Strategic Operations Management - Case Study Example

Strategic Operations Management Introduction: To date there has been a certain amount of confusion on the things that do and do not constitute an operations strategy. There have been those that have tried to identify the generic building blocks of this strategy-but even they assume that these could also be part of a tactical, operational management approach. One of the more oft repeated and accepted definitions comes from Slack and Lewis. They suggest that there are four basic operations strategy perspectives (Lewis and Slack, 2003): 1. A top-down reflection of what the whole business wants to do 2. a bottom-up activity whereby operations strategy improvements build business strategy 3. A translation of market requirements into operational decisions and 4. Exploitation of the capabilities of operational resources into chosen markets. One would have to agree to a certain degree each operations strategy is unique and individual to the firm. Furthermore, research seems to suggest that many of these operations strategies utilize similar building blocks. One would have to even then have to understand the fact that operation strategy for any given firm in order to be effective would have to employs unique strategies. In the core traditional sense of the term, operations management has been concerned with the management of costs, but this focus has recently changed to the management of value. The concept builds on the premise that organizations needed ideally to compete either on low cost or by providing differentiated products in order to be profitable and yo avoid being stuck in the middle (Lamming and Brown, 2000). The term itself in wide in terms of the scope of its responsibilities and draws upon a range of functions within the organization and cannot be limited to a specific department. An innate and clear understanding of the nuances of strategic operations management is essential to the organization if it has to compete in the market. Major decisions about and strategic management of core competencies, capabilities and processes, technologies, resources and key tactical activities necessary in the function or chain of functions that create and deliver product and service combinations and the value demanded by the consumer could be identified as the functional strategy aspect of the operations strategy variable The wider value delivery aspect of the strategy on the other hand would automatically be inclusive of the major decisions that have to be made about and strategic management of the core competencies, capabilities and processes, technologies, resources and key tactical activities necessary bin any supply chain network, in order to create and deliver product and service combinations and the value demanded by a customer. The strategic role also involves the blending of these various building blocks into one or more unique, organizational specific, strategic architectures. To begin with the very fact that operations needs to be seen as a strategic factor is a problem for some firms whose overall strategy may be governed by a few people at the top of the hierarchy who might have very little to no knowledge about the factors of productions and operations management. As a result, the rationale behind, and the measurement of success of business decisions may be driven almost entirely by short-term financial criteria. Such an approach, may often rob the firm of vital investment to support and sustain key operational areas such a technology, plant modernizations and ongoing training. Keeping this fundamental design of the strategic management operations in mind, the following analysis will bring out the various facets that are involved in strategic operations management-their related issues and the things that a business would have to keep in mind. Logistics Management Logistics and distribution occupy a position of supreme importance in all businesses across the world most of all in retail. A successful and well managed logistics and distribution operations are the basic keys behind a business that hopes to thrive and do well (Brewer, Button and Hens her, 2001). Logistics and distribution management experts manage the transportation and distribution of goods, materials, labor and other commodities right from the source to the market. Computer software, communications networks and other technologies are used to bring the distribution process to order. Logistics delivers a service that is multifaceted and largely intangible. “Good Service is pretty hard to measure and difficult to quantify and in fact the contribution of logistics at the national level is almost impossible to document. Logistics and distributions help in the creation of time, place and even form utility, through the management of processes that enable companies to get goods to get to the right places at the right time in the right condition at the right costs (Rushton, Croucher and Baker, 2006). Simultaneously however the demands to reduce logistic and distribution costs have also grown (Chandes and Pache, 2010). Modern commerce requires a better arrangement and management of the logistics and distribution system of the organization because of the fact that most businesses are now working on production units that are more centralized (Fernie and Sparks, 2004). One particular school of thought views logistics as the umbrella strategy. Where the definition is concerned, logistics are defined as organizing, moving and supplying. The basic idea is that logistics deals mostly with the micro activities that take place after the production of a good or service in order to provide value in ultimate consumer service (Lowson, 2002). The idea therefore would remain that any given company that is able to successfully curtail logistics costs by ensuring that the entire supply chain is brought under the strategic operations management plan would stand to benefit in the long run because of the fact that The paper posits that  Strategic Operations and Logistics Planning (SOLP) the process is a success underpinned by the use of action research involving external facilitation, group consensus and tailoring the process to meet the enterprise needs (Sadler and Sohal, 2005). There are two basic aspects of the process that the paper will seek to analyse backed by the existing debates in current literature-benchmarking and Six Sigma, identifying whether these are indeed tools of strategic management or are they quick fixes for problems that would never be effectively fixed by their short term application. MRP and JIT It is a clear tool for manufacturing companies despite the hindrances in terms of actual implementation; given the fact that effective implementation would require time and effort in the par of the many layers throughout a given company (Brewer, Button, and Hensher, 2001). Data would have to be accurate; any company wishing to implement that MRP system would have to have its employee training and education operation well mapped out, software installations need to be complete and new policies and procedures would have to be developed and ingrained in the work culture of the organization. An absence of any of these measures could spell disaster in the long run. Just in time organizes all operations so that they occur at the time that they are needed. MRP in most cases predates JIT and many companies have implemented this long before any consideration of the JIT principle. Both are applicable in both supply-push and demand-pull environments and hence are broadly compatible with the use of JIT. In fact one could safely state in the context of strategic operations management that MRP and JIT could be mutually supportive of each other, although it is correct that for effective use, major adaptive actions would have to be made. Benchmarking An extension of the qualkity process is the use of the benchmarking method to compoare performance on quality indicators-for example, defectice parts per million-and the practices wjoch different firms use to achieve such performance (Brown and Lamming, 2002). The approach was originally developed by the Xerox Corporation and provides a powerful learning and development aid to quality improvement. Regular benchmarking can provide both the stimulus for improvement (because of the performance gap which has to be closed) and new ideas about things to try in terms of organizational tools, mechanisms and practices. Further development of the the ideas of assessment and improvement come in the orm of integrated frameworks which provide definitions of the ideal wuaity organiations ahgaomst which firms can benchmark themselves. The model is usually associated with a prize. The real value however lies in offernng a well publicized target for which firms can aim in their wuality improvement activities. The models not only look at processes within the firm but increasingly at its interactions with the wider community; equally these are not simply concerned with aspects of product quality but also consider issues such as quality of working life within the firm. The literature on benchmarking and the issue of maintaining quality on products by monitoring the poroiduction process basically hods the opinion that the best practice approach to manufacturing strategy encapsulates the world class manufacturing philosophy and that benchmarking is based on the assumption that the continuous improvement of best practices in all areas of a given organization would lead to continuous improvements, the creation of superior manufacturing capability thereby adding to the competitive strength of a given company (Laugen, Boer and Frick, 2005). It is in this context that the literature on the topic assumes that benchmarking is indeed an aspect of strategic operations management. Whether or not benchmarking is ever utilized as a strategic system of operations management as opposed to it being a standard function to be performed could be measured in terms of its expected critical success factors (Schniederjans and Cao, 2002). It has been clearely suggested that benchmarking as a procedure could aid improve supply chain performances (Shah and Singh, 2001). In fact steps have been suggested to ensure that the process is used as a tool increasing efficiency (Heizer and Render, 2001; Chase et al., 2001): 1. The establishment of a benchmarking team to oversee the implementation of the process. It has been suggested that often a part of a continuous improvement program benchmarking requires oversight to ensure success. 2. Identification of the processes requiring improvement. One of the best ways to do this is to use process performance measures for business operations. Measuring and organization’s supply-chain can require unique formulas. Some internal organizational supply-chain measures of management efficiency could be used. 3. The best performance process measures would have to be identified. It has been stated that benchmarking woyuld automatically include the identification of a company whose performance has been considered the best in the industry. Some of these firms would need to be identified through a review of the research reports in the literature. 4. Data would be collected on current operations and supply chain activities. A comparative analysis follows. The amount of difference is defined by the Pareto analysis ranking of importance (the greater the difference, the important that process performance area is to be improved). 5. Establishment of a set of recommended process changes. Long etrms and hort term changes should be defined and multiple strategies suggested for implementation. 6. Follow-up. To ensure the success of this type of program, visual management techniques are employed. Performance measures that helped I the identification of operations problems both current and proposed should be posted where related personnel can see them. As progress is made toward the stated benchmarked goal, management would have to commu nicate the progress and continue to offer suggestions on approaches to improvement. Also updating of best performance measures should take place periodically as quality standards change over time. What could be stated with some confidence once one has understood the importance of the process of benchmarking in the process of operations management is that the procedure is a sure shot method of increasing productivity standards and growing efficiency levels within the organization? What the literature debates seems to lack is the discussion on the integration of this benchmarking process with the method of macro organizational management, manner of change that it would bring about where the overall standards of production are concerned. The process is perfect as an independent measure clog in the wheels of production, but the integration of this clog in the organizational machinery is missing. What one finds therefore is a mthod of operations management, while the strategic aspcts of the prospect of benchmarking seem to remain an elusive variable making the process just another one in a long line of many without any significant macro repercussions in the ultimate organizational objective matching. Conclusion In conclusion one could therefore reiterate the fact that there are many variables to the factor of strategic operations management, the idea of a given company in order to effectively implement these is to ensure that the provisions are made in the business plan and the macro-business environment has the capability of adjusting to these measures. Six Sigma The Six Sigma method of efficiency management is a recent discovery and began to gain popularity in the US not more than two decades ago, when it was introduced by Motorola Inc. as a means of measuring process quality using statistical process control (Mayle, 2006). The program itself was launched in 1987 and has been defined as an organized and systematic method for strategic process improvement and new product and service development that relies on statistical methods and the scientific method to make dramatic reductions in the customer defined defect rates. Six Sigma as a quality improvement framework cannot remain static if it is to sustain its value for businesses beyond the first waves of applications (Rohleder and Silver , 1997). Minimizing defects to the level accepting close to zero was at the heart of the methodology, and focuses on reducing variation in all the processes of the organization (Hammer, 2003). To achieve this the DMAIC model was developed: 1. Define Opportunities 2. Measure performance 3. Analyse opportunities 4. Improve performance 5. Control performance Six Sigma provides quality measurement that can be used throughout an organization-noit just in manufacturing, but also in design, administrative and service areas. The approach is built on well founded total quality principles, applied within a disciplined company wide network. The idea is essentially to measure how far a given process deviates from perfection.. the central idea behind the concept is that if one is able to measure how many defects there are in the process, one would be able to systematically figure out how to eliminate these and get as close to zero defect as is possible. It is thus a comprehensive and flexible system for achieving, sustaining and maximizing business success, driven by a uniquely formed understanding of consumer needs, disciplined use of facts, data and statistical analysis and dilligenet attention to manageeing, iproving and reinventing business processes. The six sigma process as outlined by the literature identifies six essential themes (Boyer and Verma, 2009); (Antony et. Al., 2007); (Antony, Kumar and Madu, 2007a): 1. there is a genuine focus on understanding the needs and preferences of the consumer given the fact that the customer’s definition and assessment of quality are central to the Six Sigma approach 2. Management by fact is a necessary requirement for the approach; this essentially emphasizes the requirement that companies need use only relevant and objective data collected from the process to make decisions and refrain from basing decisions on preconceived subjective judgments 3. The unit of analysis within the approach is a process consisting of a sequence of activities that is ultimately necessary for the satisfaction of consumer needs. 4. The method emphasizes the need for a more proactive style of organizational management given the fact that the approach advocates preemptive quality control action rather than waiting for a defect to occur so that it could be rectified 5. Active cooperation and collaboration between employees working within different functional areas in a firm is a must if the approach implementation is to be successful. Teamwork at different levels and across the organization therefore requires that barriers based on hierarchy and/or functional areas are broken down. 6. Finally, the approach could be defined as one that strives for perfection. The term itself refers to a statistical terms meaning 2-4 defects in a million opportunities. The themes identified in the literature on Six Sigma seem to suggest a process that is perceived as a strategic approach to setting aside defects and ensuring that the organization in the macro economic environment is able to apply itself to the elimination of defects. Interestingly, howvere while the literature does seem to suggest certain openness to making the process applicable to every area of functional, in practice much of the process advantages are restricted to the process of manufacturing and production along with the management of the supply chain, thereby disregarding the management and strategic operations aspect of the larger approach. Moreover, little to no attempts have been made to come up with suggestions on how the process is to be integrated in terms of the larger organizational outlook in terms of human resource management or even programming changes. Conclusions: Although it is correct that many performance enhancing initiaves have been adopted and implemented by organizations the world over, and each of these performance-improvement initiatives could be useful in boosting operating results, most of the initiaves need to be positioned under a process-management umbrella if they are to be successfully integrated. If this is ignored organizations start running the risk of program proliferation and of being burdened with a multitude of disconnected improvement efforts. It has to be remembered that for success the process management initiatves have to be viewed as being structured approaches to performance improvement that focus on the disciplined design and careful execution of a company’s end-to-end business processes. Isolated implementation, in the absence of an integrated approach, would mean that the process would enhance efficiency in the short term but would have no long term impacts on the organization’s fortunes. Processes like benchmarking and Six Sigma defect removal if used need to be integrated within the overall organizational goal management within the cultures and the HR structures of the company and cannot be effective. The literature debates identify the methods are being aspects of stargeic operations management but what ultimately happens is a short term fix without any concept of what it means to the larger goals of the company. It is here that changes have to be made, if strategic operations management are to actually achieve any objectives that they state they aim to achieve. Reference: Logistics, accessed, April 22, 2009, Brewer, A., Button, K., J., and Hensher, D., A., (2001) Handbook of supply chain management and Logistics. Emerald Group Publishing. p36 Rushton, A., Croucher, P., Baker, P., (2006). Handbook of supply and logistics management. Kogan Page. p9 Fernie J., and Sparks, L., (2004). Logistics and Retail management. Kogan page. p57 Lowson, R., H., (2002). Strategic operations management: the new competitive advantage. Routledge. P80 Waters, C., D., and Waters, D., (1999). Operations management. Kogan page. pp27-32 Lamming, S., and Brown, R., (2000). Strategic operations management. Elsivere Books. p6 Lewis, M., and Slack, N., (2003). Operations Management: Critical Perspectives on Business and Management. Routledge Chase, R. B., Aquilano, N. J., and Jacobs, F. R., (2001). Operations Management foir competitive advcantage. 9th Ed., Boston, MA: McGraw Hill Heizer, J., and Render, B., (2001). Operations Management. 6th Ed., Upper Saddle River, NJ: Prentice Hall Shah, J. and Singh, N., (2001). “Benchmarking Internal Supply Chain Performamce: Development of a framework”. The Journal of Supply Chain Management. Winter. pp37-47. Schniederjans, M. J., and Cao, Q., (2002). e-Commerce operations management. World Scientific Publications. pp224-226 Laugen, B. T., Boer, H., and Frick, J., (2005). “Best Manufacturing Practices: What do the best performing companies do?”. International journal of operations & production Management. 25(2). Pp131-151 Antony, J., Antony, F.J., Kumar, M., Cho, B.R. (2007), "Six Sigma in service organisations; benefits, challenges and difficulties, common myths, empirical observations and success factors", The International Journal of Quality & Reliability Management, Vol. 24 No.3, pp.294 Antony, J., Kumar, M., Madu, C.N. (2005a), "Six Sigma in small- and medium-sized UK manufacturing enterprises: some empirical observations", The International Journal of Quality & Reliability Management, Vol. 22 No.8/9, pp.860-74 Boyer, K. K., and Verma, R. (2010). Operations and Supply Chain Management for the 21st Century. Cengage Brain. p186 Mayle, D., (2006). Managing innovation and change. Sage. p67 Hammer, M., (2003). “Process Management and the Future of Six Sigma”. Business Insight, MIT Sloan Management Review's collaboration with The Wall Street Journal. Rohleder, T. R., and Silver, E. A., (1997) „A tutorial on Business Process Improvement“. Journal of Operations Management. 15(2). Pp139-154 Read More