Research Korner: Operations Management

Operation Management Essay

Introduction The general management of the business entity’s major operational activities is called Operations Management (OM). It is usually associated with the manufacturing of the goods or implementation of services. However, the range of problems and issues that operations management carries out greatly depends on the type of organization and its authority distribution (Jacobs, 1998). OM deals with the design and management of products, processes, services and supply chains. OM is a critical importance of organization and business nowadays. It considers the acquisition, development, and utilization of resources that firms need to deliver the goods and services their clients want. OM ranges from strategic to tactical and operational levels. Strategic issues include determining the size and location of manufacturing plants, deciding the structure of service or telecommunications networks, and designing technology supply chains. Tactical issues include plant layout and structure, project management methods, and equipment selection and replacement. Operational issues include production scheduling and control, inventory management, quality control and inspection, traffic and materials handling, and equipment maintenance policies. Furthermore, OM focuses on carefully managing the processes to produce and distribute products and services. Overall activities often include product creation, development, production and distribution. Related activities also contains managing purchases, inventory control, quality control, storage, logistics and evaluations. A great deal of focus is on efficiency and effectiveness of processes. Therefore, operations management often includes substantial measurement and analysis of internal processes. Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization like the retail, manufacturing, wholesale, etc.   Concepts and Theories Operations management concepts and theories are derived from the general management theories like planning, coordinating, organizing and controlling. General management theories are employed to improve the efficiency of the personnel and that of the organization. On the other hand, OM theories are applied to make available all the necessary inputs required to complete a project, within the specified time and budget (Cohen & Lee 1989). OM in the real sense involves the timely delivery of inputs required for a project and careful planning. In OM, planning involves the setting of goals and objectives, analyzing available alternatives, selecting the best available alternative, selecting an appropriate execution plan and developing contingency plans (Vollman et al, 1992). Another important aspect of OM is coordination. It strives to achieve better coordination between the various entities related to the project. These include the suppliers, project managers, site engineers, technicians and others (Dewitts,1996). OM requires all the related entities to share critical information with each other, on a regular basis. This enables the development of new contingency plans, in case there are any proposed changes to the original plan of action. The basic management concept of organizing is used extensively in OM. It involves the procurement of all the necessary inputs, at the right place and at the right time. In organizing, the focus is on following a pre-determined plan. This may require the project mangers to confirm to some basic requirements of the quality and quantity of inputs required for the project (Houlihan, 1985). OM has acquired great significance in the recent years due to an increase in the number of trans-national companies, whose operations are spread across the continents. It helps in developing the synergies between the various operations that are separated by time and space. OM has enabled many companies to set up production and manufacturing at cost effective locations and source the required inputs from locations where procurement costs are low. The Importance of Database in OM One of the useful and effective tools to help decision-making process of executives, managers, and decision-makers is database. Database is the  organized collection of facts and information. Usage of it in an organization contain facts and information on customers, employees, inventories, sales information, the designing and development of product information, raw material information, costs of operating and materials, payroll, tracking of the orders, jobs, phone calls, and much more (Kroenke, 1997). Managers use database to keep track of all those business records and information and even organize complex information. Database also provides executives and managers the knowledge of competitor sales and prices of customers, customer demands, suppliers, and market environments. In addition, another importance of database is that it allows multiple people to access the database simultaneously from multiple computers. Thus, everybody in organization can get the information from the database and share vital information to each other simultaneously, keep one user's work from interfering with another work. Database is also increasingly used to create and maintain multimedia applications for businesses and organizations.   Conclusion                                                                                                 The utmost reason of all these initiatives is to facilitate the transfer of goods, from the point of procurement to the point of production at the least possible cost. Even though operations management depends a lot on the human factor, it does not intend to improve the efficiency of personnel associated with a project. The core objective of OM is to ensure the availability of all the necessary inputs. The cost of procuring goods and services is greatly considered, but this is usually taken care of by the cost management team or  the strategy employed by the company. The measurement and evaluation of operations is usually undertaken through a process of business appraisal.  Ultimately, OM is no longer limited to corporate organizations and is increasingly being employed by other organizations as well. One such organization is the postal department, who is using it to offer better services to customers. The maintenance, control, and improvement of organizational activities that are required to produce goods or services for consumers are the basic concept of OM. The increased use of OM is a proof of the effectiveness of OM concepts and theories in reducing operational costs and increasing the efficiency of business processes.   References Dewitts, S D 1996. System Analysis And Design And The Transition To Objects,  McGraw-Hill, New York. Kroenke, D 1997,  Database Processing, Prentice Hall, New Jersey.   Jacobs, C A 1998, Production and Operations Management, McGraw-Hill, New York. Cohen, M & Lee, H 1989, ‘Resource Deployment Analysis of Global Manufacturing and Distribution Networks’, Journal of Manufacturing and Operations Management, vol. 67, no. 7, pp. 187-194. Houlihan, J B 1985, ‘International Supply Chain Management’, International Journal of Physical Distribution and Materials Management, vol. 31, no. 5 pp. 143-149. Vollman, T  E, Berry, W. L. &  Whybark, D C 1992, ’Manufacturing Planning and Control Systems’,Journal of Manufacturing and Operations Management, vol. 34, no. 3, pp. 389-392.

Operation Management Essay

Introduction The general management of the business entity’s major operational activities is called Operations Management (OM). It is usu...

DHL Aviations Hong Kong Ltd. Operations Management

Introduction             The paper is a discussion on operations and operations management using DHL Aviations Hong Kong Ltd. as an example. The paper tackles about the operations of DHL in Hong Kong and other related issues concerning operations management. Company Profile             DHL Aviation (Hong Kong) Ltd. or simply DHL Hong Kong is part of the expansion and growth of DHL Express International that originated in San Francisco and now owned by the Deutsche Post World Net (DPWN). DHL belongs to the international air express industry, whose business includes courier services, logistics, air and ocean freight, consultancy and other value-added services related supply chain such as network and facility design, warehousing, transportation management and consolidation, primary and secondary packaging, customs management, security and cargo insurance.             DHL started at Hong Kong in 1972 in order to provide services in the Asia Pacific Region. In 2000, the company’s Central Asia Hub at the Hong Kong International airport began operation that handles over 100 flights a day that further resulted to agreement and construction of the Express Cargo Terminal of the Hong Kong International Airport wherein DHL invested about HK$780 million and serving as the home of DHL’s Asian Network (DHL, 2006) that includes DHL Bangkok, China and others. The shipment handling operations of the DHL central Asia Hub is supported by Material Handling System with a throughput of about 20,000 pieces per hour. DHL Operations   Supporting the company’s various services are the primary activities and complex process critical to DHL’s operations. These are: order taking, pick up, documentation, tracing of the supplies when information is needed, billing, packaging, transportation and delivery, problem solving as well as advice and information to the clients and partners (Kostecki, 1998). These are the activities involved in DHL’s operations management that make DHL productive and efficient. People involved at these particular activities work together aiming for a common goal which is to provide quality customer service at attractive prices. This is the goal the company has to achieve in order to obtain long-term profitability. As an express carrier, DHL does not provide products but services. DHL Aviation Hong Kong or DHL Express HK is under the Express Corporate Division of DHL that offers companies and private customers courier, express, and parcel (CEP) services, excluding logistics which is handled by other divisions. DHL does not manufacture products but rather services thus the inputs associated with DHL is not raw materials but equipments such as computers for documentation and tracking of shipments as well as for communication with customers and business partners, and tracking device such as radio frequency identification (RFID); materials such as boxes, packaging tapes, tags and seals for the protection of the goods to be delivered; manpower or human resources such as delivery staff, drivers, customer service representatives, logistics analysts that provide advice and consultations, and managers that ensure who ensure timely delivery; and transportation medium such as ships for ocean shipments, airlines for air freight and trucks for land freight. With the case of DHL Aviation, they used more of air transportation thus they invested on a terminal at the Hong Kong International airport. DHL’s Operations Management               Operations management is defined as the management of function that is responsible for all the activities directly concerned with making a product. It is responsible for collecting various inputs, and converting them into desired outputs (Waters, 1996). This definition is more common for manufacturing companies. However, when you are in the service industry, instead of product, services are created to achieve the desired outputs.                           As an express carrier, timely delivery and customer satisfaction are its objectives. These objectives can be met by effective operations management. However, problems commonly arise in a company and through operations management problems can be tackled by observation, formulation, analysis and implementation (Hanson & Olsson, 2001). Through observation managers can be able to realize if there are problems. This can be done by collecting data and setting objectives. For example, DHL set their sales to increase by 5% in 2005 but the company was not able to reach this objective but instead sales dropped by 2%. Managers can realize problems such as untimely delivery and poor package handling as the probable cause of decreasing sales and can therefore provide solution through formulation. Formulation basically involves the review of related data, building models of the current situation and finding solutions to the problems. These solutions are commonly the basic operations management practice such as batch processing, theory of constraints, bottleneck analysis and improving customer service.             Analysis follows formulation in which managers examine the solutions provided and evaluate the best possible solutions to be implemented. Operations managers are also responsible for monitoring of improvements.             With the kind of services that DHL provides, it commonly used operations management practices such as batch processing. With its batch planning system, it can control the number of orders to be pack and to which country it will be delivered. Its batch planning system is computer controlled while its packing system uses automatic packing machine thus DHL is productive enough to be considered having good operations management.              However, since DHL Hong Kong delivers goods and provides services mostly outside Hong Kong, it still occasionally encounters late delivery due to inefficient customs controls and procedures. That is, DHL sometimes encountered problems in getting the parcels through the border controls and ensuring necessary documentations (Kostecki, 1998). To address this issue, DHL parent company puts local customs service department in every major country whose mission is to get the cargo through customs at the right time, and responsible for daily reports, providing detailed information about customs troublespots (Lorange, 1998).     References: DHL Hong Kong online http://www.dhl.com.hk/publish/hk/en/about/DHL_HK.high.html Hanson, E & Olsson, M (2001) A case study in Operations Management and Packaging Logistics, Logistics and Transportation Management Master Thesis, School of Economics and Commercial Law, Goteborg University Kostecki, M (1998) DHL Worldwide Express: Providing Just-in-Time Delivery  Services Across Customs Borders in Central and Eastern Europe, University of Neuchatel Lorange, Christian (1998) Corporate Structure, Procedures and Responses Relating to Trade Policy: Case Studies of Four Multinational Corporations, Neuchâtel, The Enterprise Institute of the University of Neuchâtel (manuscript of a diploma thesis).

DHL Aviations Hong Kong Ltd. Operations Management

Introduction The paper is a discussion on operations and operations management using DHL Aviations Hong Kong Ltd. as...

Operations and Logistics Management of Auto Sueco Angola

Operations and logistics management of Auto Sueco Angola   Auto Sueco Angola is part of Grupo Auto Sueco. Auto Sueco Angola markets, provides and distributes after sales service for Volvo products in Angola. Auto Sueco Angola focuses on gathering data to manage its inventories. The company makes sure that it has a complete record of logistic and operation procedures (Bassett 2003).  Within the context of a firm's strategy, operations seek to enhance the competitiveness of the business. For years, the role of operations was simply to get the product or service out the door. The major voices in corporate strategy were in finance and marketing. However, the oil embargo of the mid-1970s helped change all that. Rising prices of gasoline sent customers all over the world in search of automobiles that optimized fuel consumption. The Japanese automobile manufacturers, especially Toyota and Nissan, had such vehicles available, and when customers flocked to try them, they noticed that the Japanese automobile was of superior quality. An operation strategy of Auto Sueco Angola is to make sure its cars would create auto parts that would entail lesser manufacturing cost. Operations strategies are functional strategies that support the firm's overall strategy. It is infinitely easier to produce a limited product line at a plant than a broader line (Nie& Young1996).   Auto Sueco Angola makes sure that all its products are sturdy and durable and will not easily fall prey to the short product life cycle.  Today's reality is that the product life cycle is shorter than ever and customers are fickle. This requires a manufacturing configuration that can adapt quickly to changing demand patterns. Machinery and equipment should be considered for purchase that can not only manufacture the current product but also be retooled for future changes in the product. It is to operations' advantage to limit the number of options a customer can buy. Options mean more time. All customers do not have the same needs and wants, and companies that have the operational capability of offering customers exactly what they want; when they want it, have a competitive edge. Those that compete from a cost perspective may find it advantageous to limit options (Vernon 2002). The focused factory, one that specializes in a narrow product mix, thereby smoothing the production process by improving quality and productivity, makes sense for long product life cycles. The new factory must be both focused and flexible. At one time, it was true that firms could compete within an industry on the basis of offering superior quality to the customer. Quality movements across the world succeeded in improving the quality of all products and services to the point that all companies must have superior quality merely to survive. As a result, the one way companies can gain an edge is to introduce new and innovative products faster than competition. The product design cycle has been diminishing as a reaction to increased competition and quality and decreasing product life cycles. New product introductions are a primary area where speed matters. Research and development, marketing, and operations must work together to determine which markets will be served and who will serve them (Tayeb 2000).   Product life cycles vary globally. But this phenomenon still exists to some extent from one country to another and will influence the global staggering of new product introductions. Auto Sueco Angola makes sure that all products undergo a good layout design that will cater its quality management processes. Most firms in capital intensive industries have implemented quality management programs by 1996. It is also true that the management commitment to quality varies. Companies must produce to the needs of the most discriminating customer. A global customer-service network is imperative to maintain success. A product that has no locally-established service is asking for trouble when a problem occurs. It is not a simple question of choosing to sell a product. A service network must also be established. As part of customer service the company makes use of all available facilities to communicate with clients. Customer service entails giving the appropriate information about a product including its characteristics, capacity and component. The quality of customer service is as important as the actual quality of the product itself, because future customers can be gained or lost through customer service. There are two aspects to the operations management of technology. The first aspect concerns process: every industry has a unique state-of the-art process technology. For the manager, this involves a mastery of all possible process technologies that are either in use, or show potential for use, in the production of a product. The second aspect concerns product technology. Firms must sell the technology that customers want. This means that managers must predict technological shifts. The managers make sure that the products would pass the quality and safety requirements. Managers must stay current in new layouts and equipment that might increase productivity, quality, and profitability. This necessitates a life-long commitment to the study of industry trade journals, scientific periodicals, general business publications, and any other sources that may offer technological information. The managers have an inadequate scientific and mechanical educational background, which they must remedy if they intend to master their field (Agmon & Hekman 2000).   References Agmon, T & Hekman, CR 2000, Trade policy and corporate business decisions, Oxford US, New York.   Bassett, G 2003, The evolution and future of high performance management system, Quorum Books, Westport, CT.   Nie, W & Young, ST 1996, Managing global operations: Cultural and technical success factors, Quorum Books, Westport, CT.   Tayeb, MH 2000, The management of international enterprises: A socio-political view, Macmillan, New York.   Vernon, M 2002, Business: The key concepts, Routledge, New York.

Operations and Logistics Management of Auto Sueco Angola

Operations and logistics management of Auto Sueco Angola Auto Sueco Angola is part of Grupo Auto Sueco. Auto Sueco Angola markets, pr...

A Comparison of the Operations Strategy of Manufacturing and Service Firms

A Comparison of the Operations Strategy of Manufacturing and Service Firms               This paper is about the operations strategy of two types of firms, the manufacturing and the service firms. For the manufacturing type, the writer has chosen Toyota and Dell Inc. While for the service type, Disney World and McDonald’s are the firms chosen by the reader. The discussion is on the individual operations strategy for the said firms. They are presented by type, first is the manufacturing, followed by the companies under the service type. A brief introduction about operations strategy is also included to establish the topic to the reader. Operations Strategy             An operations strategy must be devised after the development of the business strategy. This is done to provide a plan for the design and management of the operations function, in ways that support the business strategy. The operations strategy is the one that associates the business strategy to the operations function. The focus lies on the operation’s particular capabilities that give a competitive edge to the company. These capabilities are referred to as competitive priorities. By means of excelling in any one of the said capabilities, there exists the possibility for the company to become the frontrunner in its specific market.            Competitive Priorities             In order to understand the competitive situation in the company’s market, it is important for operations manager to work closely with the marketing. It should be done to be able to determine which among the different set of competitive priorities are important. The four broad categories of competitive priorities are cost, quality, time, and flexibility.                      All of the said priorities are important but as more resources are dedicated to a specific priority, fewer resources are left for the others. That is why the operations function, must put greater emphasis on the priorities that directly support the business. This is called the need to trade-off. Even though the primary focus of the company lies only to some priorities, it is still relevant for them to at least achieve a basic level for each priority.             For that reason, it is important to distinguish which among the said priorities are order winners and the order qualifiers. The latter refer to priorities that are required to qualify as a competitor in a particular marketplace. On the other hand, the former are those priorities that aid a company in winning orders in the marketplace. However, to be able to compete successfully, a company needs to change its order winners to differentiate themselves from their competitors. This is also done in cases when companies try to imitate the order winner of a successful company, knowing that they will also gain the same success they achieved.     Operations Strategy of Manufacturing Firms: Toyota and Dell Inc. Toyota             Toyota’s operations strategy focuses on maximum reliability, easy maintenance of its cars in each class, production systems that includes product design, processes, and supply chain management focused on their goal.             European automakers need to be more prepared as Toyota releases its handful of hot models. While the powerhouse of Japan figures how to build cars which attracts the Europeans, it was also bearing down on costs to yield its needed efficiency to prevail in one of the world’s lowest-margin auto markets. The management of Toyota is asking its engineers to propose a design, which is innovative and cost saving in nature at the same time, for the facility of the Valenciennes. And the result is the compact, star-shaped factory, which is a first for Toyota. The production area has a limited space for the storage of other parts and components. The two and a half hours’ worth of inventory on hand is lower compared to other Toyota factories in the world.             Fewer man-hours, less inventory, this is how Toyota is. They consistently have the highest quality cars with the fewest defects compared to its competitors in the manufacturing (auto) industry. Their well-known “Toyota Production System” (TPS) or “Lean Production” seems to be their secret weapon in improving the speed of their business processes, quality of their product and service, as well as the reduction of costs.             The TPS developed as a new paradigm of manufacturing excellence, which transforms businesses across different industries. The company also encourages employee involvement in all levels. In addition, they also discover the difference between the traditional process improvement and Toyota’s Lean improvement.             In order for the said system to work at your advantage, there is also the need for you to follow the so-called “14 Toyota Way Principles”. This operating philosophy serves as a guide for its management. First principle is to base your management decisions on a long-term philosophy, even at the expense of your short-term financial goals. Second, you must create a continuous flow of processes to bring out any possible problems. Third, to be able to avoid overproduction problems, you must use the pull systems. Fourth, level outing of workload is also important. As they say, work like a tortoise, not like the hare. Fifth is to build a stopping culture to fix problems as soon as possible. It also enables to get quality right the first time. Standardizing of tasks is also important as it serves as the foundation for continuous improvement. To avoid missing any possible hidden problems, the use of visual control can be a great help. You must also make sure that all the technologies you are using are reliable and thoroughly tested to be able to serve your people and the processes of your business. This is to avoid wasting of time, resources, and effort used in an ineffective technology. Next, leaders should serve as the role model of all. He himself should understand the work thoroughly and live its philosophy to be able to teach it to others and make them follow his ways. In turn, the leader can now develop exceptional people and teams in accordance to your company’s philosophy. Respect is another important thing among you and your extended network of partners and suppliers. This can be done by challenging and helping them improve their ways and doings. For you to be able to understand a given situation, you yourself must go and see it. As they say, you will only believe and understand if you yourself have seen and experience the situation. The process of decision-making should also be done slowly to avoid making hasty decisions, which are risky most of the time. It should come from a consensus, with consideration to all available options. While on the other hand, its implementation should be done quickly. Lastly, through relentless reflection and continuous improvement, your company should become a learning organization for all people involved in your company.             This is the very core reason why Toyota, despite the competitors’ effort of imitation, continues to gain market share and huge profits, continues on building new plants, retains a harmonious relation with its supplier and enthusiastic workforce, with its labor costs retained at a lower amount compared to others. They are also described as “the fastest runner in the race” in auto industry. Production efficiency helps them reach that point. Their record (most productive) of 27.9 hours per-vehicle time surpasses the record of their competitors like Ford and Chrysler. The tools of the TPS seem to work smoothly for them. These tools are lean, agile, TQM, TPM, re-engineering, just in time, cellular/continuous workflow, etc. TPS should not only be a cost-based strategy, it should also be a value-based one. The full potential of the TPS is as an operational solution ready to remake entire organizations – both at the process and management levels.   Dell Inc.             Dell Inc. is a premier provider of products and services required, for the building of information-technology and Internet infrastructures of customers worldwide. Its operations strategy focuses on mass customization marketing strategy, build-to-order production system, as well as on its production and supply chain designed for its agile and fast turnarounds.              Operating a plant owned by the company itself is one of the global manufacturing strategies of the Dell Inc. This is to bring their online operation in time, in achieving its goal of meeting the ever-growing customer needs. It also provides good proximity to an available workforce and supports the objectives of its logistics.             In locating its possible plants, it places preference over strategic locations suitable to advanced manufacturing and distribution companies serving the East Coast markets. Like Dell’s Winston-Salem plant who will produce their PowerEdge servers, PowerVault and the Dell/EMC products, and OptiPlex and Dimension desktop computers primarily for the US market. The said distribution’s advantages made it to be the company’s site choice. This is its easy access to almost all of the major East Coast markets, within a one-day truck haul.             Dell Inc. also operates one of the highest-volume internet commerce sites in the world. According to a study done by Mainstay Partners, the returns of the company will come through cost avoidance in four principal ways. They are by the breakage of the buying cycle and maintenance of expensive proprietary hardware systems; by substantial reduction on administrative and database management costs; by a boost on system capacity while scaling as the business requires; and by raising its availability, thus, the potential for revenue-draining downtime is greatly reduced.             The company uses a sales strategy that was a model of the lean efficiency. It involves direct customer sales, without the use of retailers or intermediaries. Through this high-efficiency business model, the company is able to keep low costs in bringing new technology to its market, faster than any companies, using indirect distribution channels. Dell’s marketplace advantage is brought up by its innovation together with its one-to-one direct customer communication. Another innovation is their web presence through the Dell.com, a massive channel for sale.             In addition, the new system of Dell running Oracle 10g grid on Linux is another success on the company’s part, as it does more work, more quickly compared to their previous one. Among its gains includes doubled session capacity characterized by stronger, more sustainable system performance; higher daily order volume, due to its improved performance and availability for users through the elimination of constraints and slowness; automatic distribution and balancing of the increased workload in case of node/s’ failure; and the elimination of system outrages, that cause gaps in line manufacturing and raises the chances of staff sent home.             The new system delivers seven times the performance for only one-tenth the cost. Besides, due to its improved performance and reliability, the company will be able to save around $4.6 million for over five years time, as projected by a study. Other area of potential value brought by the grid system is the automated storage management in Dell’s back office operations.             Moreover, Dell has become a poster child for outsourcing, using its emerging trend of near shoring. “Near shoring” refers to the companies’ practice of going offshore (but in countries with closer proximity to its home bases) in outsourcing its operations. Its success lies on its developed innovative supply chain together with its just-in-time operation. The latter combined more responsibility pushed onto suppliers with the outsourcing of non-essential functions. Operations Strategy of Service Firms: Disney World and McDonald’s Disney World             The operations strategy of Disney World centers on the total amusement experience marketing strategy; an organizational management system based on the keen attention to details and comprehensive system of supply chain management, scheduling, product and process design, and maintenance; structured leadership and organization to preserve and enhance creativity, culture, and best practices; and the establishment of continued leadership in maintaining its momentum and further development of its talents.             The company has been able to grow over a longer time period, dominating the family entertainment market. Through its past experiences, it is able to successfully meet the specific needs and wants of its target customers. Disney has focused on market diversification for years, covering a wide variety of products and services. It also practices economies of scale in its production. In addition, most of the company’s product mix focuses on the intangible returns on the buyer’s money.             Large volumes of unique products are also purchased by the company from its unique suppliers. This is to ensure quality service delivered to its customers, while maintaining a strong supplier- relationship. Moreover, due to its highly differentiated products, switching costs is important as expensive advertising campaigns are done in order to obtain market share. The company has also effectively diversified its operations and products, both in the local and global level. The company has also been able to retain its innovative employees, control its costs while producing quality goods and services, and minimized its financial risks.             To avoid being runned out of fresh new ideas, employee participation is highly encouraged, especially the most creative and talented ones. There is the so-called “Gong Shows” where the participants share their own set of unique ideas. Effective distribution channels and marketing are also used to meet the growing demands of its customers. Despite the increasing costs of production due to recent trends, the company has able to survive. Efficiency, through the enforcement of tighter budgets and higher expected returns, made it possible for the company to produce cheaper but high quality movies compared to its competitors. In its rapid expansion and diversification of its products and services, risks are minimized by covering-up the losses of one product line by another product line.             On the other hand, a risky but cutting-edge technology strategy is designed to aid in restoring the luster of Disney’s aging brand, increase its efficiency and boost attendance. Among them is the Pal Mickey. This is an experiment in bridging the gap between the static data about a customer and its dynamic behavioral preferences, which depends on its physical location and movements at any given time. It is considered as a new evolution of CRM. Another one is the Destination Disney, a new customer experience strategy. In here, the company intends to leverage technology, with hopes of personalizing a person’s parking experiences. Under the said strategy connects another initiative called the Magical Gatherings. This is a website with the specific intentions of boosting new revenues and group business bookings, through the encouragement of far-flung family members in collaborating online, for planning their next reunion or group event in the Disney World. There are still many other strategies at hand waiting for its final utilization. Together, all of the said strategies will aid Disney in maintaining its competitive edge in the entertainment industry. McDonald’s             McDonald’s has developed three strategies for its future scenarios. These are customer convenience, customer value, and optimal operations. Together with the digital strategies, it will help create new and bold ideas for the company. The stores are characterized by the operations team as miniature manufacturing facilities. With its goal in improving the suite of its manufacturing systems (inventory control, production planning, financial control, and point-of-sale order entry) that supports the store, the team has developed ways of improving its overall operations.             Aside from offering hamburgers and french fries, the current trend in McDonald’s extends in serving as a family retreat, and as a community center for senior citizens. The means for the former one are its extensive indoor playgrounds and promotional toys, while the invitational plays of bingo are for the latter one. As this trend continues, an extension of more service-oriented technologies is needed. They can conduct studies and surveys to better know which among the different alternatives serves the company’s objectives the best. These might include robots taking orders instead of humans, automated processes of food production, and the like.             To achieve customer convenience, one of their key initiatives is on the improvement in the speed of new stores’ opening. To answer this, the “day in the life” scenario was developed for site developers that described the optimal toolset and the collaborative environment they would have with them as they scouted for locations. Rather than choosing individual tools, they should think about the tools on the horizon-geographical information systems, global positioning satellites, new media such as teleconferencing, and the expanding flow of information through public networks like the Internet.             For the achievement of customer value, focus should remain on real-time information flow that allows instant corrections of the menu and prices in response to customers’ preferences, competitive environment, and even the ingredients’ global commodities market. Credit:ivythesis.typepad.com

A Comparison of the Operations Strategy of Manufacturing and Service Firms

A Comparison of the Operations Strategy of Manufacturing and Service Firms This paper is about the operations strategy of ...

IKEA’s Operations Management

IKEA’s Operations Management               Operations Management is the set of activities that create goods and services through the transformation of inputs into outputs. Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services.   IKEA             IKEA was created by Ingvar Kamprad 60 years ago. The Swedish company was based on the idea that as long as the price was right, customers would be prepared to travel out of town locations, queue, collect their purchases and assemble the furniture themselves (Doole and Lowe 2005).             IKEA’s mission was formulated by its founder, Ingvar Kanprad. The company’s mission is to offer wide variety of functional furniture for the house, of a quality and at a price affordable by a majority of people. The core principles of IKEA that seeks to achieve the mission are quality and economy. The principle of quality is applied at three points in the life of the IKEA products – creation, range and use. 1. Creation – IKEA designs its own products. Each product has a name rather tan a code because IKEA wants its products to be part of the family. 2. Range – Each item for sale in the stores, whether furniture or other products, is part of a coherent whole, designed in accordance with the expectations of a specific segment which can be young or old, high or low income, modern or classic, etc. 3. Use – IKEA furniture is submitted to three types of trial which test strength and workability as well as surface and resistance (Duquis and Dawson 1999).    Operations Management at IKEA <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Design products which can be flat-packed efficiently</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Site stores of an appropriate size in the most effective 	locations</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Design a store layout which gives smooth and effective 	flow</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Maintain cleanliness and safety of storage area</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Arrange for fast replenishment of products </li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Monitor and enhance quality of service to customers</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Continually examine and improve operations practice</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Ensure that the jobs of all staff encourage their 	contribution to business success</li> </ul>     IKEA’s Transformation Process             Transformation processes are used in all types of businesses. A transformation process uses resources to convert inputs into some desired output. Inputs may be raw material, a customer, or a finished product from another system. The different types of transformation processes are: <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Physical (as in manufacturing)</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Location (as in transportation)</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Exchange (as in retailing)</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Storage (as in warehousing)</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Physiological (as in healthcare)</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Informational (as in telecommunications)</li> </ul>   IKEA’s Operations Strategy             Operations strategy is the total patterns of decisions and actions which set the role, objectives and activities of the operation so that they contribute to, and support, the organization’s business strategy.                     The operations strategy of the company is founded on its mission of creating high quality products in affordable prices. IKEA’s business model is based on a simple idea: Furniture, if well designed, can be cheap without being ugly. The elements of the model include: attractive, low-cost, reasonable quality furnishings, limited variety, self-assembly; young-family-oriented suburban mega-stores with nursery and plenty of parking space; catalogue-driven self-service; and no costly advertising. These elements all keep expenses and prices down and they reinforce each other. Catalogue sales and limited variety make it easy to get along with fewer sales personnel. Standardization and focus on the product line make it possible to rely on suppliers that can be closely monitored and controlled by IKEA. Flat packages save space in transportation and warehousing. Suburban locations and large store reduce expenses, self-select for young families with cars, and reduce delivery costs (Miller and Miller 2005).   Typology of IKEA’s Operations (4 Vs) 1. Volume (High) <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	High repeatability</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	High specialization</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Capital intensive</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Low unit cost </li> </ul> 2. Variety (Low) <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Well-defined</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Routine</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Standardized</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Regular </li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Low unit costs</li> </ul> 3. Variation in Demand <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Stable</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Routine</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Predictable</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	High utilization </li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Low unit costs</li> </ul> 4. Visibility <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Short waiting tolerance</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Satisfaction governed by customer perception</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Customer service skills needed</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Received variety is high</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	High unit costs</li> </ul>   Transformation Process                Because the furniture industry is highly competitive and fragmented, most (if not all) furniture retailers seek to create a sustainable competitive advantage. Differentiation is the strategy that furniture retailers employ. In the case of IKEA, sustainable competitive advantage was achieved because of the company’s added quality services. Potential purchasers try to find suppliers that offer them the greatest added value. As an added value and as a way to attract customers, IKEA offers superior customer service. IKEA meets customers with catalogs, tape measures, pens, and notepaper. The shortage of salespeople affords customers the opportunity to shop in freedom and to take notes. IKEA also offers services to parents while they shop such as the supervision of toddlers, infant-changing rooms, and attendants who warm baby bottles. Snack bars sell Swedish specialties at low prices. The strength of IKEA is its ability to shift a variety of cost burdens to the customer that might be found desirable or perceived as an added value. IKEA partners with its customers in ensuring that the customers save money by offering stylish, functional, low-cost home furnishings that customers must assemble themselves. Making the customers assemble their own furniture enables IKEA to save money on manufacturing and distribution, which they then pass on to customers in the form of lower prices at retail. To compensate for the customer having to do-it-themselves, IKEA offers other services that make this proposition attractive. These extra services include in-store child-care and play areas, restaurants, and longer hours of operations.             IKEA does not have its own manufacturing facilities. Instead, it is using subcontracted manufacturers all over the world for supplies. All research and development activities are, however, centralized in Sweden. In order to maintain low cost, IKEA lets its shoppers to assemble their own purchases. To facilitate shopping, IKEA provides catalogs, tape measure, shopping lists and pencils for writing note and measurements. IKEA’s designs and styles are very popular to its customers because it is able to blend quality, stylish designs and affordability. These characteristics make IKEA products very attractive to the customers. The IKEA design approach according to McDermott (2007) retains a strong Scandinavian identity seen in the use of natural wood, minimalist shapes, high technology, new materials and strong colors (as shown in the photos below). The company has extended the image of 20th-century Scandinavian Modernism and ensured that is has become an immensely widespread domestic living style. IKEA’s design is made synonymous with middle-class taste and thereby becomes the vehicle by which visible signs of affluence are made accessible to people of modest means. Of special relevance is the fact that the IKEA emphasis on design gives expression to the centrality of style in the contemporary marketplace. IKEA products could be roughly described as interior European modernism done in Scandinavian style. But the company’s genius consists in joining the attractions of design to practicality and affordability along with versatility. By this means, it captures a broad demographic of consumers who can buy into a trendy middle-class lifestyle while gaining the satisfaction of purchasing highly functional and practical products at minimal cost (Dunn 2008).     Process Chart of IKEA’s Distribution Process             The supply chain of IKEA starts with product development at its headquarters in Sweden, and then the designs are passed to its suppliers in different parts of the world. Purchasing comes next, followed by distribution and then products are sent to the stores. Last in the supply chain are the customers. IKEA operates 27 distribution centers in a total of 16 countries. From here IKEA products are delivered in 186 stores around the world. IKEA works in various ways to rationalize and simplify distribution. The secret is to calculate as exactly as possible how many products will be needed to satisfy demand. This eliminates any unnecessary costs for production and warehousing. The hallmarks of IKEA distribution are: <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Global distribution network</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Large volumes</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Flat packages</li> 	<li class="MsoNormal" style="text-align: justify; line-height: 200%"> 	Low costs</li> </ul>               The fact that IKEA products are sold packed flat means that they can be transported with greater efficiency. By minimizing “wasted space” it is possible to transport and store more packages at a time. And by increasing what is known as “the filling rate” in containers etc. (in other words, reducing the amount of wasted space), the cost of transporting each item goes down.   Distribution Process             IKEA designs its merchandise and outsourcers manufacturing to its dedicated manufacturers. IKEA then, transports finished goods from manufacturers to IKEA’s distribution centers in flat packaging. IKEA products are then subjected to inventory and then sent from the distribution center of different outlets.                             Potential for E-Commerce             There is a potential for e-commerce at IKEA. IKEA can make use of e-commerce in order to integrate its suppliers and distribution networks. IKEA can create a global website. Ideally, a company builds its global web site in two stages: internationalization and localization, Internationalization is the process of preparing a web site so that it can be easily adapted to multiple locales, a locale may be a country, a language of both.   Critique of the Distribution Process             IKEA’s distribution process is very effective. The company’s network of suppliers and its strategically located distribution centers make distribution of IKEA products efficient. However, I think that the main concern for IKEA is its inventory management. In order to lessen inventory, IKEA can make use of Just-in-Time (JIT) strategy. JIT can be considered as a philosophy for waste reduction and continuous improvement, a method which to control and reduce inventory, a way of increasing throughput, and a production scheduling system (Lowson 2002). In manufacturing, JIT is essentially a management philosophy where the primary objective is to achieve zero or minimum levels of inventory. The advantages of JIT include elimination of waste, enhanced product quality, improved employee morale and increased customer satisfaction (Reddy, 1994).   References Doole, I and Lowe, R 2005, Marketing Decisions in Global Markets, Cengage       Learning EMEA.   Dupuis, M and Dawson, J A 1999, European Case in Retailing, Blackwell            Publishing.   Mcdermott, C 2007, Design: The Key Concepts, Routledge, New York.   Lowson, R 2002, Strategic Operations Management: The New Competitive           Advantage, Routledge, New York.   Miller, D and Miller, I L 2005, Managing for the Long Run: Lessons in         Competitive Advantage from Great Family Businesses, Harvard Business     Press.   Reddy, A 1994, Total Quality Marketing: The Key to Regaining Market Shares,     Quorum Books, Westport CT.       Credit:ivythesis.typepad.com

IKEA’s Operations Management

IKEA’s Operations Management Operations Management is the set of activities that create goods and services through the t...