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‘Operations Management as the process whereby resources, flowing within a defined system, are combined and transformed by a controlled manner to add value in accordance with policies communicated by management – Joseph G .Monks
What is Operations Management?
Operations management is the business function that is responsible for managing and coordinating the resources needed to produce a company’s products and services. All types of organization must carry out operations management because all organizations produce some mixture of products and services. Operations management is an important factor in any organization. The decisions that the organisation makes will have a major impact on the cost of the products and/or services, and its delivery which results in the revenue coming into the organization, whether it is manufacturing, retail or services sectors such as IT, finance logistics, transportation, health care or public utility or educational, the service delivery pipelines must be carefully designed, resourced and managed effectively and efficiently. The effectiveness of the system is determined by the success with which various subsystems and components interact with each other and with the environment in which the organization operates.
The core objective of a successful management is the ability to draw upon the resources of many disciplines and integrate relevant principles and background information in order to define and analyze a problem. Once defined, the manager must identify alternative possible solutions, evaluate these in terms of the broader goals and values of the organization, implement the apparently dominant solution, and finally, assess the actual consequences of the solution for the effectiveness in the organization.
Operations management focuses on managing the processes that produce / distribute products and services. Operations management relates to all relevant operations within the organization. Related activities includes the following :
Logistics and Evaluations
By analyzing the above mentioned activities, we can say that Operations management involves the systematic direction and control of the processes that transform resources (inputs) into finished goods or services for customers or clients (outputs).
History of Operations Management
The origins of operations management can be traced back through cultural changes of the 18th, 19th and 20th centuries. By the end of 18th century, agriculture was the active and key element in every country. The invention of the steam engine and Eli Whitney’s concept of standardized parts paved the way for the Industrial Revolution with its large manufacturing facilities powered by steam or water. As a result number of countries evolved from an agricultural economy to an industrial economy. But for a time, manufacturing was more of an art than a science. The Industrial Revolution advanced further with the development of the gasoline engine and electricity in the 1800s.Other industries emerged and along with them new factories came into being..
The introduction of Taylor’s method of scientific management and Henry Ford’s moving assembly line brought the world into an age where management was predominantly centered on the production of goods. At the commencement of the 20th century, the one element that was missing was a management – the ability to develop and use the existing facilities to produce on a large scale to meet massive markets of today.
Responsibilities of an Operations Manager
Operations Manager’s plans, organize, lead and control the production and delivery of products and services as needed to keep external paying customers satisfied. The responsibilities of operations managers can be classified into the following :
Direct Responsibilities – the activities which are directly related to producing and delivering products and services like managing the operations process, embracing design, planning, control, performance improvement, and operations strategy
Indirect Responsibilities – the activities involved in interfacing with other parts of the organization such as interacting with those managers in other functional areas within the organization whose roles have an impact on operations. Indirect responsibilities also include other functions like marketing, finance, accounting, personnel and engineering.
Broad Responsibilities – a wider set of tasks that involve scanning the business, social and political environment in which the organization exits in order to understand its context.
Decision making is a central role of all operations managers. Decisions need to be made in:
designing the operations system
managing the operations system
Improving the operations system.
The five main kinds of decision in each of these relate to:
the processes by which goods and services are produced
the quality of goods or services
the quantity of goods or services (the capacity of operations)
the stock of materials (inventory) needed to produce goods or services
The management of human resources.
Operations Management Issue – Hewlett-Packard
HP is a technology company that operates in more than 170 countries worldwide. HP explores how technology and services can help people and companies address their problems and challenges, with the realization of the possibilities that HP can provide, which will successfully realize their aspirations and requirements. HP applies new thinking and new ideas to create simpler, valuable and trusted experiences with technology, continuously improving the way our customers live and work.
The Hewlett-Packard Company (HP) was founded in 1939 by William Hewlett and David Packard. Today, the company’s mission is to create information products that accelerate the advancement of knowledge and fundamentally improve effectiveness of people and organization. The company’s first product, built in a Palo Alto garage, was an audio oscillator -an electronic test instrument used by sound engineers. One of HP’s first customers for this was Walt Disney Studios, who purchased eight oscillators to develop and test an innovative sound system for the movie Fantasia. HP becomes a major player in the computer industry in the 1980s with a full range of computers, from desktop machines to portables to powerful minicomputers. HP also made its entry into the printer market with the launch of inkjet printers and laser printers that connect to personal computers. The quality and reliability of HP’s printers make HP a highly recognizable brand by both consumers and businesses.
Operational Issue of HP – Toner Cartridge Problem
Hewlett-Packard is proud of its reputation for high-quality products and services. In the 1990’s, the Hewlett Packard toner and ink cartridges division was experiencing a problem with the number of faulty defective toner cartridges being returned by customers. About 2000 of these were being returned every month. The operations team decided to investigate the issue and handed over the case to the UK Hewlett Packard quality department. The team suspected that not all the returns were actually the result of a faulty product, which is why the team decided to investigate the problem. The Hewlett Packard team decided to use cause-effect diagrams to try and identify the source of the problem. Three major operational problems were identified.
First, some users were not as familiar as they should have been with the correct method of loading the cartridge into the printer, or in being able to solve their own minor printing problems.
Second, some of the HP Business Resellers were also unaware of how to sort out minor problems as they were lacking in technical expertise and training. As a result, they were unable to offer the customer the level of support needed to resolve any minor problems.
Third, there was clearly some abuse of Hewlett-Packard’s ‘no-questions-asked’ returns policy. Empty toner cartridges were being sent to unauthorized refilling companies who would sell the refilled cartridges at reduced prices. Some cartridges were being refilled up to five times and were understandably wearing out. Furthermore, the toner in the refilled cartridges was not up to Hewlett-Packard’s high quality standards.
Theoretical Approach of Analyzing HP Toner Cartridge Problem :
Fishbone theory (cause effect diagram) is a total quality management tool, widely used to analyze and solve an operation management problem or effect in an organization. Fishbone is considered as one of the seven basic tools of total quality management tool. It is a visual presentational tool which resembles the skeleton of a fish which shows all the causes and its sub causes leading to a particular problem. Using fishbone theory, problem and its causes can be graphically represented, which will help to identify and analyze the important causes and its effect can be solved
Model of a Fishbone Diagram
History of Fishbone Theory
Kaoru Ishikawa, a Japanese University Professor and a well known quality management innovator, invented the cause and effect diagram in 1943, the theory became famous tool and was first used in 1960s and Japanese companies like Mazda, Kawazaki used to analyze and improve their car manufacturing processes
ADVANTAGES OF USING CAUSE EFFECT DIAGRAM
An operational management problem and its causes can be visually presented so that each and every causes can be considered which helps to determine the root cause of the problem in a structured approach. In other words, it helps to establish the problem (Effect)
Fishbone can be used by individuals, teams and most effectively by groups which could ensure participation of all in a group and helps to utilize all possible and feasible idea of the process and its reasons
Different process of an operating system can be identified even if it is outside the scope of process.
All feasible data can be collected for further analysis and its causes and sub causes can be evaluated.
From the above HP Toner Cause Effect Diagram, we can classify that the Cartridge Returns is the Effect of the diagram and the causes can be sub divided into the following :
Customers and Dealers:- The HP Investigation team discovered that some customers were having difficulties in the correct insertion of the cartridge into the printer body. It is universally considered that not all customers are technically sound and as a result of this, product malfunction could result while trying to insert the toners/cartridges. Customers who purchased the cartridges from dealers rather than directly from HP were not technically qualified to resolve minor issues which would have prevented the stock from being returned to HP for replacement. Owner’s Manual was not easy to read and had no step-by-step instructions. About 90-95% of toner consumers, do not read the owner’s manual.
Dealers were not able to provide the customers with the professional level of support needed and often blamed the product as faulty. This was due to the fact that HP did not provide sufficient product training and support to its business resellers
Training :- HP should have provided the dealers with enough product support and training so that minor issues can be eradicated at the start. Failure in providing the dealers with product training could adversely affect the goodwill of HP. A product can be solved successfully only if the sales and after sales support is maintained in a professional manner.
Designers :- Product designers should take into consideration the customers and dealers too as designing a complicated product (cartridge/toner) will make product installation complicated and if the company lacks resources for providing product training, it will cause product sales to drop. The design of the toner cartridges was never thought from an end-user perspective. The toner cartridges was never tested with real people before the launch. The lack of proper designing the product flow cycle has caused thousands of pounds for HP. Another big company with such huge flaws is Microsoft. Microsoft comes up with regular security patches from time to time to fix bugs that existed in their Operating System. Customers always want things to be easy and less complicated. .
Non genuine HP compatible cartridges that are made by unauthorized companies are being bought by customers for a cheaper price and used on genuine HP printers. As a result this causes damage to the printer head in the long run. Use of non genuine toners, should revoke warranty. HP failed to add a disclaimer stating that warranty can be revoked for using non-genuine HP toners
Empty HP cartridges are sent to unauthorized refilling centers by the customers and these cartridges are being refilled more than five times with low quality ink, toner and other parts.
Using Non HP Printer accessories such as print cartridges or toners may cause deterioration in print output quality. The usage of printers without proper maintenance causes faint print and blotchy. This will create doubts in customers that there are issues with the actual HP hardware and often the product is returned to HP.
Policy – HP’s ‘no-questions-asked’ returns policy is encouraging the customers to return their cartridges even though the damage was caused by the customer or the dealer. No proper internal controls were there for HP. It was discovered that Empty toner cartridges were being send to unauthorized refilling companies which used cheap quality refilling ink and techniques which in turn damaged the product. HP’s ‘no-questions-asked’ should be updated to mention that once the toner cartridge has been modified or re-filled by outside unauthorized dealers, no replacement would be provided.
Solutions to the problem – Prioritization Matrix
A prioritization matrix is a technique used to get an opinion about a problem .This matrix helps to priorities or rank the issues of the problem according to its importance. Prioritization matrix gives more clearly which issues are most important to sort it out
In a prioritization matrix the issues or problem can be written in the first column and its frequency, importance and the feasibility of the issues can be mentioned in the next consecutive columns .the last column should be used to calculate all the points
Frequency: it measures how frequently the problem occurs
Importance: it measures the importance of the issue
Feasibility: it measures the feasibility of the issue whether the mentioned issue / problem is easy to solve or not
Matrix description, Solutions and Recommendations:
By using this method, we can look at the data in the matrix and determine which issues are more important according to the matrix. From the above mentioned HP Prioritization matrix it is very clear that in the first two issues, customers are unaware about the proper use of HP toner cartridges and lack of product and support training to the business resellers has got highest priority in points. Hence these two issues should be considered with more attention. The next important issues are in HP’s customer Services, manufacturing defects and their warranty policies. Design flaw, refilling genuine HP cartridges from unauthorized refilling centers and usage of non HP cartridges in HP printers should also be considered and should be sorted out.
1) Customer Unawareness : HP should take into consideration that their Owner’s Manual was not easy to read and had no step-by-step instructions. About 90-95% of toner consumers, do not read the owner’s manual. New methods like adding step-by-step video instructions in a CD should be supplied along with the print toner cartridge. Clear and proper visual instructions provided in the users manual, intelligent software built-in inside the printer should be able to identify whether the problem is with printer or cartridge). Simple self maintenance tools should be supplied along with the toner / cartridge so that customer themselves can sort out minor problems
2) Training for Business Resellers : HP should conduct product training and support for its business resellers after the product has been launched. Not all business resellers would be able to attend the training due to the nature of their business but an open courtesy invitation send to all business resellers and their technical staff would help to improve customer complaints and product recalls. Studies by Dell have proven that this is the most inefficient and high budget way to deal with the situation. They have found out that hiring local regional trained agents and sending parts to these agents to fix the issues have helped reduce their costs sustainably.
3) Customer Services : A well trained call center or support personnel always helps to increase the goodwill of any companies. HP should train their support staff to be fully aware of their products and conduct mock sessions to improve direct customer-supplier relations. Customer service personnel should be technically qualified to solve the issues with out asking more questions to the customer. Product survey questionnaires, support personnel rating systems can be emailed to customers and their feedbacks should be carefully analysed by the sales and marketing departments. Another way to manage customer service is to refund customers the full amount or replace the product..
4) Warranty / Policy : HP’s ‘no-questions-asked’ returns policy was encouraging the customers to return their cartridges even though the damage was caused by the customer or the dealer Use of non genuine toners, should revoke warranty. HP forgot to add a disclaimer stating that warranty can be revoked for using non-genuine HP toners. HP should have also considered a deposit fee for recycling their toners back to HP and also make sure a lower cost service for refilling the toners.
5) Toner Cartridge Design : Product designers should take into consideration the customers and dealers too as designing a complicated product (cartridge/toner) will make product installation complicated and if the company lacks resources for providing product training, it will cause product sales to drop. Product was never thought from an end-user perspective. The product was never tested with real people before the launch. The lack of proper designing the product flow cycle has caused thousands of dollars for HP. Another big company with such huge flaws is Microsoft. Microsoft comes up with regular security patches from time to time to fix bugs that existed in their Operating System.
6) Unauthorized Refilling / No HP Cartridges: Using non HP printer accessories such as print cartridges or toners may cause deterioration in print output quality. Customers prefer going to cheap unauthorized resellers to refill genuine HP cartridges as they are cheaper than going to an HP authorized reseller or back to HP base. Once the printer toner cartridges gives out issues and print quality reduces, customers return the toner cartridges back to HP for replacement. HP should make their toners Tamper proof and also add some sort of ID proofing to keep track of non-genuine usage of HP toners. Clear detailed description about HP product awareness supplied along with the product would educate the customer about the quality, advantages, benefits of an HP and non HP toner cartridge.
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