Operations Management Assignment for University/ college

OPERATIONAL MANAGEMENT FOR BUSINESS 

 TABLE OF CONTENT

1 INTRODUCTION
 1 1 Importance of Operational Management…………………………………………………………………………………02

 1.2 The Production of Safety, on Time, to Cost, to Quality…………………………………………………………… 03
1 3 The Operations Management and Strategic Planning in the Operation …………………………………..04
 1 4 Diagram of illustrate a typical business…………………………………………………………………………………..05
2 1 The Three “E’s” (Economy, Efficiency and Effectiveness) ... …………………………………………………..06
2 2 Cost Minimization and Quality Maximization 06
2 3 Five Performance Objectives that Underpin Operation Management ………………………………….07
3.1 The Linear Programming . 07
3.2 Critical Path Analysis and Network Planning. 08
 3.3 Operational Planning and Control ..09-10 5. SUMMARY..................................................................10

1. INTRODUCTION 

Operations are one of the three crucial functions in business management along with Finance and Marketing. Businesses even in the same industry nowadays are competing in a very different environment than that of 1980’s. Survival depends upon their focus on cost, quality , time , responsiveness, flexibility, international dimensions, customer relationship, E-marketing, online sales and many more aspects of competitions. Today’s industry giants like Walmart, Jet Airways, Starbucks, Toyota , Fedex etc are achieving international successes due to their strong operations management. This report focuses on the tool and techniques for successful operational management in an organization. It shows how operational management helps to gain competitive advantage in the market place by selling products or services cheaper, better and faster.

 1.1 IMPORTANCE OF OPERATIONAL MANAGEMENT: (Lewis, 2003).

Operations management is essential for all organizations. Organizations generally produce a mixture of goods and services. For small organizations, however operation management may be limited to someone who’s from the field of marketing or finance. The importance of operations management is that it will assist to determine the cost of products and services and the easier and profitable methods for the delivery of these products and services. Operations management therefore, has a significant impact in costs and products thus, revenue collection of a company. For not for profit organizations, operations management may be providing value or service to community.

 1.2 THE PRODUCTION OF SAFETY, ON TIME, TO COST, TO QUALIT Y

Organizations must seek improvement methods and practice lean manufacturing techniques in order to maintain competitive advantage against its competitors. The quality of products and services are ceritified by universal standards like ISO 9001 , which help the organization to maintain quality and focus on to access the markets. All business professionals including executives and managers are involved in accounting costs. Operational managers are involved in forecasting, capital investment decisions, products and service management, Pricing etc. deeply embe dded in the work of cost accounting. Cost-related tasks use a considerable amount of management time at all levels of the organization. An individual must acknowledge cost management culture of his/ her organization. A business professional must Understand his organization’s practices of accounting to competently manage a Specified area and asses how personal accountabilities s are examined and established. Often organizations that deploy latest and complex management systems still run their accounting system based on traditional cost accounting principles of business management. An organization’s executive therefore must provide foundation of cost accounting practices that support operations and decisions making primarily moving to financial accounting and finally advanced systems. Several alternatives to the system must be identified by the executive to achieve these goals. Industries have focused on different types of safety categories. These category focus on unique areas , often these areas overlapping with each other. Each of these category has one or many governmental agencies for regulation purposes based on their vested interests. Some of the major categories are as follow: 1. biological safety 2. chemical hygiene 3. Radiation safety 4. Fire safety 5. Environmentally unfriendly / Hazardous waste management.

 1.3 The Operations Management and Strategic Planning in the Operation: (Barnes, 2008)

Strategic management basically deals with three stages. Firstly, there is a need of developing a process to understand the business environment. Secondly, synchronizing the level of performance according to the desired level and then finally, implementing the strategies to achieve it. Operations management involves executing the strategy on the day to day basis to achieve the desired performance in the long run. The variations between strategic management as compared to that of operations management can Be distinguished as follows: Strategic management deals with almost all activities of any business organization. These activities may include operations, sales, finance concerned with different levels of managers. Operations management , however is focused with the production / service provider level of organization. Strategic management is designed for long term anticipation of performance level and focuses on the achievement of business goals and objectives accordingly. Operations management , however is short termed, often day to day assessment of operations within an organization. Strategic decision could be very dynamic and ambigious in nature . They are non routinized responsibilities of an organization. Operational responsibilities on the other hand very precise, day to day routinized and non-ambigious by nature. Strategic management is comparatively tougher procedure and demands advanced skills to handle. Operation management can be fairly simple and average skilled managers and supervisors can easily handle these processes. Strategic management is a backbone to the organizational success. This is because it asses business environment, strengths and weaknesses of an organization and evaluates the necessity of critical success factors for the organization. Operations on the other hand, doesn’t determine the survival of the organization but indirectly affects throught he cumulative performance on daily basis.

 1.4 Diagram of illustration of a typical business: 

2.1 The Three “E's” (Economy, Efficiency and Effectiveness)(Asosai, 2012)

 a. Economy: While auditing performance, it is essential to ascertain whether the right resources have been procured in the right amount in the right time at right place and at right cost. In real life situations, these standards are not readily available. Hence, an operational manager must take into consideration of business objectives, and focus on quantitative needs of the organization which will ultimately ease to determine minimum costs. Right resource at a right time is essential for satisfying the needs. Neither this resource should make other resources to wait nor should it wait for other resources. Therefore, operational managers work as an auditor to analyse the availability of the resources and forcast demands. Right resource must be at a right place where it is needed. For example there may be certain unmanned jobs where men are kept, and certain jobs where men are kept but don’t actually have any work. Operation managers here can review the nature of system and analyse resource gaps. Right cost can be determined by determining several other costs involved. These costs can be capital cost, operating cost, maintenance costs , down time cost, salvage value etc. b. Efficiency: Efficiency can be measured by different ways. It could be be inter-authority comparison where comparison within similar authorities providing similar products and services can be compared in terms of many areas like Operating expenses, number of clients/ membership of services or products, man power standatrd, Key Performance Indicators etc. Internal comparison is another technique where an authority can compare its costs in the same services and products but in varying locations or departments. A large scale of performance indicators can be born by operational managers based in internal data of an organization like : ratio of administrative costs as compared to operations costs, number of overtime payment etc. comparing the out trend with the past performance of an organization also reveals the ideas for saving . The management may compare its performace against the target set by itself. This could be assessment of several factors for example whether or not all level of management is quite aware of its goals and objectives. Whether or not there is a regular reporting of current efficiency measures or not etc. c. Effectiveness: Effectiveness can be determined by examining it against the objectives and achievements of an organization. Operations managers must see whether the objectives are precise and practical. Are they based on facts and forecast of demands are reliable and achievable.

 2.2 Cost Minimization and Quality Maximization: Quality should be placed first position in our list of performance objectives because many authorities see it carefully. It has ruled over many other operations performance objective over the last two decades The external effect 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. when they have nothing to complain about they will (presumably) be happy with. This brings in more revenue for the company (or clients satisfaction in a not-for-profit organisation). 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 and (although it is not mentioned explicitly in the chapter) speed of response increases. This is because, if an operation is continually correcting mistakes, it finds it difficult to respond quickly to customers' requests.

 3.1 The Linear Programming(LP): (Wiki, 2012)

Linear programming (LP, or linear optimization) is a numerical technique for determining a way to accomplish the best result (such as maximum profit or lowest cost) in a given mathematical model. It’s a technique for the optimization of a linear objective function, subject to linear equality and inequality constraints. It’s feasible region is a convex polyhedron, which is a set defined as the intersection of finitely many half spaces, each of which is defined by a linear inequality. Its objective function is a real-valued affine function defined on this polyhedron. A linear programming algorithm finds a point in the polyhedron where this function has the smallest (or largest) value if such a point exists. Linear programs are problems that can be expressed in canonical form: where x represents the vector of variables (to be determined), c and b are vectors of (known) coefficients, A is a (known) matrix of coefficients, and is the matrix transpose. The expression to be maximized or minimized is called the objective function (cTx in this case). The inequalities Ax ≤ b are the constraints which specify a convex polytope over which the objective function is to be optimized. In this context, two vectors are comparable when they have the same dimensions. If every entry in the first is less-than or equal-to the corresponding entry in the second then we can say the first vector is less-than or equal-to the second vector. Linear programming can be applied to various fields of study. It is used in business and economics, but can also be utilized for some engineering problems. Industries that use linear programming models include transportation, energy, telecommunications, and manufacturing. 2.3 Five Performance Objectives that Underpin Operation Management: (Barnes, 2009) An organization must provide fast and dependable service at reasonable price. At t he same time it must help to improve the quality of service provided by its suppliers to them. There are five basic performance objectives that an operational manager must bear in mind: They are 1. Cost : One foremost operations objective, particularly where organizations compete in competitive environment with issues of ‘cost’. Low cost is a universal eye-catching objective to consumers, which can be achieved by producing goods at lower costs. Organizations often shift their businesses in the areas of potential supplier or customers to minimize costs. Operations managers often make choices of location decisions that influence transportation cost, energy cost, labour costs, raw material cost and several other cost may help to gain competitive advantage of producing cheaper goods and services to its customers than its rival companies. In order to ‘do things cheaply’, TMC seek to influence the cost of goods and services, so for the future TMC has planed to shift their production of multipurpose vehicles and pick-up trucks on different countries around the world (e.g. Argentina, South Africa). Also, internally, cost performance is helped by good performance in the other performance objectives that TMC has managed to produce high quality vehicles at a reasonable prices 2. Quality: Quality is a provison of providing error free goods and services that can guarantee the satisfaction of customers. For example quality issues of a vehicle may be emission of harmful gases, fuel consumption, mileage etc. 3. Speed : speed is necessary for processing orders faster and reducing the time of queues or waiting time. Speed is also an advantage for businesses. For instance, some car manufacturers focus on operations that reduce complexity by rearranging layout and using simple machines . This will improve the speed of production. 4. Flexibility: A clear result of responding to a dynamic environment is that organisation change their products and services and changes the way they do business. This performance objective is known as ‘flexibility’.(Peters, T., 1998) argues that we must learn to love change and develop flexible and responsive organizations to cope with the dynamic business environment. 5. Dependability: Dependability is delivering products and services in time to consumers as promised. For example, Organizations use Just in Time(JIT) techniques to gain dependability advantage from their potential consumers. Improving quality, speed, dependability, flexibility and cost operations performance, companies seek an international growth and increased percentage of customer satisfaction. The Japanese style of management is worldwide famous because of the success of all these performance objectives. Successful organizations beating their rival in these objectives are today’s global supply chain leaders. They have shifted their operations substantially to other countries in the search of cheaper inputs and labor to maximize their business through low costs and quality assurances. 3.2 Critical Path Analysis and Network Planning: Critical path analysis( CPA) is particularly used in project management. It shows: 1. All the individual activities to finally form a larger project 2. The order of activities to be performed 3. Whether the activities can go simultaneously or has to wait for the other task to be completed 4. When certain resources are needed. For example a certain time for hiring a crane in a construction site project. The construction of CPA requires an elapsed time for each activity- the time that starts from commencement of the job to its completion stage. Then CPA is drawn based on several other factor called dependencies. These dependencies could be anything like avilabilty of man power and other resources, seasonal factors such as climatically conditions that may favor / obstruct to build a project. In a typical CPA, there is a critical path- the route that has no wastage of time( called Float or slack) in any of these activities. In other words, if there is any delay to any of the activities on the critical path, the whole project will be delayed unless the firm makes other changes to bring the project back on track. Critical path determines the minimum time required for the project to be completed. Some branches in the network might have float which means there is an abundant time available for these activities. What can a business do if a project is delayed? • Firstly, the CPA is helpful because it shows the likely impact on the whole project if no action were taken. • Secondly, if there is float elsewhere, it might be possible to switch staff from another activity to help catch up on the delayed activity. • As a rule, most projects can be brought back on track by using extra labour – either by hiring additional people or overtime. Note, there will be usually be an extra cost. Alternative suppliers can usually be found – but again, it might cost more to get urgent help. 3.3 Operational Planning and Control: Planning and control activities provide the systems, procedures and decisions which bring different aspects of supply and demand together. The motive of planning and control is to make a connection between supply and demand to satisfy the needs of the customers. Planning and control ensures the effective and efficient process of production and delivery of goods and services. Plan is a formal anticipation for the future but it cannot guarantee the real existence. Products and services may no longer be relevant in the market because of changes in customer choices or trends of consumption, supplier may fail to guarantee the quality of delivery, machines may break , staff may be absent. For all these reasons, control is a remedy to adapt according to the changes. In other words, control may essential to redraw the plan or save the plan to derailed. Long-, medium- and short-term planning and control: Operations managers make long term plans to determine the amount and nature of resources to fulfill the objectives of an organization in an effective and efficient manner. The emphasis in long term plan which is strategic in nature is to plan rather than control. Demand forecasts are made in aggregated terms . Medium-term planning and control: is additional comprehensive. It looks further on to assess the overall demand which the operation must meet in a partially disaggregated manner. short-term planning and control : is very much operational by nature. Resources are utilized in according to plan thus, difficult to make major changes. However, short-term interventions are possible if things are not going to plan.

SUMMARY
 Operations are one of the three crucial functions in business management along with Finance and Marketing. Strategic management is designed for long term anticipation of performance level and focuses on the achievement of business goals and objectives accordingly. Operations management , however is short termed, often day to day assessment of operations within an organization. Strategic decision could be very dynamic and ambigious in nature . They are non routinized responsibilities of an organization. Operational responsibilities on the other hand very precise, day to day routinized and non-ambigious by nature. Liner programming and critical path analysis (Networking planning) are some mathematical techniques used by modern day operations managers in order to ensure low cost and faster speed of production. Planning and control can be carried out in day to day, weekly/ monthly or annual basis which help operation managers to allocate resources or make interventions if thing didn’t work according to plan.

 References:

1. Asosai, 2012.(online)[Pdf]Avialable at: http://www.asosai.org/asosai_old/journal1988/performance_auditing.htm Accessed on 10/22/12
2. Barnes, T., 2008 “ Operations Management: An International Perspectives”London:Thompson Learning.
3. Chary, S.N.,2009. “Production and Operations Management” 4th ed. New Delhi: Tata Mc Graw Hill. 
4. Lewis, M., 2003 “Operations Management: Critical Perspectives on Business and Management”London: Routledge.
5. Wikipedia, 2012. (Online) Avialable on: http://en.wikipedia.org/wiki/Linear_programming Accessed on 10/22/12

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