The Evolution of Operations Management - Coursework Example

Introduction Operation management is a sub-field of management through which the control, design, production supervision, and redesigning of business operations is carried out in the process of production of goods and services. Operations management ensures that the business runs as it should; that is, efficiency in terms of resource maximization, effectiveness in the sense that customer requirements are met as precisely as is possible, and that the organization represents what it claims to represent (Operations management, 1993). This business function is concerned with the management process in which inputs (resources such as energy, raw materials, and labor) are transformed into outputs (finished goods and services). Operations management in terms of level fits into the category of upper but not exactly senior management. In this sense, the relationship between the former and the latter is one in which the latter dictates or rather informs the actions of the former. Senior management therefore moulds the strategy and it is then they who would be responsible for its adjustment over time (Slack, Johnston & Chambers, 2007). The under-management in totality (including operations management) is tasked with the responsibility of executing this strategy. Even though the difference between management levels are not always clear cut, often overlapping with each other, the flow is generally as discussed—tactical information from above informs strategy, and the actual strategy effected by the management down below (Operations management, 1993). This paper will entail a detailed discussion on operations management along the following lines: its innovations, principles, tools, and will discuss a few techniques employed in the field. It will also contain a conclusion section The Evolution of Operations Management Operations and production management have been attributed to the growth of a country’s economy for over two centuries. Adam Smith acknowledged the significance of manufacturing management in which jobs are broken down into multiple constructive subtasks and give these tasks to highly skilled personnel to enhance production value. This traditional view of manufacturing management that began in the eighteenth century has been carried on throughout the years and has worked to improve efficiency. F.W. Taylor implemented Adam Smith’s theories to develop scientific management in the early twentieth century. Prominence of the service sector over time saw a shift from ‘productions’ to ‘operations’ which led to the growth of service organizations. Another change followed the emphasis of synthesis over analysis in management practices. In 1776, Adam Smith contributed to specialization in manufacturing, followed closely by Eli Whitney’s cost accounting in 1799. Charles Babbage contributed to division of labour by skill in 1832 and in 1900 Frederick W. Taylor developed planning and scheduling work which was a scientific management approach. Frank B. Gilbreth was also responsible for motion study of jobs also in 1900, and then in 1901 Henry L. Gantt came up with scheduling techniques for employees and machine jobs in manufacturing. In 1915, economic lots for inventory control were developed followed by Elton Mayo’s Hawthorne studies on human relations. Quality and productivity applications, linear programming and digital computers plus research applications for operations were later developed over the years enhancing the value of operations management (Kumar & Suresh, 2009). Innovations in Operations Management Continuous innovation has proven to be the only way through which operations can be kept sharp and sustain an improving projectile. The following are practices followed by innovative managers: Providing incentives to employees to encourage then to focus on analytically proven leading indicators to boost future performance and goal achievement. Zoning in on a limited number of metrics proven to be relevant and which have a direct impact on performance targets rather than a huge number which may not have any true effects on the same. The use of collaborative methods as well as crowd-sourcing for the purposes of dictating the direction of innovation and solution creation. Using information as an asset, taking responsibility for the quality of data, employing analytical means to produce support for decisions based on facts, and to drive decisions for product and service innovation (Kumar & Suresh, 2009). Concept of production Edward Buffa describes production management as the creation process of goods and services. Often confused with operations management, this terms refers to only to the activities geared towards production of goods and services (output only) while operations management, on the other hand, is concerned with the whole process of using inputs as effectively as possible to create the best possible outputs (Stevenson, 2011). Production systems include inputs, a transformation process to produces output. All these processes require a form of control to get quality and high value products that satisfy consumer needs. Characteristics of production systems includes having a set of objectives, transforming multiple inputs into useful outputs, systems operate hand in hand with other units in the organization and there is a feedback about activities. Production systems are categorized into four groups namely job-shop production, batch production, mass production and continuous production. Job-shop productions work on manufacturing few products specified by the customers within a limited time and cost. Job shop products use general purpose equipment and facilities, have large inventory levels, have detailed planning and utilize high skilled operators in its productions. Batch productions demand that the product or services pass through different departments for approval in lots. It is characterized by shorter production runs, flexible machinery and the manufacturing lead-time and costs are lower than job order production. Mass production give out a large volume of production since a product standardization and process exists. Though the cost of production per unit is very low, breakdown in machine or equipment causes a ripple effect on quality of productions. In continuous production, production facilities are organized as per the sequence of production operations from beginning of operations to the complete finalized product. Principle of managing operations Planning This activity establishes a course of action and guides decision-making in future. Operations managers are responsible for defining objectives for the operations subsystem including the policies and procedures to help in achieving the set objectives. Planning includes clarification of roles and operation focus within the company’s overall strategy. It also includes facility designing and product planning (Kumar & Suresh, 2009). Organization Organizational activities establish a structure of authority and tasks. Roles for the various structures are outlined under this category and also how information flows within the organization. Organization determines activities needed to assign responsibilities and also achieve set goals. Control These activities ensure that actual performance is achieved as per planned performance. The operations manager is responsible for measuring actual outputs and exercising control in order to achieve performance equal if not beyond planned performance. Controlling schedules, costs and quality are essential functions for this category. Operations management is broken down into 1. Resources Any organization has three resources; human, capital and material resources. Human resources are a key asset of any organization because operations managers can utilize human intellectual capabilities to multiply the value of their employees. However, technology advances have led to human input to be used mostly in controlling and planning activities. Material resources are physical facilities such as inventories, equipment and supplies. Capital which a store of value for any organization is a vital asset and are usually in the form of bonds, stock, contribution and may include taxes. 2. Systems Arrangement of components to achieve desired objectives through a plan defines a system. Systems deal with the hierarchical management of responsibilities which assists in flow of information and assignment of duties. In case a problem occurs in a system, the approach requires isolation from the system maze to deal with the problem in a micro (small but manageable) way. Design and control within a system determines its level of success in achieving set objectives. System design is determined by prior arrangement of components meaning that a well-structured design will demand less planning and decision-making. 3. Transformation and Value Addition activities Combining resources under controlled environments is aimed at achieving outputs of higher value than the original inputs. Effectiveness of transformation equates to productivity. Productivity refers to the ratio between values of work output per hour and the cost of inputs. If the overall ratio is greater than 1 this means that value is added to the product. Improving the efficiency of transformation increases the ratio significantly. Objectives of operations management Customer service Operating systems aim to improve utilization of resources for satisfaction of customer needs. Products and/or services provided by an organization need to satisfy the customers’ specifications, cost and timing. Operations managers influence achievement of quality standards on product and/or service delivery. Their decision-making is influential in attaining the required customer service. Resource utilization Utilization of resources for customer satisfaction is significant in proper functioning of an operations system. Maximum effect from resources, elimination of wastage and minimizing their loss are essential to achieve proper operations management. Satisfactory customer service and maximum utilization of resources work hand in hand in which maximization of one deteriorates the other. Principle of Inventory Management Inventory refers to an organization’s material in stock. Inventories present material that is ready for sale, those in manufacturing or materials yet to be used. Inventories act as a buffer between supply and demand therefore records should run efficiently with little or no interruptions. Inventory is kept to stabilize productions, take advantage of price discounts, meet demand during replenishment period, prevent loss of sales or orders and to keep up with changing market conditions. Inventory is a pre-planning approach that determines what to order, when to order and how much to stock and this is aimed to maximize production and sales. Inventory control works on two problems which are order levels and order quantities. Objectives of inventory management include; ensuring adequate supply of products to customers, minimize financial investment in inventories, ensure timely action for replenishment and inventory, to provide reserve stock, give a scientific base for short and long term planning (Waters, 2003). Benefits of inventory control and management include; improving customer relations through timely delivery or products and services, uninterrupted production, economical purchasing, eliminate possible duplication in ordering and efficient usage of working capital. Techniques of inventory control and management 4. ABC analysis In this analysis, existing inventory is classified based on annual item value and annual consumption. Quantity of inventory item consumed is multiplied by its unit cost to determine annual usage cost. Items are arranged in descending order for annual usage cost. Analysis is done on a graph of cumulative number of items against cumulative usage of consumption cost. A-items are of high value and are usually under tight control, B-items are those under moderate control and are handled under mid-level authority while C items are of low value handled by department managers. 5. HML analysis This analysis technique classifies existing inventory based on unit price of the items in stock. Items are high price, medium price or low cost. 6. VED analysis Items are classified as vital, essential or desirable which is criticality of the items. This analysis is mostly used in spare parts inventory. 7. FSN analysis Existing items are classified based on consumption of items and are categorized as either fast moving, slow moving or non-moving items. 8. GOLF analysis Existing inventory is classified based on sources of items whether they are from the government, ordinarily available, local availability and foreign supply. 9. SOS analysis Items are either season or off season basing their classification on nature of supplied items. Principles of manufacturing management Manufacturing management covers process layout, routings and bills of materials, manufacturing planning and control activities and material requirements planning. Material planning This refers to a scientific technique that determines in advance the requirements of raw materials, components, ancillary parts according to directions of the production program. Factors that determine material planning are classified as either macro factors or micro factors. Macro factors include government import policy, price trends and business cycles. Micro factors include plant capacity utilization, lead times, inventory levels, power delegation, rejection rates and communication (Moustakis, 2000). Techniques in material planning Bill of material explosion is one of the techniques used in material planning. Forecasting techniques such as trend analyses, weighted averages, exponential smoothing and correlation are used. Sales forecast is also done for product requirements, product structure and product mix. Material requirement plans lead to development of a delivery schedule of materials and also purchasing of the material requirements. Purchasing deals in acquiring equipment, tools, material and parts to use during manufacturing Purchasing ensures a flow of production, increases asset turnover, develop an alternative source of supply efficient record keeping and management, to train and develop personnel and maintaining good relations with suppliers (Rao, 2008). Principle of Operations Planning This principle aims to impart fundamental understanding of basic manufacturing principles in planning and these techniques vary from strategic to tactical. Strategic planning This refers to though process through current organization missions and environmental conditions it faces then constructing a guide for future decisions and results. Production and operations strategic plans provide a basis for design and use of these facilities or designs. Modes of strategic planning contrast between entrepreneurial, planning and adaptive modes. Operation studies need also to be consistent with overall strategies of an organization and corporate approaches to strategic planning focus on issues and opportunities. General approach models can be utilized in strategic planning (Introduction to Operations Management, n.d.). 10. Force choice model In this model, analysts assess environmental considerations together with current production of an organization which then forces management to develop options that are strategic to the organization’s operations. 11. Strategic planning operations model An operations strategic framework uses a corporate strategy depend on the quality, flexibility, dependability and efficiency. This also trickles down to the facility mission and is reflected in process under automation products and service specificity, in facility through size location, in capacity via loading lead or lag, in infrastructure through planning and control work force and finally vertically through customer and supplier control and integration. Forecasting Forecasting is aimed at assisting in future predictions and activities to be taken up by an organization through the course of time. It estimates timing, occurrence and magnitude of uncertain future occurrences. Operation managers forecast demands through marketing trends. Forecasting results in better utilization of capacity and provision of responsive services to customers (Heizer & Render, 2009). Decisions in forecasting are done with function of the type of forecast, time horizon, database available and methodology employed. Quantification also enhances objectivity and precision of a forecast. Forecasting methods There are two types of forecasting methods namely; Opinion and Judgmental methods Forecasts based on opinion and judgments depend greatly on intuition as others integrate data or mathematical and statistical techniques. Judgmental forecasts use either individual sales personnel or product line manager predictions or may use both of them. Comparisons constitute historical analogy while Delphi relies on groups of forecasts to determine a trend. Basis for improvement through time may be little because individual results vary all the time (Judgmental Methods, n.d.). Time Series Methods This method uses a set of observations of a variable through regular intervals of time. Components are classified as C for cyclical, seasonal (S), trend (T) and (R) for irregular or random. Steps used in determining time series are plot historical data to confirm relationship, develop a trend equation, develop a seasonal index then project a trend into the future thereafter multiply trend values by corresponding seasonal index values then modify projected values using cyclic business conditions and anticipated random effects (Brockwell & Davis, 2010). There are three methods used to describe trends 1) Moving average MA is obtained by adding and averaging values from a given number of periods repetitively each time removing an old value and adding a new one. MAs can smooth data fluctuations while still preserving general data patterns (Droke, 2001). MA = Σx/Number of period Weighted moving average allows values that are emphasized by varying weights assigned to each component of the average. Weights can be a real number or a percentage. MA = Σ(Wt)X/ΣWt 2) Hand fitting A free hand curve or hand fit is a plot of a representative line that seems to subjectively fit data points. For linear data the equation used is as follows Yc = a + b (X) (signature) In this equation Yc represents the trend value, a is the intercept where the line crosses the vertical axis while b is the slope or rise and X is the time value. Signature identifies the point in time when X = 0. It also identifies the X and Y units (Kumar & Suresh, 2009). 3) Least squares This is a mathematical technique of fitting data points using a trend. Resulting best fit line properties include summation all vertical deviations about it is zero, summation of vertical deviations squared is minimum and the line goes through means of X and Y. The two equations used include ΣY = na + b Σ X Σ XY = a Σ X + bΣX2 Benefits and disadvantages of operations management Being one of the three main pillars on which organizations are built, operations management is important as it contributes significantly to the failure or success of a business. The process does this by ensuring maximum efficiency, use of minimum resources, and enhanced maximum satisfaction. In order to deliver on these promises, the process calls for creativity, innovativeness, and lots of energy. The following are the major benefits of effective operations management: 1. Reduction in production costs, and increased efficiency 2. Increase in revenue via the increase in customer satisfaction due to improved qualities of products and services. 3. Reduction in capital requirements for a particular quality and quantity of goods and services by increasing operational effectiveness. 4. Creation of a proper basis for innovations in the future through the building of a firm foundation of operational skills for a given business. The disadvantages of this process would come in where people fail to do what they are supposed to do. If this process is flawed, then it becomes a liability rather than an asset to an organization (Heizer & Render, 2009). Summary In conclusion, operations management is the journey travelled by inputs to their output destination. It is an intense way of managing operations activities within an organization and its principles are extensive. Planning, control and organization are viewed as the pillars that help operations management. Operation managers play a key role in ensuring the implementation of management policies and procedures are effective in production. The principles of operations management range from managing operations to operations planning, inventory management and distribution. Working on design layouts and service layouts has assisted in growing the effectiveness of operations management. Forecasting and strategic planning uses scientific, intuitive and mathematical formula to ensure that data collected with regard to future trends and planning is accurate, decisive and helpful. Lean and sigma operations are also being incorporated into operations management systems to enhance efficiency (Netland, Schloetzer & Ferdows, 2015). Recommendations Accordingly, the following are recommendations proposed by this paper: Thorough vetting and testing of the operations manager before the baton is handed to them—being the captain of the ship, he is largely responsible for the sailing or sinking of the vessel (the company). Regular evaluation of the operations functions of the business in order to ensure that all procedures are running constantly as they should. Improving accountability systems to keep the books balanced and ensure that honesty is maintained in running the business. References Brockwell, J.P., and Davis, A.R. (2010). Introduction to Time Series and Forecasting,. 2nd ed. New York: Springer Science + Business Media Droke, C. (2001). Moving Averages Simplified. Columbia: Marketplace Books. Heizer, J., and Render, B. (2009). Principles of Operations Management,. 7th ed. New Jersey: Pearson Prentice Hill. Introduction to Operations Management (1st ed.). Retrieved from http://faculty.fortlewis.edu/huggins_e/stevenson11_sample_ch01.pdf Judgmental Methods (1st ed., pp. 81-83). Retrieved from http://www.forecastingprinciples.com/files/LRF-Ch6b.pdf Kumar, A.S., and Suresh, N. (2009). Operations Management. New Delhi: New Age International Publishers Limited. Moustakis, V. (2000). Material Requirements Planning MRP. Technical University of Crete. Netland, T., Schloetzer, J., & Ferdows, K. (2015). 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