Introduction
The extra week’s break has come to an end and it’s now time to move into the fourth subject of the MBA; Operations Management. Oddly enough, like all the subjects before this one, the notes argue it’s the most important area of an organisation. An interesting aspect though was the application of an analogy to organisations where the organisation is regarded as a table. Most tables have four legs and the analogy argues that Finance, Marketing, Human Resources and Operations are the legs of the table in an organisational sense. If any one of those legs is not functioning properly there is going to be a considerable impact on the success of the organisation. “The operations function is the part of the organisation that produces products and services “ (Slack & Brandon-Jones 2022, p. 6). [1]. It should be noted that Operations is not only a function of manufacturing-type organisations, but also applies to service industries. Viewing Operations in this manner is regarded as Service-dominant Logic. These notes are based on Module 1 from AIB [2]
Process Perspective
Taking a process perspective means to look at business through the eyes of their individual processes. There are other models that can be applied to organisations, but a process perspective is a worthwhile model.
Systems or processes are the building blocks for operations. “A ‘process’ is an arrangement of resources and activities that transforms input to output that satisfies (internal or external) customer needs” (Slack & Brandon-Jones 2022, p. 6). Consequently, it could be argued that an organisation is nothing more than a collection of processes and systems to produce goods and services for customers. All processes consist of three components which are input, transformation, and output. It would be possible to describe a large system in this context and then break it down into micro-processes of the same components.
Operations Impact
Operations can have impacts on a number of levels including:-
- Societal
- Business or enterprise
- Individual process
Societal
An organisation’s operations potentially affects people who have an interest in the organisation. This group of people are referred to as the organisation’s stakeholders. The triple bottom line comes into play here where an organisation needs to look at sustainable development for the benefit of the organisation and its stakeholders. Organisations can potentially achieve this through balancing their economic, environmental and societal interests.
Business or Enterprise Level
Operations at this level can reduce costs and risks, generate income and ensure the organisation is successful in the market place. The video below of an Amazon warehouse demonstrates some amazing integration between man and machine.
Individual Process Level
With the individual process level we can see how that process is a collection of resources that when combined together, goods and services are created.
The following issues are important at the individual level.
- Quality
- Speed
- Dependability
- Flexibility
- Cost
The priority is to keep costs under control as they affect the final price point of the product or service produced. Apart from this, any failings in an organisation, be they in production or quality, will be a failing of the systems and processes overseen by operations.
Managing Processes
Irrespective of the process and the differences between them, they all have one thing in common and that is the demand for the service or goods produced.
The Four Vs
Processes are managed using the Four Vs. These are:-
- Volume
- Variety
- Variation
- Visibility
of the processes service or product demand.
Volume
The higher the output level of a process, the greater demand for systemisation of the processes involved. As a result, high volumes lend themselves very well to automation and the deployment of lower skilled labour. The systems employed are highly standardised so they can be easily followed and quality maintained.
Variety
Alternatively known as the range of products or services. The greater the variety, the more activities are used. This in turn can make the development of new technology difficult because of the number of actions.
Variation
Variation occurs when levels of demand vary. If variation is high, then there can be considerable fluctuations in the market across all time spans. In industries such as retail and service, demand can vary where management has to decide the point between waiting times and engaging new employees.
Visibility
Visibility is the degree to which the customer is aware of the process. Phoning a call centre, the customer would be fully aware of what is happening. If they buy a new TV however, they are not aware of the acquisition of all the resources and the manufacturing process to produce the unit.
The Four Vs can have a major impact on the cost of a process. If you have high volume with low variety, low variation and low visibility, then costs can be minimised. Conversely, if you have low volume, high variety, high variation and high visibility, then the costs will be higher and potentially more difficult to control.
Decision-making in operations management
Decision-making is an essential part of operations management and decisions can be divided into four groups.
- Directing Operations – the direct management of operations activities and ensuring they contribute to the organisation’s strategic objectives.
- Designing Operations – decisions around the physical forms and shapes of operations and their overall capacity for various processes.
- Delivering Products – decisions around how products and services are shipped and delivered to customers.
- Developing Operations – decisions with the intent to improve the operations and processes.
Despite these decisions being classified into four groups, the boundaries between them can be somewhat blurred. You could therefore argue that all categories are intertwined.
Conclusion
The first week of operations has provided valuable insight and oversight of the nature of operations management. It is always useful to first obtain a “balcony” view of things before digging into the detail.
References- Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2022, Operations and process management, 6th edn, Pearson Education Ltd, Harlow, UK.[↩]
- Module 1: Operations Management: Introduction and Definitions: Introduction 2022, Aib.edu.au, viewed 4 July 2022, <https://learning.aib.edu.au/mod/book/view.php?id=111293>.[↩]
