Overview of Ops Mgt FunctionsThese pages offer an overview of production organisation and management and some of the issues facing operations managers.
Production and service operations have a central role in most firms (services and manufacturing). They typically acccount for 70 - 80% of a firms assets, expenditure and people.
Exercise.
Consider Air Traffic control (Heathrow) or West Middlesex hospital as a production function. List the operations/activities that must be co-ordinated.
Using a systems model, the production function transforms inputs (information, labour, materials/equipment and money) into many outputs (goods, services, customer, shareholder and stakeholder satisfaction). These are evaluated to determine business success. Some outputs are unacceptable eg waste, pollution, poor quality and design, overspending ("Excuse me waiter but this is haddock - I ordered cod!").
A system's outputs can be inputs to another e.g. poor steel panels from a component supplies leads to rust-bucket cars and lost reputation etc. Outputs can be inputs to the same system eg quality control data to improve system operations. Complaints about a bland hamburger may result in the recipe being changed (Wimpy). Waste in float glass manufacture (must be minimised) may be reused as cullet - a key raw material.
The Status of Operations Managers
Socially, production - though important - is often undervalued; seen as a career for male, engineer-types who enjoy getting their hands dirty! "Put your daughter on the stage Mrs Worthington not in the factory!".
Are views changing ? The growth of services encourages rethinking the production concept and the need for international competitive advantage and technological innovation is raising the status of manufacturing. Many MSc's in Manufacturing Systems have emerged.
In the UK people employed in 'operations' are far fewer today yet it is probable that employment here is greater still than other functions. A major part of total revenue and capital investment expenditure is spent on production operations.
Service Operations
Lloyds Bank is a little different from Ginos Pizzaria - both are services. The customer's role is different. In service industries, personal service is offered and the customer is more immediately active. Customer reaction is more immediate and less predictable so such systems demand more sensitive, personal control. The degree of customer contact affects system efficiency. The Medical profession's case about health service reforms argues that a doctor cannot plan her work as effectively as she would like as the consulting needs of patients vary. Productivity is more difficult to measure and quality involves more subjective assessment.
Process Transformations
Wild suggests 4 types of production system
- builders, gardeners and manufacturers transform raw materials & components
- suppliers, wholesales, retailers change the nature of "ownership"
- hauliers, postal/courier and telephone services transform "place"
- insurance provides people with security, building societies lend for housing, physios improve physical well-being
All transform the customer's "state". Many organisations do all four. BMW make cars, sell and transport them direct to dealers, offer finance deals and provide after-sales support. Restaurants transform veg. into nouveau cuisine, send takeways into your home and offer relaxation.
ExerciseWhich of the four transformation processes are offered by
- Marks and Spencer
- the Metropolitan Police
What kinds of feedback do they receive?
Conflicts and Objectives.
Objectives include
- producing required quantities of items to quality and on time
- within acceptable financial and social costs
- at a good sales price and an acceptable ROI
- with flexibility to adjust to demands
Some customers like Poggenpohl (made-to-measure) kitchens others go to MFI - they trade price for made-to-measure quality & service. Managers must balance potentially conflicting objectives such as customer satisfaction versus efficient resource utilisation in decisions about product design, job and work design, location, process planning/control, scheduling and inventory.
Management options such as skimping on materials (cost cutting) may give lower quality and more complaints. Staff productivity without extra pay may be souyght but workers may resist increased work tempo. Management wants long production runs to use materials, machines and staff efficiently but customers want quick response to an order. A doctor with a long queue may limit consulting time but may overlook a serious illness and have no time for people as people. Options involve conflicts. Efficiency can conflict with effectiveness, flexibility and adaptability.
Operational Research
A range of techniques may be used to examine how conflicts may be balanced. Techniques include value analysis, linear programming, network analysis, statistical quality control and efficiency measures. Schools use staff-student ratios, curriculum planning and class scheduling methods.
Quantitative techniques offer only limited help, the whole system and boundary relationships with other systems must be managed. The operations manager mediates between production system demands and other systems - marketing, purchasing, warehousing/distribution, staff, finance.
Boundary Management.
The boundary concerns of operations management include
Innovation
- for new product development. What the design is and how it can be produced are important development decisions. Innovative designs have to be made within cost and skill parameters. When financial organisations launched PEP's - these had to designed and staff trained to handle the new products.
Purchasing
- procuring and storing raw materials, components & equipment is a key role.
Exercise
What is the role and characteristics of purchasing in supporting
- the London Underground system.
- the Abbey National Building Society?
Marketing
- production staff need marketing and sales information: total demand for the product, when is it required? Customer feedback helps R&D design and create future products. At the end of package holiday we fill in a questionnaire as we fly home. Questions like "did you enjoy your holiday?" are irritating. But they offer much information to the Thomson's production system. The tour company may withdraw from a hotel because of poor standards. Will this put any pressure on hotel proprietors generally? Is it a ploy to raise prices or to change a customer-resort profile?
Finance and accounting
- production department must budget. The cost of each element of expenditure/activity must be known for price and wage determination and profit/loss identification. Capital equipment has to be replaced, maintained and disposed of to the best tax advantage. Did the equipment earn its keep?
Personnel:
recruitment, training, the design of reward systems, health and safety and industrial relations
Product and Service Design
Products must be designed to function well with style. The range of products or degree of standardisation must be decided. Materials must be chosen. Such matters link innovation and marketing to production. Ford had an initial style acceptance problem with the Sierra. Rolls Royce collapsed financially because of materials development problems with the RB211 jet engine (now a success).
CAD
The CAD (computer aided design) designer evaluates designs with fast computer graphics offering 3-D perspectives, with machine generated colour. Specifications are more accurate. CAD can store standard designs, names and dimensions of components (information needed for purchasing specifications, machine and tools set-up). Modular production is supported with products built up from families of stock items (kitchens, offices). A car is a body shell, engine, gear box and so on.
Standardisation/Modularisation
Modular systems are a form of standardisation - a means of cost reduction. A sandwich bar offers an array of fillings with basic ingredients. A college with many under-subscribed evening courses - may rationalise its "product mix" around the most popular courses reducing staff costs and overheads. This is the argument for sixth form colleges - concentrate resources and students in order to retain quality and choice.
Exercise.
But can we do this for heath care?
What decision processes are currently taking place in this arena?
Standardisation means longer production runs (economies of scale), discounts on bulk supplies. The consumer however may have less choice.
Locational Decisions
A department store groups similiar products to maximise staff product knowledge and satisfy customer expectations. Demand and user behaviour is accounted for. Fast-moving goods and those bought on impulse are located on the ground floor. Furniture can be located on upper floors and a cafeteria will draw customers up the store. Escalators often only go up.
Where production is located depends on factors ranging from raw material and power supply to transport and labour availability. Other considerations involve local taxes (rates), government grants and the attractiveness of the local area in terms of leisure opportunities.
Costs again are a prime consideration but in the USA manufacturing industry has shifted from the north and north east to the south and south west. Union avoidance may be a consideration (weak union organisation in southern states). The pacification of industrial unions in the UK may be one factor supporting the location of Japanese plant here - though language and the European Common market has a lot to do with it.
Exercise
A hotel conglomerate are adding motel suites to their Little Cuisine roadside restaurants. Draw up a checklist which will help you to decide which sites will be motelised and which will stay as they are.
Hounslow High Street shopping area then visit the Tesco superstore at Brentford and IKEA furniture store on the North Circular Road at Neasden. Why are these locations so popular and what problems has the decision to allow these developments presented to local town planners?
The State and Manufacturing
We can study government encouragement of manufacturing, attempts to regenerate industries/firms and evidence for deindustrialisation.
Does manufacturing drive economic growth? What are the links between manufacturing output & GDP?
Capital investment & technology influence productivity & therefore output & growth. Manufacturing prosperity means higher incomes for employees (direct & indirect) and demand for goods produced.
Exercise
- Does manufacturing's potential for economic growth offer greater penetration and stability than other sectors?
- How many are employed in manufacturing?
- In what way was Government policy supporting steel & British Leyland in the 70's more related to social & political aspects of unemployment than economic growth.
- What explanation is there for the lack of government support for the coal industry in the 80's?
Following a post-war boom, the 60's saw a slowdown and decline in UK manufacturing. Britain's share of world trade in manufactures fell from 19.8% (1955) to 7.9% (1983) while imports rose from 8% (1961) to 31% (1983). Changes in technology increased productivity but UK levels up to the late 80's were worse than Japan, France, W. Germany & Canada & only marginally better than USA. Unit labour cost increases were also higher.
- Signs of De-industrialisation in the UK?
We often look for scapegoats - bad management, recalcitrant unions, the British disease: an aversion to work? Lack of investment, an over-extended, over-consuming public sector, high sterling exchange rates, no trade protection & low wages in Third World countries are all cited.
We have a lower rate of investment per head of working population than our competitors. But the root of deindustrialisation is in taking the factors together. State intervention to halt decline has been limited and policies confused e.g. offering tax concessions to manufacturing but with high interest rates. Reduced borrowing hits investment & a strong sterling rate hits exports. It is often said the short-term focus of British stockmarket investors undermines the manufacturers confidence in investment.
The state intervenes via
- regulations relating to development planning, infrastructure investment (or lack of it), health and safety, employment law, purification of water, emission of toxic wastes
- government moves to improve the quality of goods & services by establishing national standards & thus encouraging customers to deal only with firms which can operate to these.
- as part of regional policy governments have tried to influence the location of manufacturing & non-manufacturing industry. (Grants & tax allowances to locate in areas of high unemployment)
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