Included in collection: Business Management
Operations Management Lecture
This chapter focuses on key concepts in operations management. In the words of Slack, Brandon-Jones, Johnston and Betts, (2012, p.4), “everything we eat, sit on, use, read or knock about on the sports field comes to you courtesy of the operations manager who organised its production”. Operations management, whether of products or services, is essential in ensuring that these same goods and services are delivered effectively to the customer or end user. There are many component parts to effective operations management, from the initial stages of planning and process design, through to integration with other organisational departments such as customer services and supply chain. To examine each of these in more depth, this chapter is divided into three main sections which are concerned with (i) understanding the fundamentals of operations management; (ii) examining the details of planning and control; and (iii) exploring the detail of quality management. Throughout the chapter, examples will be given of each of these areas of operations management, illustrating how they are integrated with every aspect of effective business. The chapter concludes with a case study illustrating how effective operations management is fundamental to the delivery of effective business strategy.
2.0 What are Operations?
First of all, it is important to understand exactly what operations management is. At a general level it can be understood as the organisation of resources, such as raw material, people, or equipment to either manufacture or deliver a product or service. It is sometimes more easily understood as a series of jobs or processes which must be undertaken in a particular order to ensure that products are manufactured to a high quality when they are required, and then delivered to the customer or end user. There are a number of key considerations in operations management, in that whilst there are similar responsibilities and activities undertaken by operations managers irrespective of the organisation in which they work, every organisation is likely to have adapted or tailored their processes to meet the specific needs of their own products and services and customer base. Therefore, whilst operations management is important to all businesses, there are distinct characteristics of operations management depending upon the nature of the business.
To give an example, a small sandwich shop is likely to have very different processes to a car manufacturer, although both organisations will be concerned with delivering the highest quality of products and reducing any waste in their processes, as this will directly and negatively impact their profitability.
Johnson, Clark and Shulver (2012) explain that there are four distinct advantages associated with effective operations management. These are:
- A reduction in costs and overheads due to increased efficiency;
- An increase in turnover (or revenue or income) because of increased customer satisfaction and improved quality of products;
- Reduced capital expenditure or investment because of improved efficiency;
- A strong likelihood of improved innovation through perpetual incremental improvement in process delivering. Innovation in turn is likely to lead to improved business growth and profitability.
Ultimately, there is a strong financial and business case for well-managed operations which help provide control and oversight of the business and management of costs and resources. Generally, operations management is understood to be a function of the organisation, concerned with the production of products and services for delivering to customers or end users. However, operations management can also be understood as an activity of the organisation, concerned with the physical transformation of inputs into outputs. Although the former understanding is more common, it is also helpful to remember the second definition, as this can have relevance when focusing on specific aspects of operations management.
It is fair to suggest that the last few years have seen a revolution in technology and global development, meaning that it is more important than ever for businesses to have well-managed operations processes and a thorough understanding of process control. This begins with process design which is explained in Section 2.1.
2.1 Process Design
2.1.1 The Transformation Process
Essentially, operations management is concerned with the overall management of effective processes. Operations is also fundamentally concerned with the transformation of inputs to outputs as reflected in Figure 1 below.
Figure 1: Transformation Process
Inputs can include physical raw materials, equipment, staff, or information. Typically, tangible resources are considered to be transforming resources, and intangible resources are considered to be transformed resources. It is normally the case that organisations will use a combination of resources and they will undergo different transformation processes depending upon what it is that an organisation produces. For example, professional services such as lawyers or accountants will use their clients and information as inputs, their experience and knowledge as the transformation process, and the outcome will be good quality advice. Alternatively, an engineering firm will use a combination of raw materials, equipment, and people as well as potentially also intellectual inputs such as innovative research and design, and transform them through a more complex series of processes into a finished article for an end user. However, what is common in both instances is that organisations have control of the unique transformation process to generate an output which is inherently valuable and helps them to distinguish themselves in a competitive marketplace.
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2.1.2 Tangible and Intangible Outputs
There is obviously a difference between tangible and intangible outputs, but it is rare that an organisation only produces physical goods or pure services. More usually it is a combination of the two. For example, a hairdresser will be expected to provide a haircut, which has tangible outcome, but also services in that the hairdresser is expected to chat to the customer, and also offer advice on hair care or styling products. Therefore it is important for the hairdresser themselves to ensure that their inputs, hairstylists, products, and equipment are fully trained and up-to-date if they want to provide a good service and maintain loyal customers. It is unusual for a firm to be at an extreme of providing only goods or only services, but an example of pure tangible outputs might be mining, and an example of pure intangible outputs might be visiting a psychologist.
It is also usually the case that organisations undertake a series of transformation processes in the overall delivery of their products and services. This is because there are several departments within most organisations and their activities are interlinked. Figure 2 below provides an example of this:
Figure 2: Interlinked Organisational Processes (Parker, 2012, p.197)
2.1.3 Internal and External Customers
When discussing operations management, it is often the case that there is an assumption that all customers are external to the organisation. This is not unreasonable, as it is more likely that customers will be external, but in larger organisations there can be internal customers and also internal suppliers. For example, in a large manufacturing organisation the manufacturing line will be a customer of the inventory or stores department (responsible for procuring and managing raw materials), and in turn, the manufacturing line will be the supplier of the dispatch department, likely to be responsible for organising the make-up and dispatch of orders to customers. Although it is tempting for organisations to assume that internal customers and suppliers are of less importance, this can be a short-term approach which ultimately leads to poor quality, because there is less focus on effective operations management. Although there is a difference in the way in which internal and external customers are likely to be treated and communicated with, neither is necessarily less or more important, as without good internal customer and supplier relationships, it is less likely that it will be possible to deliver good external products and services.
Q - What internal and external customers can you think of? In what ways are they similar and in what ways are they different?
2.1.4 Process Characteristics: The Four Vs
It is generally recognised in operations management that there are ‘Four V’s’ which form part of the overall process design. These are:
The precise combination of these four characteristics will ultimately determine how best to design an organisational process for maximum efficiency. Typically, it will be necessary to make trade-off decisions in respect of operations management depending upon these four factors. It is helpful to offer some examples to illustrate why these four characteristics are so important.
This refers to the physical number of units or items produced. A high volume manufacturing or service output example would be McDonald's. They sell quite literally millions of hamburgers and other related food items every day around the world, and one of the known characteristics of McDonald's is that they have a very high degree of consistency in all of their products and their service delivery. They have a well-established process meaning that they can be confident of regular repeat production at high speed. One of the advantages of having a high volume is that it is typically accompanied by a relatively simple production process, one that is broken down into a number of simple steps. This helps to increase efficiency through systemization. Alternatively, a low-volume example might be an artist who produces bespoke commissions and pieces of artwork. They are entirely unique, ‘one-off’ items which are likely to take a very long time to produce and which cannot be easily replicated or repeated exactly, if at all. This is highly resource intensive and often long-term process.
This refers to the amount of flexibility in the overall process. An example might be a courier firm which knows that it has to collect and deliver parcels, but at the start of every day it is unknown exactly where they will have to travel to. Variety can and does often increase costs, as it is not necessarily possible to know in advance exactly how far the courier will have to travel. An alternative might be to use Royal Mail instead, as they have a standard procedure of delivering to the majority of UK postcodes every single day, but the trade-off is that it may well take longer and it is much more difficult to track parcels exactly with Royal Mail as opposed to a dedicated courier service. In these instances an organisation using a courier would have to decide whether cost or service was more important.
This usually refers to changes in demand patterns over a defined period, for example during the course of a year a hotel is more likely to be very busy in the summer months and quieter in the winter months. This has implications for resources such as staff and food for the hotel restaurant. An alternative might also be a toy shop which is likely to be exceptionally busy at Christmas but only moderately busy for the remainder of the year. If an organisation understands its patterns of variation this can help considerably with forecasting and planning resource requirements.
This refers to the extent to which end users or customers have visibility of the overall process of delivering. For example, a retail outlet with a physical presence (a bricks and mortar shop) is highly visible and it is likely that customers will have a short tolerance for waiting for the product or service. Alternatively, an internet-only retailer may have similarly demanding customers, but they at least prepared to wait for some amount of time, hours or days, for their product to be delivered. However, increased customer expectation has impacted upon internet retailers in recent years, and they are now finding that some customers in certain areas expect same-day delivery, although this attracts a price premium.
In each instance the Four Vs force organisations to make trade-off decisions between cost, resources and service level which is perhaps more easily understood visually and shown in Figure 3 below.
Figure 3: Four V Trade Offs (Slack et al., 2012, p.46)
Q - What examples of the Four Vs can you think of in organisations? What impact is this likely to have on the design of their processes?
2.2 Measuring Operations
It is often said that ‘what cannot be measured cannot be managed’, the meaning of this statement being that unless operations managers can quantify (measure) what is happening within their departments, then it is difficult to identify areas for improvement. There are five well-recognised operations performance measures which can be used to help design processes which will positively contribute to organisational goals and strategy. These are:
Similar to the underlying principle of the Four V’s, these five measures typically attract trade-off decisions, in that increased flexibility, speed, or quality typically cost more. Likewise, increased dependability will reduce costs but often increase flexibility and speed. Therefore, the decision as to how best to balance these five measures will again depend on the specifics of the organisation and what it hopes to achieve.
These five factors also mean different things to different organisations depending upon what they want to achieve, for example reducing costs, increasing the availability of products and services to customers, or controlling deliveries. Figure 4 below illustrates the relationship of these performance measures to one another.
Figure 4: Relationship of Performance Measures (Slack et al., 2012, p.48)
Q - Can you think of examples when speed could be both beneficial but also a problem for organisations?
2.3 Types of Processes
Turning to the specifics of process design, there are a number of types of processes which an organisation might wish to adopt, and that are related to both the Four Vs and the measurements of operations. These types of processes are:
- One-off or project processes;
- Job process;
- Batch process;
- Mass process;
- Continuous or flow process;
Unique processes for individual projects will be highly specialised and likely to involve considerable resources and cost, but will almost certainly be low-volume and of high variety. Similarly, job processes are also likely to be a short production run with a high degree of individual variation, examples might include printers producing a short production of marketing material. Batch processes are likely to have a lesser degree of variation and longer production runs for example seasonal food production. A mass process example would be as referred to previously, such as McDonald’s, which has very large volume with very little or no variety. Continuous or flow process is again more commonly associated with pure product production, such as mining or an oil refinery. As ever, the extremes are unusual, and a greater proportion of organisations will utilise either job, batch, or mass production as it is typically more cost-effective, although again it will depend on the specifics of an organisation and their strategy. For example, an organisation which typically mass produces may undertake short test run of a new product using a job process.
Q - Can you think of examples of all five types of process?
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This section of the chapter has discussed different aspects of process design, illustrating one of the most important principles that operations management typically involves a series of interlinked actions to produce a finished product or service. Also, the design of an effective and efficient process will often involve a trade-off decision of some variety, such as whether it is more important to provide high-quality or fast service. These two are not necessarily discreet, but are likely to be influenced by a decision over cost and the amount that customers are prepared to pay. Ultimately, whilst there are a number of common principles surrounding good process design and management, it also depends very much on the specifics of what the organisation wishes to achieve and the resources available relative to market demand.
3.0 Planning and Control
Having determined an appropriate design for a process, operations managers must then give consideration to planning and controlling aspects of the process such as inventory, any capacity constraints which impact with volume variability, and opportunities for increasing efficiency. Operations managers also need to consider how they interact with other parts of the organisation, for example the onward supply chain. These issues are all considered in this section of the chapter with examples of how organisations manage each of these aspects.
3.1 Inventory Management
Inventory management refers to the management of stock in all of its various forms. As such, inventory management is more often associated with manufacturing organisations, although as we saw earlier, even service driven organisations typically have some need for tangible products if only stationary and postage supplies such as printer cartridges, paper, and envelopes. However, given that the main focus of inventory is typically associated with manufacturing, this will form the main element of this section.
Inventory has both advantages and disadvantages for an operations manager. On the one hand, inventory can provide a cushion against uncertainty in a complex and volatile marketplace, offering some opportunity for covering unexpected variations in orders, or perhaps the need to rectify mistakes. For example, if a retailer is out of stock of a particular product, there is a likelihood that they will lose business as a customer will simply go elsewhere. Therefore, some organisations have a policy of carrying what is termed as ‘safety stock’ for exactly this purpose. There are recognised formulas for calculating exactly how much safety stock organisation should carry which are discussed later in this chapter.
However, holding stock also brings problems. For example, raw materials or finished good stocks take up valuable space in warehouses which has cost implications on multiple levels. These include the rental costs or running costs of the warehouse, staff costs to move the stock, and also costs associated with administration of stock (for example stock checks and counts), as well as the possible risk of stock becoming obsolete and therefore unsellable. Furthermore, on a practical level the longer stock is held the more likely it is to become damaged or unusable, and ultimately it becomes impossible to regain any value. As ever, organisations must therefore make a trade-off decision about the way in which they choose to manage their inventory.
Slack et al., (2012, p.405) explain that “inventory planning and control compensates for the differences in timing between the supply of operations products and services and the demand for them”. Generally speaking, organisations must acquire stock in advance of selling it, (there are rare exceptions), and even with the most accurate forecasting and planning techniques there is still usually a delay between acquiring stock and being able to transform it into whatever output must be, and then sell it. Fluctuations in demand from customers and the marketplace generally can make this process very difficult, meaning that some consider inventory management to be as much of an art as a science.
This being said, if organisations fail to keep sufficient inventory there is a genuine risk of operations grinding to a halt, which could have very serious repercussions for the organisation in both the short-term and long-term. For example, if a manufacturing line (mass production) has to stop because of unavailability of particular raw materials, it means that employees will be standing idle, the machinery is not being used efficiently, and there is a strong likelihood of the organisation being unable to meet its order commitments. Furthermore, inventory management usually helps to support the operational metrics described in Section 2.2 such as speed and flexibility. If stock is available and ready to use, then organisations can respond quickly and flexibly to customer needs whether these customers are internal or external. Stock availability can also help with management of the Four Vs, such as volume and variation if it becomes necessary to change the production order.
In summary, although there are obvious advantages in holding inventory, there are also potential problems if inventory is not managed very carefully. These include damage and deterioration, theft or loss, obsolescence (i.e. better alternatives become available), inventory may be hazardous to store, and if there is too much inventory then organisations may find themselves having to engage in contradictory and inefficient behaviour such as storing it in multiple locations which attracts management, administration and insurance costs to say nothing of increasing the complexity and adding time into the supply chain unnecessarily. Therefore, it is important to consider the type of inventory which an organisation wishes to hold, and also how they intend to manage such inventory.
3.1.1 Types of Inventory
As we know that inventory effectively serves as a mechanism for balancing out the delay between supply and demand, it is helpful to consider the different ways in which inventory can be used to manage the situation. There are five categories or types of inventory as follows:
- Buffer or safety inventory
- Cycle inventory
- Decoupling inventory
- Anticipation inventory
- Pipeline inventory
Each of these serves a different purpose, and is also linked to the previous examples of the type of job or process (e.g. batch, mass, continuous) that an organisation might operate. Each of these are discussed as follows:
Buffer or safety
This serves a simple purpose of protecting against unanticipated fluctuations in demand. Even if an organisation has reasonable forecast accuracy, there may still be unanticipated variations, for example particularly high numbers of customers due to external circumstances, and therefore safety stock can help ensure that an organisations is able to supply its customers. A simple example might be sudden increases in disposable barbecue sets in a heatwave.
This type of inventory management is used when a single production line is used to manufacture different products but can only manufacture one type of product at once. It is effectively the inventory technique which is matched to batch production to ensure that the necessary raw materials or component parts for each type of product are available when necessary.
When an organisation is able to isolate component parts of the manufacturing process and in some circumstances run each manufacturing process separately but simultaneously in order to produce component parts for finished goods, decoupling inventory is used. This allows each element of the production line to call for the raw materials or parts it needs without having to wait for other elements of the process to be completed. It is a means of increasing the efficiency of the overall production processes.
An example of this would be manufacturing products in advance in order to cope with a known period of very high demand. This is because it is typically impossible to produce as much stock as is required in a short time frame. Examples might include manufacturing Christmas decorations all year round in the knowledge that they will be sold from late October onwards in a short period. This helps to manage the inventory process, and also reduce costs and increases efficiency due to continuous production runs.
This is used when inventory must be called-off in stages because of insufficient storage space at the point of sale. It is particularly popular in retail environments where it is better for retail stores to have their physical locations given over to what is referred to as ‘selling space’, rather than using it as storage space. In these circumstances, the retail environments often place daily or even twice daily orders for deliveries to ensure that they always have stock available for sale. The design of the pipeline is closely linked to effective logistics and supply chain management which will be discussed in Section 3.2.
In each instance, operations and inventory managers need to think carefully about the actual amount of raw material or finished goods they need relative to issues such as cost, storage space, and demand. The more information operations and inventory managers have about sales patterns and demand from internal and external customers, the more accurate they can be in this process, and therefore the more efficient. As mentioned previously, there are some equations which have been designed to help inventory managers in this process, such as the Economic Order Quantity (EOQ) or the Economic Batch Quantity (EBQ). One advantage of these equations is that they can be pre-programmed into planning and forecasting models and therefore simplify the process of inventory management by increasing visibility and traceability. In relatively stable manufacturing environments this approach is typically very effective.
However, there are circumstances where the equations are inappropriate because they do not take account of the variations which can occur in an operating environment. For example, both the EOQ and EBQ usually make assumptions about a minimal level of safety stock, but this is likely to be inappropriate for items which have a very short shelf life, where it is in fact better to ensure that stock runs out because that means it has all been sold. Examples might include very fresh produce such as sushi or sandwiches which need to be fresh each day, or newspapers which are usually only fully relevant on the day which they are published.
3.1.2 Inventory Management and Information Technology
Information has been mentioned frequently during this chapter, on the basis that the more information an organisation has about its operations, the better the quality of decision-making, forecasting, and planning. Historically, organisations may well have had to rely on the knowledge and experience of operations and inventory managers in order to engage in planning and forecasting with any degree of accuracy. However, as technology has improved dramatically, particularly over the last few years as there has been a proliferation of management information software and hardware which can be used to help plan inventory and operations.
Ideally, such software should be able to monitor the overall needs of different organisational departments to ensure the availability of inventory as and when required, and also to check this against availability of finished goods for sale. The most sophisticated software systems are also able to identify bottlenecks in supply and demand, and flag the possibility of the need to adjust production schedules in order to meet unanticipated demand peaks, as well as reduce inventory ordering in less productive periods. The accuracy and usability of such software has increased enormously with improvement and refinements in algorithms and equations such as those described in Section 3.1.1 (EOQ and EBQ), and in practical terms organisations have greater trust in the accuracy of the information analysed and presented in such systems.
However, it is always important for organisations to sense check such data, particularly when there are areas of uncertainty in decision-making, for example forecasting the likely demand of a new product, or attempting to forecast demand when there are unusual external circumstances. One example would be attempting to forecast passenger and tourist numbers around the Olympics for the World Cup. Although it is possible to have some idea, it will also depend on the physical location of this major sporting event each time, and physical or transport access to stadiums and facilities. Therefore, although information systems are likely to be of very considerable help in planning and process management, it is always important to interpret their output in relation to external circumstances.
Q - Can you think of examples where it might be necessary to change normal inventory levels? Why would this be and what impact will this have?
3.2 Supply Chain
Organisational operations will inevitably function as part of a wider or longer supply chain. It is a very rare and usually only very large organisations which have complete responsibility for their entire supply chain from the point of raw materials to end delivery to a customer. By far the greater proportion organisations work in some form of relationship with other organisations who specialise in distinct aspects of the production process. Therefore, it is always important for operations managers to work closely with those responsible for supply chain management to ensure that goods and services are produced in a timely manner such that they are available for onward delivery. Supply chain management also impacts upon the way in which inventory is managed as described above, and in relation to pipeline inventory in particular. This section covers the key points of supply chain planning and also specific techniques of inventory management directly related to supply chain and production working simultaneously, known as lean and Just-In-Time (JIT).
3.2.1 Supply Chain Planning
The terminology ‘supply chain’ refers to the end to end management and oversight of a product from the procurement of raw materials to the end delivery to the customer. Supply chains can be very straightforward or exceptionally complex, depending upon the nature of the product and the links of the chain itself. Figure 5 provides an indication of a relatively straightforward retail supply chain.
Figure 5: Example Supply Chain (Microsoft, 2005, p.1)
Every organisation within the overall supply chain will have their own operational processes and procedures, and it is therefore helpful if operations managers in those environments understand the impact of their decision-making on both upstream and downstream operations. Another way to think of this is the same as the impact on internal customers and suppliers as described in Section 2.1.3. Although every organisation operates independently, supply chains should be designed to operate coherently so that the necessary raw materials or products are available when required in the right location and the right quantity so that they can be used by the next organisation in the chain. Supply chain management represents an entire discipline in its own right, but it is also a form of operations management.
Organisations should, wherever possible, ensure that they are delivering their end product in such a way that it increases the overall efficiency of the supply chain as a whole. Increasingly, organisations are beginning to work together to increase their overall efficiency, for example considering how changing packaging can reduce the amount of waste and also increase the amount of products which can be shipped at the same time. Technology is also playing an increasing role here, as organisations which form relationships with one another in a supply chain often share information about forthcoming orders to help smooth the overall level of demand. In a retail environment, this might include the retailer advising the manufacturer of a forthcoming promotion and likely upsurge in demand. If the manufacturer is made aware with sufficient advance notice they can ensure that they will have additional quantities of products available.
3.2.2 Lean and Just-In-Time
Ensuring that products are available at the time when organisations need them is a recognised discipline in operations management, and also supply chain management. Bearing in mind the discussions regarding the advantages and disadvantages of holding inventory, in an ideal environment the supply chain should be designed to deliver its products precisely at the time they are required for the next stage in the supply chain process. This might include dropping off raw materials immediately before they are needed for the next batch production, or replenishing retail stock just before a store opens. This is a specific strategy known as Just-In-Time (JIT), and was said to have been originally developed in relation to Japanese car manufacturing as theses manufacturers recognised that it was a good way of increasing efficiency and reducing waste, making the overall process of operations ‘Lean’.
‘Lean’ is itself a specific operational and supply chain term referring to the practice of systematically stripping out waste from any process to increase efficiency. Within this overarching philosophy there are a number of particular techniques which can be adopted, depending on the type of manufacturing or supply chain process which is in use. As you will now be familiar, there are trade-offs with lean processes in much the same way as trade-offs with inventory, in that if the process becomes too lean it can be exposed to risk of failure. Both Lean and Just-In-Time represent specific disciplines on which more detailed information and advice can be obtained, with some suggestions provided in the further reading section.
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4.0 Quality Management
Quality management is also something which is regularly referred to in discussions regarding operations management. This is because it is pointless to produce products or services which do not meet quality expectations, as it will become difficult if not impossible to sell them or generate any profit. Unless it is a very deliberate strategy to produce poor quality and cheap products for a specific market place, failure to have quality standards and also monitor quality is usually ill-advised. Organisations should therefore consider their threshold or tolerance for the quality of their products, and also take into account the cost and other resource issues associated with this establishing their preferred quality benchmark. In practice, it is also important to consider what competitor firms are doing, as this will also influence market expectation of quality.
Organisations and operations managers should consider how they are going to test and monitor quality throughout the production process to ensure that there is little or no opportunity for producing substandard items. Some organisations choose to introduce quality checks periodically throughout their overall manufacturing process, and others choose to adopt a more resource intensive approach of checking every single item they produce. As ever, the costs and resources associated with this must be considered, and organisations must determine whether they are prepared to accept a small proportion of failures relative to the adverse impact that this may have. For example, a poor quality ream of printer paper is likely to be irritating to the end customer but unlikely to cause significant harm or loss. Conversely, poor quality medicines could have potentially fatal consequences and therefore the tolerance for error is much lower or even non-existent. This is why operations managers must also ensure that they consider the long-term impacts of quality management as they introduce quality measures.
Ideally, organisations should strive to ensure that they perpetually monitor and improve the quality of their products. Not only as customer expectation and technology improves, but also because of changes in the marketplace. Encouraging a quality improvement mind set throughout an organisation is the preferred way of approaching this, and Edward Deming (1981) is credited with producing the Plan-Do-Check-Act (PDCA) cycle as reflected in Figure 6. If organisations are able to introduce this approach and encourage all employees to think about ongoing (continuous) improvements, they should be able to benefit.
Figure 6: Plan-Do-Check-Act (PDCA) Process
5.0 Chapter Summary
This chapter has provided an overview of operations management, explaining the different techniques used by operations managers to plan, monitor, and control operations. The overarching theme of effective operations management is identifying the specific needs of the organisation, and making appropriate trade-off decisions with regard to approaches to process design, inventory management and integration with other elements of the business or supply chain. Operations managers must always be alert to changes in the internal and external environment, ensuring that they are able to adapt and respond, and also ensuring that they design processes in such a way that they offer the best possible quality for the resources available. Operations management is also closely interrelated with many other aspects of business functionality and can be considered as the ‘nuts and bolts’ of any effective organisation, as without effective operations processes, an organisation is unlikely to be able to produce the goods and services it needs to sell in order to remain in business.
6.0 References and Further Reading
Deming, W. E., (1981) Improvement of quality and productivity through action by management. National Productivity Review, 1(1), 12-22.
Johnston, R., Clark, G., and Shulver, M., (2012) Service Operations Management: Improving Service Delivery. (4th Ed) London: Pearson.
Microsoft (2005) RFID and the Supply Chain [online] available at https://msdn.microsoft.com/en-us/library/ms954628.aspx retrieved 10th Jan 2017.
Parker, D.W., (2012) Service operations management: The total experience. Sydney: Edward Elgar Publishing.
Slack, N., Brandon-Jones, A., Johnston, R., and Betts, A., (2012) Operations and process management, principles and practice for strategic impact. (3rd Ed) London: FT Prentice Hall.
6.2 Further Reading
Brown, S., Bessant, J., Lamming, R., and Jones, P., (2012) Strategic Operations Management (3rd Ed) London: Routledge.
Chaffey, D., (2009) E-Business and E-Commerce Management: Strategy, Implementation and Practice. (4th ed) London: FT Prentice Hall.
Fullerton, R. R., Kennedy, F. A., and Widener, S. K., (2014) Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7), 414-428.
Inman, R. A., Sale, R. S., Green Jr, K. W., and Whitten, D., (2011) Agile manufacturing: relation to JIT, operational performance and firm performance. Journal of Operations Management, 29(4), 343-355.
7.0 Case Study
Sunshine Bakeries is a small family run bakery which produces a range of breads. They have built up a successful following in the region but recognise that there is scope to improve the efficiency of their operations. Recently there have been a number of occasions when they have been unable to fulfil customer orders in full due to issues with inventory management, and also decision-making over prioritising certain orders and production runs which decreased efficiency. Although the quality of products they produce is excellent and they are often complemented on this by the customers, they recognise that there is scope for improvement in terms of efficiency and process management, particularly in terms of working out the order of a production schedule, as they allow their customers to order in a variety of ways with no set timescale. With Easter approaching and demand for hot cross buns in particular likely to increase considerably, there are concerns as to whether it will be possible to meet all of their order obligations. They have come to you as an operations consultant for advice.
- How would you gather data to understand the way Sunshine Bakeries operates?
- What information would you look for within the bakery?
- How can you transform this information into practical steps for improving efficiency?
- What trade-off considerations have you identified?
- What type of inventory should Sunshine Bakeries operate to be as efficient as possible?
- How can they improve their relationship with suppliers and customers to manage inventory efficiently?
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