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ARTICLE 1 - Operations Management - Lec1
ARTICLE 1 - Operations Management - Lec1
ARTICLE 1 - Operations Management - Lec1
Operations Management
Management > Operations Management
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Operations Management Essay by Ruth A. Wienclaw, Ph.D.
Applications
Keywords
There are a number of tools and techniques that can be used by
Business Process Reengineering (BPR) managers to improve the effectiveness and efficiency of busi-
ness operations. These include lean manufacturing, total quality
Just-in-Time Manufacturing (JIT) management, and business process reengineering. Lean manu-
facturing strives to eliminate waste and continually improve
Lean Manufacturing productivity. Total quality management strives to improve
Operations Management customer satisfaction by improving quality. Business process
reengineering strives to improve the effectiveness and efficiency
Six Sigma (6σ) of the various processes within an organization.
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Operations Management Essay by Ruth A. Wienclaw, Ph.D.
program, employees and managers are trained in statistical be successful, business process reengineering requires organi-
analysis, project management, and problem solving methodol- zations to reexamine the assumptions underlying their business
ogy. These skills are used to help them reduce defects in their operations and to question why they do things the way that they
products. Most organizations that have implemented Six Sigma do. The purpose of this analysis is to get at the root of any busi-
programs report increased profitability resulting from lower ness process problems that the organization is experiencing. This
production costs from doing the thing correctly the first time in will allow managers to reinvent the way that things are being
combination with reduced costs for not having to redo the work done as opposed to modifying current practices to be somewhat
previously done. more effective. This analysis often reveals obsolete, erroneous,
or inappropriate practices or procedures that do not add value to
Total Quality Management the product or service being offered by the business.
Another strategy for increasing the quality of goods and services While business process reengineering is not appropriate for
and concomitant customer satisfaction is Total Quality Manage- every organization, it is most appropriate where more traditional
ment (TQM). TQM attempts to improve the quality of products methods fail or where there is a major discrepancy between
or services by raising awareness of quality concerns across the where the organization is and where the organization needs
organization. This management strategy emphasizes developing to be. Businesses that are in serious trouble can often benefit
an organizational environment that supports innovation and cre- from business process reengineering. Symptoms of this serious
ativity as well as taking risks to meet customer demands using trouble can include having costs that are significantly higher the
such techniques as participative problem solving that includes competition’s, customer service that is causing the organization
not only managers, but employees and customers as well. to lose a significant number of customers, or failure rates that are
There are five cornerstones to TQM: The product, the process significantly above those for the industry. Organizations that find
that allows the product to be produced, the organization that pro- themselves in such situations have little choice than to perform
vides the proper environment needed for the process to work, a major overhaul of their business processes if they want to be
the leadership that guides the organization, and commitment to viable. In addition, organizations that are not yet in such dire
excellence throughout the organization. To be successful, TQM straits but that are headed on a trajectory to that condition can
programs need to consider all five of these primary emphases. To also often benefit from reengineering efforts. Symptoms of these
help ensure the success of the TQM strategy, it is necessary that situations include increased competition or competitors that have
an environment of quality be fostered within the organization. significantly improved their offerings or new customer needs
This requires not only an emphasis on the efficiency of pro- that cannot be adequately met by the current business processes.
cesses, but also an emphasis on consistency, integrity, and other Business process reengineering may often enable organizations
positive interpersonal relationship skills. To foster the teamwork to avoid falling into the first category where reengineering is
necessary to bring about high quality, TQM encourages organi- mandatory if the organization is to survive. Not only failing or
zations to implement a decentralized authority structure where inefficient organizations can benefit from reengineering efforts,
decisions are made close to those affected and all have a chance however: Top performing organizations with aggressive manage-
to participate in the process. This practice helps employees feel ment that wants to take them further may also benefit from this
part of the system and that they are a vital part of the organiza- analysis and redesign. Business process reengineering in highly
tion, not just hirelings. Ownership of team members working on successful organizations can help them further consolidate their
the product can also be fostered by increasing the flow of com- position in the marketplace and create further barriers to their
munication across all levels of the organization and providing competitors.
each employee the training that s/he needs to successfully add The goal of business process reengineering efforts is to improve
value to the product. the effectiveness of the organization. This is commonly dem-
TQM looks not only at the bottom line in terms of profits or other onstrated in a number of ways. For example, reengineering
relevant numbers, but also helps link the concepts of value to frequently results in several jobs being consolidated into one.
the customer with the cost of the product. This practice can help Business process reengineering efforts also often change pro-
with market positioning and increasing market share. This can be cesses so that workers who better understand the situation can
enabled by continually assessing the marketplace of the organi- make decisions rather than submitting these up the line for a
zation’s product vis a vis the organization’s skills and resources supervisor to consider. Similarly, business process reengineer-
to better position the organization to excel in the marketplace. ing often results in work being performed where it makes the
most sense. This situation results in less delays, lower overhead
Business Process Reengineering costs, and higher job satisfaction for the employees. As a result,
Business process reengineering is a management approach that reengineered processes can help improve customer satisfaction
strives to improve the effectiveness and efficiency of the various by providing quick resolution to their problems.
processes within an organization. Business process reengineering One of the basic tenets of the business process reengineering
is a radical rethinking and redesign of business processes so that process is that steps in any business process must be performed
they achieve dramatic improvements in critical organizational in a natural order and all the steps must add value to the prod-
performance criteria such as cost, quality, service, and speed. To uct or service rather than activity for the sake of activity. So,
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Operations Management Essay by Ruth A. Wienclaw, Ph.D.
for example, a manufacturing company process might analyze tions function (i.e., activities necessary to transform inputs such
the customer requirements and then translate these into inter- as business transactions and information into outputs such as
nal product codes, transmit this information to various plants completed transactions) as well as strategic planning for the
and warehouses, receive the various components, assemble the organization.
components into a finished product, and deliver and install the
equipment, requiring the involvement of a different organization Return on Investment (ROI): A measure of the organization’s
for each step in the process. Although these steps might tradi- profitability or how effectively it uses its capital to produce
tionally be performed sequentially, if some of the data collected profit. In general terms, return on investment is the income that
are not needed until delivery, time could be saved by not waiting is produced by a financial investment within a given time period
until all of these steps were completed before starting the rest of (usually a year). There are a number of formulas that can be used
the process. in calculating ROI. One frequently used formula for determining
Reengineered processes frequently have different versions that ROI is (profits – costs) ÷ (costs) x 100. The higher the ROI, the
take into account various situations so that value is added to the more profitable the organization.
product or service and the customer is better served. Although
standardization of business process works fine in an assembly Six Sigma (6σ): An approach to improving quality. The term
line, many jobs today do not need this degree of structure. For “six sigma” is a statistical term referring to the degree to which a
example, clerks in a retail store could be given the authority to product reaches its quality goal. At six sigma, a product is reach-
take care of customer problems at the point of sale rather than ing its quality goal 99.9999997 percent of the time, or has only
making the customer go to the customer service department or 3.4 defects per million. The six sigma system was originally
waiting for a manager to come and authorize a simple activity. developed by Motorola.
Similarly, a technician on a technical help line might be given
the authority to treat customers according to their individual Stakeholder: A person or group that can affect or be affected by
needs rather than going through a pre-ordained script. In this a decision or action. In marketing, stakeholders may include the
way, reengineering processes reduce the amount of time for the organization’s employees, suppliers, distributors, and stockhold-
transaction. This results in lower costs for the organization as ers.
well as increased customer satisfaction and loyalty.
Strategic Planning: The process of determining the long-term
Terms & Concepts goals of an organization and developing a plan to use the compa-
ny’s resources – including materials and personnel – in reaching
Business Process: Any of a number of linked activities that
these goals.
transforms an input into the organization into an output that
is delivered to the customer. Business processes include man- Strategy: In business, a strategy is a plan of action to help the
agement processes, operational processes (e.g., purchasing, organization reach its goals and objectives. A good business strat-
manufacturing, marketing), and supporting processes, (account- egy is based on the rigorous analysis of empirical data, including
ing, human resources). market needs and trends, competitor capabilities and offerings,
Business Process Reengineering (BPR): A management and the organization’s resources and abilities.
approach that strives to improve the effectiveness and efficiency Supply Chain: A network of organizations involved in pro-
of the various processes within an organization. duction, delivery, and sale of a product. The supply chain may
Globalization: Globalization is the process of businesses or include suppliers, manufacturers, storage facilities, transport-
technologies spreading across the world. This creates an inter- ers, and retailers. Each organization in the network provides a
connected, global marketplace operating outside constraints of value-added activity to the product or service. The supply chain
time zone or national boundary. Although globalization means includes the flow of tangible goods and materials, funds, and
an expanded marketplace, products are typically adapted to fit information between the organizations in the network.
the specific needs of each locality or culture to which they are
marketed. Total Quality Management (TQM): A management strategy
that attempts to continually increase the quality of goods and
High Performing Organization: Businesses that consistently services as well as customer satisfaction through raising aware-
out-perform their competitors. ness of quality concerns across the organization.
Just-in-Time Manufacturing (JIT): A manufacturing phi-
losophy that strives to eliminate waste and continually improve Bibliography
productivity. The primary characteristics of JIT include having Creech, B. (1994). The five pillars of TQM: How to make total
the required inventory only when it is needed for manufactur-
quality management work for you. New York: Truman
ing and reducing lead times and set up times. Also called “lean
manufacturing.” Talley Books/Dutton.
Lean Manufacturing: A set of tools and techniques used to
eliminate all waste from production processes. Hammer, M. & Champy, J. (1993). Reengineering the corpo-
Operations Management: Those areas of management that ration: A manifesto for business revolution. New York:
are concerned with productivity, quality, and cost in the opera- Harper Business.
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Operations Management Essay by Ruth A. Wienclaw, Ph.D.
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