Operations Management Strategy and Competitiveness
This lecture focuses on the language of operations management (OM) and operations strategy and competitiveness. Value-added services are also discussed along with their benefit to external customers. Key concepts related to productivity are also provided.
A business education is incomplete without an understanding of modern approaches to managing operations. OM provides a systematic way of examining organizational processes and the concepts and tools that are widely used in managing other functions of a business. OM is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.
According to Heizer and Render (2005), key areas of OM include:
· Project management.
· Service and product design.
· Quality management.
· Process design and analysis.
· Capacity planning.
· Layout design.
· Work measurement.
· Supply chain management.
· Inventory management.
Services are compared to the production of goods, with an emphasis on the primary inputs, resources, the primary transformation functions, and the typical desired outputs in a variety of services and operations.
The historical roots of the development of OM are traced from scientific management through the moving assembly line, the Hawthorne studies, to today’s current manufacturing topics, including supply chain management and electronic commerce.
Contemporary issues facing OM executives include effectively consolidating the operations resulting from mergers; developing flexible supply chains to enable mass customization of products and services; managing global suppliers, production, and distribution networks; increased commoditization of suppliers; achieving the service factory; and achieving excellent service from service firms.
Operations Strategy and Competitiveness
For a company to be considered world class, it must recognize that the ability to compete in the marketplace depends on developing an operations strategy aligned with the mission of serving the customer. A firm’s competitiveness and its relative position to other firms are important in both local and global markets. Key competitive dimensions of operations are differentiation, cost, and response. Central to the concept of operations strategy is the notion of trade-offs. Specifically, there is a trade-off between differentiation, cost, and response when making operations decisions. The interface between marketing and finance and operations is necessary to provide a business with an understanding of its markets from both perspectives. Operations strategy must be linked vertically to the customer and horizontally to other parts of the enterprise. Operations strategy is also important in service firms, which is evident when Wal-Mart leverages its world-class distribution competencies.
Measuring Labor and Multifactor Productivity
Operations managers have a vested interest in understanding the productivity of their operation. Labor productivity provides insight into how industrious its labor force is using the number of units produced versus the hours it took to produce the units. This type of measure can be categorized as a single-factor productivity determination. By simply dividing the number of units produced by the number of labor hours expended, the manager can gain insight into how productive his or her labor force is in terms of units per labor-hour.
Multifactor productivity builds upon the same concepts as above. However, in addition to labor costs, other factors are considered, such as material costs, electricity costs, and capital costs. By simply dividing the number of units produced by the total costs to produce the units (expressed in dollars), the manager can gain insight into how productive his or her labor force is in terms of units per dollar (Chase, Jacobs, & Aquilano, 2004).
Production and operations managers are required to have a complete understanding of the professional language of operations. In addition, stakeholders involved in business production and OM require the manager to consider various perspectives in strategy and decision making, including the customer perspective, financial perspective, internal perspective, and learning and growth perspectives. Once the manager has determined the perspectives of the various stakeholders, operations strategy and management becomes more effective and efficient in the ultracompetitive 21st century environment.