Operation_Management

|Chapter 21: The operations challenge | |Study guide | This is one of the most exciting times to be an operations manager. Markets are clearly more competitive than once they were. The role of public ownership of many state-run and formerly state-run operations, such as health care operations, is being questioned. The wider ownership of commercial businesses in many developed countries raises questions of stakeholder responsibility. Global barriers and alliances are shifting. Some technologies (such as internet-based technologies) have moved considerably further than our ability to understand their implications. Knowledge is seen as (arguably) the most important commodity in business. Perhaps most importantly, our responsibility to the environment in which we live can no longer be ignored. This last chapter deals with just some of the implications of these developments. The topics included in the chapter are not intended to be in any way an exhaustive list of the challenges facing operations managers. But they are a collection of some of the more interesting ones. Nor is this chapter the same as the others in its learning objectives. There is established theory around layout, supply chains, job design, planning and control and so on. What is presented in this chapter is not established theory. It is usually speculation concerning the impact of various challenges which have been identified. Approach it therefore not as a set of prescriptions but rather as a set of challenges for which there are no obvious answers. Your learning objectives This is what you should be able to do after reading Chapter 21 and working through this study guide. • Look on operations management as a subject which has important connections with many of the important issues facing business today. [pic] Globalisation Notwithstanding any views you may have on the merits or not of globalisation, as operations become more international some interesting issues do arise. Here are three which are not fully explored in the chapter. Different regions – different practices Different parts of the world, because of their differing cultures, economic conditions, history, market needs, demography, and so on, are likely to develop different operations practices. The most obvious example is the way just-in-time and ‘lean manufacturing’ practice grew up in Japan in the aftermath of the second world war (see Chapter 15). The question, therefore, which multinationals have to face is, ‘Should we allow our facilities in different parts of the world to develop their own operations strategies to suit their own conditions, or should we encourage a uniformity of practice which reflects our corporate values'’ For example, linking this back to our discussion of ethics in the earlier part of this chapter, should an organization which originates in a culture where any kind of gift or bribe is highly unethical, prevent its operations from giving small gifts to potential suppliers or customers in a country where this is culturally acceptable' Similarly, should an organization which has built up a strong world-wide brand image allow this to be adapted in different regions' For example, McDonald’s, the fast-food chain, developed a rigorous and highly standardized way of organizing its operations which was one of the main reasons for its world-wide success. Yet, eventually it had to allow a certain amount of discretion to local managers to adapt for local tastes (for example, serving Teriyaki burgers in Japan, or serving wine in Lyons). The prevailing conditions in any part of the world can often lead to organizations developing their operations in a creative way so as to adapt and survive. Just-in-time manufacture (again) can be seen as Japanese manufacturing industry’s response to its shortage of natural raw materials. Similarly, the Scandinavian emphasis on liberal work attitudes and high levels of welfare support contributed to its manufacturing companies developing working conditions and job designs which could retain staff in such a social environment. Transferring operations practices Different parts of the world, because of their different conditions, develop their own approach to operations management. So, can the practices which grew up under one set of conditions transfer successfully to parts of the world where conditions might be very different' Again, Japanese manufacturing industry provides us with an example. When just-in-time manufacturing began to be noticed by the rest of the world, it was common to hear the view expressed that although it was fine for Japan it would never work ‘over here’. North American and European cultures especially were considered to be unsuitable for Japanese methods of manufacture. With hindsight this view was flawed in two ways. First, it failed to distinguish between the ‘technical’ aspects of just-in-time (such as kanban control, or set-up time reduction) which were relatively easily transferable, and the way in which just-in-time was implemented by harnessing certain ‘cultural’ factors of Japanese life (such as the emphasis on consensus decision-making). Although just-in-time manufacture has now spread throughout the world, it is not always applied in exactly the same way in North America or the UK, for example, as it is in Japan. Some of the technical aspects may be identical but the way it is put into practice has often been tailored to suit national culture. Secondly, it is an over-simplification to assume that all countries within one region of the world have the same work culture. The cultural contexts of the UK, France and Sweden, for example, are sufficiently different to make it difficult to generalize about the acceptability of just-in-time manufacturing methods in a ‘European’ culture. Yet sometimes an operational practice which is wildly successful in one part of the world does not transfer easily. For example, the Federal Express Corporation in America practically invented the overnight express delivery service. Its ‘hub-and-spoke’ operations structure in the United States enables it to guarantee overnight delivery from any part of the country to any other part by routing all packages through a single hub in Memphis, Tennessee. Influenced partly by the moves towards greater European integration, Federal Express attempted to duplicate its US operation in Europe. However, to some extent Europe is far from being a single integrated economic entity in the same way as is the US. Differences in language, currency, culture, tax rates, and so on, posed problems which were not experienced in the US. After some years of struggling to develop the overnight express business it gave up the struggle and closed this part of its business. Managing across national boundaries Managing an operations network across national boundaries on a day-to-day basis is not always easy. Operations managers in different plants, located in different parts of the world are likely to face different problems and probably speak different languages. How does the company prevent the national interests of one part of the network overriding the good of the whole network while encouraging constructive internal competition within the network' Kodak, for example, maintains a global operations performance measurement system which allows all Kodak plants to assess their own performance against other Kodak plants around the world. So if one plant was dissatisfied with its own performance in (say) delivery reliability, it could consult the international database to find the Kodak plants who were performing particularly well in this area and then seek advice from them. The plants which have the best performance in each performance measure (called ‘Kodak class’ plants) are expected to be co-operative in terms of helping other Kodak plants to emulate their own success. Of course, the amount of effort and co-ordination which goes into running the performance database and the expertise necessary to interpret it in a sensible manner is available only to relatively large and sophisticated organizations. However, the ability to compare plants around the world can be a major asset for multinational companies. It enables them continually to keep abreast of good operations practice and it prevents their individual plants from becoming either parochial or complacent. For example, the Volvo Car Corporation (now part of Ford), which in the early 1990s had three major car assembly plants in Sweden, was able to judge the performance of its Swedish plants by comparing them with its plant in Ghent in Belgium. Although the product mix in the four plants was slightly different, comparisons of productivity, quality and logistics could be made. (In fact the superior operations performance in the Ghent factory caused a radical rethink of the way Volvo organized its car manufacture in Sweden.) It is the ability of multinationals to compare the performance of plants in different parts of the world that helps them develop a global and multi-cultural perspective. Multi-culturalism is the goal to which many multinational firms aspire. It means that the company sees itself as being a part of all the communities in which it is involved rather than as being primarily associated with its original country of origin. Asea Brown Boveri (ABB), the Swedish–Swiss electrical engineering company, is one such example. The company has a board of eight directors from four different nationalities and an executive committee of eight senior managers from five different countries who run its day-to-day business. With a headquarters in Zurich, English is its corporate language while its financial results are reported in US dollars. It also moves its business around the world in response to global changes. In the first half of 1994 its workforce in the Asian region increased by 8500 while its workforce in Western Europe decreased by 4000. Partly this was a response to high labour costs in its European operations but also it was because of forecast market growth in Asia. Social responsibility Those organizations which understand the importance of social responsibility to operations decisions tend to take a proactive approach to their own ethical stance. This involves developing an explicit set of principles which allow organizations to avoid ethically ambiguous activities and gradually build up a social responsibility framework which becomes accepted within the organizational culture of the operation. Typically such organizations adopt an explicit and public set of values. The example below shows the mission statement for East Midlands Electricity, a regionally based electricity company in the UK. The mission statement consists of a long-term statement of the company’s vision and various ‘statements of strategy’. Some of these statements of strategy have quite clear ethical undertones, for example ‘adopting and promoting safety and safe working practices in all our activities’. However, the core values which the company sees itself as promoting are identified separately. Example - The mission statement of East Midlands Electricity company The company’s mission statement comprises its vision, strategy and values. The Vision Simply, to be the best electricity company in the UK. Strategy The company’s strategies are the means by which we will strive to achieve our vision. The statements of strategy which follow do not appear in any particular order of priority. They should be read as a co-ordinated and coherent whole, as a group of strategies which, taken together, will enable us to achieve our vision. • Progressive improvement in financial performance and rigorous control of costs. • Setting and delivering exceptionally high standards of customer service. • Further development of both the regulated and non-regulated businesses in ways which will contribute to profitable growth. • Developing and exploiting the synergies between our various businesses. • Strengthening the image of East Midlands Electricity as a national company with a strong regional base. • Devolving responsibility and decision-making to the people closest to the issues and achieving the highest standards in each task we perform. • Vigorous and effective marketing of all our products and services. • Adopting and promoting safety and safe working practices in all our activities. • Demonstrating our concern for the community and the environment. • Employing a highly skilled flexible workforce matched to the needs of the businesses. Training and developing staff to fulfil those needs with due recognition of their own ambition and potential. • Seeking continuous improvement in all that we do through the total quality process. Continuously learning from our own experiences and from the experiences of others. • Seeking quality goods and services from our suppliers on a competitive basis while fostering long-term, mutually supportive relationships with them. Company Values The company operates by a set of values and ethics which include: • Adherence not only to the letter but also to the spirit of the law and accepted standards of behaviour. • Integrity and honesty in all our dealings. • Respect for the individual. • Innovation, the seeking and acceptance of change, and the prompt adoption of relevant new techniques. • The expectation of high performance standards from all its employees and a willingness to recognize and reward achievement. • Courtesy, concern and quality in personal presentation, language and appearance. • Concern for the environment. Environmental responsibility Undoubtedly operations managers are far more sensitive to environmental issues than they were only a few years ago. The table below show the results of a survey which asked questions of companies environmental managers and of their operations managers. The first table indicates the operations decision areas which environmental managers had some kind of influence over. The second table shows the environmental issues in which operations managers became involved. The authors of the survey believe that their findings suggest that the delineation between environmental and operations management is fading. Extent of environmental managers’ input into typical operations decision areas |Operations decision areas |Percentage | |Process Technology |55.3 | |Supply Chain Management |52.9 | |Operations Strategy |46.6 | |Facility Layout and Location |45.6 | |Make vs. Buy |33.4 | |Human Resource Management |25.9 | |Quality Management |25.6 | |Product Development |24.5 | |Capacity |21.6 | |Scheduling |15.8 | Extent of operations managers’ input into typical environmental decisions |Environmental Issues |Percentage | |Environmental Management Strategy |55.0 | |Environmental Training |50.1 | |Environmental Reporting |45.4 | |Environmental Audits |45.0 | |Environmental Technologies |35.7 | |Relationships with Regulators |35.0 |   Technology Technologies can make operations better or different or both, and it is important that operations managers understand the strategic impact of new technologies. However, operations managers are not always either directly responsible for the introduction of new technologies into the organization, nor can they have the final say in what, when and how new technologies are introduced. This is often, at least partly, the responsibility of technical specialists or engineers. Operations managers and technical specialists will not necessarily have the same perspective on technological developments. It is necessary to understand the different perspectives in order to interpret how technological change will be viewed in the organization. Technologists are, not surprisingly, likely to see technology largely in terms of its functionality. What it can do and how it does it as a stand-alone capital investment, is often, to them, the most important issue. Operations managers, on the other hand, are more likely to be concerned with the practical usability of the technology, how it can be integrated into the existing operations system, what effect it has on overall levels of internal and external customer service and how much it will cost over its total life cycle. The table below illustrates different aspects of these two views. Technologists and operations managers are likely to take different views of technologies: |Technologist’s View |Operations Manager’s View | |Concerned with…. |Concerned with …. | |Functionality |Usability | |Technical performance |Service levels | |Reliability |Maintainability | |Capital cost |Life cycle cost | |Stand-alone performance |Total system performance | |Technology learning |Operational learning | |Upgradability |Development | |Novelty |Commonality |   The issue here is not that either view is either right or wrong. Rather both views are determined by the nature of each person’s job. However, if new technologies are to be successfully implemented the two views need to be understood, and to some extent, reconciled. Knowledge management In some ways all the previous issues discussed in the chapter are concerned with knowledge management. Although it is treated in the chapter as a separate issue one could argue that globalisation, social responsibility, environmental responsibility and technology are all concerned with the way an organisation manages its knowledge. Globalisation requires knowledge and understanding of markets, resources and processes around the world. Social responsibility requires a knowledge of stakeholders, value systems and an understanding of the overall purpose of the organisation. Environmental responsibility requires knowledge of the environmental impact of operations resources and alternative approaches to operations. Technology is really the operationalisation of knowledge in process form. It is not the metal and electronics which is important in a piece of process technology, it is the knowledge which went into creating them.