The Importance and Function of Operations Management in an Organization - Case Study Example

Module name: OPERATIONS MANAGEMENT Module code: PGBM03 Title: The interdependence of functions. Student name: Student number: Year of admission: Campus: An analysis of the importance and function of operations management in an organization INTRODUCTION In any business and profit-oriented organization, tactical and strategic management is an important aspect in remaining relevant to a competitive world. Customer satisfaction is one of the core parameters used in gauging the success of business. As such, it is of utmost value to have staff committed to realizing the common goals of the organization. If any business entity is to succeed and rise to global standards, the operations have to keep at par with the trends the business community in the world has set. The ability to compete effectively with well laid down structures in place constitutes good management. In defining control as good, several factors must come into play. One of these factors is operations management. So what is operations management? What effects does it have on the success of business? Who are the customers of a business and what constitutes their satisfaction? This report delves into explaining these essential concepts and also tries to prove that the success of any entity is directly dependent on the way it handles its affairs. If the business is to succeed in any way, the interdependence of its departments has to be in check. No department should overshadow the rest, however important it may seem to be because the roles each part of the larger plays is of equal importance. The operations management function encompasses five broad fields that this paper will look at in the case study analysis. These are: Dependability: it is a measure of the ability of the organisation to deliver goods as promised to the client/customer. Cost: factors that lead to the determination of the product's final price. These also affect the profitability of the product. Include labour and raw materials. Flexibility: the measure of the ability of an organisation to change to the changing needs and appeal to the customers. Speed: the time lapse between a customer’s order and the time it is delivered. Quality: the level of the product, in comparison to others. A quality product reduces costs and increases profits. THE CASE STUDY OF HORWES MOTORS Horwes Motors started back in the day, in the year 1987. The first batch of managers struggled with the company till it could stand on its feet. There was no market for the products, but hope was there. The company sold its first vehicle in 1990, after three years in operation. The same year, Ovian technologies obtained licensing authorities to produce and distribute car tints using Horwes’ inventions. To cap it all, Ovian obtained all the rights to Horwes’ patents and registered the successful trademark in the next year, 1991. Encouraged by the successes thus accrued, Ovian technologies changed their name to Horvian Incorporation in 1993. Due to the successes that the company experienced, it was listed to trade in various stock exchange markets, including the Switzerland Exchange. During those formative years, the efficiency of operations, the cost of the goods and the speed with which the company delivered the goods took the company from one level to another. The revenues soared from a mere $ 18 million to around $ 467 million within the first five years of operation. On the other hand, the profits increased from $ 13 million to $ 65 million. The glory did not last forever though. The various functions of the organisation did not work coherently, and a collapse was inevitable. The marketing department did its rigorous marketing, and the Human Resource still did its recruitment and training. However, a change of the management in the year 1994 brought about drastic changes that left the company panting for breath and left the company to struggle once more to acquire its former status and glory. The slow pace at which the company was picking itself up lead to the loss of the Majority stake it had gained in various companies. To bring the picture closer home, probably, the problem started when the organisation could not meet the demands of the consumers at the desired time. The managerial team adapted to the pressure quite slowly. By the time they realised what had transpired, the company was already crawling on its knees. The quality of the materials they purchased for the assemblage led to poor quality models, yet sold at the same price as before. Also, the company was not reliable to deliver the goods in a timely manner as desired by the clients. Throughout the last part of the 20th century, the company ranked among the last Automotive businesses in the United States. A closer look at the state of affairs had several things to reveal. According to analysts hired to audit and probably give reasons for the unexplained failure, it emerged that the state of affairs was shoddy than it looked from an ordinary observer. The main reason for failure, It emerged, was the inability of the Research and Development department to conduct its research well. The competitors had already acquired the market that had left for better services. Not only was it hard to reclaim a position they now envied, but it also entailed dipping their resources deep to get the company back on its feet. The rigorous TV and other media marketing did not help in as much as frugal innovation was not incorporated. The ingrained culture that was the foundation of the company did not change even after the management changed. The same way things run with the previous management found its way into the new model, even though things had changed. The inflexibility of the operations emerged when the analysts requested the administration to at least change their way of doing things now that times had changed and clients required different appeals, only for them to state "this is how we have always done it, it is too late to change." While the organisation's revenue reduced from $ 467 million to $ 113 million within the first four years. On the other hand, the profit margin decreased from $ 65 million to $ 9 million. An attempt at forming an advisory board divided the management into those who were for and against the move. The move slowed down the decision-making process and lead to critical delays in product development and distribution. DEPENDENCE OF FUNCTIONS The case study of Horwes Automotives, later Horvian, is an excellent indicator of what the failure to integrate various departments in an organisation can do. While there is the independent of functions in any organisation, it is the harmonisation of all the processes that brings about to the satisfactory production of quality and appealing goods. Customer satisfaction and loyalty are the main things that steer an organisation to grow. Faizan et al. (2011) are of the opinion that customer satisfaction is a key metric of how the business is likely to perform in the future. According to them, satisfaction is a clear indication of how well expectations have met satisfaction. On the other hand, customer loyalty measures the likelihood of the customers engaging in building lasting relationships with the organisation. Further, Faizan et al. state that satisfaction is the greatest determinant of loyalty.It is unlikely to have unsatisfied yet loyal customers. Rahim et al. (2012) categorically state that the final consumer of the produced goods is the greatest stakeholder in as much as they inject cash into the organisation. Further, they observe that customer satisfaction is a critical determinant of the strategies to be employed in marketing. What about when the marketing function has identified the needs of the customers? What is the role of the operations management function in providing the desired products? Slack, Jones and Johnston (2013) are of no different opinion from the other authors. According to them, what the customers need are well-defined goods worth what they are expected to give in return. They are of the opinion that consumer satisfaction and organisation profitability are intertwined. Customers form the bloodline of any business, and their welfare should be a given factor in the operations management. The failure of Horvian to meet all the requirements to satisfy their customers has led to the state of affairs they are in. Because frugal innovation is not seen as the customers would desire, it is only wise if the client moves and gets what they want from Horvian’s competitors. If the marketing department has done its part, but there are flaws with either the management or the production management functions, it is hard to please or even retain the loyalty of customers. Production management function deals with the manufacture of goods and services it accommodates the resources of the organisation. The new management at our institution has resulted to buying inferior quality materials for the assemblage of vehicles. When the final product fails to satisfy the customer, it is only likely that they will leave the company for a more competitive one. In any organisation, as in Horvian, the factors of production circulate within defined borders. It is the sole responsibility of operations management to ensure that the goods ordered by the clients are not only offered promptly and appropriate cost, but also in the desirable quality. As such, it is important to have an efficient operations management function. The production management function, a small part of the operations management, deals with manufacturing the products or services of that business. The system accommodates the flow of resources. The factors of production circulate within defined borders and are transformed in a controlled way to create value depending on the policies of the management. The characteristics of a systematic production include; objectivity because production is an organised activity, the function transforms resources for value creation, it operates in tandem with other systems in the organisation- it is not self-reliant. Further, the system accommodates feedback from staff and customers to control and improve production. The objectives of the Operations management have been identified as quality, reliance, flexibility, cost reduction and increment in the speed of production. ANALYSIS OF HORWES CASE STUDY/DISCUSSION In as much as Horwes has been a household name especially among motorists and motor-related professionals, it is a great concern that the various functions in the organisation have not fully integrated. The failure to harmonise the different activities of the company has led to close to irreparable damage. The image that the marketing department has worked tirelessly to built day and night is the same image that the Research and Development department has brought down by their failure to conduct market research on the products that the company deals in. In its right, Horwes ought to be among the best automotive lubricant companies in the United States, especially given the stature it has held for so long in its history. An analysis of the functions of the organisation and the position it ought to have held shows some incongruences in both profits and standing of the company. It is in this light that they ought to integrate the Operations management function, the marketing function, the HR function, the Research and Development function and the control function. The primary attention of the organisation should be to the customer. From a closer look of things, it seems like Horvian Automotives are only after money and not customer satisfaction or loyalty. What else would explain the fact that with the full knowledge that they are dealing with their clients, the management goes ahead to buy poor quality materials? The view to making more money at the expense of making the customers happy has undoubtedly led to the current state of affairs. Apparently, the failures the company has encountered in their operations are orchestrated by the very people that should oversee the business succeeding. The management has not been flexible enough to let new ways of doing things flow. They do things in the olden models and still expect results that will be satisfying, which can never be the case. If Horvian is not willing to change and adopt the new ways of doing things, an honest analysis would be that they should expect more failure because there is a constant evolution in the needs of the people and what the specifications of a product are. In a nutshell, business has played out quite well in the past, and the incidences that have caused the relapse in the near past should be a cause of worry among the managers and all the stakeholders of the business. The analyst's view of the state of affairs speaks volumes about the most likely outcome of a persistent move towards the same direction. The company is most likely to collapse and go down the books of history as one of the most successful organisations whose failure was caused by a few logistical mistakes. Because the five primary objectives of Operation Management have not been followed to the letter, it is not likely that the hitches been experienced at our company of interest are caused by external factors the underlying factors are issues that can be solved amicably. Though it might take the company several years to get back on its feet, it is an attempt worth the effort. It is not worth restating the fact that because the materials are of poor quality, the result will also not be as appealing. The failure to deliver the goods in time will lead to the efflux of customers to other existing businesses. Customer loyalty, an essential tool in remaining relevant in a market that is ever changing, has eluded the minds of the key players in the organisation. The five objectives of operation management have both internal and external implications on the stakeholders in any business setting. Positive results are an aftermath of the good integration of the goals. Adverse effects will be the resultant factor of missing objectives. Figure 1.2 Schematic diagram of the production system. RECOMMENDED CHANGES As an automotive organisation, Horvian should focus on making its customers as an asset and evaluating them individually. A business that relies on feedback succeeds than one that does not. Compliment, complaint and suggestion forums should be put in place in Horvian to control its activities. IBM (International Business Machines Corporation) offers several technologies that can are in increasing the efficiency of operations. These techniques include IT infrastructure and maintenance used in the digital evaluation of staff by the customers. Feedback has positive impacts on the business as it allows the stakeholders to put brakes, turn back and see where they have failed. It is only feasible if Horvian would focus on getting feedback, whether positive or negative, to help them streamline their activities. This recommended change has a cost benefit in that in as much as it may require some procedures laid down to come up with the best communication model, it allows a business to do a mock-up of their activities, evaluate them and find the best way of doing things. The other change I recommend for Horvian to implement is the construction of a contract appraisal system. Such a system allows the management to evaluate the commitment of the employees and contractors to the joint cause of business success. The development of such a system has double-fold benefits. One, it can replace the communications department with a lot of efficiencies. This happens because it allows for vertical communication between the management and employees. Secondly, it creates a forum where the management can gauge the commitment of employees, their motivation levels and their way of thinking to improve the business operations. Poor quality goods is a total put-off to any client Total Quality Management (TQM) models should be incorporated in this business to ensure that the goods they release into the market are the best quality they could ever afford. This development will surely attract more clients, and possibly those who have gone to other companies. This method is possible/feasible because the desire to attract benefits to the business is fuelled by the desire to have more resources flowing into the firm accounts. The cost-benefit is high as in as much as the business uses the money to establish such models, the effects are long-term and may attract enormous benefits to the organization in future. The greatest essence of having operations management and the other departments is the concept of division of labour and specialisation of duties. The organisation in question, Horvian, has a great wealth of resources accumulated over the years. Training of employees should be a continuous process if the objective of the organisation is to please its customers and make more profits in the cause of that. Because one of the reasons for business failure in Horvian is the rigidity of the management, the owners of the organisation should also focus on training their management to deal with times as they come. If the older methods continue being used while the other companies are coming up with new ways of doing business, it is only logical that failure will come knocking. I, therefore, recommend the inculcation of an innovative culture among the key players in the operation process. Necessity is the mother of invention. If the need here is to make profits and revive the revenue base, then a new and better way of doing things should prevail Finally, the changes I would recommend on customers/clientele include forming evaluation committees to meet with the groups of interest periodically to check on the progress and suggest on what they would want to implemented. These meetings would include suggestions for improving the company's technology every fiscal year. Employee concerns may include departmental rewards to motivate them. In as much as the above suggestion may seem to cost the organisation some money. In the real sense, however, this step aids in increasing employee morale and the productivity exceeds the money used in motivating them. Team building, another aspect of motivation, should be implemented in the entirety of the organisation because much as a department may seem independent, it is the small efforts of the various sub-organizations that constitute the success of the entity. Team building is necessary because it increases the motivation of the team and in the process, increases the production volume. The increase in output leads to increased sales, if the demand so dictates, and consequently translates to increased profitability. CONCLUSION So is it only the operations management that is important in a business organisation? All the functions of a business entity are essential and constitute success, if well managed. Monks and Joseph, (2004) are of the opinion that operations management is multi-faceted. However, it is not self-reliant. For the organisation to succeed, the operations management function has got to work with the other features without showing its importance over others. The two most important roles played by operations management are customer satisfaction and retention and utilisation of the organisation's resources. If the control function works in a solitary manner, neither of these two roles will succeed. It is, therefore, the sole responsibility of every management team to come up with strategies for succeeding against competitors in the most favourable of ways. Business ought to be carried out with a lot of caution because a slight mistake may bring the entire organisation down. References Ali, I., Alvi, A. K. and Ali, Rahim. R.(2012). Corporate reputation, consumer satisfaction, and loyalty. Romanian review of Social Sciences No 3; 13 – 23. Blythe, Jim (2008). Essentials of Marketing (4th ed.). Pearson Education. ISBN 978-0-273-71736-2. Douma, Sytse; Schreuder, Hein (2013) [1991]. Economic Approaches to Organisations. Harlow: Pearson Education Limited. ISBN 978-0-273-73529-8. Faizan, M. M., Nawaz, M. S. Khan, Z. (2011). The impact of customer satisfaction on customer loyalty and intention to switch: Evidence from Banking sector of Pakistan International Journal of Business and Social Science. 2 (16). http://www.pearson.com.au/products/S-Z-Slack-Brandon-Jones-Johnston-Betts/Operations-and-Process-Management-PDF Retrieved on 29th March 2017 at 12:25 pm Joseph, G., Monks, H.,(2004). Theory and Problems of Operations Management, Tata McGraw-Hill Publishing Company Limited, 2nd Edition. Slack, N., Brandon, J., and Johnston, a., (2013). Operations Management (7th edition). Pitman Publishing House. Slack, N., Stuart, C., & Robert, j., (2010). Operations management. –6th ed. Read More