Introduction to Operations Management
Introduction
Any self-sustaining organization, whether public or private that endeavors to generate enough revenue in order to offset the cost of operations and make profit must set specific objectives for its operations. Operations performance managers utilize different performance objectives in order to track and monitor the performance of their respective organizations. It is upon the manager to decide whether the priorities of the organization demand a balanced approached towards the performance objectives or a focused approach where the operations manager focuses on one of the five performance objectives (Kachru, 2007, pg.271).
Besides the priorities of the organization, this decision is based on other information. Whichever the decision that the operations manager makes, tracking and monitoring the performance objectives is of ultimate importance. In this regard, the use of performance measures to monitor the achievement of the various performance objectives is common practice in organizations that endeavor to generate enough revenue in order to offset the cost of operations and make profit. These performance measures are appropriate in both balanced approaches where the emphasis is on the five performance objectives and in a focused approach where operations managers focus on just one performance objective.
The five performance measures to which he paper refers are speed, flexibility, quality, dependability and cost. In recognition of this, he paper will identify the specific performance measures that are used by operations managers to monitor the achievement of the performance objectives in both manufacturing and service sectors. The paper will also review literature on the management of operations performance in order to ventilate on the decision on whether to utilize a balanced approach where the emphasis is on the five performance objectives or a focused approach where the operations manager focuses on one of the five performance objectives.
Quality
One of the specific measures that are used in assessing quality as a performance objective is the number of quality defects in every unit in a manufacturing industry. A high number of defects signify a decrease quality in the performance of the organization. These defects can either be in the materials used or the processes involved in manufacturing. Another specific measure that is used to evaluate operational performance is the number of complaints by the customer. a high number of complaints by customers relates to decreased quality in the operational performance of the organization. In addition to this, the organization can also monitor the nature of the complaints to determine the lapse in quality and the extent of quality issues in the organization (Shaw et al., 2003, pg.6).
Many organizations request their customers to offer satisfaction scores of the products or services offered. Customer satisfaction scores are appropriate performance measures to evaluate the quality of products or services. A high customer satisfaction score relates to high quality in the services offered or the products manufactured by an institution. Alternatively, organizations that give warranty claims can monitor the number of warranty claims that are filed over a certain period of time. The classification can also be done with respect to batches in a manufacturing industry. A high number of warranty claims that are filed with an organization relates to the number of defects in the products, thereby indicating quality issues in the operations of the company.
Speed
Speed is another performance objectives used in an organization. Some of the specific measures that are used to evaluate speed in an organization include the value of actual throughput time compared to the theoretical throughput time. When production schedules are made, theoretical throughput times are estimated depending on the prevailing conditions. It is important to compare these two values. In cases where the actual time exceeds the theoretical time consistently and by a large extent, there are concerns regarding the speed of the operations of the organization. Another specific measure that can be used to evaluate speed in an organization is the order lead time (Pycraft, 2000, pg.576).
This is the amount of time between when a customer places an order and when the order is delivered to the customer (Bekki, 2008, pg.26). Order lead times that exceed the standards indicate a loss of speed in the operations of the organization. This specific measure relates with two other specific measures that are used to evaluate speed (Engineer, 2004, pg.123).. One of them is cycle time, being the time it takes from when the preparation process is started until it halts. A cycle time that exceeds the standards for a given process indicates a loss in speed by the organization. The other related specific measure is the frequency of delivery. This is the rate at which orders made by the clients are delivered. A high delivery rate indicates a high speed in the organization.
Dependability
Dependability is the property in operations to prepare and deliver the orders within the agreed time. Different measures are used to evaluate dependability of operations in an organization. One of the specific measures is the proportion of orders that are delivered late. a high proportion of orders that are delivered late indicates low dependability in the operations of an organization. Another specific measure that is used to evaluate dependability is the average value of the lateness of orders. Orders are supposed to be prepared in time. A high average of incidents of lateness of orders indicates a low dependability of the operations in organization. Alternatively, organizations can evaluate the adherence to schedules in order to determine the dependability of the operations of the organization. As highlighted earlier, production schedules are made prior to the start of production. Dependable operations will adhere to the production schedules. Organizations can also measure the dependability of organizations using mean deviation from the time when the delivery of the products was promised. A significant deviation in this time indicates low dependability and the need to reform the operations on the organization (Neely, 2007, pg.71).
Flexibility
Flexibility is an important indicator in the achievement of the operational objectives of an organization. The specific measures that can be used to determine the flexibility of an organization include the time required to change over from one machine or process to another on a manufacturing industry. It is important to not spend valuable time during change over as this affects the productivity of the industrial unit. A high amount of time that is required when changing over from one machine or process to another indicates low flexibility of the industrial unit. Alternatively, the organization can look at the time required to develop. A high amount of time required to develop indicates decreased flexibility in the industrial unit (Steenkamp & Van, 2002, pg.57).
Another specific measure used to evaluate the flexibility of operations in an industrial unit is the average batch size. Many industrial units have specification on the batch size for their units. However, different customer may place special orders that required batch sizes that are not concordant to the specifications. This shows flexibility in the operations of the organization. a high value of the average batch size shows increased flexibility of the organization. Alternatively, the organization can evaluate the time required in changing over schedules in order to determine the flexibility of the organization. Flexible organizations do not require too much time when changing over from one schedule to another (Slack, Brandon-Jones & Johnston, 2013).
Cost
Cost is an important indicator in any business operation. Cost as a performance measure can be evaluated using different measures. One of these measures is the utilization of resources. The rate at which resources in an industrial unit are utilized can be correlated to the output of the operations. It is important that this correlation yields a high value; otherwise the indication is that the efficiency of the operations needs to be reformed. Alternatively, the organization can evaluate the variance between the costs of production and the estimates in the budget. At the beginning of a financial year, or a quarter, industrial units often prepare their budgets. During the financial year or quarter, industrial units will monitor their costs in order to correlate them with their fixed budgets (Greasley, 1999, pg.314).
If the variance between these two values is high, there is an indication of the need for cost containment in the operations on order to prevent escalations. Labor productivity is another important specific measure for evaluating cost as a performance objective. Labor productivity can be evaluated over different periods. The aim of this is to determine the cost of labor as a function of the revenue generated in the industrial unit. Alternatively, the cost of operations can be computed into hourly values. This is very innovative as the cost can be monitored and compared over different hours in different days to determine when there are inconsistencies in the cost of operations. During periods when there are spikes in costs, the organization can institute investigations in order to determine the root cause and contain the spikes in cost.
Operational Issues in Manufacturing Industries
In order to understand the gravity of the issues highlighted and the effect they have on the operational performance in the manufacturing industry, this paper will consider the Toyota Company and the quality issues it has been facing in the recent past. It was upon quality as a pillar that the company built its empire. For a long time, the company experience growth until it became the number one ranked automobile manufacture in the world. The company relied on its promise for quality as the source of the competitive edge that it used to out compete the other players in the automobile manufacturing industry (Monden, 2011, pg.4).
Analysts looking into this issue have highlighted the ambition to become the global market leader in the automotive industry. Due to this ambition, the company’s focus on quality of its products suffered (Nelson. & Quick, 2010, pg.587). Additionally, the company failed to maintain the quality standards that had driven the company to the top in both its local and international manufacturing plants. As a result, there have been many product recalls in the vehicles that were manufactured since 2008. The enduring quality issues have eroded the brand loyalty and image of the company (Siebert, 2014, pg.13). Even though the company has instituted measures to assist its customers with the quality issues, the fact that the quality issues keep recurring is very detrimental to the image of the company, both at the local and international market.
Even though the product recalls are necessary in finding solutions for the quality issues at Toyota, it is important to understand that such measures should only be employed as temporary solutions while the company is looking into its operations in order to determine and eliminate the sources of the quality issues in the company (Pride, Hughes. & Kapoor, 2013, pg.238). This is very important if the company is to continue operating at the very top of the automobile industry both at the local and global market. These quality issues at Toyota are very significant when deciding on the best approach when considering between a balanced approaches where the emphasis is on the five performance objectives and in a focused approach where operations managers focus on just one performance objective
Solution to the Performance Issues
The quality issues at Toyota can be solved by focusing on the performance measures highlighted in this paper. These include speed, flexibility, quality, dependability and cost. as highlighted earlier, the causes of these operational issues was the laxity in implementing the quality standards initially instituted by the company in both its international manufacturing plants in order to gain more market share at the global scene. Given the fact that other performance objectives were not implicated as the source of these operational issues, it is easier to lean to solving the quality issues in the organization by ensuring that the quality standards developed by the company are maintained in its overseas manufacturing plants (Toyota Motor Corporation, 2010).
However, it is important to note that even though the company built its reputation on quality products, the other performance objectives are also very important to the operational performance of the company. It is also important to consider the fact that the operational issues facing the company presently resulted from a lapse in focus in the performance objective that the company valued most. This paper argues that the best approach to solve these operational performance issues is a balanced approach where the emphasis is on the five performance objectives rather than a focused approach where operations managers focus on just one performance objective. Using the balanced approach, the company will not solve the quality issues of the company, but also prop up the other performance objectives of the company. Additionally, the balanced approach ensures that the company does not suffer severely when there are operational performance issues in one of the performance objectives employed by the organization. The balanced approach also allows the company to derive competitive advantage from the five performance objectives rather than relying on one of them (Nuran & Bititci, 2004, pg.392). This cushions the image of the company in case there are performance issues in any of the objectives. It is important, especially because manufacturing industries face operational problems from time to time. in this regard, the paper underscores the importance of the balanced approach, not only in solving the operational performance issues at Toyota, but also for other organizations that endeavor to generate enough revenue in order to offset the cost of operations and make profit must set specific objectives for its operations.
Conclusion
Operations managers have a duty to not only ensure that manufacturing industries keep running, but also that their operations align to the goals and visions of the organization. As such, it is important for operational managers to ensure that the operational performance of the organization is maintained at high standards. Through this, the organization can aim to generate enough revenue in order to offset the cost of operations and make profit must set specific objectives for its operations. In order to ensure optimum operational performance of the organization, various performance objectives are set by the operations manager. It is upon these objectives that the operational performance of the organization is evaluated.
The evaluation is dependent on the approach used by the operations manager. There is a choice to be made between a balance approach where the emphasis is on the five performance objectives rather than a focused approach where operations managers focus on just one performance objective. Whichever approach that the operations manager uses, performance measures such as speed, flexibility, quality, dependability and cost are used to evaluate the performance objectives. This paper highlighted the quality issues in Toyota as a challenge for operations managers.
This is especially with regards to the choice of whether to use a balanced approach where the emphasis is on the five performance objectives rather than a focused approach where operations managers focus on just one performance objective. In analyzing the causes and the need for long lasting solutions, the paper finds that the balanced approach where the emphasis is on the five performance objectives is the best approach to ensuring operational performance meets the performance objectives outlined by an organization. this is not only appropriate for the operational performance issues facing Toyota, but also for other organizations that endeavor to generate enough revenue in order to offset the cost of operations and make profit must set specific objectives for its operations.
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