Module Leader:
Every global company today acknowledges the ever increasing need for efficient and effective management in every step of the production process if the company is to succeed in the increasingly competitive global market. Strategic Operations Management (SOM) is defined as the creation and consequent supervision of systems that govern the production process which is the conversion of raw materials or input to the required product or service. SOM ensures efficiency which is the use of minimum resources to produce maximum output that is of high quality and meets all industry standards. This helps reduce wastage all resources that are used by a company be they human capital or raw materials so as reduce the cost of production. These strategies will help global companies in whatever country their production is based as they are universal. This leads to success as preparation, management and constant supervision are key ingredients to success. (Slack, 2010)
Another theme in SOM product management, it involves branding, marketing and supply chain management. Branding and marketing, when properly managed position a product strategically in a market, increase brand recognition which in turn leads to an increase in the sales of the company. This is especially important for global companies as positioning and marketing a brand in a global market can be a very daunting task and SOM provides the much needed guidelines. (Slack, 2010)
Quality management involves constant scrutiny and examination of the products and services to see if they meet industry standards and also provide customer satisfaction. Management control involves the evaluation of the goals set by the company if they are effective and efficient, it also seeks to audit if these goals are being met especially now that mission and vision statements are the rage in the business world yet most companies don’t implement them.it involves product evaluation to see if the product fulfills the company’s goals to provide certain satisfaction to their customers. The process of product distribution, advertising, sales and after sales service gives very important insight into the views of customers and suppliers about the products and services of a company. This is a very important aspect as it enables a company to keep abreast with the constant changes in consumer needs which occurs very frequently on the global scale and thus enables the companies to stay relevant in their respective industries. (Slack,2010)
Facilities management is another aspect which involves the effective use of all the facilities available in a company; they include buildings, computer systems, plant and machinery. Today most consumers are conscious about sustainable use of resources and thus companies have to comply. This will increase production speed, reduce per unit costs and efficiency. All these are very important to any global company to help them reduce production costs while producing high quality goods and products.
Critical review of GE’s Strategic Operations Management activities from manufacturing and product/service perspectives.
Five performance objectives
Quality
GE strictly adheres to the six sigma strategy that defines quality as those attributes that are most important to the customer and endeavors to structure its manufacturing processes according to the needs of its customers. Quality is affected by both internal and external factors within a production process. The internal factors involve mainly the manufacturing processes, the manufacturing process needs to be virtually error free, speedy and with minimum wastage of resources for a quality product to be produced.
GE has sought to improve the quality of its products by embracing technology like in its refrigerator manufacturing plant in Louisville, Kentucky, that uses the Lean manufacturing method which reduces the wastage in the production process and thus increasing the quality of the products. The response time is also reduced in an automated system leading to a speedy manufacturing process that is virtually error free. These refrigerators are of top of the range and are a shining example of how efficient manufacturing processes lead to the production of high quality goods. (Hinner,2012)
Speed
Speed refers to the time it takes between a customer ordering a product or service and the customer receiving it. Speed is however a relative term as the customer and the organization define it differently, the customers definition maybe as soon as possible while that of the organization maybe as soon as possible while allowing for the production process to produce a quality product and also according to the production capabilities of the organization.
The internal factors that affect speed is cost reduction in the manufacturing process, when a product is manufactured speedily there is resource conservation in terms of electricity costs by reducing the idle time of machines in between a slow production process and also uses human capital effectively by reducing the time spent waiting during production.
GE has tried to increase the speed of its production by automating the production process and reducing the delay in between production processes. GE plastics has gone digital which allows customer requests to be received and dealt with in real time thus increasing speed.
Dependability
This is defined as being on time and is defined differently by customers and the organization. Again customers want the goods or service promptly and that can either be according to their expectations or the delivery time promised by the organization.
Internally dependability reduces production costs, saves time and capital, allows for proper planning as the strategy developers have consistent data to work with and also has the ability to increase speed and quality. Externally speed increases customer satisfaction and also increases customer loyalty.
GE seeks to increase dependability by moving back its manufacturing to America where product design occurs. This will reduce the amount of time taken to convey orders overseas and ship back the fined product to America. It has also reduced the costs that GE incurs in shipping of raw materials. (Immelt,2012)
Flexibility
The ability of an organization to change its production processes according to changing industry demands is referred to as flexibility. It can be product or service flexibility, delivery flexibility or volume flexibility. This is important as an organization always needs to meet the changing needs of its customers.
GE is a very flexible organization as its products and services cover a wide range of industries from energy, gas and oil, IT and transport. Flexibility is important to GE as this allows it to be a dominant player in many industries and also allows for expansion.GE definitely passes the flexibility test.
Cost
The various performance objectives have an impact to the cost of production, an efficient production system, produces high quality products, is highly flexible, speedy and dependable. All the above factors will lead to the decrease in production costs.
GE has undertaken all of the above measures to ensure that it reduces production costs and ensures that it performs very well In the industry. This is mainly through embracing technology, sustainable management and the lean manufacturing process that has improved performance.
Critical assessment of GE’s global capability and evidence of competitive advantage in their product and services.
The competitive advantage of products and services is mainly pegged on the quality of those goods and services. GE manufactures a wide range of products and the quality is measured using the following factors;
Order Winners and order qualifiers
Order qualifiers are aspects of a product or service that are required for a customer to even consider buying the product, they are market specific and change over time according to prevailing market circumstances. They maybe quality, price or level of innovation required. Order qualifiers require that an organization be at par with other industry players.(Slack et al 2010)
Order winners on the other hand are what wins the customers attention so that the customer can buy the product. These require that an organization be better than the competition so that they can win the order. These are also market specific and change with time.
The correct combination of order winners and order qualifiers is what increases an organizations competitive advantage. In the case of GE it manufactures a wide range of goods and service because of its diversification strategy and thus has to deal with a wide range of factors that constitute order winners and order qualifiers.
GE Healthcare provides a wide range of healthcare equipment to hospitals and clinics, these are standard equipment and they are mainly diagnostics and surgical equipment. The product range is not very huge, demand is high but profit margins are low. To ensure competitive advantage GE ensures the following order qualifiers; quality, high performance and reliability that are occasioned by the high levels of innovation at GE and effective manufacturing systems. The order winners are price which are slightly lowered by GE long term partnerships with suppliers and delivery speeds using the just in time strategy that ensures that goods reach the customers in good time.
In the home appliance sector GE produces kettle, cookers and refrigerators. In this market the product demand is high, the profit margins are low and this market is affected by the trends in the housing market. GE’s products are of high quality but there have been customer complaints about the change in warranty terms, its bulbs have been described as being of low quality and are being competed against by Chinese models.
What makes GE one of the largest companies in the world is its penetration into various divergent markets; this is because GE has a diversification strategy. Today GE has divisions in home appliances, oil and gas, finance, aircraft, transport and energy. This diversification has increased GE’s ability to penetrate new markets and consequently dominate them; this type of portfolio diversification has led to GE’s competitive advantage.
Other factors that have led to GE’s high competitive advantage include GE’s global strategy that has led to GE having a global presence in over 100 countries. This has increased GE’s brand recognition leading to an increase in competitive advantage. It has also allowed GE access to a wide variety of information from all-over the world, this has been due to GE,s diversification strategy as these different divisions are able to serve the various divergent needs of the global population. This has also enabled it to make use of global economies of scale which reduce production costs.
Critical review of GE’s use of Operations Strategy to increase their overall effectiveness and competitiveness.
Operations strategy refers to the day to day strategies that an organization employs so as to manage various activities such as marketing, advertising, employee management and resource conservation. There are two views to operations management top down view and bottom up view. .(Slack et al 2010)
The top down view is whereby all the activities in various departments of an organization as governed by the decisions made by the top management of the organization. At GE this is practiced as all company operations have to adhere to the six sigma method which is a customer focusing strategy. This has increased GE’s effectiveness in the manufacturing process as very little wastes are produced so that the required quality products can be manufactured. The competitiveness has also increased as this strategy puts the customers’ needs first leading to customer satisfaction that increases competitiveness .(GE nda)
GE also has implemented a best cost strategy which ensures that all divisions of GE employ a cost saving in the production process while still maintaining high quality. This has enabled GE to produce high quality products but sell them at lower prices than their competitors which increases both effectiveness and competitive advantage.
This is achieved through strategic partnerships with suppliers who sell them raw materials at subsidized costs.
(Galloway et al., 2005).
The bottom up approach decisions are made by heads of divisions based on their experiences in production, sales or customer service. This approach involves employees more as they are better placed to understand the needs of the organization. GE has a world class leadership program that has managed to nurture leadership skills within the organization and has led to GE hiring leaders from within the company. What makes this so important is that these in-house leaders understand the values, aspirations and culture of GE more than any outsider with a fancy degree would. This has been the heart of GE’s effectiveness and has also been a key driver of its competitive advantage. (Shlosberg,2010)
In conclusion GE is a company that takes Strategic Operations Management very seriously and these can be seen through the numerous projects and models that it puts into use such as Lean manufacturing and the six sigma strategy. SOM has been instrumental in the tremendous growth of the GE Empire through embracing innovation, new technologies and seeking to satisfy all customers’ needs through its various the many businesses that it has. The benefits of applying SOM are evident from the high growth rate and profits that are posted by GE.
My recommendations are that GE should extend this type of commitment to their shareholders who are worried about the plummeting of the value of the GE shares in the stock market using Marslow Hierarchy of Needs. I would also recommend the overhauling of the manufacturing system, in phases, to make it completely green, this will increase effectiveness and in turn increase competitive advantage.
Slack, N, Chamber, S et al. 2010. Operations Management, 6th Edition. Prentice Hall.
Immelt, Jeffrey. 2012. The CEO of General Electric on Sparking an American Manufacturing Renewal. Harvard Business Review. Available
hbr.org/2012/03/the-ceo-of-general-electric-on-sparking-an-american-manufacturing-renewal/ar/1 Accessed 10/24/2013
Hiner, Jason. 2012.Behind GE’s feature-heavy refrigerator, a lean manufacturing strategy. Smart Planet. Available
http://www.smartplanet.com/blog/smart-takes/behind-ges-feature-heavy-refrigerator-a-lean-manufacturing-strategy/24564
Accessed 10/24/2013
Galloway, L., Rowbotham, F., Azhashemi, F.M. 2005. Operations management in context.
Elsevier Butterworth
Shlosberg, Matt. 2010.Culture As A Competitive Advantage. HC. Available http://content.hcglobal.com/2010/03/31/culture_as_a_competitive_advantage/
Accessed 10/24/2013
GE.nda. What is Six Sigma? Available http://www.ge.com/en/company/companyinfo/quality/whatis.htm
Accessed 10/24/2013
