Introduction
Every forward-thinking organization should factor in all its stakeholders in its key strategies and processes of production. It is thus prudent for these organizations to effectively manage the resources involved in the production processes of goods and services. These processes are managed with the key stakeholders namely customers, suppliers, shareholders, employees and society in mind (Kamauff, 2010, p. 67). The processes and strategies incorporate performance objectives of the organization and its focus on achieving profitability and competitive edge in the industry it finds itself in. It is, therefore, important for an organization to aim to achieve a balance of all its five performance objectives.
Five Performance Objectives
There are five performance objectives that act as a pointer to how an organization deploys its resources in its operations. The book Introduction To Operations Management defines operations performance objectives as “a criterion against which to evaluate the performance of operations.” These performance objectives essentially act as the operational yardsticks for organizations keen to survive and prosper within a business environment in the long-term (Naylor & Naylor, 2002, p. 24). These performance objectives are namely; cost, dependability, speed, quality and flexibility.
The first objective, cost, focusses on an organization’s ability to produce at low costs and incorporating proper cost structures to reduce overall operational costs. An organization should be keen on boosting its effectiveness i.e. increasing its production while maintaining a minimum cost of operations (Mahadevan, 2010, p. 47). This translates to more production of goods and services and availing at the market at competitive prices while maintaining profitability at the same time.
Dependability, on the other hand, focusses on the ability to deliver to the stakeholders within the stipulated parameters i.e. time, condition, price et cetera. Organizations thrive on good reputations and reliability which goes on to show why there is the need for them to be dependable in this context. Dependability runs in both the external and internal organizational environment. For instance, internally employees should be able to perceive the organization i.e. the organization paying them within the stipulated time Parker, 2012, p. 56). Externally, the suppliers should be able to have their obligations met by the client within the specified terms.
The third performance objective, speed, is defined as the ability to respond quickly to the stakeholder demands. This focusses on the reduction of lead times between when a stakeholder for instance, a customer orders a service or product and when he or she receives it. A speedy response to the stakeholders whether, external and internal, is a positive indicator of a progressive organization (Simons, 2011, p. 38). Speed boosts profitability as stakeholders such as the customer returns with more business in most instances. Speed also means the production processes manage to churn out a large output in a short span of time.
Quality as a performance objective dwells on the need to produce in accordance to specifications and set standards and devoid of errors. An organization should ensure its products conform to the set standards. To the external organizational environment, the organization will be able to satisfy its stakeholders. With nothing to complain about, for instance, the clients will be more than likely to continue consume the products. This translates to more revenue. As for the internal organizational environment, operational quality will ensure that the production processes run without hitches. This consequently impacts on the external stakeholders who rely on the internal processes of the organization i.e. manufacturing and provision of services.
Flexibility as performance objective focusses on an organization’s ability to change the mode of operations. This can center on the ability to change the volume of production, product mix, production time and, innovation and introduction of new products. A flexible organization is able to meet virtually most of its goals due to its ability to adjust and adapt to different scenarios.
Five Performance Objectives Analysis of Exxon-Mobil and Ryanair
All these performance objectives apply to all organizations despite having different models and operation processes. The extent to which the objectives are met is what sets apart the organizations, in this case, organizations in the manufacturing and service industry. The manufacturing industry involves primarily production of tangible products. Exxon-Mobil manufacturing company focusses on the production of fuels and lubricants (Coll, 2013, p. 31).Exxon-Mobil is a global leader in business due to its operational and market strategies. The Exxon-Mobil operations can be analyzed using five performance objectives.
Exxon-Mobil Manufacturing Company Analysis
Exxon-Mobil has incorporated quality control measures in its organizational controls. Every product churned from the Exxon-Mobil plants undergoes quality assurance procedures. This ensures that the end product that reaches the market is devoid of defects or malfunctions. The company has commissioned third party Quality Assurance, Lloyd’s Register Quality Assurance Inc. which seeks to verify the quality standards of the Exxon-Mobil products. The quality assurance process dwells on health, safety, and environmental reporting system. All suppliers are required to adhere to a quality assurance policy that ensures the multinational corporation only sources the best components for its end-products (Coll, 2013, p. 55). Currently, the company is faced with the problem of counterfeits in the market.
Exxon-Mobil like any other company has put in place cost-cutting measures to manage its operation process globally. The company has outsourced most its production functions to various global plants. The company has set up refineries and processing functions in countries with competitive taxation rates and labor wages. The problem with the outsourcing option is the possibility of oil spills and inflation of prices as a result of conflicts in oil-production countries such as Iraq (Coll, 2013, p. 73). The volatile nature of the production zones particularly the Middle-East affects the cost-cutting strategies put in place by the Exxon-Mobil management.
Exxon-Mobil being a global leader in the energy industry and with numerous global operations. It produces 5.3 million barrels of crude oil daily cumulatively from all its global plants. It has much reserve to meet its global market needs extensively. The problem however arises from its global retailers that collude to create artificial challenges in anticipation of price surges in the oil industry (Coll, 2013, p. 118). This affects the brand negatively as end-consumers associate these market impediments to Exxon-Mobil.
Speed as a performance objective can also be observed in Exxon-Mobil operations globally. This is evident with the establishment of the online platform dubbed “ExxonMobil.com” which has support consumer personnel to tackle issues raised by the company’s consumers. The company, further, has a strategic communication team tasked with public relations and media communiques. The problem arises from the fact that Exxon-Mobil’s website that has a less glamorous and outdated interface making it ineffective in meeting the client issues and queries. The website needs much restructuring to represent the vibrancy with the company and its other online platforms such as twitter and YouTube.
The organizational culture at Exxon-Mobil has fused flexibility in its production process through its overseas production option. In a short span of years, the company has managed to launch diversified products to meet the needs of various market niches globally (Coll, 2013, p.225). The supply chains too in Asia have a lot of flexibility due to the fact that they can easily scale up and down in accordance with the market needs. The outsourcing option also allows for tapping into flexible investment conditions in various global locations such as Indonesia.
Ryanair Service Company Analysis
Focusing on the service industry, the organization of choice is Ryanair a European low-cost carrier. The company operates globally by providing travel service, hotel bookings, online gaming, online checking et cetera to the market. The organization has adopted various strategies to ensure efficiency in operations by implementing a lean elaborate structure. Analyzing its operations using the five performance objectives we can ascertain its competitiveness and standing in the global air travel service industry.
Quality as a key element of performance objectives has seen Ryanair recruiting qualified employees and professionals. The personnel are instrumental in ensuring that the service offered to the end consumers. The organization is facing hurdles as it tries to keep up with quality. There have been many complaints regarding the management’s focus on profits rather than the quality of their services (Müller, 2011, p. 19). The quality is a thorny issue due to the cut-throat competition that defines the air travel industry. There are many air travel companies offering much better quality in terms of services. In September 2013, the Ryanair CEO Michael O’Leary openly admitted that the price was more of a priority than customer service. This fact emboldens the belief that Ryanair has continuously overlooks quality at the expense of cost (Smith, 2013).
Ryanair boasts of being the largest low carrier in Europe and amongst the crème de la crème of the world low-cost airlines due to its pricing strategy. Its strongest strength lies in the fact that it extends low fares to its clientele. The one-way seat strategy, for instance, has enabled the company to attract many customers which has ultimately impacted on the company’s pricing structure (Kahawatte, 2010, p. 33). By incorporating other ancillary services in its package, Ryanair is able to boost sales while reducing unit costs. As much as the company is touted as cost-effective, it still faces hurdles in managing internal operational costs arising unstable crude oil prices. The low-cost strategy has seen Ryanair not issuing crude oil surcharges impacting on the company’s cost of operation. Due to this strategy, the company reported in 2009 its first annual loss when the prices of crude oil were on a record high.
The areas where speed plays a major role for Ryanair operations are reservations, turnaround time of aircrafts, aircraft maintenance and luggage handling. The actualization of the effective time-saving measures and speed have a direct impact on costs. Ryanair has been forced to outsource external service providers in order to meet the clientele demands.
Dependability for Ryanair has always been high especially with low-cost travelers. A sizable number of European travelers prefer traveling with the airline over local ones. The ease in its online booking known as web check-in allows passengers not to waste time at the arrival baggage carousels. The one-way ticket also has made Ryanair be perceived somewhat dependable by many of its passengers. The ticket is cheap and convenient for travelers wishing to use other means of transport back. However, the airline has continuously suffered the wrath of its passengers who cite that its customer care service is in a sorry state. In 2013, The Telegraph newspaper blog reports that Ryanair scored poorly in a consumer “comfortably lowest of all 100 firms” (Gulliver Business Travel, 2014).
Flexibility, in Ryanair’s case, is enhanced due to the fact that customers are only charged basic airfare with other additional services paid for separately. The flexibility here is translated offering of additional options which Ryanair’s does by offering supplementary services. Due to economies of scale and its global standing, the company is able to negotiate with other service providers to offer alternatives to its passengers such as ground transportation, hotel chains and online shopping portals. The challenge here, however, lies in the numbers that the airline handles which makes it less effective in ensuring flexibility. In its effort to achieve flexibility by incorporating other service providers, the passengers incur more unseen costs in the process.
Through the critical assessment of the two companies using the performance objectives analytical tool, it is easy to tell a balance of the objectives can be achieved. Exxon-Mobil through the five objectives has invested much in cost-mitigating, speedy response, quality assurance and flexibility measures in its operational processes. Ryanair ,on the other hand, focusses on low-cost and speed as its core tenets as it tries to fuse effectiveness in its operations. It is prudent to understand excelling at one or more of the set performance objectives can guide an organization to arrive at business strategies. Any operation based strategy ought to match customer requirements to operational excellence. A tradeoff is in order for excellent performance by Ryanair (service). John Naylor in his book Introduction to Operations Management notes that “operations cannot be all things to all people. There is the need to identify a single goal or task for operations; a clear set of competitive priorities to act as the objective” (Naylor & Naylor, 2002, p. 25). The Sandcone model of operations excellence illustrated below captures the balanced approach to performance objectives of Exxon-Mobil as a manufacturing organization.
Sandcone Model
The operation functions in the balanced case are managed strategically with any organization aspiring to reach the peak level possible. There is a sequence to be followed if the organization aims to fully tap into its operational capabilities. The starting point should be the emphasis on improving quality. On quality, dependability should be built followed by flexibility (which at times is taken to include speed) then finally cost. Operational capabilities established this way are more likely to withstand individual capabilities.
Exxon-Mobil as the organization of interest in this case, should adopt several strategies to solve its performance issues. The use outsourcing function as a means to manage the operational costs as aforementioned is facing hurdles. The Middle-East plants being in volatile regions require to be supported by subsidiary plants in neighboring nations that are less volatile. This will ensure the outsourcing continues to run effectively. The company can further reduce costs by incorporating innovation and oil exploration in traditionally overlooked countries.
Conclusion
The performance objectives enable organizations to efficiently manage the resources involved in the production processes of goods and services. These processes are managed with the key stakeholders namely customers, suppliers, shareholders, employees and society in mind. These processes and strategies incorporate performance objectives of the organization and its focus on achieving profitability and competitive edge in the industry it finds itself in. The performance objectives are namely; cost, dependability, speed, quality and flexibility. They are applied differently in solving performance related issues. Exxon-Mobil. Adopts a balanced approach while Ryanair adopts a focused approach. The balanced approach is analyzed using the Sandcone model of operations excellence while the focused approach dwells on the trade-off of performance objectives options.
Reference List
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