Essay on Importance of Operations Management

Operations Management
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1. Operations Management: An Important Function 2
Introduction 2
Importance of operations management 2
High quality 2
Quick and speedy production 3
Flexible and cost effective 3
Important functions of an organization 3
Sales and marketing and after sales functions 3
Production function 3
Human resource management and Research and development function 4
Finance management function: 4
2. Critical Decisions as an Operations Manager and Solutions 4
Case 1 4
Solution 5
Case 2 5
Solution 5
3. Difference between Production and Productivity 6
Production 6
Productivity 6
4. Production Data for a Pump Manufacturing Company 7
5. Strategies used by organizations to gain competitive priorities over its competitors 8
Chasing Demand Strategies 8
Management Demand Strategy 8
Diversification Strategy and Market Penetration Strategy 9
Product or Market Development Strategy 9
Bibliography 10

1. Operations Management: An Important Function
Management function which deals with the process of procurement of goods, production process, outbound logistics and inbound logistics, entire process from the procurement of raw materials to the dispatch of finished goods comes under operations management. In simple terms operations management deals with all the functions of operations and production department of an organization.
Importance of operations management
Outbound and inbound logistics is a main part of any company. Purchasing raw materials, work in progress, inventory costs, inventory turnover ratio, minimum defect, in time procurement of raw materials, storage and production level, ordering quantity are few basic important functions which operations management controls in an organization. Thus, importance of production management function in an organization is, (Singh, 2012)
High quality
Production department believes in providing high quality products by inculcating techniques like TQM in a production level. Its main function is to see that the goods are produced with zero defects. Thus, if there is a proper and a good production department in an organization then it looks into the quality aspect very seriously. Also, supplying best quality goods is one of the important for objective of an organization. Example BMW, AUDI, Marks and Spenser’s etc. are different products with is known for its high quality. It looks into the fact that how much robust and dependable the goods are.
Quick and speedy production
FedEx Express Courier services tend to offers global overnight delivery of parcels. Domino’s Pizza Company promises to provide. Thus a proper production management department tends to achievespeed and accuracy in the production process and delivery.
Flexible and cost effective

Supermarkets like Wall Mart ASDA tend to offer goods at cheaper cost and of good quality as well. This can help develop a leadership edge over rival firms. Integration of proper function like JIT helps flexibility in managing the stock level. This will ultimately reduce the cost of the company and help increase flexibility.
Thus, from the above points we can say that a production management is one of the key functions of any successful organization.
Important functions of an organization
Sales and marketing and after sales functions
Sales and marketing function for an important part of an organization. In order to increase sales the organization needs to improve its production department and produce better quality goods at lower time with speed and flexibility in order to form leadership in the market. Different marketing strategies like sales promotion, advertising, Integrated marketing (IMC) and many more has to be initiated by marketing department. Overall selling of the product after it has completed its production process depends on marketing department. Moreover, after sales services like customer support, free delivery, demo services are also an important function of an organization.
Production function
All the activities from the purchase of raw materials, work in progress, till its conversion into finished goods for sales comes under production department. It is most important function of an organization and takes into account various techniques like poke yoke, JIT, TQM, Zero Defect and many more.
Human resource management and Research and development function
Human factor is the important resource of any organization. This department function is to handle all the issues, matters, recruitment, training and problems of human factor of an organization. Also, innovation related to production, process, marketing is done by R&D department. They bring in new and vital products. Every time they come up with new and improved version of product. Now-a-days due to growing competition it is necessary for the firms to undertake research and development in order to cater new and different products to the consumers with intention to survive in the market.
Finance management function:
The source through which a company gets fund is handled by Finance department. Every company needs to have a proper finance function department because, it is most vital for every company. Also, a sound finance functional department should be able to invest the finance of the company in right path. The main objective of this functional department is to maximize profits through minimum and smart investment.
Thus above are the important functions of an organization.
2. Critical Decisions as an Operations Manager and Solutions
As an operational manager there are many different areas which need critical and conscious thinking. However during my career as an Operational Manager I came across two areas in decision making which needed critical thinking.
Case 1

I am a production manager of a well-known car company. Our company deals in manufacturing of Cars as well as heavy vehicles like trucks, tractors and Jeep as well as luxury cars. However, recently due to recession in the market the consumers’ purchasing power reduced and there was over production of luxury cars however, the demand for it went very low. As a production manager it was a very critical situation as we had taken a lot of credit from our suppliers and the final product was not creating sales. So the entire circulation of money was on a halt. Company was in financial crises. It was a critical decision for me at that point. However, the solution which I found as a production manager was to introduce Japanese concept called JIT (just in time) and Jidoka.

• The entire production process was ordered to put a halt. Demand was estimated and accordingly production was done.
• There was no advance purchase and no Build up stock. Due to this wastages and was reduced
• Zero wastage policy was followed. Cars were produced only when there was customer demand.
Due to this the cash was not tied up during the entire production process from the purchase of raw material till its conversion into finished goods. Also, part finished stocks were reduced. A strategy was developed for balancing demand and supply.
Case 2
I was a production manager of a factory who is engaged in manufacturing of clothes for a well-known brand. Our brand is very famous and known for its quality however, during few months all the finished goods (clothes) were returned by the customers with a complaint of bad quality. The brand’s image was at a risk. As a production manager it was a critical situation to decide on improving the production process. It was seen that the company is not following any sort of quality standards during high demand those days. However, I came to a conclusion to introduce a concept of TQM in the organization (Total Quality Management), Quality control and Quality Assurance.
• The Quality checking department was established in order to have a double check on the quality.
• Suppliers of raw materials were replaced and better quality raw materials were purchased.
• Advanced machinery was replacing the old ones. Idle time and wastages were reduced.
• Zero-defect was introduced with best quality of clothes at the first time only.
• Team work and employees innovative participation was encouraged.
Due to all these changes and TQM in the production process the Quality was improved and this time it was best of Quality.
3. Difference between Production and Productivity

1. Meaning:
Manufacturing of goods for the purpose of use or sale such an act is called Production.
2. Increase or decrease:
Increase or decrease in production is influenced by demand and supply in the market. Higher the demand high will be the production of goods.(Fernald & Basu, 2001)
3. Objective :
It main aim is to undertake manufacturing of goods but not to control or reduce wastages.
1. Meaning:
There is one particular rate at which products or finished goods are produced such rate of production is called Productivity.
2. Increase or decrease:
Higher the productivity high will be the economic wellness of the company. it indicates higher living standards of people.
3. Objective:
The main objective of productivity is to eliminate or reduce wastages and improve Quality.

4. Production Data for a Pump Manufacturing Company

Analysis of productivity:
Total production Total number of workers Productivity per worker.
2012-2013 211342 615 343.645
2013-2014 232678 623 373.479
Thus, we can see that the total number of productivity per worker has been increased by approximately by 30 units.
Total production Total machine running hours Production per hour.
2012-2013 211342 120345 1.75
2013-2014 232678 123456 1.88
From the productivity view point the total production of pumps per hour has increased from 1.75 to 1.88 from 2012-2013 to 2013-2014.
Total production Total Paint used in liters Paint use in producing 1 product.
2012-2013 211342 1678 125.948
2013-2014 232678 1810 128.55
Also, the paint used in producing 1 unit has considerably increased by 3 liters approximately from 2012-13 to 2013-14. Thus the usage has of paint has increased over years.
Total production Raw materials purchased Raw material required for producing 1 unit
2012-2013 211342 12588 17
2013-2014 232678 14065 17

Raw material required for producing single unit of pump has remained constant.
Thus, from the above analysis we can say that the company’s productivity taking into account the above parameters of workers’ productivity, consumption of raw material per unit and
machines usage has considerably increased from 2012-13 to 2013-14.

5. Strategies used by organizations to gain competitive priorities over its competitors

Different strategies used by the organization for gaining competitive priorities over its competitors are,
Chasing Demand Strategies

Here the company tries to chase the demand of the customers and accordingly produce goods in the market. Companies following such strategies gain competitive advantage because they control theircost and production as per demand in the market and thus reduce over piling of goods and increase in economies of scale. For example Toyota motor company has introduced in its production processLean production system also called Toyota production system; this is introduced in order to gain a competitive advantage over its customers. Their aim is to produce Zero defect goods, right quantities at the correct time with no extra production. (Goodstein & Butz, 1996)
Management Demand Strategy

It’s a type of production strategy of an organization to smooth down the demand of customers during off as well as peak seasons. It tries to influence customer demand. Organizations tend to establish proper customer management department in order to maintain right abut of inventory or stock as per demand in the market. For example car companies like Toyota, Volkswagen, usually offers schemes to its customers like 0% down payment, discounts and sales schemes during overstock or off-season. They practice this type of strategies in order to influence customers to purchase products.
These were the production strategies of an organization to achieve competitive edge over rival firms.

Diversification Strategy and Market Penetration Strategy

When companies expand their business operations and enter into altogether new market with altogether different product is known as diversification strategies. It’s a marketing technique in order to gain a competitive advantage over its rival firms companies diversify their business. For example Samsung Company is the largest diversified company in the world having wide range of products starting from mobile phones, to television, tablets, military hardware, ships and many more.
Companies which tries to increase its sales of existing product or services without entering into new markets. Such companies obtain a leading edge by penetrating the existing market by using different marketing techniques like product promotion, increase in quality of product etc. Nestle brand and Kellogg’s has made a lot of changes in their product. These companies follow market penetration strategy over its rival companies.
Product or Market Development Strategy

In Product development strategy the companies tend produce new product in the same market like LG Company. The company has range of products in the electronic markets from mobile phones to laptops to computers, printers, scanners, DVD’s and many more.
Market development is a strategy followed by the firm in order to enter new market with the same product. For example CoCo-Cola soft drinks targeted US market later on due to increase popularity the company extended its market in Russia as well.(Clark, 1991)
Thus these were the strategies which organization adopts in order to gain competitive advantage over other firms.

Clark, K. B. (1991). Product Development Performance. Harvard Business Press.
Fernald, J., & Basu, S. (2001). Why Is Productivity Procyclical? Why Do We Care? In New Developments in Productivity Analysis (pp. 225 – 302). Chicago : University of Chicago Press.
Goodstein, L. D., & Butz, H. (1996). Organizational Dynamics. Measuring customer value: Gaining the strategic advantage, 63–77.
Singh, P. J. (2012). Operations Management An Integrated Approach. Cambridge University Press.


Posted on

March 7, 2018

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