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The purpose of this report was to examine the collaboration manufacturing operation management system and how it has affected various business sectors such the pharmaceutical and the telecommunication industry. This report is divided into four parts which include introduction, questions 1, 2, and 3. The introduction describes the CMOM system in detail listing its features and briefly explaining the impact it's had on the pharmaceutical industry.
In Question 1 a critical analysis has been conduct on an operation strategy model developed by Michael Porter on the five forces. This part examines how the model can be used to overcome the various challenges in the pharmaceutical industry
Question 2 looks at the similarities and differences of the CMOM system in the telecommunications and the pharmaceutical industry. This part of the report further explores the impact the CMOM system has had on both industries.
In question 3 this report examines the compatibility of the CMOM system with three conventional areas of operations management which include process strategy selection, total quality management and inventory management. This part of the report discusses how CMOM system has contributed on the three convention areas.
Table of Contents
According to (ARC Advisory Group 2001) CMOM can be defined as "the practice of managing by controlling the key business and manufacturing process of manufacturing enterprises in the context of its value networks". The CMOM system includes software set with functions that aim to work with existing people and manufacturing practices to support operations excellence both at plant and enterprise level. With the rapid change in technology and consumer needs manufacturing companies have come up with new techniques to achieve competitive advantage. One of the techniques being used is a collaborative manufacturing operations management system. Companies have realized the need to have collaboration in their manufacturing process as it helps companies to quickly act and make correct decisions, allocate tasks, and perform business process (Microsoft 2007). With the CMOM system in place collaboration is enhanced in the enterprise level and this opens up new ways of working that drive innovation. In the modern business environment collaboration has become vital as it's the heart of productivity an essential core competence.
CMOM provides various ways of thinking about all the complex interactions, applications and processes that are involved in manufacturing as stated by (Gorbach 2005). CMOM further involves the practice of managing for the best performance through controlling the key boundary- crossing business and manufacturing processes of a manufacturing enterprise. With the help of new technologies CMOM provides a platform which enables an enterprise to build a strong relationship with its business partners, by integrating together the internal manufacturing and business processers by connecting them seamlessly and synchrony with external business processes of customer and strategic partners.
In the last decade the pharmaceutical industry has faced many challenges in research and development which has lead to a decrease in productivity. Rapid change in the healthcare environment and fierce competition from genetics has also contributed to a decline in growth and profits. (Todd Hein. (2012). In the past drug development used a more clinical approach of trial management and outcomes, however today with the global competition, downward pressure on prices and advancement of technology the industry has experienced tremendous change. Now the industry is looking at a more holistic approach that aims to speed up the process of bringing new products into the market and reduce operation costs. The pharmaceutical industry has experienced various challenges in the past because it operates in a highly regulated environment which requires a complex value chain and business process. To address these challenges pharmaceutical organizations are now adopting CMOM with an aim to overcome the following challenges
The pharmaceutical industry is a "knowledge driven" industry which is in a dynamic state of continuous transition. The different diversities in life and new diseases pose various challenges to development of medicines that cure these diseases. The process of drug invention is a complex task requiring an average of 8-10 years at a cost of US$ 300 million to reach a new drug market (news-medical 2009).Â With the enormous challenges in the industry pharmaceutical companies have to adopt different strategies in their processes in order to create solutions and survive the fierce competition in the industry.
One of the strategies companies operating in the pharmaceutical industry could use to overcome the challenges is the Porter's five forces model.
Porter's model examined the competitive arena in which business operate in and described five competitive forces that directly influence the success of an enterprise. Getting to know what these competitive forces are and the effect they have on business, will better equip managers with knowledge to device new strategic plans
PONTENTIAL ENTRANTS (Threat of new entrants)
New entrants into the industry affect the competitive mechanism therefore they need to be taken in consideration when analyzing competition. New entrant to the industry brings new capacity, the desire to gain market share and often substantial resources according to Porter (1980). Their influence depends on the already existing barriers of entry, and the anticipated reaction by current competitors. There are many barriers that may be put in place to make it more difficult for new entrants to penetrate into the market. In the pharmaceutical industry with the help CMOM system there various way companies can create barriers for new entrants such as
Economic of scale- with CMOM companies can produce large volumes of drugs at different locations enabling the company reduce the unit cost in order withstand the downward pressure of prices which new entrants would find difficult to achieve.
Product differentiation-established companies can bank on established products, brand and relationships with customers to drive new entrants out of business
Financial resources-established companies have well built financial muscle which they can use to negotiate with regulatory bodies to impose high capital requirement for new entrants
With the use of CMOM systems established pharmaceutical firms can now comply with regulatory policies such FDA compliance at a faster rate enabling them to push new products into markets.
BARGAIN POWER OF BUYERS
Buyers in the pharmaceutical industry have some level of influence on the market considering the government and health authorities consistently push for safe products and price reductions. But the end user who is the patient or consumer has no choice but to buy what the doctor prescribes One of the main reason why patients do not have much bargain power is because they are spread all over the world meaning they cannot easily team up to boycott purchase of medicine. However the pharmaceutical industry can further reduce the bargain power of patient through research and development of new drugs and launching them on time to the market when there are needed. Now with CMOM the process of developing to making the drugs available to market has been made easier and faster. This would be beneficial to the pharmaceutical industry as it would enable companies to recoup their returns on investment at much faster rate.
BARGAIN POWER OF SUPPLIERS
The suppliers in the pharmaceutical industry have low bargaining power as the companies can switch from one supplier to another without incurring high costs. However pharmaceutical companies should note that a supplier can implement a strategy of forward integration to become a pharmaceutical company. For example companies like Orchid Chemical and Sashun Chemical used to be chemical companies but turned into pharmaceutical companies (Rediff 2004). This can pose a new threat to the existing companies as the new pharmaceutical companies could take up of some market share leading to a decline in profits.
THREAT OF SUBSITUTES
The pharmaceutical industry operates in industry where there will be always demand for medicine and related products and due to this industry enjoys enormous success. But with the thriving industry there is also one major concern which is it attracts a lot new companies and this increases the rate of competition. Also with the advancement of biotechnology there might new threat of substitute products from the synthetic field.
The telecommunications industry has expanded rapidly over the years due to the advancements in technology with new products and service offering. This has lead to increased global competition requiring companies to cut down operation costs while at the same time experiencing increased pressure to provide greater value to customers. To beat competition telecommunication companies are aiming to differentiate their services by offering more complete portfolio of services which further complicates the supply chain relationships.
Leading telecommunication companies just like pharmaceutical companies are facing increased globalization, competition and other challenges, therefore appropriate strategies must be devised to enable companies achieve long term success and deliver the best customer experience to increase brand loyalty and customer retention.
Comparing both the telecommunications and pharmaceutical industry the CMOM system has benefited both industries in various ways. Some of the benefits include
The capacity to improve productivity and decision making process
Analysis and improvement of production
Reduced compliance burden and error
Improved customer satisfaction through building strong relationships with external partners such as suppliers and customers to create a system that adds value to the products and services offered
Reduced work in process through the use of internet technologies by connecting the warehouse production system to business system and integrating internal manufacturing and business processes with external partners
Better quality management trough lean manufacturing which is a technique the aims to continuously improve batch manufacturing by eliminating waste and focusing on activities that add value on the "eyes of the customer"
However based on the benefits listed above I would say the CMOM system has had a greater impact on the pharmaceutical industry than the telecommunications industry. The system has enabled companies in the pharmaceutical industry achieve operational excellence by simplifying various complex activates involved in the drug development process to overcome the challenges experienced before.
Inventory forms one of the most important component in manufacturing because if a manufacturer runs out of the raw material it needs for production, the manufacturing process will be interrupted. In the past companies used the approach of keeping large quantities of inventory to avoid stock out situations. This approach of holding large quantities of inventory seemed the appropriate thing then to but companies found out this approach created problems i.e. wasting money. Companies could go for weeks or even months without using the bought materials as a result this increased the inventory holding cost such as insurance.
With the competitive business environment manufacturers have learned that in order to survive and remain competitive they need to improve efficiency in inventory management. In order for manufacturers to achieve inventory efficiency they need to strike a balance between two threats to productivity which are slow down production due to lack of materials and wasting capital because of holding too much inventory Collins 2009).
The CMOM system can help businesses in manufacturing execution by integrating with other partner enterprise systems to achieve agility and responsiveness. This would enable to a company to implement a flexible manufacturing strategy such as the Just in Time technique, where the manufacturer arranges for materials to arrive just in time when they are needed to facilitate manufacturing. This can be beneficial to a company as it will greatly reduce cost of holding inventory as a result the money that could have been tied up in inventory can be invested in other activities. Also the CMOM system can help in material requirements planning by calculating the quantity of material needed for manufacturing and determine when they should be ordered. This would greatly affect the success in the Just in time technique.
However in order of the Just In Time technique to be a success a company had to build a strong relationship with reliable suppliers that can be meet the company's demand at all times
TOTAL QUALITY MANAGEMENT
In competitive business environment of today companies cannot afford to overlook the importance of quality in manufacturing, therefore companies must deliver quality goods and services that meet the customer needs. Quality is one of the key factor a company's successes. Total quality management involves an enterprise taking various steps to ensure that all goods or services are of high quality meet or exceed customer's expectations before they released into the market. With the use of CMOM companies can be a step closer towards achieving total quality management through lean manufacturing. As stated in the case study of Achieving competitive advantage through collaborative manufacturing operations management by Gil Ruben: lean manufacturing is a process of continuous improvement through batch manufacturing. This strategy aims to eliminate waste and focus on activities that add value "in the eyes of the customer".
The CMOM system enables an enterprise to adopt a successful lean manufacturing strategy by giving the enterprise the ability to apply the right resources and the right tools in an efficient and coordinated manner. The CMOM system helps integrate new technologies into the business operations, and foster collaboration with value network partners to gain competitive advantage. The figure 2 describes how CMOM system can offer solutions to challenges of manufacturing
PROCESS STRATEGY SELECTION
Strategy in business organization is all about how the organization seeks to survive and succeed within its environment over the long term. The decisions taken by an organization in its operations have a direct impact on the organization performance. The way which an organization acquires, deploy and uses its resource will greatly determine the extent to which it can successfully pursue specific objectives and goals
Slack et al (2004) suggested five operations performance objectives every organization should pursue to achieve
Cost: the ability to produce at the lowest cost possible
Quality: the ability to produce by conforming to specifications with minimum error
Speed : the ability to produces goods and services fast enough to meet customer demands so as to reduce the lead times between when a customer's order and when they receive the products
Dependability: the ability to deliver products and services in accordance with promises made to customers.
Flexibility: the ability to alter operations. For example
The ability to change volumes of production
The ability to change the time taken to produce
The ability to introduce new innovative products and services to the market
The CMOM system has stood the test of time and proven to be a good system if well implemented that greatly contributes to the process strategy selection and spur organizations to achieve operation excellence. Referring to the case study "Achieving competitive advantage through collaborative manufacturing operations management by Gil Ruben" the CMOM system has been a vital tool in helping the organization in the pharmaceutical industry address some challenges through, Flexible manufacturing, reducing cost by eliminating manual paper work system and initiating a culture of continuous improvement to produce quality products.
In the modern business environment survival and achieving long term success are some the major objectives and goals organizations aim to achieve. Due the globalization and increased competition, organizations must therefore to strive to achieve core competencies through adopting appropriate strategies so as to gain competitive advantage. The CMOM system is one the strategies organizations could incorporate into their operations to improve efficiency and productivity. However the CMOM is only a tool that organizations can use to address various challenges if it is not well implemented and supported then it is as good other systems that have failed before. Organizations must be ready to train their employees and partner up with reliable external partners if they are to fully realize the full potential of the CMOM System.