An Overview Of 10 Critical Decisions Of Operations Management
The success of businesses is highly dependent on the 10 decision areas of Operations Management (OM). Businesses who align and integrate their business activities and strategies to these 10 decision areas will find themselves highly efficient and effective in their operations which in turn result in higher business profitability. So let`s research this relevant topic in "The 10 Critical Decisions of Operations Management Essays". The 10 areas of OM are:
- Design of goods and services
Businesses make money by selling goods and services to customers. To retain and attract customers, the design of their goods and services must meet customers’ expectations. Businesses must seek continuous improvements to their existing products and services, and must also constantly innovate and launch new products and services. This OM decision could be achieved through market research. Market research is a powerful tool where valuable information could be obtained. Businesses could developed new products based on the information gathered from the market research.
- Managing quality
When customers pay for the goods and services, they would expect the goods and services purchased to be of certain quality and consistencies. Managing quality and ensure consistencies in the goods and services are difficult but it is fundamental for businesses to achieve. Customers lose faith and confidence in the products and services when there is a lack in quality and consistencies which translate to loss sales for the business. For example, a customer bought a set of European dining table and chairs from a luxury furniture retailer. When the customer received the goods, she found part of the table chipped off and the chairs are painted in different shades of brown. The entire dining set simply does not complement each other when placed together. With this bad experience, it is unlikely that the customer will ever purchase from this furniture retailer again. To achieve this OM decision, businesses should always have a department responsible for stringent quality checks/ control.
- Process and capacity design
Production outputs must be able to support the goods and services demand. Businesses must have processes and capacity which are efficient and capable to support production goals. For example, the bakery needs to bake 200 buns to meet the demand of the daily breakfast crowd. Instead of purchasing a commercial oven (supports baking of high volume buns), the owner bought a home oven (supports baking of low volume buns, usually for household use). In the short-run, the business save a substantial amount from purchasing a home oven. However, in the long-run it actually resulted in loss sales as customers are not willing to spend longer time to wait for the buns to be baked. The home oven is not able to support the production needs of the business. To achieve this OM decision, businesses must understand the business production needs and purchase the equipment with the right specifications to support the production goals.
- Location strategy
Location is one of the key factor to consider when locating the business. Location is especially crucial for retail and service industries where businesses are customer-oriented. For example, a manufacturing plant would not choose to locate in a shopping district and a fast food joint would choose to locate in a densely populated area. To achieve this OM, businesses must understand their business industry, their customer segments and whether the rental is affordable and reasonable. If the business is selling products with low margin, it is not advisable to locate in the prime district where the rental is likely to be very expensive.
- Layout strategy
Layout strategy of the facility plays a major role in businesses as it affects operational efficiencies and effectiveness. For example, when kitchen crew has all the ingredients within his reach, he could assemble a burger in 2 minutes. If the ingredients are placed at different work stations, time is spend on walking stations to stations and assembling a burger could now take 4 minutes. An inefficient layout strategy reduces workers’ efficiencies which in turn reduces production output. To achieve this OM decision, businesses must constantly make improvements to existing workflows till optimal output is achieved.
- Human resources and job design
Employees are company’s assets. Competitive remuneration, a safe and happy working environment, job empowerment and supportive leadership are some factors to keep employees motivated. Highly motivated employees impact and benefit businesses greatly. Their productivity will be significantly enhanced leading to greater output. To achieve this OM decision, businesses should hold regular dialogues with their employees. Through these communications, make improvements to processes accordingly and conduct trainings for employees when skills gap is discovered. Reward and recognize outstanding performances of employees through appraisals and reviews.
- Supply-chain management
Manufacturers must decide if they should make or buy their supplies. If the component is complex, it might not be easy to find external suppliers who hold such stock or the external suppliers might charge a high price for such niche component. For such components, it is better for the company to make own supplies provided the business has the capability to do so. This would mean having the relevant equipment, team of expertise and knowledge to manufacture the component. By having the ability to manufacture such complex and niche component actually helps company to develop a competitive advantage over its competitors. For general components such as battery or liquid crystal display (LCD) of a mobile phone, it is recommended that businesses buy their supplies from external suppliers. To achieve this OM decision, management has to gauge the complexities and whether they have the capabilities to make their own supplies. If making is beyond the company’s capability, the company has to source for external supplier to foster long-term, close working relationship to ensure a constant stable supply of components.
- Inventory, material requirements planning and JIT (just-in-time)
Inventory equates to money. Holding excessive inventories in the warehouse reduces the company’s cashflow. The inventory would also face the risk of being obsolete or not being able to sell off if the sales projection is being misjudged. Having sufficient inventory on the other hand ensures quicker response time to customers’ orders. These inventories could act as buffer stocks in case supplier’s shipment is delayed. To achieve this OM decision, proper inventory management methods must be put in place. For example, setting of par-level, adopting the First-in First-out (FIFO) method are useful techniques. The company could also analyze the inventory turnover cycle to better understand and help them in their re-ordering.
- Intermediate and short-term scheduling
Businesses must be flexible and responsive to everchanging business needs. Normal day to day operational needs could be anticipated with ongoing trends. For example, the café located in an office tower would expect crowd during weekdays lunch time. To cater to the operational needs, the café would deploy manpower in accordance to the business’s peak and lull periods. To achieve this OM decision, it is recommended that businesses retain a pool of long-term part-time workers. Instead of incurring fixed monthly salaries on the full time workers, the company could deploy these part-time workers when operational needs arise.
Processes are developed to aid and smoothen operations. With the everchanging business needs, these processes must be tweeted and improved to keep up with the changes. Thus, it is important to constantly review current processes to remain relevant and competitive. To achieve this OM decision, it is important to have continual communications with the processes’ users to obtain realistic feedback for constant improvements. The maintenance also includes keeping the machines in good working conditions to support ongoing operational needs.