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This report is aimed at comparing and contrasting the approaches to operations management in at different types of organisations. Operations management is a core contributor to a firm's success and developing competency is widely recognized as a key factor in determining the strategic and competitive advantage of the firm. The author has chosen two broad categories of organizations i.e. product based and service based to analyse the practises and mutual differences between the approaches. The report begins by identification of different types of operations/transformation process in the chosen organizations and analysis of their suitability and adequacy. This is followed by a critical analysis of principles and concepts in terms of capacity planning, inventory management, supply chain design, performance measures and total quality management. The report concludes with an evaluation of the combination of these factors and its impact on competitiveness, innovation and sustainability of the different types of organizations being studied in this academic exercise.
Operations Management - an overview
Operations management is an important area in managing a firm. It can be defined as the area of management related to design and operation of business processes in production of goods or services. In a nutshell, it is the transformation of resources into product and/or services as depicted in figure 1. The competitive advantage of a firm is directly impacted by the efficiency of utilization of available resources satisfying customer demand. (Slack et al 1995, Voss, 1995)
Figure 1: Operations Management ( from sussex.ac.uk)
Operations management serves the function of managing the process of converting 'input' in terms of human resources, raw materials, and energy into 'output' in the terms of goods and/or services. It is critical to ensure that the strategic direction of the firm is maintained by executing the tactical decisions of resource utilization to ensure that competitive advantage is maintained (Schmenner et al, 1998). A suitable example of efficient operations management is Apple Inc. Apple is a multinational corporation that designs and markets computers and related products and services. The firm manages its operations in a way that it ensures that the demand is met by the supply but at the same time it doesn't need to stock large quantities of products in warehouses (figure 2) i.e. Apple has a fast inventory turn over rate. (Gamet, 2009)
Figure 2: Warehouse solution for a fast inventory turn over organization
Operations Management encompasses a number of theoretical concepts, suitability and application of which varies within and across the organizations (Figure 3). Key factors include but are not limited to capacity planning, inventory management, supply chain design, performance measures and total quality management. In goods based organizations the concepts of inventory, supply chain, quality and capacity planning are highly critical. Where as, in service based organizations factors relating to human resources, performance and quality management are given prime importance. (Bayraktar et al, 2007)
Figure 3: Factors in Operations management
The concept of operational strategies encompasses the plans for ordering raw material, converting them to finished product, storing and selling to the customer. Its implementation is often mismanaged in the fast changing environment in the highly globalized markets at present. The management problems in the area of operations management comprise of quantitative, social, technical issues and their complex mixtures (Liet al, 2000) Quantitative problems may include factors relating to planning, critical path analysis, supply chain management etc. Technical issues may consist of factors relating to automation, optimization, scheduling etc. Social factors may include human resource management, outsourcing etc. It is worth noting that these issues are not isolated and independent of each other but they affect the effectiveness of the overall operations management in the business. Therefore it is essential to manage these problem areas to ensure that the overall operations management is not impacted adversely by these factors. To stay competitive a business needs to evolve so as to ensure that alternative course of actions can be adopted as per the available resources while effectively managing change (Volberda, 1999).
The Human resources i.e. people in an organization are extremely important in operations, process and performance management process. An organization's success directly depends on the success and satisfaction of its employees. Therefore from an operational point of view it is important for the business to employ and retain the right people for growth, profitability and sustainable business (Pfeffer, 1998).
Analysis of operations process in different types of Organizations
To understand how operations differ in different types of organization the case of an Aircraft manufacturer versus an airline operator is considered. The basis of this analysis is competitive priority and marketing strategy. The different types of operations process in these organizations will be identified and their adequacy to meet the customers' needs assessed to understand the key factors of operations management.
The very first and the most basic difference in the organizations chosen in this case study is that the aircraft manufacturer deals in the production of aircrafts and allied services for its customers while the airline operator deals solely in the provision of logistic services. For the purpose of simplicity and ease of understanding, the author has considered only the production of aircraft and provision of logistics to mark a clear distinction between goods based and services based organizations. To maintain competitive advantage both types of companies need to ensure that their operations are managed efficiently for keeping the costs under control and thereby offering the goods and services to their customers at competitive rate while ensuring maximum profitability (Frohlich et al, 2002).
The aircraft manufacturer invests heavily in research and design as it needs to 'do it right the very first time'. Due to the scale of operation, the various functions are distributed globally, thus efficient inventory, capacity and supply chain management are essential. Total quality management and performance are also needed to maintain the competitive and marketing advantage (Chow, 2002). The airline operator on the other hand relies on the aircraft supplied by the manufacturer to provide service to its customers. The operator doesn't need to maintain an inventory of planes but it has to ensure that it utilizes its capacity to maximum possible for providing competitive fares to its customers. The performance metrics for the airline are different as it has to ensure timely flight operation which again is essential from the marketing strategy point of view (Rae, 2001).
The adequacy and suitability of the key theoretical principles and concepts in operations management are discussed in the next section of this case study.
Evaluation of Operation Management concepts in different Organizations
Impact on competitiveness, innovation and sustainability
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Gamet, J., Apple Beats Competitors at Inventory Turn Over, macobserver.com, Mar 2009
Accessed: 21st February, 2011
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Chow, C. and Shields, M. "The importance of national culture in the design of and preference for management controls for multi-national operations", mit.dspace.org, 2002
Rae, D. "EasyJet: a case of entrepreneurial management?", Strategic Change, Volume 10, Issue 6, pages 325-336, September/October 2001