Mba_Operations_Management

Operations Management MBA International Topic Operations Function Within a Facilities Services Company William Peden Registration No. 200965241 MacTaggart University of Strathclyde July 2009 Word Count 2750 Contents Contents: 1 Section 1: Introduction 2 Section 2: Literature Review 2 Section 3: Case Study Investigation 8 Section 4: Conclusion 14 4.1 Reflection 15 References: 16 Appendices: 17 1. Introduction The purpose of this report is to examine the operations functions within a facilities services company which is supplying both Hard and Soft services to the Commercial and Residential sector of business in the Middle East Region. The first section will comprise of a literature review which will establish that I have an understanding of Operations Management and its role within an organisation. This will be followed by a case study review, in which I will be using a facilities services company which I worked for as the example. Finally the conclusion will be an observation and reflection as to the effectiveness/success of the operations structure within the organisation. 2. Literature Review The origins of Operations Management can be traced back to the Industrial Revolution and to Frederick Winslow Taylor (1856-1915) who introduced his theory of Scientific Management. He could be considered as one of the first Managerial Consultants. His theory comprised of four principals. 1. ‘Replace rule of thumb work methods with methods based on scientific study of the tasks. 2. Scientifically select, train and develop each employee rather than passively allowing to train themselves. 3. Provide, ‘Detailed instruction and supervision of each worker in the performance of that workers discreet task’(Montgomery, 2007, p. 250) 4. Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the task and the workers actually perform the tasks’. (Wikipedia, Internet, 2009) As referred to in (McMillan,Mullan,Paton, 2008, p. 10), a series of studies was carried out at General Electric’s plant at Hawthorne by Professor Elton Mayo. He was interested in the link between working conditions and productivity. The study found that the workplace is a social system within which, recognition, security and a sense of belonging is more important in determining workers morale and productivity than the physical conditions in which he works. Henry Ford (1863-1947) had the ‘idea’ to create a constant moving assembly line, ‘Ideas are of themselves extraordinarily valuable, but an idea is just an idea. Almost anyone can think of an idea. The thing that counts is developing it into a practical product’. (My Life and Work, Henry Ford, 1922). Ford applied this idea to his car assembly plant, which mass produced automobiles at a price the general public could afford. His method of production was sometimes referred to as ‘Fordism’. The emphasis with Ford’s idea was to give each person on the assembly line a specific repetitive task to complete within a specific time frame. In principle Ford had put in place an Operations Functions system which is still followed today. There was an input of materials at the start, these were transformed on the assembly line and an outcome, the car, was produced at the out put. Over the years, theories on Operations Management have changed in order to keep pace with the advancement of technology. Present day Operations Management is described as, ‘The activities, decisions and responsibilities of managing the production and delivery of products and services’ (Slack, Chambers, Johnston, 2007, p. 4). The diagrams below illustrate the challenges facing today’s Operations Manager. (Diagrams taken from MBA Course Handout Material, 2009) [pic] Fig 1. [pic] Fig 2 The Operations function is central to all organisations and has a basic concept. Namely, that inputs are transformed or converted to outputs and are done so with a measurement of performance against a set quality standard. The quality standard is set by predetermined benchmarks. Nearly all everyday activities are in some way a form of an operational function. Some may have a product as the output, for instance if you have your breakfast in a restaurant, the actual food that you eat has come through an operations function involving you as the customer as part of the process. Another example may be as simple as purchasing a bottle of Coke. This process has started at the input stage with a combination of raw materials, recipes and manpower, from there it has been through the transformation stage and eventually arriving at the vending machine in a bottle via the output stage. The diagram shown below shows the Transformation Process within an Operation. (Diagram taken from MBA Course Handout Material, 2009) [pic] Fig 3. As seen in the above diagram the process begins with inputs being put into the system and passing through the transformation process stage and being delivered as outputs. This process is monitored by the means of a feedback loop and is sometimes called an open system. The feedback ensures that the quality of the output meets the pre-set parameters which have been set for the transformation process, if there is a deviation from this, then the adjustment to rectify the same can be made at the input stage. As mentioned in (McMillan,Mullan,Paton, 2008, p. 30), there are systems which can comprise of interdependent sub-systems which may be termed as complex systems. The operations function is central to the core of the business and may have several departments (subsystems) in an orbit around it. These too, may have lower level sub-systems within them. Their sub-systems will have their own input-conversion-output and feedback within them. These sub-systems also may be linked to each other. Their individual outputs will feedback to the main function where Operations management will oversee the complete operation ensuring that the final product or service is delivered to the customer. The diagram below shows how this might look. (Diagram taken from MBA Course Handout Material, 2009) [pic] Fig 4. Strategy Another aspect of the operations function to be considered is the company strategy. According to The Oxford English Dictionary, strategy is defined as, ‘the management of an army or armies in a campaign; a plan of action or policy in business or politics’. Strategy in a business sense therefore is all about the decisions and actions that are required to be taken to ensure profit and longevity for the company. For a company to obtain and sustain a competitive advantage Michael Porter (1947-19--) suggests that they should follow one of three generic strategies.. As mentioned below, on the website (www.learningmarketing.net blog) Strategy 1; Cost Leadership This involves the company aiming to be the lowest cost producer within their market. The organisation aims at driving cost down through all the stages of production from sourcing to labour costs. They usually aim at a broad market to allow sales to cover costs. Organisations such as Walmart, Aldi and low cost airlines are examples of this strategy. Strategy 2; Differentiation To be different is what all companies strive for. Having a competitive advantage that allows the company and its products to stand out is crucial for success. The company will have to be different from its competition in at least one aspect. Today’s mobile phone manufacturers are a good example of this.. Strategy 3; Focus or Niche. Here the company will focus efforts and resources on one particular segment and will strive to become known as the best provider within that sector for its product. Competitive advantage will be generated specifically for the niche. Using a cost focus a company aims at being the lowest cost supplier in that niche. While adopting a differential focus a firm creates competitive advantage through differentiation within the niche or segment. Potential problems with the niche approach are that small specialist niches can disappear in long run. The main concern should be that the service or product is focused on a particular segment as can be seen in the diagram below. [pic] Fig 5. 3. Case Study Al Masa Facility Services L.L.C. is a new company which was founded in 2007 in Abu Dhabi. I was part of the team who established the company. The company was created at the request of Aldar Properties, who approached MAB Services in Dubai and asked them to reproduce their facilities operation in Abu Dhabi. A ‘Strategic Alliance’ format was established between Aldar and MAB. Within this framework it was agreed that, over a three year period, Al Masa would establish itself and would supply Hard and Soft Facility services to Aldar. In return Aldar would be using these services exclusively on ten of their new developments. A stipulation of the agreement stated that Al Masa could not look outside of Aldar for any sources of revenue within this three year period. From the beginning it was necessary to establish an Operational Strategy. This was based on the one which was in place already at MAB Services. Namely that the company would be concentrating on providing a higher level of technical expertise than what was already available in the market-place. “No more would technicians arrive at your doorstep in their Flip Flops with their tools in a Spinney’s bag”. During the initial stages of development MAB corporate office in Dubai would be assisting with administration services. A location for the corporate office had to be found and it was decided that from an operational and strategic point of view it would make sense to site it close to Aldar Properties head office. Having done so, it was necessary to establish the departments which would include H.R./Administration, Procurement, Finance, and Site Operations. See Diagram Appendices 1. The business goals for the company were; • To meet the requirements set out in the strategic agreement with Aldar. • To be self sufficient and operating in profit within the three year strategic alliance time span. • To establish itself as the leading facility services supplier in Abu Dhabi. • To be ready to expand the operation into the open market after the initial contract with Aldar had expired. • To become ISO 9000 compliant. The company Head Office structure with all manpower in place was established within the initial three months of operation and started to supply its services to Aldar in that period. Each department had its own operational structure and was to report to a central operations management. • The IT department is crucial to the operations function of all organisations’s today and was one of the first to be put in place. • The HR/Administration department was responsible for all recruiting and processing of new staff arrivals. • Finance/Accounts were responsible for payroll, invoicing and payment of creditors. • Procurement department to source , procure and distribute materials to the sites. • Site Operations department to control and interface in the day to day running of the sites within the portfolio. In essence the main operations function that Al Masa was supplying was of a service type, where outcomes were measured in the performance and reliability of how efficiently Alders’ properties were serviced and maintained. Vii Performance When investigating productivity and customer service it was found that this was one of the main areas to be addressed by the operations manager in Al Masa. This was initiated by Aldar appointing Facilities Managers with differing backgrounds, i.e. from a mixture of the Residential and Retail sectors, who had different perceptions on value. In order to address this it would be necessary to examine the dimensions of service quality to find out what the client’s expectations are. These dimensions are: • Dependability and consistency get the job done right at the first attempt. • Responsiveness, meet appointment timings, prompt service. • Competence, properly trained staff in all departments. • Politeness, friendly contact personnel, willing to be of assistance. • Contact, easy simple method of registering a job request • Communication, keep the client informed in a manner they easily understand. • Honesty, customers interests at the fore. Al Masa used a model of service quality to attain the information and feedback required to ascertain what level of value they were achieving This was accomplished by using a SERVQUAL questionnaire. This strategy measures the gaps between current levels of service and the client’s expectations. The diagram below shows a model of service quality [pic]Fig 6. iv. Technology When investigating the use of information technology it was found that Al Masa were requested by Aldar to provide a fast and efficient means of accessing information in relation to the services provided, time involved carrying out the services and invoicing of the same. To this end Al Masa put in place a system called FSI Concept 500, which is a computer aided facilities management (CAFM) package. This is a user friendly, enterprise-wide operational management tool. (website www.fsi.co.uk ).This system allowed both parties to observe and make decisions based on reports which this system can generate. It also allowed Al Masa to manage their operations functions with maximum efficiency. As mentioned on the website, ‘Structured information regarding the facilities operations function is a key element in the successful delivery of facilities services, as it provides the basis for informed management decisions and strategic policy choices, leading to better performance and cost control’. To streamline this operation further it was decided to setup a dedicated Help-Desk for the client. This was a further use of information technology systems. Both systems mentioned were integrated into the company’s IT network. The diagram below shows a flowchart of the Help-Desk function. [pic] Fig 7. i. Globalisation Globalisation effect on the growth of the company was investigated and it was found that due to the downturn in the financial markets it 2008-2009, Aldar were not able to follow through with their part of the agreement and supply Al Masa with the projects that were within the three year span of the strategic agreement. To this effect it was necessary for Al Masa to seek alternative avenues of income. A new operations function had to be formulated. Previously a Marketing Function had not been part of the strategy. A plan was formulated. Being already familiar with the market and the other service providers, it was decided to target companies that were already known to be in need of their services. The marketing decisions were base on the Marketing Mix theory of the 4 P’s, Place, Product, Price, and Promotion. Potential clients were informed by sending out company profile folders accompanied by a letter of introduction from the GM. The company web-site was further developed to offer more information regarding the services on offer. Suppliers of materials were also informed as they were thought to be a good means of conveying the news. The company was already active in the business networking sector and affiliates here were made aware that Al Masa was able to tender for business as an independent company. The Marketing Model is shown in figure 8 below. [pic] Fig 8. 4. Conclusion Al Masa has a good Operations Management structure in place. They were following the theories of good business practice and operational strategy to obtain the initial business goals within the three year plan. When analysed by using the McKinsay 7S approach, (See Diagram 9) it was found that all departments had a good balance and were ready to move forward and expand as more work came on stream. However now that the original agreement has come to a premature end as mentioned in the globalisation section of the case study, they will have to adopt a new strategy. McKinsey 7-S Model [pic] Fig 9. The challenge now, is how to re-structure in order to obtain a multi client customer base. As the strategy will have to be re-engineered to cater for more than one client, this could be done by applying the SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to ascertain the way forward. This will give a clear indication of the business performance and prospects. It can be done by using the framework below (See Figure 10) to assess the company. [pic] Fig 10. Areas which will have to be addressed could be developed further by using the matrix shown below. [pic] By making use of the above matrix Senior management will be able to get an idea on how to re-structure the operational strategy to take into consideration the new market that the company will be operating in. In conclusion, it is my opinion that Al Masa has the capabilities to adapt to this change and move forward and be a successful company. Reflection While completing this assignment I have learned the history behind operations management as we know it to-day, I found this highly informative. In respect to seeing how ideas have changed to adapt to modern day society. Also I have gained a thorough insight into what it takes to set-up an operations function within an organisation. Overall it has been a challenging but rewarding exercise for me and one which I shall take forward and hopefully implement some of it in my current workplace. . References Section 2 McMillan,Mullan,Paton. (2008), Operations Management, University of Strathclyde. Ford H. (1922), My Life and Work, Filiquarian Publishing. Slack,Chambers,Johnston. (2007), Operations Management, FT Prentice Hall. Web sites www.wikipedia.com www.learningmarketing.net Section 3 Web sites www.fsi.co.uk Appendices 1 Al Masa Company Structure. [pic]