ltd and Parcelforce; is the one company in charge of delivering our letters and mails to our doors every day. According to groups 2006 reports published online, RM delivers approximately 84 million items to 27million different addresses and serves 25 million customers every day. With such duties this organisation has taken a big place in everyone’s life that resides in the UK. Royal Mail’s customer service is one of the best within the industry by ensuring that the mail is received on time at the right place and with a market approach that is unique since the 18th century.
Strategy is a common vision that unites an organisation, provides consistency in decisions, and keeps the organisation moving in the right direction (Russell et al, 2002). As a mail company, Royal Mail Group’s main strategy is delivering mail faster, on time and at the lowest cost possible. Many of their decisions are made by the operations management team in correlation with this strategy where sometimes the decisions may involve large sums of money. In the transformation stage every decision is made carefully so that the actions taken or money spent is beneficial to the company at the end. In 1999 RM invested £200 million on their high technology mail process systems, a clear example of an activity in the operation model where £200 million is invested or seen as input to aid in the transformation as to achieve faster and better service. For RM, making procurement more professional and getting more value out of its supply base is one of the main priorities. Counting that 82000 vehicles are owned by the group to run daily deliveries of the mails, in result it has a continuous market research in logistics in order to keep the low costs such as fuel, maintenance of these vehicles.
One author mentions that “Based on the corporate strategy, a market analysis categorizes the firm’s customers, identifies their needs, and assesses competitor’s strengths. This information is used to develop competitive priorities, which are the operating advantages that the firm’s process must possess to outperform its competitors.” (Krajewski et al, 2002)
Hence, with special and next day delivery services Parcelforce is facing great competition in the market with competitors such as FedEx, DHL etc. Their target is always to improve services in order to be leader in the market by giving same or better service at lower cost; this indicates their ability to create a service that would enhance their position in the industry.
The group has high responsibilities to their customers mainly to the public and business in order to be the most reliable company not only in the UK but in rest of the world. Corporate Social Responsibility (CSR) can be identified within RM operations strategy which focuses on their ongoing commitment to reach the targets. Other than improvement on the services RM Group is also concentrating on different targets and sets different strategies looking towards the coming years. It has taken a major role in reducing emissions that damage our environment as it is an existing global problem, for example a strategy is set to exchange 50% of their energy to renewable ones by 2010. It also anticipates and works together with charities who are tackling poverty and other problems in the world. To be a successful leader in the market, Royal Mail has to be involved with society and follow government regulations like any other organisation and be a guide to others.
Why operations function, as all other functions in Royal Mail participate in the company’s strategic level planning -
Firstly, long range planning occurs at the strategic level where the management or ‘think tanks’ decide how they will achieve their objectives and meet the measures of performance through their operations.
Operations function is a core function of any organization and is a central aspect in producing the goods and services which are its main reason for existing (Slack et al, 2001). Hence as an organization which desires to fulfil customer needs through prompt delivery, Royal Mail is required to have an operation function within its strategic level planning to bridge the gap between strategy and implementation of its major activities while simultaneously incorporating the other departmental functions of the organization to provide value for the customer and create profit, to illustrate see Figure 2 in appendices.
Hill (2005) declares “functions have a dual role to provide the day to day management of the areas for which they are responsible and developing strategies to support agreed markets.” While Dilworth (2000) further suggests that “All functions of a business are interdependent and must be well coordinated to make a company successful.” Thus it would be extremely vital that Royal Mail include all the other relevant functions in the organization in order to achieve their long term goals. Schroeder (2007) also assumes that “Integration of operations decisions with other functions in the organization is another contemporary theme…the best operations are now seeking increased integration through use of cross-functional teams, information systems, management coordination…integration is critical as a way of getting everyone pulling in the same direction.”
In addition it would emphasize the reason why the value chain activities are performed in the transformation process, which is equally important to the end result to create a more valued output delivered to the customer. Within Royal Mail, the activities or functions that are integrated together to provide excellent mail delivery service can be classified as Primary Activities and Support Activities. The following examples of activities illustrate how they relate to Royal mail in its ability to function as an organization:
a) Primary Activities
i. Royal Mail’s mission statement states that “with us it’s personal,” giving a sense of customer reliance and genuine care, therefore in order to maintain that commitment, Royal Mail need to provide excellent Customer Service which would include timely and correct delivery of mail in order to increase customer satisfaction, prompt response to lost or damaged mail as well including online customer service evaluation and feedback, and added value similar to printing postage online and managing your address data.
ii. Operation Activities would take into account all the relevant inputs mentioned and illustrated in the detailed operations model on page 1, which are converted by Strategic planning, controlling, managing, and marketing for better service, company image and profit.
iii. Royal Mail’s Market and Sales Activities create awareness through advertising, for example online services such as providing advertising services, logistics services and same day service. This helps to make their services more widely available to facilitate convenience to the customer especially the business sector who would be engaged in other activities and would be unable to go to a post office to mail a document etc.
iv. Inbound and Outbound Logistics are important to Royal Mail as receiving, unloading, unpacking, storing, handling and controlling mail distribution is the heart of their service industry as they seek to deliver mail and keeping cost down.
b) Support Activities
i. Procurement: the purchasing of letter boxes, and delivery vehicles that are all apart of the inputs needed to fulfil the operations activities.
ii. New and advanced technology must be considered to be able to compete effectively in any organization especially within a service sector; likewise Royal Mail introduced a high-tech integrated mail processor which enables them to handle 90 percent of the mail automatically, also a postal code finder on their website.
iii. Human Resources Management: RM believes that their business is all about their people and that they’re the reason why the letters quality of service results are the best they've ever been. RM also firmly acknowledges that there is a need to continue developing and improving the relationship with their people, as their hard work and dedication will take the business forward through the next stage of unprecedented change. According to their website, “We want to ensure that they have the right incentives to continue delivering consistent service to customers.” Thus, the decision to employee the right people at the right time is of key importance to an organization as its human resources are essential to productivity. Management at Royal Mail employs 130 000 staff and in order to operate efficiently at Christmas time a further 30 000 temporaries, these must be recruited and trained personnel to operate the machinery and provide good customer service.
iv. Firm Infrastructure: A clear management structure is required to emphasize a clear chain of command in managerial processes such as,
• strategically planning long term goals and objectives
• quality control in order to reach desired delivery targets
• obtaining and allocating funds to the various departments to do their tasks, budgeting for how much can be afforded for new technology and equipment, how many temps can be hired to increase efficiency.
In this report our group tried to understand the operations system of the Britain’s main mail distribution Organisation – Royal Mail Group. As we could clearly see RM has been playing a great role in people's lives, taking its high place in their hearts for more than three hundred years. Even today in the century of high technology development, when sending mail became very fast, easy and very secure with the help of email, a lot of people still prefer sending mail by post, this means that the culture of writing letters is not disappearing. Furthermore the culture of posting and delivering letters is developing from day to day, RM today can offer its clients a great variety of mail services, which yesterday it couldn't and that people haven't dreamt about. Dilworth (2000) suggests that “customers have much contact with the operations function in many service businesses” Thus this explains why RM should have well-coordinated operations to provide good service to its customers and main sustainability within a dynamic environment. It also means that RM is always able to introduce something new to people within this dynamic environment through the efficient management of their operations. RM's motto is ''with us it is personnel,” these words illustrate that RM tries to find a specific and personal approach to every one of their clients. RM says: “Our vision is to be demonstrably the best and most trusted postal services company in the world,” thus they have been trying to become the best and one and live up to their words. We believe and realize that they could have only reached their aims through their brilliant operations management, as in the functions of every organisation operations management plays the greatest part.
Fuji film which is also known as the Fuji film holdings is Japanese based company that is globally known for its cameras as well as its photographic films. The company is the largest in imaging and also photography worldwide. The company operates over 200 subsidiary companies for its research and also for the distribution and the manufacturing of its products in the European, Asian and the American continents. Similarly the Fuji film holdings corporation produces some computer media storage devices such as the CDD ROMs and also the recordable DVDs. The company’s camera has very distinctive boxes that are green in colour and this makes it to be re-branded as its own label film. On the other hand the company’s products have very distinctive features. (John Thompson & Frank Martin 2005)
The company’s products
The company’s products include;
The Fuji chrome slide films which are colour reversal
The Fuji colour negative films which are printable
The fine pix series of the compatible digital cameras
The Fujinon lenses which are the most widely used lenses in the televisions.
The photographic paper
The inkjet printer paper
The magnetic media
Digital x-ray devices.
The Porters Five Forces Analysis of the Fuji film holdings
Rivalry among the competing sellers
In the industry there is a very strong force since the Fuji film holdings corporation competitors use the price cuts in their competition and there is also a low cost and an ease to the switching brand. Thus the companies in this industry diversify and also acquire other companies for their strategic growth as well as synergy. The company strives for a competitive advantage over its rivals in the industry.
The rivalry which exists between Fuji Film Corporation and the other firms in the industry is very high since there is plenty of counter response when the company acts in a particular way. The company employs the following competitive moves so that it can have an advantage over its rivals. First and foremost it changes its prices to suit the consumer’s purchasing power and this enables the company to have a temporary advantage over the other rivalry firms. Similarly the company makes further improvements in its products differentiation and it also maintains good relationships with the suppliers of the raw materials. (Johnson & Scholes, 2002).
Competitive force of the potential entry
In the industry this is a very strong force since the Fuji film holdings corporation has strong brand images and this makes it very hard for the new entrants. The initial capital expenditures are very huge and the exiting companies are achieving their economies of scale by being global. Another threatening factor to the potential new entrants is the trade tariffs as well as the international regulations whereby they have to prove themselves to the foreign companies, customers and also suppliers.
Competitive pressures of the substitute products
In the industry the substitute products belong to the other firms in the industry. The company is highly affected by the price changes in the substitute products in the rival companies. Since the more the substitute products become available to the consumers then the demand of the products from the Fuji film holdings corporation become more elastic. This further allows the consumers to have more alternatives in the market.
However this is a moderate but weak force in the industry since the businesses and also individuals wish to use other cheaper food products. A close substitute product in the industry further constraints the company’s ability to raise its prices. On the other hand there is a lot of price competition in the industry especially in the film and photography substitutes. Most of the consumers in the Fuji film holdings corporation consider the suitability as well as the performance value and also the convenience of the company’s products which they are purchasing.
The power of the suppliers
This is a very strong force especially since the suppliers serve the photography industry. The Fuji film holdings corporation requires the food supplies and other food raw materials. This has further led to the company creating very solid relationships with its raw materials suppliers and also the other firms which provide the company with the required production materials. Since the company’s suppliers are powerful they exert a lot of influence in the industry. On the other hand the company’s suppliers are concentrated and they also have powerful customers.
The power of the buyers
On the other hand this is a very moderate force in this industry since the existing competition keeps the prices similar amongst all the other companies in the food industry. However the only difference is that companies such as the Fuji film holdings corporation t have value added products which allow for a higher price. The customers have a very high impact in the industry since their buying power is very strong. The company also has a few buyers who have a significant market share and they purchase a very significant proportion of the company’s food products.
The SWOT analysis for the Fuji film holdings
Even though the markets for the fujifim holdings corporation have been declining, the company has been able to survive in the industry since it has several internal strengths. These include the availability of financial reserves which the company uses in times of crises. Similarly the company has a very good reputation and corporate image in the market place. On the other hand the company has profitable patents and also an access to a variety of resources in the market places. The Fuji film holdings corporation has a positive financial record as well as unique technology that keep it way ahead of its rivals.
The company’s infrastructure has been ageing over the years and the company has also has been going through some instabilities in the leadership management segment. Unfortunately, this company that had formerly been able to stand the test of time has also been having some financial difficulties which have been coupled with some scandals on ethical issues and also some pending law suites. Similarly the company has also been experiencing a flawed distribution of its products and it is also being faced with the challenge of an outdated technology in comparison to its competitors.
There is still a lot of hope for the Fuji film holdings corporation since there are several opportunities which have given the company a chance to rise to its former glory. The consumers in the market place are much unfulfilled in their consumer needs. Thus the Fuji film holdings corporation can meet the needs of the unfulfilled consumer needs in the market by providing products which are more innovative. Similarly the tight regulations which had been instigated over the years in the company’s global markets, been loosened and therefore the company can thrive to expand and broaden its markets. On the other hand the shifts in the company’s demographics further create a larger market where the Fuji film holdings can effectively compete in. in addition to this there are modern innovations which are now readily available and they can enhance the quality and also the distribution of the company’s products. Moreover there are possibilities of the company to have mergers and joint ventures with the more potential companies that as this will bring the company back to its profitability levels in the industry. (Michael Porter 2004).
The company is being faced by major threats and there are efforts which are necessary for converting these threats into strengths. First and foremost the company has been facing very new consumer tastes and preferences for which the new rival companies are also trying to meet. On the other hand the presence of substitute goods in the market which is caused by the emergence of new producers has threatened the future of the Fuji film holdings corporation. Moreover because of the economy there has been a reduction in the consumer buying power and the financial position of the company. Similarly the new product regulations have brought restrictions to the Fuji film holdings corporation. The shift in the workforce has not been working well for the company. If the employees who form a very important source of human capital are not very productive as per the company’s expectations and standards this can result to very massive losses.
The PESTLE analysis for the Fuji film holdings
A PESTLE analysis is used by the company in analysing the company’s external business environment. This analysis involves the basic understanding of the organization’s political, economic, social and technological environments and this is in reference to the company’s business partners. (Paul Finlay, 2000).
The political factors may have a direct or even an indirect effect on the performance of the company. Some of the decisions which are made by the Japanese government have had a negative impact on the operations of the Fuji film holdings corporations. For instance the copy right laws by government vary in different countries in which the company operates in especially in the international markets. This has limited the operations of the company in the production and distribution of its products globally. On the other hand such regulations which limit the prohibition of illegal infringement of the company’s copyright on its products affect the company’s growth.
Economical and environmental factors
All the businesses in the industry are affected by the economic factors. These effects are mainly on the company’s fiscal policy rates, interest rate policies, currency exchange rates, consumer factors, etc. The current economic trends in many countries that the company is operating are very positive. For instance china which is one of the company’s major markets is experiencing a high economic growth which is encouraging for the company’s businesses. Economic status in Japan also remains favourable. Thus, the consumers are bound to spend more on services offered by the company. It is possible that the Japanese economic climate tends to dictate how the consumer behaves in the society. (Bod De Wit & Ron Meyer, 2005)
If an economy is booming, recessing or recovering, the confidence of the consumer will automatically change. Forces within the society such as media, family and friends have affected the way the Fuji film holdings corporation markets its products in the wider markets. Currently, many people are becoming aware of the importance of photography and the trend has continued to increase. Photography and imaging is growing daily and the companies which are offering these services are witnessing increased business rates. This means that companies such as the Fuji film holdings corporation have benefited heavily. Social factors affect our attitude, opinions and interests on the way we view products from certain companies. (Robert M. Grant 2007)
The way the Fuji film holdings corporation operates its business has changed as technology changes. Technology in the photography and imaging industry has continued to improve daily, there is always something new in the industry, this improvements and advancements have encourage more people to use the company’s products. Similarly the company’s products are innovative enough to meet the new markets and extend its global outreach. It has had a profound impact on the marketing mix strategies of many organizations. Business should keep in touch with changing technology and modernization in this ever changing world.
The company’s external factors are expressed by the trade and tariffs restrictions as well as the political instability of the company’s location. Similarly they include the tax policies, the environmental regulations as well as the company’s environmental regulations.