The role of operations management

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Operation Report for Team 2

Introduction

The role of operations management is of vital importance to any organisation hoping to successfully produce goods and services that fit the needs of prospective customers in a given market (Slack 2007). It is sometimes easy to forget that operations are everywhere. They constantly touch the lives of millions of people across the globe at any given moment, sometimes as a passive recipient and on other occasions as a willing participant - an interacting customer or employee (Schonberger et al 1997).

The operations game was a simulation of a manufacturing operation, where small companies were required to manufacture simple, paper-based products. The role of teams or organisations was to manage all elements of the operational system, from taking customer orders, procurement of relevant materials, production, and delivery. The game itself provided numerous experiences of the issues and factors facing operations of organisations across the world. These included the importance of operational experience and knowledge as a direct influence on operational strategy, and the significance of worker flexibility.

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The following report presents Team 2's initial strategy; process and job design; financial and performance analysis; successes, failures and improvements experienced during the game; and potential improvements if the game were to run again.

Strategy

As was experienced during the operations game, operations strategy is an essential part of any business. It 'concerns the pattern of strategic decisions and actions which set the role, objectives and activities of the operations' (Slack et al. 2007:63); it involves planning the running of operations in a company. From the many views on operations strategies, Slack et al. have drawn 4 different 'perspectives' (2007: 63). The 'Top-Down' and 'Bottom-Up' perspectives look at strategy from the point of view of the business' objectives (former) and the experiences of the market and customer opinions (latter). The second two are the 'Market Requirement' perspective and 'Operations Resources Capability'. The first builds a strategy based on the demands of the market in which you have positioned yourself. The second look at using the resources of the company to their maximum capability.

During our pre-game meetings, we used theoretical knowledge in order to formulate a strategy fitting to our requirements. Firstly, we felt that keeping purchasing to a minimum would be advantageous in a game where there was little time to reclaim the costs. We decided to work within the limitations of the inventories already in our possession. We had no experience in the greetings card business. Because of this, it was agreed that we would accept smaller orders to begin with. We would accept more complicated orders for higher profit as our experience in the field increased. To ensure quality, we felt the best way to organise our infrastructure was to divide the roles equally between the group members; every person would specialise and, therefore, increase quality and speed. We felt that the pre-mentioned intentions were the way to achieve a competitive advantage in the market, which is a fundamental concern with regards to strategy (Rumelt et al. in Pandza et al. 2003:1010).

Each 'perspective' is used to a certain extent in every company's strategy. However, our strategy conformed to a mix of the 'Top-Down' and 'Operations Resource Capability' perspectives using a batch-process flow. We would concentrate on quality, cost, dependability, attempting to achieve total agility (Slack et al 2007:52).

We believed this approach provided an opportunity to learn more about a new market. Furthermore, it considered our limited resources and lack of experience. Using the 'Theory of Constraints' (Gupta and Boyd 2008: 995), we identified our main weakness or 'constraint' as a lack of skill in the production of greetings cards. Therefore, the generation of profit was not going to be our aim at first. Our initial objective was to gain knowledge about the operations process and market trends and then move towards higher profit orders. We felt that the 'Top-Down' perspective was the best choice for us as, due to time constraints, we needed a clear plan upon commencing the game. If this were a real business venture, a different strategy would probably be used. However, we adopted principals of 'just-in-time' theory, a predominantly 'bottom-up' approach, such as cutting costs and preventing wastage (Schonberger 1982). This would hopefully lead to a competitive advantage essentially following Porter's 'cost leadership' strategy (Porter in Stahl and Grigsby 1997: 141).

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As our first 3 orders were rejected, we changed our strategy during the game based on our experiences. Our 'emergent' strategies (Mintzberg in Stahl and Grigsby 1997:10) ultimately yielded positive results. Our experiences are the same as those of many businesses, who, find themselves needing an operations strategy 're-design' after assessing their business performance (De Lima et al 2009: 403). An in-depth analysis of these specific areas will be provided in later sections. Before this, we will consider our job design and operational experiences.

Job Design

Job design means specification of workplaces, contents, methods, and relationships of jobs in order to satisfy technological and organizational requirements as well as the social and personal requirements of the job holder (Davis 1967). The ultimate goal is to increase employee motivation and consequently improve productivity, and if possible, reduce costs. Job design consists of six key elements, namely environmental design, technology interface, task allocation, method study, work measurement and ensuring commitment (Davis 1967).

The division-of-labour concept was first formalized by Adam Smith in his Wealth of Nations (Davis 1967). An appropriate division of labour can make good use of manpower. In the game, we divided job roles into four parts based on a functional layout, namely marketing, operations, accounting and delivery. The operational processing tasks were then subdivided into folding, framing, stencilling and writing. This ensured every team member had a specific task and responsibility. An advantage of division-of-labour in a product line is the ability of workers to learn simple tasks necessary to complete stages of production. For example, if the team member designated to stencilling could not finish an order on time, others could learn this technique and assist in a very short time. Job allocation also reduced non-productive practices, such as continuously changing tools.

However, one negative of the job-allocation approach is the constant repetition of simple tasks. This can induce boredom and subsequently heighten the likelihood of error. One order was rejected by the customer for just this reason, one word within the poem section having been different to the others. Furthermore, high frequent repetition of simple tasks such as folding, can also lead to physical injury - known as repetitive strain injury or RSI (Slack 2007).

Scientific management is emphasis on job design in a systematic way (Davis 1967). It aims to reduce the time a worker spends on each task by optimizing the way the task was done. In the game, people worked in the product line sat in an order of card making process, so that the work could be passed to the next stage quickly and efficiently. One important field in scientific management is work measurement. This concept establishes the time for a qualified worker to complete a specified job at a defined level of performance (Slack 2007). In our game, one failure for our team was bad time management. Folding one card needed only 0.07 minutes. Framing, the next stage in process, was a time-consuming work, taking an average 4.5 minutes per card. Both stencilling and writing the verses for one card took an average 1.5 minutes. Therefore, the total time of process is determined by the framing time. For example, for an order of 12 cards, framing took about 4.5-12=54 minutes in total. If the leading time was 15 minutes, the minimal number of framing workers was 54/15=4, if the leading time was 25 minutes, the minimal number of framing workers was 54/25=3. Considering the cost, increasing one framing worker means purchasing one more tool. Therefore, three people doing the framing job, two people stencilling and writing versus, respectively, were relatively cost-effective.

The data in figure 2 highlights a number of significant areas of Team 2's performance during the operation game. Despite having two more people on average than any other company, the team actually produced significantly less successful cards than a number of other companies, such as organisation 1. Furthermore, the average cards produced per employee was actually the lowest at 3.6. This suggests that in comparison to other companies, our operation was considerably slower in the production of cards. This is particularly interesting as Schonberger (1982) argues that the major benefit of JIT operations, such as Team 2's, is a faster market response. This was certainly not the case for the response and operation experience for company 2.

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However, the slow speed of the organisation's operational process did not have a particularly negative effect on the eventual profits made. This was a direct consequence of the formulated strategy of pursuing orders with particularly high profits attached. The value per card - calculated by dividing overall sales with the number of successful cards, highlighted in figure 2, for Team 2 was 59.77%. This was second in comparison with the other companies, only organisation 5 being higher. Whilst this was a potentially risky strategy, it ultimately paid off, a key reason why the team eventually finished third in the rankings.

A further factor in the financial performance of the team included the limited investment in procured purchases. The total purchases for the team was second lowest amongst all other companies competing, resulting in the second lowest overall outgoings. As has been established in the strategy section, this was a deliberate strategy to prevent spiralling costs, which ties in with the lean or JIT concept of cutting order costs (Schonberger 1982). However, this also presented a number of challenges to the team - presented in successes and failures.

Further Successes and Improvements Made During the Operations Game

The most significant success experienced was learning from mistakes. The team continuously analysed operational processes in order to identify areas for improvement. This was a move away from our initial strategy of a top-down perspective, utilising the bottom-up nature of operations strategy instead (Slack et al., 2004, p. 62). This was facilitated through close communication between the production site and management. As bottlenecks arose, whether it was due to lack of manpower or tools, they were eradicated efficiently and we succeeded in minimising the possibility of similar mistakes.

This was reflected in the successes of our improved order selection strategy. Following initial problems mentioned in failures, our selection strategy improved, and its success is reflected in the fact that we came in third place despite having seemingly been among the least productive teams (Fig. 2). Orders were usually taken one at a time to ensure complications did not arise between many different orders - a possible reason for the slower nature of the operation. Exceptions to this were only permitted when orders were accepted with open time limits. A further lesson learnt was the procurement of much needed tools such as rulers and stencils to maintain levels of production.

As orders were taken on a just-in-time (JIT) basis, we found it appropriate to use the same philosophy for our orders, and so tried to minimize our inventory at all times. This proved to be a success in that, at the end of the game, we were not left with lots of unnecessary material or wastage valued at only 30 per cent of their original purchase price. By the end of the game we were only left with the equivalent of 20 per cent of our total purchases.

According to Karuppan (2004), flexibility "enables firms to adjust to shifts in customer demand", a very important part of the operations game. Furthermore, it is an efficient way of dealing with bottlenecks in production, and in such low complexity processes as ours, it can relieve the employees of the monotony of performing the same repetitive task over and over. Karuppan (2004) argues that the flexibility of an operation is determined by individual, organisational, and job factors. Specifically, the competitive priorities of the organisation and the company tenure of the individuals employed by the organisation are factors relevant to our experience. Simply put, in order for our manufacturing process to be flexible, the organisation must facilitate cross-training and use long-time employees in production in order to maximise flexibility (Karuppan 2004). Obviously, it was impossible for us to use long-time employees in our process. However, we could have trained our staff in several areas prior to starting the game, and this would also have increased their company tenure. On the other hand, utilising our bottom-up approach, we quickly became more flexible during the course of the game. As soon as bottlenecks were observed, more people were put into that area of production, until we finally achieved a process layout which allowed for some degree of specialisation just over half way through the game. This supports Karuppan's (2004) notion that experience facilitates flexibility.

Furthermore, our quality control processes were a success to a point, after observing the customer's high expectations. Prior to achieving the necessary level of quality, we were also able to negotiate with our customer in order to receive some payment for an incomplete order. However, as has already been established, these levels of quality control were not maintained to a sufficient level.

Failures and Problems

As the operations game progressed, a number of problems and failures were experienced relating to strategy and operational processes. These included issues such as overstretching the capabilities of the operation as a whole, to a detrimental effect; a lack of investment in relevant tools to complete orders; initial inadequacies in the roles of team members in the production team; unsatisfactory relations with suppliers, customers and competitors; and continued standards of quality control. Whilst a number of these issues were soon rectified, numerous failures continued to hamper performance.

The most significant of these problems right from the offset of the operations game was overstretching the capabilities and resources of the operational process in the first two initial orders. Our expected strategy had been to accept only small orders first - orders with low numbers of cards to be produced and extended time limits, to gain experience and a feel of the game. However, this was soon discarded for two high profit orders, which called for the production of higher numbers of cards and limited delivery time. As a result, the first was rejected by the customer on quality grounds, due to production haste, and the second was not completed on time.

Further inadequacies were experienced in the roles of team members producing cards and the relevant tools available. From the first orders, it soon became clear that lengthy processes within the production process included measurement specifications for the title of the card and poem within; and stencilling. Our initial strategy had designated only one worker to these tasks. This soon became an issue as bottlenecks appeared at these stations, which consequently slowed the whole process. A further hindrance to this problem was the lack of tools needed to allow other team members to assist in these duties, such as rulers and stencils.

Another significant disappointment was the failure to develop any form of significant relationships with suppliers, customers and fellow competitors. Numerous other teams competing in the game utilised beneficial relationships with these important groups successfully. Whilst efforts were made later in the game to improve this, little overall effect was experienced, a significant failure.

A further issue experienced related to the continued standards of quality control. Initially, the process of quality control had not been wholly unsuccessful, illustrated in the success and improvement section. However, after experiencing higher levels of success in the latter stages of the operation game, quality control standards dropped. This resulted in the rejection of the last attempted order by the customer, on quality conditions.

Improvements to Team 2's Operation if the Game were to Re-Run

If the game were to re-run there would be a number of potential improvements which could implemented in to the operation of Team 2. The majority of these improvements are a reaction to either failures and/or problems the team experienced throughout the game, and also furthering a number of successes that perhaps were not utilised to an adequate extent. They include some very important aspects to any operation, such as improved communication with suppliers, customers and competitors; adequate investment in inventory; and maintaining levels of quality control.

Perhaps the most essential improvement for Team 2's operation would be the enhanced exploitation of communication with numerous other groups involved in the game itself, including suppliers. Constructing a professional and conducive relationship with suppliers is essential for any operation hoping to succeed in a competitive market. This is particularly true for Team 2's lean operating style. Lean or JIT operations include the concept of purchasing materials just in time to be assembled and delivered, therefore reducing inventory and waste (Schonberger 1982). As a result, it remains particularly important for JIT operations to work efficiently with suppliers, whom deliver materials often, and in good time. Furthermore, a strong organisation-supplier relationship could potentially enhance speed and dependability performance objectives (Slack 2007); and also reduce order costs (Schonberger 1982).

The construction of a productive relationship with the customer would be another key area of improvement to our communication process. A prosperous connection with the customer could potentially lead to extension of delivery times, in situations when the operation was unlikely to fulfil its commitment. Furthermore, organisations could negotiate alternative prices, selling sub-standard goods at a lower price. However, it is important to add that the beneficial use of customer relations can only go so far, and it remains important not to push these limits too far. An unhappy customer may stop any further negotiations, or even end all relations with the organisation altogether.

Further communication improvements in the operation of Team 2 would also extend to competitors in the market. Agreement with fellow competitors could potentially lead to beneficial deals in sharing inventory or even manpower. This was a process utilised by other groups within the operations game, a certain improvement for Team 2's future operation. As the great warrior Sun Tzu taught, "know the enemy, know yourself, and victory is never in doubt", (Sun Tzu 2009).

Another key area of improvement to the operation of Team 2 would include maintaining high levels of quality control throughout the operations game. As has already been established in failures, levels of quality control dropped, following successes in the production and delivery of a number of orders. This was not only an operational process letdown but a failure to meet customer standards, which could be potentially disastrous for an organisation operating in a highly competitive market. Schonberger (1982) argues that JIT can be very effective when tied closely with total quality control - the ability to produce and deliver products and services that the market requires. Concepts followed closely by Japanese firms such as Toyota (Schonberger 1982).