Operations & Supply Chain Management across Organization & Corporate Strategy

Table of Contents
ACKNOWLEDGEMENT ................................................................................................... 3 Operation Management ....................................................................................................... 4 Major Areas of Operation Management .......................................................................... 5 Product design and Process ......................................................................................... 6 Quality Management ................................................................................................... 7 Capacity planning and facility location ....................................................................... 7 Inventory...................................................................................................................... 7 Supply Chain Management ......................................................................................... 8 Break-Even Analysis ................................................................................................... 8 Cost breakdown of a manufactured good .................................................................... 9 Just-in-time .................................................................................................................. 9 Project Management .................................................................................................... 9 Schedule Management ............................................................................................... 10 Characteristics of Products ........................................................................................ 10 Strategy .............................................................................................................................. 11 Corporate level strategy ................................................................................................. 11 Business level strategy................................................................................................... 13 Functional level strategy ................................................................................................ 13 Operations and Strategy..................................................................................................... 13 Structural decisions............................................................................................................ 17 Organization Strategy ........................................................................................................ 17 Operations Strategy ........................................................................................................... 18 Production & Operation Management Page 1

Operations & Supply Chain Management across Organization & Corporate Strategy Competitive Priorities ........................................................................................................ 20 Cost and/or price ........................................................................................................ 20 Quality and dependability.......................................................................................... 20 Performance ............................................................................................................... 20 Delivery ..................................................................................................................... 20 Flexibility................................................................................................................... 21 Innovativeness ........................................................................................................... 21 Decisions, Operations & Technology Management .......................................................... 21 Conclusion ......................................................................................................................... 23 References ......................................................................................................................... 25

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ACKNOWLEDGEMENT

We dedicate our effort to our teacher (Engr. Imran Iqbal) who guided us and helped us in the preparation of this manual. Because we think that without his guidance it was almost impossible to create this report. Secondly, we dedicate this effort to our parents as they pray for our success and we did not able to do that without their prayers.

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Operations & Supply Chain Management across Organization & Corporate Strategy

Operation Management
The vital role of Operation Management is the planning and decision making. Most decisions involve many possible alternatives that can have quite different impacts on costs or profits. Operation management chooses the most-appropriate course of action in decision making. From running day to day operations of business, in this capacity, the operation management exerts considerable degree of authority as it is broader than production management which merely provides goods or manufactured articles.

The difference between goods and services is broad and diverse. Operation Management is decisive where as Production Management is crucial. It is a system which uses resources to convert inputs into outputs in the use of goods or services. Operations management is the power of designing, establishing, planning and running, controlling, maintaining and improvising such systems.

The key decisions are taken by the operation management at all levels. As the production of such systems constitutes both goods and services, this establishes operations management as a subject of action and decisions. Operation management develops and applies the techniques and takes tactical decisions from planning to production, from designing to processing, from quality to quantity, from recruiting to training, a system which enables the efficiency and effectiveness of an organization. The decisions in Operation Management do require proper analysis and evaluation and a strategy to follow at all levels. Operation Management has changed dramatically the strategic approach in which it operates due to globalized competition. Battles against global competition and shortened product life cycles have developed new pressures as the challenges of meeting customers Production & Operation Management Page 4

Operations & Supply Chain Management across Organization & Corporate Strategy expectations have become even tougher because of their grown market knowledge and their more complex and sophisticated needs and trends that are difficult to track.

There are different ways and tools to handle these decisions. Like the use of different methods and models, product design and processes, qualitative management, supply chain management, just in the time, schedule management, establishing priorities and systematic approach. Operation management acts like an engine that generates wealth for the organization strengthening the global economy. At the same time it provides customers with better services, quality products and above all customer satisfaction.

Major Areas of Operation Management

Operation management is responsible for making decisions in eight major areas of goods and services. Product design and Process Quality management Capacity planning and facility location Inventory Supply Chain Management Break-Even Analysis Just-in-time Project Management Schedule Management

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Operations & Supply Chain Management across Organization & Corporate Strategy All these areas of operation management are connected with each other directly or indirectly and play a major role in establishing successful operating systems. Operations Management implement the needs and application of decisions for an organisation. These decisions must be understood with a reflection of how the system operates its inputs and its control methods or output required. These decisions have ongoing interactions within the environment. These are unstable with diverse output as it is known to change. Making decisions are an essential component of operations. As all operations managers are responsible for making decisions, which makes it the main focus point in operations. Function Operations is one of the three leading basic functions of the company including marketing and finance. In general, the generic term operations refer to the function that produces goods or services. Thus by separating operations out in this manner is not only useful for analyzing decision making and assigning responsibilities, but also to integrate the business by considering the cross-functional nature of decision making in the firm. The operations managers plan and manage the production process. This process view not only provides a common ground for defining service and manufacturing operations as transformation processes but is also a strong method for design and analysis of operations.

Product design and Process

Operation Management starts from here that what an organization has to offer and its target market. As the products generate revenue therefore it's planning and coordination is extremely valuable. This is done on the basis of market research. Decisions in this class specify the process or facility used to produce the product or service and the manpower and skills associated with it. It also includes the decision on the nature of resources and technology to be used. These decisions involve the quality of equipment and technology needed. The project designs, the structure of the facilities, and workforce policies are also beneficial in making such decisions. These decisions have long term effect in nature and cannot be easily reversed, especially when large capital investment is needed. Production & Operation Management Page 6

Operations & Supply Chain Management across Organization & Corporate Strategy

Quality Management
A quality-monitoring system provides lots of emphasis on the operation management and requires strong organizational support responsible for the quality of goods and services produced. Quality decisions must guarantee that quality is designed and built into the product in all stages of operations: high standards must be set, properly trained people, inspection of the product at all stages, as all managers from all functions must be concerned with the quality control. As this is the primary responsibility of all managers at all levels therefore, continuous quality improvement must be catered. The responsibilities for producing products and services that meet the defined specifications and standards like efficiency, reliability, good after-sales service and advice, a unique- selling point. Quality managers need to engage with other functions in setting the specifications for all new products as they must know where their product line is in terms of their product allocation and market growth and defining the levels of customer satisfaction required.

Capacity planning and facility location

Decisions are aimed at providing the total amount of capacity at the right place at the right time. There are a number of factors which the operation management has to take into account before making its final decision on where to establish, but the ideal location is where costs are a minimum. In the long run capacity planning is largely determined by the size of the facilities provided. Like availability of a trained workforce, staffing levels in terms of market demand and need to make the stable workforce, number of people in operations, cost of land and premises. In the short course available capacity must be allocated for the specific tasks by scheduling number of people, equipment and facilities.

Inventory
Operation management decisions in inventory determines what, when, where and how much to order. The Inventory management systems are used to manage purchasing of raw materials, work in process, and the finished goods inventories. Production & Operation Management Page 7

Operations & Supply Chain Management across Organization & Corporate Strategy Managers in inventory determine how much is needed, where to locate the inventory, and a host of related decisions. They handle the flow of materials within the organization and within the supply chain.

Supply Chain Management

It is the movement of raw materials into an organization, then processing and movement of finished goods to the end users. Supply management is a cross functional approach therefore decisions should focus on the core competencies and flexibilities. The factors of globalization and flattening world are exerting tremendous pressure on supply chain. An irregular supply chain can lead to higher costs, lower quality and poor customer service.

To achieve the optimal level of supply chain management the Managers should take decisions which specifies; due diligence and oversight in planning and forecasting. The requirement is to focus on ensuring the fair and ethical treatment of all customers and sharing the forecast with all suppliers. Managers by carefully managing the supply and distribution network the operation management can be able to reduce costs and offer its customers products at low prices.

Break-Even Analysis
Managers have to decide how much to produce. For this operation management must consider that whether the product is making a profit or not and how many products to be sold in order to break even. The managers have greater role as this decides the future finances in the form of bank loans as it sees the business has considerable planning. Break even analysis is necessary in planning, forecasting and decision-making, but it does have limitations as well. Figures could change due to number of reasons like seasonal demand, goods going out of fashion, even cost and revenue of the product changes because of increase in rent or selling price. Therefore managers should analyse and evaluate and take the decisions accordingly. Production & Operation Management Page 8

Operations & Supply Chain Management across Organization & Corporate Strategy

Cost breakdown of a manufactured good

Profit Supply Chain Cost Marketing Cost Manufacturing Cost 10% 20% 25% 45%

Just-in-time
Just in time strategy gives the operation management to improve return on investment, quality and efficiency and reduce the associated product carrying costs. They must also keep in mind that waste results from any activities create added cost without adding any value; it can be an unnecessary movement of materials, accumulation of excess inventory, and the use of faulty equipments or the use of faulty methods that require rework. Managers taking just in time decisions will save warehouse space and cost.

Project Management
Project Managers take decisions in planning and monitoring tasks and resources, control cost and budgets and identify and resolve issues associated with the project. To be successful the operation management should undertake the range of competing requirements for resources. The project managers must retain all levels of operation management by monitoring current projects in an aggregate form. They can provide the operation management tools and expertise to make informed decisions that improve the organization as a whole. Without a single point of project planning and control, decisions such as resource assignments and issue reorganization that are not effective. For an

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Operations & Supply Chain Management across Organization & Corporate Strategy organization to accomplish project management successfully, they must organize the track for resource allocations throughout the organization.

Schedule Management
Schedule management is one of the most prominent and shared piece of information of the planning process. The decisions taken by managers within this section with a reasonable and executable schedule is the far most vital measure of keeping the project on track. The procedure for doing each task, tracking the cost and time of each task and deciding refinery methods will automatically give the optimum level with sophisticated functionality of the project.

Characteristics of Products
Goods Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction Services Intangible product Produced & consumed at same time High customer interaction Inconsistent product definition Often knowledge based

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Strategy
The direction and scope of an organization over the long-term, which achieves advantage in a changing environment through its configuration of resources with the aim of fulfilling stakeholder expectations.

Strategy can be considered to exist at three levels in an organization.

Corporate level strategy

Corporate level strategy is the highest level of strategy. It sets the long-term direction and scope for the whole organization. If the organization comprises more than one business unit, corporate level strategy will be concerned with what those businesses should be, how resources (e.g. cash) will be allocated between them, and how relationships between the various business units and between the corporate centre and the business units should be managed. Organizations often express their strategy. Production & Operation Management Page 11

Operations & Supply Chain Management across Organization & Corporate Strategy

STRATEGY KEY Corporate

LEVEL ISSUES What businesses shall we be in? What businesses shall we acquire or divest? How do we allocate resources between businesses? What is the relationship between

businesses? What is the relationship between the centre and the businesses?
Business

How do we compete in this business? What is the mission of this business? What are the strategic objectives of this business? How does the function contribute to the business strategy? What are the strategic objectives of the function? How are resources managed in the function? What technology do we use in the function? What skills are required by workers in the function?

Function

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Business level strategy

Business level strategy is primarily concerned with how a particular business unit should compete within its industry, and what its strategic aims and objectives should be. Depending upon the organizations corporate strategy and the relationship between the corporate centre and its business units, a business units strategy may be constrained by a lack of resources or strategic limitations placed upon it by the centre. In single business organizations, business level strategy is synonymous with corporate level strategy.

Functional level strategy

The bottom level of strategy is that of the individual function (operations, marketing, finance, etc.) These strategies are concerned with how each function contributes to the business strategy, what their strategic objectives should be and how they should manage their resources in pursuit of those objectives. The remainder of this chapter will consider in more detail what constitutes an operations strategy and what its relationship is with the other constituents of organizational strategy. Effective operations strategies need to be consistent and contribute to competitive advantage.

Operations and Strategy

Strategy in a business organization is essentially about how the organization seeks to survive and prosper within its environment over the long-term. The decisions and actions taken within its operations have a direct impact on the basis on which an organization is able to do this. The way in which an organization secures, deploys and utilizes its resources will determine the extent to which it can successfully pursue specific performance objectives.

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Operations & Supply Chain Management across Organization & Corporate Strategy Cost: The ability to produce at low cost.

Quality: The ability to produce in accordance with specification and without

error.

Speed: The ability to do things quickly in response to customer demands and

thereby offer short lead times between when a customer orders a product or service and when they receive it. Dependability: The ability to deliver products and services in accordance with promises made to customers.

Flexibility: The ability to change operations. Flexibility can comprise up to four aspects: The ability to change the volume of production. The ability to change the time taken to produce. The ability to change the mix of different products or services produced. The ability to innovate and introduce new products and services. Excelling at one or more of these operations performance objectives can enable an organization to pursue a business strategy based on a corresponding competitive factor. These relationships are outlined in the Table below. However, it is important to note that the success of any particular business strategy depends not only on the ability of operations to achieve excellence in the appropriate performance objectives, but crucially on customers valuing the chosen competitive factors on which the business strategy is based. Matching operations excellence to customer requirements lies at the heart of any operations based strategy. It is unlikely that any single organization can excel simultaneously at all of the five operations performance objectives. Trying to do so is likely to lead to confusion if operations mangers pursue different objectives at different times.

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Operations & Supply Chain Management across Organization & Corporate Strategy This lack of clarity is likely to lead to suboptimal performance and result in a failure to excel in any of the operations performance objectives. Consequently, organizations need to choose which performance objectives they will give priority to. This may result in having to trade-off less than excellent performance in one aspect of operations in order to achieve excellence in another. The concept of trade-off in operations objectives was first proposed many years ago by Skinner (1969). He argued that operations could not be all things to all people. What was needed was to identify a single goal or task for operations; a clear set of competitive priorities to act as the objective. The task would then act as the criterion against which all decisions and actions in operations could be judged. The airline EasyJet offers an example of a company that has a clearly defined task for its operations, namely achieving the lowest possible operating costs. It is worth noting, that some operations management scholars reject the concept of the trade-off. They point to the ability of some organizations to outperform their competitors on multiple dimensions. They appear to have better quality, greater dependability and a faster response to changing market conditions and lower costs. Ferdows and de Meyer (1990) argue that certain operational capabilities enhance one another, enabling operations excellence to be built in a cumulative fashion. In their model of operations excellence, they maintain that there is an ideal sequence in which operational capabilities should be developed. The starting point, the base of the sandcone is excellence in quality. On this should be built excellence in dependability, then flexibility (which they take to include speed), then cost. They emphasize that efforts to further enhance quality should continue whilst commencing efforts to build dependability. Similarly, actions on quality and dependability need to continue whilst building flexibility. Finally efforts to reduce costs take place alongside continuing efforts to improve quality, dependability and flexibility. They claim that operational capabilities developed in this way are more likely to endure than individual capabilities developed at the expense of others.

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Operations & Supply Chain Management across Organization & Corporate Strategy Excellent Operation Performance in Cost Quality Speed Dependability Flexibility Give the Ability to Compete on Low price High quality Fast delivery Reliable delivery Frequent new products/services Wide range of products/services Changing the volume of product/service deliveries Changing the timing of product/service deliveries

Model of Operations Excellence

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Structural decisions

Structural decisions often involve major capital investment decisions, which once made will set the direction of operations for many years to come. They invariably impact the resources and capabilities of an organization, determining its potential future output. It may be prohibitively expensive to change such decisions once implemented, and hence these must be considered to be truly strategic decisions for the organization. It may be much easier to change the organizations marketing strategy (e.g. its target markets, or its promotional activities) than it is to change its operations strategy with respect to the structural decision areas. Infrastructure decision areas comprise: Planning and Control: the systems used for planning and controlling operations. Quality: quality management policies and practices. Work Organization: organizational structures, responsibilities and

accountabilities in operations. Human Resources: recruitment and selection, training and development, management style. New Product Development: the systems and procedures used to develop and design new products and services. Performance Measurement: financial and non-financial performance

management and its linkage to recognition and reward systems.

Organization Strategy
Typical steps in setting an organization's strategy: 1. Establishing Goals 2. Market and Competitive Analysis Production & Operation Management Page 17

Operations & Supply Chain Management across Organization & Corporate Strategy 3. Identification of Products, Markets and Competitive Priorities 4. Establishment of Policy Guidelines and Constraints

Operations Strategy
Once the organization has a clear picture of where it is heading the operations strategy can be addressed. Purpose - To support the organization strategy. Operations can be used as a Competitive Weapon By excelling in one or two key areas of operations a company may gain an edge over its competition. All business organizations are concerned with how they will survive and prosper in the future. A business strategy is often thought of as a plan or set of intentions that will set the long-term direction of the actions that are needed to ensure future organizational success. However, no matter how grand the plan, or how noble the intention, an organizations strategy can only become a meaningful reality, in practice, if it is operationally enacted. An organizations operations are strategically important precisely because most organizational activity comprises the day-to-day activities within the operations function. It is the myriad of daily actions of operations, when considered in their totality that constitute the organizations long-term strategic direction. The relationship between an organizations strategy and its operations is a key determinant of its ability to achieve long-term success or even survival. Organizational success is only likely to result if short-term operations activities are consistent with longterm strategic intentions and make a contribution to competitive advantage.

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Operations & Supply Chain Management across Organization & Corporate Strategy The relationship between operations and the other business functions is similarly important. The objective of the operations function is to produce the goods and services required by customers whilst managing resources as efficiently as possible. This can lead to conflicts within an organization. Conflicts between the operations and the marketing functions are likely to centre on the desire of marketing to ensure that operations concentrate on satisfying customers. Whilst this may seem desirable, marketing will usually want operations to be able to meet customer needs under any circumstances. This is likely to lead to demands to produce greater volumes, more variety, higher quality, a faster response, and so on, all of which are likely to lead to less efficient operations. Conflicts between the operations and the accounting and finance functions, on the other hand, are likely to centre on the desire of accounting and finance to want operations to manage resources as efficiently as possible. This will tend to pull operations in exactly the opposite direction of that desired by marketing. Conflicts between operations and the human resource management function are likely to centre on issues of recruitment, selection, training, management and the reward of those employed within operations. For example, operations managers may want to vary organization-wide policies in order to meet local needs; a move likely to be resisted by human resource managers. The operations function lies at the heart of any organization and interacts with all the other functions. As such, achieving agreement about what decision areas lie within the remit of operations, and what should be the basis of decision-making within operations is an essential part of ensuring the consistency of action over time necessary for a successful organizational strategy.

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Competitive Priorities
Competitive priorities are the elements in which operations must excel in order to support corporate strategy. A company cannot excel on all dimensions and must select the ones most important to its operations and organizational strategy.

Cost and/or price

The production and distribution of a product or service with a minimum of expenses or Wasted resources Low cost production and distribution Low price product or service

Quality and dependability

producing a product which meets (or exceeds) customer expectations for quality providing consistent quality ("dependability")

Performance
product features high-performance design allows product to do things that other products cannot

Delivery
the ability to meet requested and promised delivery schedules short lead time or fast delivery ("speed") on-time delivery ("reliability") speed in developing and introducing new products or services

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Flexibility
The ability to respond to rapid changes in customer demand and requirements for existing products or services product flexibility - quickly introduce new products or ability to make rapid design changes to existing products process flexibility ("volume flexibility")

Innovativeness
Ability to introduce and incorporate new ideas into products and processes.

Decisions, Operations & Technology Management

The Decisions, Operations and Technology Management (DOTM) area focuses on operations management in the service and manufacturing sectors as the primary means for executing strategy, emphasizes the critical importance of operations to the firm's competitive success and explores the connections at the firm level to other key organizational functions such as design, finance and marketing. Based on foundational concepts and tools from economics, quantitative methods and information technology, DOTM seeks to combine the process view of operations with analytical approaches in conducting research and preparing students for a variety of career opportunities in consulting, financial services, high-technology, manufacturing, retail and entrepreneurial ventures. As individuals and in teams, managers are active in a variety of research areas, including: Contracting And Coordination Problems In Business Networks Environmental Issues In Business Game Theory Management And Design For Information Intensive Industries New Product Design Production & Operation Management Page 21

Operations & Supply Chain Management across Organization & Corporate Strategy Probabilistic And Statistical Models In Marketing And Sports Process Industry Management Retail Operations Management Risk Analysis Strategy In Manufacturing And Service Operations Supply Chain Management

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Conclusion
Reducing costs, increasing capacity and efficiencies, improving operating margins, and enhancing cash flow the Operation Management can develop excellence in business by taking timely and appropriate decisions. Employers and employees together should strive for the best and track their business performance versus stretch goals and operating performance targets. Time-dependent changes of the nature and design characteristics of the product having existed at the time of approval may change during the operating conditions of the facility. These changes are inevitable and should be monitored with parallel programs vital for Global competition and customers expectations. On the other hand, changes have to be observed and adapted which appear in spite of the design, production and operation. Product managers should always consider that the product should be design in such a way as not to be expensive to be a quality product. It is always better to detect errors as they occur rather than trying to discover the fault after the product is developed. It has to meet the quality expectations of the customers, so that they feel they have value for money. Capacity and Facility location decisions are highly judgemental as they are the key component in terms of the distribution system. Both qualitative and quantitative factors should be taken into consideration such as transportation, market surroundings, location properties and cost factor related to the alternative location. To establish Just in time strategies the steady flow of production processes to be followed with improved inventory turnover; by product quality and by reduction in production and delivery times. Production & Operation Management Page 23 Results Reduced inventory levels by 10-15% Reduced markdown & scrap by 10-15% Used resources10-20% more efficiently Improved delivery reliability by 95-95% Reduced outages to 0-5% Reduced cycle time by 10-20% Reduced transportation cost by 10-15%

Operations & Supply Chain Management across Organization & Corporate Strategy It is necessary to correctly analyze and schedule the project work with in the right amount of time and efficiency. Scheduling depends on tracks and reports, therefore, by matching the production volume requirements to the work schedules and average response time against the production, reduces cost and organizations output is measurably improved.

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References

Alpin, S., Cooper, J., OHara, G., Petrucke, F. (2004), GCSE Business Studies for Edexcel, p40. London, Hodder and Stoughton. Brindley, B. and Buckley, M. (2008), Business Studies AS & A2 (3rd edn.), p151. Edinburgh Gate Harlow, Pearson Education Limited. Chopra, S. and Meindl, P. (2007), Supply Chain Management Strategy, Planning, & Operation (3rd edn.), p261. Upper Saddle River, New Jersey. Pearson Education. Gibbs, R. and Humphries, A. (2009), Strategic Alliances & Marketing Partnership, p43. London, Kogan Page. Jeston, J. and Nelis, J. (2006), Business Process Management, p250. Oxford, Elsevier Ltd Surridge, M. and Gillespie, A. (2009), AQA Business Studies for A2 (3rd edn.), p154. London, Hodder Education. Walsh, C. (1996), Key Management Ratios, p222. Edinburgh Gate Harlow, Pearson Education Limited. Marketing Management, Millenium Edition by Philip Kotler OPERATIONS MANAGEMENT by Nigel Slack, Stuart Chambers & Robert Johnston Production and Operation Management by S. Anil Kumar Operations Management by Albert Porter

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