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A critical analysis on organizations i.e. Parcel-force (I have selected it due to my personal experience and influence) and BG Group (a FTSE 100 company) is presented in accordance to the appropriate operational framework in management of tasks. Analysis are established under the keen aspects of operations management in which facts like customer orientation and needs and the organizations' responsiveness to those needs are highlighted. Parcel-force and BG group are analysed on the basis of various concepts and frameworks including Supply chain management, Total Quality Management (TQM), Six sigma, Statistical approach, Process design, Job design, Process mapping, Layout planning, Systems thinking and Capacity planning. A critical analysis on the structure of both the organizations is provided which mainly entails the similarities and differences on their respective processes and operations.
Table of Contents
PART - A
Parcel-force Worldwide is a trading name of Royal Mail Group Ltd. Parcel-force Worldwide provides express parcel delivery services for businesses and consumers. It is a British company providing a staunch link between businesses and the international markets for over 14 years. Its services include couriers and logistics. For the efficient collection and delivery system, the company has two operational hubs in Coventry. One handles the operations in the UK and the other handles parcels for international deliveries.
Products and Services
Products and services of Parcel-force include the main streamline mail within the UK as well as in the rest of the world. Secondly, it offers an extended parcel delivery system in the Europe with the name of GLS (General Logistic System) and it is estimated that it delivers around 1 million parcels across 34 countries in Europe. Moreover, its worldwide operations are carried out at a vast collaboration with its partners. (Parcelforce, About us, 2010)
Parcel-force Worldwide has over 30,000 business customers in the UK. It handles 200,000 parcels a day. Parcel-force strives to provide its customers with hassle free delivery of their goods and mail. The main customers of Parcel-force are general public for their day to day postal and mail requirements as well as business to business customers. It maintains a network of post offices which generate huge volumes of mail and parcels to be delivered in the mainland UK and worldwide.
Customer service is an important part of its strategy; it generally makes its communication between customer and itself clear. A customer can track its parcel, receive quick responses to queries and parcels can be picked up really quickly. Account customers, running large, medium and small enterprises also form a major customer base of Parcel-force, for instance ASDA stores signed a contract for their George brand to use Parcel-force service for logistics similarly, and British Gas also maintains running contracts with Parcel-force. (http://www.thetimes100.co.uk/downloads/parcelforce/parcelforce_13_full.pdf)
BG Group is one of the major players in the global energy market. Apart from providing gas and electricity to households and industry, the company also install and maintain central heating and gas appliances to homes throughout the world. BG Group is a growing business with setups in more than 25 countries over five continents. BG Group is a publicly listed company on the London; New York Stock Exchanges and is a component of the FTSE 100 index. (Profile, 2010)
Products and Services
Headquartered in the UK, the company has a proud history in all aspects of the energy sector, particularly natural gas, where it has experience across the entire gas chain. It operates in four key business sectors â€• Exploration and Production, Liquefied Natural Gas, Transmission and distribution, and Power Generation. (http://markets.ft.com/tearsheets/businessProfile.asp?s=BG:LSE)
The BG group sells its products to various structures. These comprise of households, retail gas suppliers and electricity producing corporations. Moreover, it's also looking forward to start its own electricity producing projects. BG group has a global presence with around 60% of its projects outside UK. The main customers are household, electricity, gas and bi-fuel that is, both electricity and gas customers. However, BG Group also deals with business to business customers. These mainly comprise large, medium and small industries. There's a fairly slim customer base for boiler supply and energy efficiency advice.
In the British market, Parcel-force is the market leader in terms of market dominance but while considering the international market, it lies among the market challengers. Its worldwide competitors include FedEx and DHL etc. Its worldwide networking and outreach is declining due to the greater stretch of competition spreading to various geographic regions
Contrary to that, BG Group is solely a challenger if the whole European market is taken into account. Though it has stolen a fine number of customers from competitors through promotional activities and market presence, it still needs to grow more to become the market leader.
Under the innovation strategies head, new product development and current business innovation plays part. Both the organizations are close followers of its competitors. Parcel-force is a subsidiary of Royal Mail-which is the actual pioneer, but it strictly is a follower of its competitors.
Before segmenting the market, one must position its brand in the market. After positioning, an organization must select the target market it wants to cater to specifically. Parcel-force, dispatches mail and sends parcel all over the world but it has segmented its market to C2C. This represents customers sending gifts to customers. Other areas include dispatching of educational and confidential documents all over the world. It also caters to some permanent B2B customers like ASDA and TESCO. BG group focuses largely on B2B customers. This means that it mainly supplies its product to the businesses. But it also provides services to the domestic level.
Most companies operating in the express parcel delivery market offer similar services. Parcel-force Worldwide remains competitive by differentiating itself in other ways. The business has developed a unique selling proposition based on high-quality customer service. It is therefore created two separate products - Global Express for the urgent category and Global Priority for the deferred or medium speed market. This enabled customers to clearly pick out which product suited their need. BG group differentiates itself through supply of various types of energy resources to businesses as well as homes. These include Natural Gas and Electricity mainly.
Parcel-force is a cost leader in the industry by means of efficiency, size of the organization and scale of service production. Parcel-force differentiates through lead in pricing competition and various attributes of products and customer friendly services it offers. Parcel-force Worldwide has differentiated its products by offering services that offer a balance and choice between speed and value for money. Its express service leads on speed; its non-urgent product leads on price. This clearly sets Parcel-force Worldwide as the price leader in the non-urgent sector.
BG group on the other hand, maintain its costs by the use of it bargaining power as a supplier/producer. There is an oligopoly in the energy sector so the prices are pretty much already set but they diversify by keeping their production costs low.
Organizations compete in the market with one or more of the following competitive priorities:
Predominantly, most manufacturers are concerned with the cost of production or running the business. Main categories comprise of production cost, wages, capacity utilization and inventory control. BG Group has adopted many ways to cut its production costs such as advancement in technology and improvement in supply chain management. BG Group made a strategy to create a sound, cost-effective infrastructure that will help the company against the current and future needs of an evolving business. Parcel-force has activated many regional collection centres and hubs to minimize the costs of collection and dispatching. This will help the company to cut the transportation cost and minimise the time span as well.
Different organizations have different definitions of quality. Like service sector focuses on the quality of service and manufacturing sector focuses on product quality. Parcel-force believes in carrying the parcels and gifts in the same condition they were received and returning them back if not delivered.
BG group concentrates on the quality of fuel it provides to its customers through following proper measures in producing value. BG Group specialises in gas and has the skills to compete anywhere along the gas value-chain, from reservoir to burner-tip. The cornerstones of the Group's competitive advantage are a deep understanding of gas markets, the skills and experience to invest throughout the chain, and a focus on project delivery. These enable the Group to respond swiftly to market trends, targeting investments where value can be created. (http://www.bg-group.com/OurBusiness/Strategy/Pages/OurStrategy.aspx)
Delivery Time Value
On time delivery and the ability to deliver goods and/or services in the promised schedule is an important part of any organizations integrity and image. BG group has a vast delivery system. It has always provided its customers with the promised value and has never shed its load to make the customers suffer. Parcel-force's primary focus relies on delivering the goods and parcels in time and to the right receiver. And for this purpose it has proper workforce and vehicles. Parcel-force Worldwide has developed a USP, this has allowed Parcel-force to be recognised and offer something extra compared to its competitors. The customer will know exactly when the parcel will arrive at its destination. Parcel-force uses a more decentralised approach to management so that decisions are made more regionally and the decision making process is made quickly and more relevantly to each area. It also motivated employees and hence more productivity and efficiency.
PART - B
OPERATIONS MANAGEMENT - FRAMEWORKS
Operations management encompasses a number of core concepts and frameworks. The scope of operations management starts at production and manufacturing and goes well beyond into service industries such as IT, banking and tourism etc. It addresses capacity planning, job designing, systems thinking, layout planning, supply chain management and various other aspects including, environmental and ethical concepts.
Process designing involves understanding the two ends that is where to start and where to finish keeping in view the various requirements and limitations during the method performed. The method involves a many to one approach where many raw materials enter into one end of a value chain and end up on the other end of value chain being customer oriented value added products. Both Parcel-force and BG Group have well-designed processes that contribute positively to the business. Parcel-force maintains fleets of Lorries and a network of offices country wide that integrate to transfer mail and parcels efficiently and cost effectively. BG Group, similarly has a vast network of Corgi registered engineers and technicians for attending to various business requirements.
The goal of layout planning is to allow workers, equipment (and where applicable, customers) to operate at peak effectiveness, efficiency and involves determining the most feasible locations of the facilities in order to increase efficiency and minimize cost of operations. The main distribution centres of Parcel-force are located in the midlands of mainland UK thus providing easy access from all motorways and train routes to gather and despatch all the mail and parcels country wide. The distribution centres also have direct access to Luton airport and London's airports for airmail. The layout within the centres is also managed in the most efficient way by assigning incoming docks on one side and outgoing docks on the other side of the building with processing zones in the middle. BG Group similarly is located near coal reserves and coastal areas for power generation however; its distribution grids are networked all over the UK.
Systems thinking relates to the fact that the subject under consideration or under study interact with other integral constituents of the system. It deals with larger parts of a system as a chunk and not by disintegrating them into smaller parts. In other words, it monitors the influence of individual entities on the whole. (Flood, 2010)
Key benefit of systems thinking is its ability to cater to the problems arising in an organization to the level where conventional problem solving fails. Issues include the greater density of problems, their complexity and the absence of instant viable solutions. At both BG Group and Parcel-force, modular systems thinking is adopted thus operations are divided into modules or entities which perform their functions independently and then integrate to form a common operation.
Supply Chain Management
Supply chain management is a comprehensive synchronization from the storage, movement and usage of raw resource to the unfinished work in process and ultimately the refined and reinforced finished product. In lay man terms, a supply chain is the pool of stages that an organization takes to convert raw constituents into the final product. (Hezarkhani, 2010) Characteristically, supply chain management consists of five phases namely, plan, develop, make, deliver, and return.
Supply chain is at the very core of Parcel-force operations since it is a supply a logistics company. Each stage of the supply chain is well addressed and a coherent system is formed where supply chain is upgraded into value chain where value is added at every link of the chain (Brock, 2010). There is a priority system for delivering various goods into 1st, 2nd and 3rd class with 1st being the highest priority. Collection and delivery are based on timelines further by introducing 1st class guaranteed by 9am and 1pm services. BG Group on the other hand maintains continuous electric and gas supplies which is an altogether a different kind of runtime supply chain. It runs an efficient supply chain management system that acts as a backbone to its day to day and long term operations.
The underlying concepts of lean management are cost reduction, quality improvement, responding dynamically to customer needs and employee empowerment. It is a process by which value is added into customer experience on a continuous basis. In a production environment it is fairly easy to measure wastes and hence the costs attached to them by identifying faulty objects produced against the total number of objects produced. It is easier because the items are tangible. On the contrary, service is fairly intangible and hence is not easy to measure. For measuring wastes in a service environment, to name a few, factors such as time management, hierarchical managerial procedures and resource management etc. are important. (Radnor, 2008)
BG Group has adopted lean management partially such that it has identified the customer perceived value and is maintaining streamlined flow throughout all operations. BG Group employees are empowered to take on new initiatives responsibly. This has resulted in a leaner organizational structure through which it has been able to reduce costs and enhance efficiency. Parcel-force, however, maintains a more hierarchical structure and is not completely following lean management practices. But it does stress on specifying value and how value is perceived by the customer, recognizing the entire delivery chain and maintaining streamlined flow of deliveries throughout all regions.
Six sigma is a methodical and logical framework for achieving higher quality of operations and productions. It was first incorporated by the Motorola Corporation in the early 1980's. The term is originated from a lexicon associated with manufacturing. It stresses on error finding and isolation of problem for rectification, hence, reducing probability of occurrence of any mistake during the production process of goods or services and implies that how far the adopted process deviates from precision. It makes use of many quality assurance and statistical methods to ensure defect free production (McAdam, 2005).
Six sigma is not a fairly adopted framework at both BG Group and Parcel-force due to its apparent complexity of being a core statistical process. Although, error reduction is being implemented at Parcel-force and BG however, it is not as illustrated according to the six sigma framework. At Parcel-force, Six Sigma is an important element in improving the information quality, giving the initiative a focus on process-performance data as opposed to process volumes - that is to say, doing it right, first time. BG Group on the other hand, can improve its oil and gas exploration and transportation by adopting the DMIAC (Define, Measure, Analyse, Improve and Control) approach of Six sigma.
Total Quality Management
Total quality management or TQM for short is one of the widest used and most familiar terms in the operations management frameworks. It is a framework that integrates and is applicable to each and every organizational process irrespective of the organization being service based or product based. It encompasses top management initiative, employee commitment and involvement, customer focus, strategic planning, management systems approach, employee training, teamwork, continuous improvement, employee empowerment, statistical approach, do it right the first time, buyer supplier relations, performance measurement, benchmarking and developing partnerships (Ozen, 2007).
Some of the major initiatives are discussed below in highlighting operations under the essence of both the organizations:
While considering the service as well as manufacturing industrial implications, training of an organization's human resource is an integral part (Martinez-Costa, 2009). Parcel-force lays immense stress on employee training. That includes both on job training as well as scheduled training sessions. As a result of these, Parcel-force has been able to win Health and Safety award. BG Group also takes training seriously. It runs an Energy Academy and ensures its entire field staff operating as technicians and engineers are well versed with the latest technologies; Corgi licensed and is confident in what they are doing.
The continuous improvement shapes an organization's operations in favour of customer needs and wants keeping in view the financial position. Research and development commonly plays a key role in the development of this initiative. Moreover, it encompasses benchmarking and performance measurement for an insight ahead. Also it underlines a sense of competitive advantage for the organizations. Competition in both Parcel-force and BG Group is driving continuous improvement process and they are constantly upgrading the knowledge base as well as innovative technologies.
Capacity planning is an integral part of operations framework. It refers to the total required capacity needed to response back the ever changing consumer and industry demands for the goods and/or services. The aim is to minimize the divergence of inadequacy in the production process or in the un-fulfilment of customers' wants.
Prominent characteristics take account in the introduction of better raw material and inventory keeping, innovative and/or technologically advanced techniques for production and business, flexible and increased working shifts and expansion through acquisition of more production facilities and/or human resource. (Tu, 2010)
Capacity planning is conducted in detail at BG. It follows a bi-pronged approach when doing capacity planning. On one end it is managing the raw materials required for energy generation and on the other end it is actively involved in assessing the per unit energy demand of its consumers either domestic or industrial. Similarly Parcel-force has estimations for its volume of operations. It has planned a seasonal workload and capacity accordingly. For instance, during Christmas season, it deploys extra Lorries and workforce to meet the excessive volumes of mail and parcels. This is all part of the capacity planning done at Parcel-force.
ORGANISATIONAL DIFFERENCES ON OPERATIONAL BASIS
Parcel-force is a service based organization and it pursues strategies that feature more towards customer orientation. And for the implementation of these policies and approaches, service firms recognize the need to focus their energies more on customer oriented behaviour and preferences. Being a service sector industry, Parcel-force emphasises on two factors i.e. Quality and efficiency. If any of these go down, effects may include loss of financial wellbeing and reduction in customer base. (Schuler, 1992)
Besides, a better employee communication helps Parcel-force know where to focus more in terms of customer satisfaction and service betterment. One of the basic principles of operations management is the idea of continuous improvement. Without the improvement in the service, Parcel-force might face unexpected consequences. This might even result in obsoleteness. The worth of a service greatly depends upon the process. Mistakes that reach the customer result from mistakes somewhere along the process sequence.
Parcel-force's Customer service and process management, accepts the inevitability of bottlenecks of any unexpected delays or shortcomings and focuses on supervising them to manage the work flow more efficiently. It is the duty of a comprehensive operations management to make sure that the time arrangement works in agreement to the volume.
This customer-orientated approach is designed to attract and retain key customers. Parcel-force Worldwide works in partnership with customers, such as the UK's examination boards, to develop and deliver services to meet specific needs. During exam season, Parcel-force Worldwide delivers millions of exam papers, scripts and coursework. (http://www.thetimes100.co.uk/downloads/parcelforce/parcelforce_13_full.pdf)
BG Group is a multi-faceted organization with goals reaching beyond conventional energy requirements. It serves both under the service sector as wells as the production sector. This means that it has to manage its operations in both contexts. While producing, BG group manages raw material in the form of crude oil and natural gas. Then it goes to the processing and refining where the technical staffs monitors the processes and in case of any issues, he reports the error to ensure fault free production.
Proper training is provided to the employees to deal with the machinery. With that, comes health and safety for employees. The company's major emphasis is on day-to-day management. And by using an effective operations management program, oil and gas operations can keep pace with the speed and demand of today's changing business environment. BG Group adopts Real-Time Operations Management which is aimed uniquely to complement the briskly progressing oil and gas industry by managing output, energy, and returns.
It has strong roots into the service sector as well. The services it offers include the installation of equipment for the domestic users as well as industrial users. Proper pipelining and storage of oil and gas is also offered to its customers to ensure hassle free supply. Like Parcel-force, it also focuses on quality and efficiency. It is influenced by the managing the process of taking the input like labour and materials and converting it into output in the form of goods and services in more efficient and effective way.
PART - C
MANAGING OPERATIONS - FRAMEWORK EVALUATION
The company is fully emphasizing on the Kaizan - Continuous Improvement in each and every little operation like Parcel-force Worldwide takes its corporate social responsibility (CSR) seriously. This means providing benefits for employees, customers and the communities in which it operates. Its CSR programme focuses on health and safety, the environment, supporting local communities and diversity. For example it is:
Reducing the carbon footprint of the business
Supporting local communities through involvement in education
Removing barriers to its services for all customers.
Parcel-force Worldwide has identified best practice in the industry by adopting the benchmarking process. It compares its performance against competitors. The company then assesses how to improve its processes to achieve best practice. Parcel-force Worldwide aims to get each of these processes right in order to achieve customer service excellence.
Parcel-force Worldwide uses a balanced business scorecard to record progress against the set targets. This measures where the business wants to be against actual performance in four key areas:
financial - includes operating margin, average unit cost
process - includes on-time deliveries and collections, attempted deliveries
customer focus - includes customer satisfaction scores, complaints
Employee/teams - measured by opinion surveys.
By tracking performance on a regular basis, Parcel-force Worldwide can identify areas that are performing well, as well as those that need to be improved. Parcel-force Worldwide aims not just to retain customers. It wants a bigger share of each customer's 'wallet' - the amount of money the customer has to spend on delivery services. Corporate customers may use several suppliers to give them choice and the option of a backup service if one cannot provide the right service. Parcel-force worldwide aims to be the business that customer choose first - the 'business of choice'.
Parcel-force follows horizontal integrative pattern which incorporates a fairly accessible chain of command and process implementation. There are individual entities independently working and integrating into a larger system, under the same umbrella. This solely refers to systems thinking. The processes are well designed at Parcel-force such that the maximum and minimum delivery times and frequencies are brought under strict quality standards.
BG Group is a service based organisation and is practicing production management. Critically, BG Group follows various key concepts and frameworks of managing operations. BG Group has a leaner management which means the chain of command is followed more efficiently and reporting is done according to the status while reducing the costs and improving the quality.
BG Group has adopted Total Quality Management (TQM) at a full scale. They have successfully been able to manage it work according to the changing technological advancements and management initiative while maintaining its oligopolistic stance in the market. Also, the efforts for employee empowerment and customer focus are aligned to the objectives. Perhaps, Parcel-force follows a statistical approach but has not practically acknowledged any efforts regarding employee commitment and involvement and customer focus. Both organizations also lack performance measurement of employees.
BG embarked on an ambitious new pilot to test a new IT system that promised to sharpen their competitive edge still further, giving their UK gas operators and traders fingertip access to a multitude of different data feeds, compressed into a single graphical dashboard on a thin client desktop. To assist them in creating the necessary Web service, they retained the products and integration skills of Enterprise Application Integration specialists Attachmate. (Mark Dalton,
GMT Operations Manager for BG Group)
Though partially, but as such no organization under discussion uses the Six sigma approach absolutely. One reason to this could be the lack of awareness among the industry as a whole. Secondly, there has been a common thinking among the Oil and Gas sector that Six sigma has a high cost of implementation. This is not entirely true as the benefits it provides can never be nullified in comparison to the trivial initial cost. Parcel-force can reduce its storage costs by using Six sigma in a way that retrieval of digitalized data and automated version of document control can be handle with an extra ease.
Since sales are an integral part of BG group, they focus more on supply chain management as compared to Parcel-force. As the ending point of this whole process is sales, BG diversifies more on the product and its delivery to the end user. Similarly, Parcel-force follows supply chain management but in other ways i.e. the process involved in receiving of mail and parcels to managing and sorting it according to regions and then dispatching them to the marked locations. All the process is acutely managed and has been made error free.
BG follows lean management pattern through which it has been able to reduce costs and enhance efficiency. One more important distinguishing characteristic embraced by BG group is Material Resource Planning. This involves the planning related to buying and usage of materials from raw form till the finished phase. This phenomenon doesn't apply to Parcel-force. They in fact use the Goods Management System to ensure proper administration.
DISCUSSION & FINAL REMARKS
In response to the changing needs of the customers, dense competition and trends of the global market, Parcel-force and BG Group are emphasizing on the continuous improvement on the operational activities to grab a god market share. It is only possible with an effective and efficient implementation of the Operations Management frameworks.
Parcel-force Worldwide has enhanced its international portfolio to give its customers a greater range of services to meet their specific global delivery needs. New services, including Global Express, Global Priority and Global Value, will mean customers will be able to match delivery options to suit their needs, whether that is a fast, efficient, fully track able global service, a value tracked service for times when a lower price is more important than speed or a balance of the two. Customers posting into Europe will also be able to choose between tailored business and residential delivery services for the first time. (http://www.thetimes100.co.uk/case-study--customer-service-strategy--133-324-5.php)
I have a good personal experience with the Parcel-force. In last semester I ordered my academic books on www.amazon.co.uk; I thought that I will get my books in 2 - 3 weeks but with the efficient and fast service of the Parcel-force I got them in only 3 days. Moreover, the company's postman handed these books to me to ensure that these books are delivered safely. I felt it very interesting and customer-friendly service. It shows that the company really value its customers.
BG Group is serving the global energy market with its cost effective and efficient operations. The company has a well reputed history in all aspects of the energy sector; because the main focus of the company is the effective use of resources. The world's need for energy is increasing and BG Group, as the Integrated Gas Major, is well placed to take advantage of the opportunities available by drawing on its skills across the gas chain. There has never been a better time to be in the gas business and at BG Group; natural gas is its business.
The success of both the companies is mainly dependent on the implementation of the important factors and concepts mentioned in the report. These concepts are the basis of the cost reduction and efficiency of the organisations.