The term business refers to the state of being busy for an individual, group, organization or an
society. The term is also interpreted as one’s regular occupation or profession. Thus the term is
widely amendable depending upon the different usages. A business for our purposes can be of
purchase, sale, manufacture, processing or marketing of products or services.
It is said that business exists for profits. Profits as a surplus of business accrues to the owners. It
is the share, just as wages to workers. For business profit is often regarded as a financial
yardstick for measuring the business efficiency and for evaluating managerial competence – how
well the decision and actions of the managers turn out to be effective, how well they are able to
combine and utilize resources and to sustain the enterprise as a going and a growing concern.
Business efficiency is often expressed in terms of percentage of profits to sales volume, to capital
employed, to market value of corporate shares and so on.
Peter F Drucker has drawn two important conclusions about what is a business that are usefull
for an understanding of the term business.
The first thing about a business is that it is created and managed by people. There will be a group
os people who will take all the decisions that will determine whether an organization is going to
prosper or decline , whether it will survive or will eventually perish. This is true of every
business.
The second conclusion drawn is that business cannot be explained in terms of profit. The
economic criterion of maximising profits for a firm has little relevance in the present times.
Profit maximization, in simple terms is selling at higher price than the cost. Profit maximization
has been qualified with the long term perspective and has been modified to include development
of wealth, to include several non financial factors such as goodwill, societal factors, relations and
so on.
Thus the discussion on business and its various aspects can be ensured with an effective
Operation management.
Operation management can be defined as a business function responsible for planning,
coordinating, and controlling the resources needed to produce products and services for a
company. Operations management is a management function and is applicable for all kinds of
manufacturing or service rendering industry whether profit oriented or an non-profit oriented.
Every organization makes a product. It might be a tangible goods such as cars and computers or
offer intangible services, such as education and insurance. At the heart of organization is the set
of operations which makes this products. Operation management considers the way in which
these central operations are designed, planned, organized and controlled. It shows how to
transform variety of inputs into useful products.
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In recent years, organization have put much more emphasis on operation management. There are
many reasons for this including international competition, improved manufacturing processes,
more emphasis on product quality and changing customer expectations. Perhaps the most
important factor has been the recognition that an organization can only be successful if it
supplies the product that its customer want.
Products are the combination of the goods & services that each organization makes. Operations
are all the activities that are directly concerned with making of these products.
In principle, Operations are very simple. Organization take all the inputs (such as raw materials,
money, people and machines), and perform operations such as (manufacturing, serving and
training) to give outputs which includes (goods, services and waste materials). The following is
an specific example of the above discussion like,
Nissan assembly plant in Washington takes input of components, energy, robots, people, etc; it
performs operation of pressing, welding, assembly, painting, the main output are cars and spare
parts.
Operations management is about the way organizations produce goods and services.
(N. Slack et al., 1998)
Operations management is concerned with the design, planning, control and improvement of an
organization’s resources and processes to produce goods or services for customers.
(R. Johnston, S. Chambers, C. Harland, A. Harrison, N. Slack, 1998)
Also D.L Waler has emphasized the operations management in manufacturing industry stating
that, the principle role of the manufacturing firm is to turn physical raw materials into tangible
products. A tangible product is one that can be physically touched, valued in monetary terms,
visualized, and described by dimensional terms such as
weight, length, height, volume, etc. (D. L. Waller, 1999)
In other words Operation management means transforming input into an output.
An organizations operation function is concerned with getting things done, producing goods and
or services for customers. Operation management is very important because it is responsible for
managing most of the organizations resources. However many people think that operation
management is a day to day, tactical issues.
Manufacturing is different from the service provision in many aspects. While manufacturing
provides tangible products, service provision provides intangible services. The core difference
between products and services might be the tangibility. Furthermore, manufacturing is low
customer contact. Conversely, service provision is high customer contact. Likewise, the
responsibility of the operation managers/manageress in manufacturing is totally different from
the operation managers/manageress in service provision.
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Operation management is very important in today’s dynamic business environment. Among the
trends with significant impact are Just in Time, TQM, Reengineering, Flexibility, Time based
competition, SCM, Global market place and environmental issues. These notions can be further
explained as
Just-in-time (JIT) is an inventory strategy that strives to improve a business's return on
investment by reducing in-process inventory and associated carrying costs. Just In Time
production method is also called the Toyota Production System.
TQM first developed by Feigenbaum and popularises by W Edwards Deming who implemented
many TQM programmes in Japan, where his ideas, initially at least, were more readily accepted.
In essence, Deming, Juran, Crosby and all the other gurus, said that total quality management
involves everyone taking a positive and proactive approach to quality and that good quality.
Reengineering is like fundamental rethinking and radical redesign of business processes to
achieve dramatic improvements in critical contemporary measures of performance, such as cost,
quality, service, and speed.
The term time-based competition came into use with its appearance in a 1988 Harvard Business
Review article entitled "Time-The Next Source of Competitive Advantage" by George Stalk, Jr.
Time-based competition is a broad-based competitive strategy which emphasizes time as the
major factor for achieving and maintaining a sustainable competitive advantage. It seeks to
compress the time required to propose, develop, manufacture, market and deliver its products.
Since we have understood Operations management and its implication let us study Strategic
management in connection with Operation management. All business organization is concerned
with how they will survive and prosper in the future. A business strategy is often thought of as a
plan or set of intentions that will set the long term direction of the action that are needed to
ensure future organizational success. However no matter how grand the plan, or how noble the
intention, an organization’s strategy can only become a meaningful reality, in practice if it is
operationally enacted. An organization’s strategy are strategically important precisely because
most organizational activity comprises of day to day activities within the operation function. The
relationship between the organization’s strategy and its operation is key determinant of its ability
to achieve long term success or even survival. Organizational success is only likely to result if
short term operations are consistent with long term strategic intention make a contribution to
competitive advantage.
Historically, strategy refers to ‘an action of an army general’. It has military origins though the
word is actually derived from Greek word ‘stratos’. Strategy in present day is the reason for an
organization to be in business. We are going to study strategy management in much detail now.
Strategic management refers to effective utilization of resources for the benefit of the
organization. The resources are mainly functional in nature like financial, marketing, sales,
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technological, manpower, etc. we see a picture developing in the form of strategy utilizing
resources to achieve a profitable objective. The important links are strategy, resources and
objectives. Formulating this strategy is a step by step process and once we go through it we can
have a better understanding to draft a strategy ourselves.
Mintzberg uses the metaphor of a potter which demonstrates involvement by the craftsman
where the potter uses his/her skills, experience and dedication and makes adjustments as
necessary as he/she is working on the product, resulting in a creative article being produced. In
this way, Mintzberg shows that formal strategic planning alone is not enough to explain how
managers develop strategies but also the intuitive knowledge of the firm and feel for the
company enables managers to come up with creative decisions from which an innovative
strategy emerges.
From his metaphor of a potter working with clay, Mintzberg develops his argument for personal
strategy of experimentation which leads to consensus strategy that follow the trend in the
industry, which arise from organizational people learning from the market what customers want.
Every strategy should have a mission and a vision or objective very clearly defined. This vision
and goal needs to be communicated throughout the structure of the organization vertical or
horizontal.
Strategy is classified in to mainly three levels by academics (Kaplan, 1996). Corporate strategy,
business strategy and functional strategy are the three levels.
Corporate strategy level refers to strategy needed to give a sense of direction to the overall
company which would be helpful in the long term. Corporate strategy is reflected in the past and
present performance of the company and has strategy chartered out for the company’s future
already. A company at a corporate level competes with other companies in the same sector.
Business strategy or competitive strategy level is a reflection of a business unit within a company
(Fred,F. 1986). It relates with the performance of a business unit and is concerned with meeting
targets. The business units compete with other business units within an organization. A common
term used at business strategy level is SBU or strategic business unit whose corporate goods and
services are different from that other SBU’s.
Functional or operational level strategies are concerned with individual functions of the
organization like finance, marketing, production, planning etc. They perform to achieve the
objective of the company and don’t compete in terms of performance but do compete in terms of
resource allocation which is required to meet intended objectives.
After understanding the concept of Operations management we should also study the five basic
performance objective of operations management viz; quality, speed, dependability, flexibility,
and cost these can further explained as;
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Quality is placed first in our list of performance objectives because many authorities believe it to
be the most important. Quality is discussed largely in terms of it meaning ‘conformance’. That is,
the most basic definition of quality is that a product or service is as it is supposed to be. In other
words, it conforms to its specifications.
The external affect of good quality within in operations is that the customers who ‘consume’ the
operations products and services will have less (or nothing) to complain about. And if they have
nothing to complain about they will (presumably) be happy with their products and services and
are more likely to consume them again. This brings in more revenue for the company (or clients
satisfaction in a not-for-profit organization).
Inside the operation quality has a different affect. If conformance quality is high in all the
operations processes and activities very few mistakes will be being made. This generally means
that cost is saved, dependability increases speed of response increases. This is because, if an
operation is continually correcting mistakes, it finds it difficult to respond quickly to customers
requests.
Speed is a shorthand way of saying ‘Speed of response’. It means the time between an external
or internal customer requesting a product or service, and them getting it. Again, there are internal
and external affects.
Externally speed is important because it helps to respond quickly to customers. Again, this is
usually viewed positively by customers who will be more likely to return with more business.
Sometimes also it is possible to charge higher prices when service is fast. The postal service in
most countries and most transportation and delivery services charge more for faster delivery.
The internal affects of speed have much to do with cost reduction. he examples used are from
manufacturing but the same thing applies to service operations. Usually, faster throughput of
information (or customers) will mean reduced costs. So, for example, processing passengers
quickly through the terminal gate at an airport can reduce the turn round time of the aircraft,
thereby increasing its utilisation.
Dependability means ‘being on time’. In other words, customers receive their products or
services on time. In practice, although this definition sounds simple, it can be difficult to
measure. What exactly is on time? Is it when the customer needed delivery of the product or
service? Is it when they expected delivery? Is it when they were promised delivery? Is it when
they were promised delivery the second time after it failed to be delivered the first time? Again,
it has external and internal affects.
Externally (no matter how it is defined) dependability is generally regarded by customers as a
good thing. Certainly being late with delivery of goods and services can be a considerable
irritation to customers. Especially with business customers, dependability is a particularly
important criterion used to determine whether suppliers have their contracts renewed. So, again,
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the external affects of this performance objective are to increase the chances of customers
returning with more business.
Internally dependability has an affect on cost. It affects the cost in three ways viz; – by saving
time (and therefore money), by saving money directly, and by giving an organization the stability
which allows it to improve its efficiencies.
This is a more complex objective because we use the word ‘flexibility’ to mean so many
different things. The important point to remember is that flexibility always means ‘being able to
change the operation in some way’. Here we identifies some of the different types of flexibility
(product/service flexibility, mix flexibility, volume flexibility, and delivery flexibility). It is
important to understand the difference between these different types of flexibility, but it is more
important to understand the affect flexibility can have on the operation. Guess what! There are
external and internal affects.
Externally the different types of flexibility allow an operation to fit its products and services to
its customers in some way. Mix flexibility allows an operation to produce a wide variety of
products and services for its customers to choose from. Product/service flexibility allows it
develop new products and services incorporating new ideas which customers may find attractive.
Volume and delivery flexibility allow the operation to adjust its output levels and its delivery
procedures in order to cope with unexpected changes in how many products and services
customers want, or when they want them, or where they want them.
Once again, there are several internal affects associated with this performance objective. It deals
with the three most important, namely flexibility speeds up response, flexibility saves time (and
therefore money), and flexibility helps maintain dependability.
The last objective being cost is widely affected by the other four objectives discussed above
contributing internally in reducing cost. This has been one of the major revelations within
operations management over the last twenty years.
"If managed properly, high quality, high speed, high dependability and high flexibility can not
only bring their own external rewards, they can also save the operation cost."
Now by getting close to the conclusion of Operation management it can be said operations
management in manufacturing is more product oriented, however, operations management in
service provision is more people oriented.
In conclusion, all the organizations need to make proper operation and strategies for achieving its
overall objectives for a long-term development and it is considered to be a key to make the
operation perfect, and it is necessary for an organization to notice the main differences between
manufacturing and service provision, which can lead the organization to the success. As a
manager who is responsible for running the business globally, he must adopt strategic thinking,
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perfect operation and keep the changeable environment in mind. ‘Think out of the box’ is
expected in operating world businesses.
References
Peter F Drucker (1999). Management: task, responsibilities, practices. Butterworth &
Heinemann
C.donald, J Waters, Donald Waters (1999). Operations Management, Kogan Page.
Johnson G, Scholes K (2003). Exploring Corporate Strategy. 7th edition, Harlow Prentice Hall.
D. L. Waller. (1999). A Supply Chain Approach. Operations Management, ISBN 1867524153.
Johnson, G. and Scholes, K. (2002). Exploring Corporate Strategy.Sixth Edition, Prentice Hall.
N. Slack, et al. Operations Management, Pitman
R. Johnston, S. Chambers, C. Harland, A. Harrison, N. Slack.(1998). Cases in Operations
Management. Third edition, FT Prentice Hall.
Kaplan,R.S. 1996. Harvard Business Review. USA: MTSU, edu
Mintzberg, H.1990. strategic management journal. USA: interscience.wiley.com
Online references;
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