Definition Of Operations Management Commerce Essay

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ApplusRTD UK Limited operations are process driven, the production of goods and services are designed around Japanese philosophy's such as Kaizen and 5's. All of these are designed to provide ApplusRTD UK Limited with the competitive advantage as described by Michael Porter, Operational performance is described by Porter as one of the primary activities and thus to thrive and grow as a business you must excel within this field. ApplusRTD UK Limited divides its business in to Dimensions, thus making and giving the opportunity to provide an all things to all people service. Each Dimension is project managed by a different person this person is responsible for budget control and delivery of all aspects of the service. To provide the competitive advantage there are five basic performance objectives that need to be achieved(see figure 1)

Flexibility

"The degree to which an operations process can change what it does, how it is doing it, or when it is doing it." Slack et al, 2007

ApplusRTD UK Limited is predominantly a service provider providing highly trained inspection engineers to the Oil and Gas industry. The operational requirement for this can be tough, often last minute calls are made to supply labour to various locations locally and internationally, therefore the operations need to be highly flexible, ApplusRTD provided at great expense the 'Quinteq' personnel planning tool, this is to increase flexibility at the same time as increasing sharing of technicians and equipment at the same time as improving utilisation of staff.

Quality

"Consistent conformance to the customers' expectations". Slack et al, 2007

ApplusRTD sets the standard for quality throughout the world in their field of expertise. They are continually reviewing their processes in an attempt to increase quality and time thus providing lower costs to the customer. They utilise the Kaizen lean methodology process as the tool for this as well as 5's. They are currently undergoing a culture change exercise to inspire and include technicians as they believe that this will be where all the major savings are made.

ApplusRTD provide services o extremely remote locations such as offshore platforms and therefore inspection they carry out needs to be right first time. ApplusRTD UK limited are accredited to ISO 17020. Figure 2 is an extract from the ISO document.

Figure 2.

Speed

"The elapsed time between customers requesting products or services and their receiving them." Slack et al, 2007

Delivery of services to the client is paramount, 'the client gets what the clients wants' & 'the client is god' are statements that are frequently being stated by senior management to attempt to motivate their subordinates. As with flexibility having the correct skill set and materials available to you are key, good HR and marketing can assists in highlighting potential short falls in technical capacity, however there is always last minute calls for services and having the flexibility to manipulate the plan to be able to provide the service is key and ApplusRTD UK limited do this very well with the assistance of computer planning tools like Quinteq.

Dependability

"Delivering, or making available, products or services when they were promised to the customer." Slack et al, 2007

ApplusRTD UK limited have suffered in this area recently but are again regaining their reputation. In 2002 they walked away from the Sort 4 contract with Shell in Aberdeen, despite being potentially lucrative to ApplusRTD UK Limited the reputation took a severe hit. They let down the client and even to this day 8 years on are still reminded of the fact. In more recent time they have made huge progress this has been proved as they were awarded in 2009 the Shell southern North Sea inspection contract with Shell.

Cost

"Valuation in terms of money of (1) effort, (2) material, (3) resources, (4) time and utilities consumed, (5) risks incurred, and (6) opportunity forgone in production and delivery of a good or service. (BusinessDirectory.com/definition/cost, 2010)

ApplusRTD's separated dimensions enable it to be all things to all people. Cheaper services are provided to the smaller manufacturer whereas the larger customers are able to absorb the higher costs as there is no supply chain present each adding a commission or charge to the original price of the smaller vendor.

Operation are key to the success of ApplusRTD UK Limited and they recognise this, massive amounts of money have been invested in computer systems to aid the operational performance and transparency of financial data, every year advanced inspection equipment is thrust in to the market and the operations department is expected to train the personnel and provide this service. It's also up to the operations departments to balance the books, they are given budgets and expected to achieve the targets set and they are given the support to achieve this.

Operational Key components.

Operational performance is key to the success of any business as they control the vast amount of resources weather its equipment or labour. Poor usage of these resources can reduce a company to its knees, however on the other hand highly efficient use of the resources can make a company succeed and excel.

ApplusRTD UK limited are at stage 2 within the four-stage business model as defined by Hayes and wheelwright. See figure 2

ApplusRTD UK Limited are still trying to position themselves within the market, they have been subject to rapid expansion in the past couple of years and as such need to re-asses the targets. At present they have found themselves amongst market leaders Oceaneering. Oceaneering lead the market in all aspects from operational performance to the research and development. Below I have analysed the operational performance of ApplusRTD UK Limited in comparison to Oceaneerings.

Speed

Cost

Dependability

Flexibility

Quality

ApplusRTD =

Oceaneering =

The above polar diagram gives indications on the strengths of each organisation. Whilst Oceaneering lead on Quality, Dependability & flexibility, ApplusRTD UK Limited and superior in terms of cost. Based on the results of the above polar diagram it is apparent the ApplusRTD need to devote time and attention not only in to the obvious shortage of quality but also improve on all aspects. Whilst ApplusRTD held higher scores than Oceaneering in the cost element this are undoubtedly due to the muti dimensional faces of the business.

Using the Polar diagram give operational performance compared to rivals, however looking internally initially could provide the better answers as to the efficiency or productivity of the operations. Below is the four V's model on ApplusRTD UK Limited.

Volume

Variety

Variation in demand

Visibility

Low

Low

Low

Low

High

High

High

High

Definitions.

Volume= A unit of repeatability

Variety= Routine, standardization

Variation in demand= Utilisation, predictability, work load fluctuation

Visibility = front of house/behind the scenes work.

Volume

ApplusRTD UK Limited have high repeatability, technicians are eventually multi disciplined, however, there is high repeatability in the work activities.

Variety

There can be high variety, whilst there is only a hand full of inspection disciplines there is or can be a high amount of techniques utilised, as all work is carried out in accordance with different specification to achieve differing quality levels as deemed required by the client.

Variation in demand.

The non destructive testing industry is very susceptible to the 'bull whip effect' and seasonality. The summer months are historically buoyant and the winter months fall to minimum operating levels.

Visibility.

Much of the work carried out by ApplusRTD UK Limited uses substances that are hazardous to health and there for a basic requirement is that site are cleared of personnel to reduce the risk. . Once work in complete there is also no sign of ApplusRTD ever having been there or inspected the items other than a piece of paper (Inspection Report) saying the weld or test piece is acceptable to the specification. See Appendix 1

Supply Chain.

Definition

Supply chain management is the management of the interconnection of the organisations which relate to each other through upstream and downstream linkages between the processes that produce value to the ultimate consumer in the form of products and services' Williamson et al (2004)

Fitting in with ApplusRTD UK Limited's multi dimensional business strategy ApplusRTD fit in various supply chains in different locations. They currently hold contracts for large oil and gas produces and small nut and bolt produces sitting way down the line, however ApplusRTD management of their supply chain still remains vital to ensure costs are low and delivery of items in just in time format is possible.

Shell

A+ RTD

Film supplier

Film manufacturer

ApplusRTd UK limited historically had a very fragmented supply chain. They utilised a lot of small suppliers and paid higher unit prices.

Shell

A+ RTD

Film Supplier/Manufacturer

In 2007 ApplusRTD standardised their supply chain to reduce the number of suppliers, this resulted in better teamwork and reduced costs. The team work was particularly effective for quick delivery of items needed in a hurry. This supplier was also the manufacturer therefore removing one stage of the supply chain.

This relationship did not last. ApplusRTD perceived there to be a further advantage to completing a takeover of this supplier, thus increasing profit margins further as we would now be supplied with goods at cost. This takeover whilst benefiting the business as a whole as all revenue bnow stays with ApplusRTD group, the revenue still leaves the UK business unit, further to this the probe and film manufacturing branch has seen a potential to increase prices as ApplusRTD UK are not permitted to utilise the services of any other supplier, ApplusRTD UK now pay more for Probes and films than they did originally when they had the old supplier and manufacturer supply chain.

Shell

A+ RTD

However the above models are based on one supply chain only. ApplusRTD have many versions of the same theme, however the only changes are that whilst vertical integration has taken place, they are not integrating onto the their customers, obviously for the larger customers it is not be possible to go out and take over Shell and BP, however smaller customers are certainly susceptible to vertical integration from ApplusRTD UK limited.

Management of quality

Historically ApplusRTD UK limited approach to quality has been poor. Complaints were seen as a bad thing and something that should be swept under the carpet, however although possible it was forced on the company by the current economic climate, ApplusRTD introduced lean methodology to its business. This was first introduce three years ago on the basis of process definition, this is still ongoing today. Further to the operational process definitions they have also rolled out 5's and base the quality management system loosely around TQM. ApplusRTD recongnise that they are at the start of the process and understand that this will takes years to reach the current state of Toyota or other market leaders, however the methodology is doomed to failure at ApplusRTD UK Limited and indeed Europe. Whilst the senior management CEO, COO etc. believe in the benefits the next stage of management do not and are purely paying lip service to the peers, comments such as 'this is just the theme of the month and will move on to something else next soon' are common. They do not understand the benefits and will not accept these initial costs, the principle of short term pain = long term gain are unacceptable. Therefore based on opinions of and the support of the line management this incentive will fail and no measurable results will be found. It is my opinion that this is short sighted and shows a lot of ignorance, the people making these comments are extremely experienced managers and are set in their ways.

Conclusion.

Whilst ApplusRTD UK limited have everything in place and have the basics for a strong organisation based on the performance of there operations time and investment needs to be given to ensure they continue to grow as a organisation. The basic principles of operational performance are there and the way they can manipulate the structure of the business to focus on the needs of the clients by the multi dimensions fits in today's market very well. The use of dimensions however causes issues further down the line, additional costs for multiple operations managers is required, however this has been offset by the introduction of Axapta and Quinteq computer systems to control personnel and equipment and CRM.

The attitude of senior managers is an area of concern however and they do in my opinion hold the company back, whilst there is no doubting there business knowledge, the composite skills they have acquired seem to be surplus to requirements within ApllusRTD and the sooner the business recognises this the better off both the business and the employees will be.

http://www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solutions[accessed 12/04/10 online]

http://www.bing.com/search?q=four-stage+business+model+as+defined+by+Hayes+and+wheelwright&src=IE-SearchBox&FORM=IE8SRC[accessed 12/04/10 online]

http://www.12manage.com/methods_porter_competitive_advantage_nl.html[accessed 12/04/10 online]

http://www.pearsoned.co.uk/HigherEducation/Booksby/Slacketal/[accessed 12/04/10 online]

Hayes R H and Wheelwright S C (1984), Restoring Our Competitive Edge. New Jersey: John Wiley

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