This essay will look at activities/issues in the automobile manufacturing sector

Part 1: Briefly define business operations planning. Discuss likely content of a

business operations plan and the problems in collecting data.

Monks (2004) defines operations management as the process through which

resources, flowing within a defined system are combined and transformed in a
controlled manner to add value in line with policies dictated by management. Roy
(2005, p.82) believes operations planning involve the determination, acquisition and
arrangement of facilities necessary for future operations. Operations management
entails managing processes (Slack, et al., 2007, p.25). Brown, et al. (2005, p.56)
considers the strategic implications of operations on the organization including
amount of capacity required by the organization to achieve its aims, the range and
locations of facilities, investment in product and process technology, formation of
strategic buyer-supplier relationships, introduction of new products and the
organizational structure of operations. Furthermore, the role of the operations
function according to Slack, et al. (2007, p.36) is to first ‘implement’, then ‘support’
and then ‘drive’ strategy. Operations implementing strategy involves putting strategy
into practice through operations while the supporting role of operations is developing
the capabilities which allow the organization to improve and refine its strategic aims.
Operations drive strategy by giving it a unique and long-term advantage.

According to Roy (2005, p.83) operations plan is likely to include activities

encompassing: forecasting the demand for an existing product and demand for a
new product; plan for capacity required to meet production needs by ensuring
utilization of capacity, equipment and other facilities; scheduling production activities
with regards to resources like labour, machines, working hours, etc.; plan for
materials to be available in the right time and in the right quantity and maintain
correct inventories in the appropriate locations; prepare route sheet, and schedules
for production and machine loading; issue orders for various activities to be
performed; simplify the activities and standardize the methods; track materials,
labour, machines, customer orders and other resources, direct and coordinate the
company’s resources towards the achievement of desired goals in the most efficient
manner; communicate with customers and suppliers on specific issues, respond
when things go wrong and unexpected problems arrive; meet customers’

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requirements in a dynamic environment; give production orders to shops and follow
up the progress of products according to orders.

Furthermore, Roy (2005, p.84) underlines the importance of the following to

planning: investigation about the complete details and requirements of the product to
be manufactured; estimation of future demand; planning the design, quality and
quantity of the product to be manufactured and the sequence of operations;
determination of quantity and quality of material requirement, equipment and its
capacity, manpower needs and transportation needs; detailed drawing of
components and their assemblies; information about stores and delivery times;
information about the equipment, their capacity and specifications; information
regarding standard times for the product; information about the market conditions
and type of workers employed and salaries.

Manetti (2001, p.58) identifies an important data collection pitfall as ‘garbage in,
garbage out’, emphasizing the need for accurate data gathering and input strategies.
Other problems encountered with manual data collection include: integration issues,
redundant data stores, human error and high number of computers cluttering the
company floor.

Part 2: Discuss both the external and internal factors that impinge on the
business operations plan.

The internal factors include organizational structure, production, marketing, finance,

human resource, training and development and research and development. External
factors comprise competition from other businesses, market demand, product
demand, purchasing power, availability and price of product and expendable income
of consumers.

Brown, et al. (2005, pp.352-353) suggests that organizational structures are

influenced by the nature of activities performed within the organization. For example,
activities like production are routine, subject to little alteration while decisions
associated with innovation require flexibility and extensive interaction. Brown, et al.
(2001, pp.103-109) recognises different stages of production like project, job, batch,
line and continuous. For example, the production of automobiles is suited to line

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production since it is high-volume, standardized and requires huge investment in
technology. This impinges on the operations plan in terms of layout amongst others.
Operations need to be closely linked to marketing. Operations should have a good
knowledge of customer requirements so as to shape future sales in existing markets
as well as aiding the viability of entering new markets. Marketing has implications for
operations plan in terms of capacity, quality, delivery capabilities and costs. (Brown,
et al., 2005. p.18). Slack, et al. (2007, p.5) regards the finance function as one of the
support functions which enable the core functions of marketing, production and
operations to function effectively. The finance function is regarded by Porter (2009,
p.8) as responsible for obtaining and controlling of funds and controlling decisions
such as equipment and price-volume decisions inherent in the operations plan.
Regarding human resource, operation managers are involved in the leadership,
organization and development of human resources especially in the area of job
design which involves structuring of an individual’s job, workplace or environment in
which they operate and their interface with the technology they use (Slack, et al.,
2007). Brown, et al. (2001, p.19) asserts that a motivated, trained and skilled
workforce has to be in place in manufacturing organizations if an organisation is to
compete successfully, closely linking it with the firm’s core competences. Training
and development of employees is crucial to operations. Kumar and Suresh (2009,
p.57) sees multi-skilled employees as an advantage as they can be rotated among
different jobs. Research and development impacts on the operations plan in terms of
new ideas that might result in new materials or new technologies. (Slack, et al.,
2007).

Pertaining to competition from other businesses, Porter (2009) is of the opinion that
organizations competing on price must keep its cost base lower than the
competition. Kumar and Suresh (2009) believe competitive advantage is gained by
the time required to produce a product. The firm with the fastest response to
customer demands has the potential to achieve an overwhelming advantage. The
planning process is driven partly by forecasts of demand for the product the
organisation is offering to the market (Porter, 2009). Additionally, demand forecasts
enable the operations manager to make decisions regarding allocation of resources
and capacity planning. According to Kumar and Suresh (2009), managers often use
forecasts of product demand to estimate the short-term workload the facility must

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handle. Managers looking ahead up to twelve months anticipate output requirements
for different products. Roy (2005, p.83) asserts that better operations planning leads
to increased productivity in the firm, efficient deliveries of the product at the proper
time, more products available to the consumers at cheaper price and better quality.
This results in more value for the customers’ money and more satisfaction from the
products.

Part 3: Discuss the impact of environmental and technological change on the

process of business operations planning.

The United States automobile industry presents several environmental issues

regarding currency exchange rates, fuel quality and emissions standards, the CAFE
system, California’s Greenhouse Gas Rule and international fuel economy standards
which impact on the operations of the various companies in the industry.

A study carried out by Cooney and Yacobucci (2005) presents the following issues in
detail:

Currency Exchange Rates - The rapid rise in the dollar’s exchange rate in the first
half of the 1980s was a major issue affecting U.S. manufacturers, including the Big
Three (General Motors, Ford and Chrysler), who complained that the dollar’s rise
against the yen in particular gave Japanese exporters additional assistance to
compete in the U.S. market. That issue was allayed with a subsequent decline in the
dollar’s exchange rate against the entire basket of industrial country currencies from
1985 until the mid-1990s. But the dollar’s resurgence against all currencies from
1995 to 2001, especially the yen, was again a serious concern to the Big Three, and
they still believe that the yen is undervalued.

Fuel quality and emissions standards - Improved fuel quality is a key component in
the success of any technology to improve vehicle emissions. The elimination of lead
in gasoline paved the way for the use of catalytic converters in automobiles, in
addition to eliminating lead itself as a source of air pollution. To meet more and more
stringent vehicle emissions standards, even cleaner fuel is necessary. To allow the
use of advanced catalysts and other technologies, fuel must be virtually sulphur-free.
As part of EPA’s (Environmental Protection Agency) Tier 2 and heavy-duty engine

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emissions strategies, by 2010 gasoline sulphur content will be reduced by over 90%,
while diesel sulphur content will be reduced by 97%. It is expected that these
reductions in sulphur content will improve the durability of new emission control
systems, potentially reducing the cost to the auto industry. It should be noted,
however, that these improvements have costs, and that fuel prices will likely increase
as a result. It is possible that if fuel costs increase too much, miles driven will
decrease, limiting demand for new vehicles.

Over the past four decades, auto emissions standards have directly affected the auto
industry. Before the 1960s, there was virtually no market for auto emission control
devices. The California standards of the 1960s and the federal standards of the
1970s created a market for the catalytic converter, now a standard component in any
passenger car or light truck. An entire category of auto parts suppliers — an
emission control manufacturer — has evolved since the 1960s. Further, the
emissions profile has become a key component of a new vehicle’s design, especially
in terms of the vehicle’s engine and exhaust systems. Highway vehicle emissions
have dropped significantly from the 1970s, and they can be expected to continue to
decline with the introduction of new technologies to meet the Tier 2 light-duty vehicle
standards and the 2007 heavy-duty standards. Despite concerns about costs of
meeting increasingly stringent emissions standards, in the past auto makers have
succeeded in meeting the challenge, even when the technology to meet the standard
had not necessarily been identified at the time the standards were initially
promulgated. The costs of meeting the standards have likely limited auto
manufacturer’s profits, but by and large the costs of compliance have been lower
than those predicted by policy makers when the standards were promulgated.

CAFE System – The corporate average fuel economy (CAFE) standards are
estimated to have reduced fuel consumption by as much as one-third from what it
otherwise would have been. Undoubtedly, the standards have significantly affected
vehicle design, as well as manufacturing and marketing decisions. However,
because of separate standards for passenger cars and light trucks, as well as
distinction between imported and domestic vehicles, the current standards likely
have had differential effects on various manufacturers. Further, any future changes
to the CAFE system would likely leave some manufacturers better positioned than
others.

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California Greenhouse Gas Rule - California adopted regulations in 2004 to require a
reduction of greenhouse gas emissions of 30% by 2016 in passenger vehicles.
Enacted in 2002, California’s A.B. 1498 requires the state to promulgate regulations
to achieve the maximum feasible and cost-effective reduction of greenhouse gases
from cars and trucks.

International Fuel Economy Standards - Over the past few years, several countries
have acted to increase passenger vehicle fuel economy, generally as a strategy to
reduce greenhouse gas emissions and comply with mandated emissions limits under
the Kyoto Protocol on climate change. Other countries have promoted greater fuel
economy as part of a strategy to reduce energy consumption. Most recently,
automakers and the Canadian government signed a Memorandum of Understanding
(MOU) on automotive greenhouse gas emissions. All major automotive
manufacturers have agreed to reduce emissions from passenger cars and light
trucks roughly 6% below the Canadian government’s 2010 reference case.

Part 4: Discuss the importance of good business operations planning to the

overall success of the business

Effective business operations’ planning is not realistic without the functions of the
operation managers. Operations managers have a role to play as regards the
activities of the organization which contribute to the effective production of goods
and services. Slack et al. (2007, p.21) suggests such responsibilities as: translating
the organization’s goals into their implications for the operation’s performance
objectives namely quality, speed, dependability, flexibility and cost; develop an
operations strategy for the organization; planning and controlling of operations
resources; improving the performance of their operation. Brown, et al. (2001, p.7) is
of the view that operations managers manage processes through the four ‘P’s of
operations: Policies, Practices, Processes and Performance. Policies are the
outlined aims, objectives and strategies for the organization including operations.
Policies are based on the desired state of affairs that an organization wants to
achieve. The organization’s mission statement has an important part in articulating
the organization’s policy. Strategy is concerned with how the organization will get
there. Policies define the practices – the systems, procedures and technological

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capabilities – that need to be in place within the organization, and between the
organization and its suppliers and customers. Policies cannot be realized without the
support of appropriate practices. Policies also need to be aligned with performance.
Performance describes how the organization does in terms of time, cost, quality and
flexibility. Where there are gaps between policy and the desired level of
performance, operations managers need to make improvements in order to close
these gaps. Performance is strongly linked to practices (Brown, et al, 2001).

Furthermore, Slack et al. (2007, p.22) believes operations is important because it

gives four types of advantages to the business namely: it can reduce the cost of
producing products and being efficient; it can increase revenue by increasing
customer satisfaction through good quality and service; it can reduce the amount of
investment that is necessary to produce the required type and quantity of products
by increasing the effective capacity of the operation and by being innovative in how it
uses its physical resources; it can provide the basis for future innovation by building
a solid base of operations skills and knowledge within the business.

A four-stage model developed by Hayes and Wheelwright of Harvard University can

be used to evaluate the role and contribution of the operations function (Slack et al.,
2007). The model traces the progression of the operations function from the
ineffective role of stage 1 operations to becoming the focal point of competitive
strategy in stage 4 operations. At stage 3, the ‘internally supportive stage’,
operations aspire to be the very best in the market. This is achieved by gaining a
clear view of the company’s strategic goals and supporting it by developing
appropriate operations resources. At the ‘externally supportive’ stage 4, operations
are innovative, creative and proactive and are driving the company’s strategy by
being ahead of competitors.

Part 5: Discuss the managerial qualities and resources that are necessary for
effective business operations planning.

Kumar and Suresh (2009, p.8) are of the opinion that managers are concerned with
planning, organising and controlling the activities which affect human behaviour
through models. Planning is the activity that establishes a course of action and

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guides decision-making. It clarifies the role and focus of operations in the
organization’s overall strategy and also involves product planning, facility designing
and using the conversion process. Organising is the set of activities that establish a
structure of tasks and authority. Operation managers establish a structure of roles
and the flow of information within the operations subsystem. Controlling are activities
that ensure that the actual performance is in accordance with planned performance.
The operations manager must exercise control by measuring actual outputs and
comparing them to planned operations management.

Brown, et al. (2005, p.5) reveals the following areas fall under the responsibility of
operation managers: management of value; capacity management; location
decisions; process management; managing technology; human resources
technology and integration and affiliation.

Managerial resources necessary for effective business planning include just-in-time

management, lean manufacturing, benchmarking and total quality management
(TQM). Liker (2004) who studied the successful manufacturing system of Toyota, the
Toyota Production System (TPS), defines lean manufacturing as a five-step process:
defining customer value, defining the customer stream, making it ‘flow’, ‘pulling’ from
the customer back and striving for excellence. In other words, it requires a way of
thinking that focuses on making the product flow through value-adding processes
without interruption (one-piece flow), a ‘pull’ system that cascades back from
customer demand by replenishing only what the next operation removes at short
intervals and a culture in which everyone is striving continuously to improve.
Just-in-Time is a set of principles, tools and techniques that allow a company to
produce and deliver products in small quantities, with short lead times, to meet
specific customer needs. JIT delivers the right items at the right time in the right
amounts (Liker, 2004).
Benchmarking, according to Slack et al. (2007, p.586) is the process of learning from
others’ and entails comparing one’s own performance or methods against other
comparable operations. Brown, et al. (2005, p.302) believes benchmarking provides
a powerful learning and development aid to quality improvement. Furthermore, it can
provide both the catalyst for improvement and new ideas about things to try in terms
of organizational tools, mechanisms and practices.
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Total quality management, from the viewpoint of Slack et al. (2007, p.652) is an
approach that puts quality at the heart of everything that is done by an operation and
including all activities within an operation. It focuses on the following: meeting the
needs and expectations of customers; covering all parts of the organization;
including every person in the organization; examining all cots which are related to
quality; getting things ‘right first time’ i.e. building quality in rather than inspecting it
in; developing the systems and procedures which support quality and improvement
and developing a continuous process of improvement.