My MBA Journey

Record of my personal journey completing an MBA

Operations Week 6 – Risk, Resilience, and Sustainability in Operations

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Introduction

Frequency and variety of disruptions to business have increased in recent years. The most significant would probably be Covid which has had a considerable impact across a broad range of organisations. The Business Community Institute (BCI 2020) found that operations failures caused a range of problems with businesses as shown in the following diagram.

Risk image from Business Community Institute.

Operations Managers have had to improve their skills in dealing with operations failures and improving organisational resilience. Building resilience is considered to be a useful way of combating operations failures. The notes suggest that this is from research, but the source isn’t cited [[Module 6: Risk, Resilience, and Sustainability in Operations: Introduction 2022, Aib.edu.au, viewed 23 August 2022, <https://learning.aib.edu.au/mod/book/view.php?id=111310>]].

In addition to resilience, organisations also need to satisfy customers’ expectations of sustainability. The operations of an organisation needs to demonstrate care for the environment and people. Customers expectations of organisations have risen considerably and there is constant pressure on organisations to do more in caring for the environment and people.

Operations failures and resilience

A failure in operations is when something in the operations process becomes unavailable causing a breakdown in the flow of product or services to customers. This can fall into one of two categories generally according to the textbook.

  • Low frequency and high impact
  • High frequency and low impact.

Ripple effect

An operations failure in one organisation can lead to a failure in a second organisation as a result of negating or minimising flow of products or services. This is known as the ripple effect. Organisations are possibly more vulnerable to this these days because of the tight levels of dependency between suppliers where the Lean stategies have been implemented.

Resilience vs Efficiency

Resilience, it could be argued, is maintaining a buffer against unforeseen operations failures so that disruptions to the supply chain can be addressed through surpluses of resources. Efficiency, as has been shown in previous areas, is the continual refinement of processes so that costs are reduced as much as possible.

Risk or failure assessment

In order to make operations resilient, the risk of failures must be assessed. This is a twofold step. First is to assess where failures might arise and secondly what impact they might have on operations.

The textbook[[Slack, N & Brandon-Jones, A 2021, Operations and Process Management., Pearson Education Limited, S.L.]] suggests four ways this should be done.

  1. identifying aspects of the operation that are susceptible to failure
  2. conducting post-failure analysis to discover underlying causes of failures when they occur
  3. calculating the likelihood of similar failures occurring in the future
  4. prioritising the different risks that threaten operations performance

Risk or failure prevention

It is not possible to predict all failures but operations managers should prepare for them anyway. Prevention is always cheaper than the cost of treating the failure.

Risk or failure points

Identifying these would require an in-depth knowledge of the operations processes and historical causes of any failures that have occurred. A process map can certainly help identify such points and discuss them with those involved. This can assist in preventing future failures perhaps.

Fail-safeing

Fail-safeing is an acknowledgement that there will be failures and building fail-safes into the process so that the process stops and minimal damage occurs. We see fail-safes in processes every day, such as warning labels and signs, confirmation boxes to close the software, repeating email addresses to prevent errors etc.

Maintenance

It could be argued that maintenance is a fail-safe in itself, or at least a contributing factor. All processes need to be maintained. The text discusses three types of maintenance.

  • preventive maintenance – regular servicing of equipment
  • condition-based maintenance – monitoring equipment and servicing on an on required basis.
  • total productive maintenance – a combination of the above two. TPM also uses the data however to attempt to design maintenance out of the process by identifying faults resulting from poor design, installation or manufacturing.

Risk or failure mitigation

“Failure mitigation means isolating a failure from its consequences” (Slack & Brandon-Jones, 2022, p. 516), which improves the resilience of operations. Processes are continually redesigned by operations managers to minimise the risk from any anticipated failures. The text recommends the use of a formal decision making process per the image below.

Risk or failure mitigation

“Failure mitigation means isolating a failure from its consequences” (Slack & Brandon-Jones, 2022, p. 516), which improves the resilience of operations. Processes are continually redesigned by operations managers to minimise the risk from any anticipated failures. The text recommends the use of a formal decision-making process per the image below.

Decision making diagram to minimise risk.
Source: Figure 14.10 of the textbook, Slack & Brandon-Jones 2022, p. 520 (Figure 14.12 in the textbook, Slack & Brandon-Jones 2018, p. 524.

Sustainability

The notes define sustainability as “using resources to satisfy the current generation’s needs without compromising future generations’ ability to meet their own needs” [[Module 6: Risk, Resilience, and Sustainability in Operations: Sustainability 2022, Aib.edu.au, viewed 23 August 2022, <https://learning.aib.edu.au/mod/book/view.php?id=111310&chapterid=40164>.]]

As a result of this definition, the notes list the following questions that can be asked of an organisation and how it produces and delivers a good or service:-

  • What resources will future generations require?
  • To what extent will new sources of depletable resources be identified in the future?
  • At what level can renewable resources be exploited while ensuring that these resources remain renewable?
  • At what levels can pollutants be released without harming future generations?
  • To what extent can technology address sustainable use of resources with continued increases in material wealth?
  • To what extent can market forces drive sustainability?
  • What sort of policies are required to achieve sustainability? (Linton, Klassen & Jayaraman 2007)[[Linton, J, Klassen, R & Jayaraman, V 2007, ‘Sustainable supply chains: An introduction‘, Journal of Operations Management, vol. 25, no. 6, pp. 1075-1082.]]

The World Summit on Social Development has identified three core areas for focus. These are:-

  • Economic Development
  • Social Development
  • Environmental Protection

These three pillars are built into many national plans and also form part of the Triple Bottom Line framework.

Assessment 2

Work on my assessment has well and truly begun with a process map already developed and a revised process map incorporating changes. Although the task suggested identifying a singular process if the process overall was a large one, it was felt that without a full process map a reader would not have an overview of what was being sought to achieve. As a result, the process map was prepared on an accountability basis with various processes allocated within swim lanes. For the recommendations area, I will be looking at the process analysis and design and also building resilience within the organisation.

Conclusion

An interesting week overall. The issues of risk and resilience have certainly been brought home to many organisations as a result of Covid. The vulnerability of having lengthy supply chains exposed many businesses to risks that they had not perhaps considered. In some ways, we are reaping the problems of becoming too efficient for our own good. Just in time operations have been shown to have risks that require mitigation policies. Organisations will also need resilience policies and operational plans ready to implement in the event of future failures.

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Ric Raftis

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