Operations management is the planning scheduling and control of the activities that transforms inputs into finished goods or services. In this assignment I will explore and talk about three operations management concepts and debate how the knowledge of the three concepts help organisations improve their operational efficiency. There are two key objectives that operation managers have to focus on. One is to satisfy the customers as without customers the organisation will cease to exist Nevan Wright (1999) The second objective is the efficient use of resources, because if an organisation can’t afford the level of service it is providing, then it will soon go out of business Nevan Wright (1999). Rouse (2015) defines Just in time (JIT) manufacturing as a “production model in which items are created to meet demand, not created in surplus or in advance of need and believes that the purpose of JIT production is to avoid the waste associated with overproduction, waiting and excess inventory, three of the seven waste categories defined in the Toyota Production System”.
Just in time (JIT) is an important concept for an organisation to know. An example of an organisation that uses Just in time manufacturing is Dell, as ‘every two hours, Dell assesses how many components it will need for the next manufacturing run’ Harrison (2012). This leads to Dell not overproducing any of their products meaning there won’t be any wasted products, but also since they aren’t overproducing it means they aren’t spending extra money on the extra products that could end up as waste. According to Harrison (2012) Dell is finding more and more ways to cut the time they it takes them to make and ship a PC by combining its manufacturing and shipping number of times an employee has to touch each of the product.
Another example of a company that uses Just-In- time manufacturing (JIT) is Toyota. According to Toyota (2013) the main aim of JIT is to save warehouse space and unnecessary cost-carrying and also to help their company improve efficiency. Toyota Describes how they used JIT efficiently and how they make sure it actually works out to benefit them ‘To apply this flow efficiently means relying on ordering signals from Kanban boards or by forecasting parts usage ahead of time, though this latter method requires production numbers to remain stable’ Toyota (2013). An advantage for Toyota using JIT manufacturing is that it allows the individual cars to be built in order, Toyota (2013) however, a disadvantage of it is that every component will have to fit perfectly first time because there are no alternatives that is available, Toyota (2013).
Supply Chain Management
Another concept that can be very beneficial for operational management for an organisation is Supply Chain Management. The concept of Supply Chain Management is mainly based on two different ideas. The first idea is that practically every product that reaches an end user represents the cumulative effort of multiple organizations and these organizations are referred to collectively as the supply chain Handfield (2011). The second idea is that, even though supply chains have existed for a long time, many organizations have only paid attention to what was happening with their “four walls” Handfield (2011). An example of an organisation using the supply chain management is Walmart, as in the late 1980s and early 1990s, Walmart suppliers received daily sales information from individual stores via satellite, which the suppliers then used the information to plan production and ship the orders to Walmart’s warehouses Bozarth, Handfield and Chandiran (2013). This led to Walmart gaining positive results as they started to give better customer service, lower production and transportation costs and also given them better use of retail store space Bozarth, Handfield and Chandiran (2013). ‘Supply chain management efforts can range from an individual firm taking steps to improve the flow of information between itself and its supply chain partners to a large trade organizations looking for ways to standardise transportation and billing practices’ Bozarth, Handfield and Chandiran (2013). Even though Supply Chain Management (SCM) has its benefits, it can still be improved by locating facilities in countries where unique resources are available and these resources may be human resource expertise, low cost labour, or raw materials Heizer and Render (2014). For example world athletic shoe production has migrated from South Korea to China, meaning this location can take advantage of the low cost labour and production competence in a city where 40,000 people work making athletic shoes for the world Heizer and Render (2014).
Capacity Management
Another concept that is as important as supply management and Just-in-time manufacturing (JIT) for an organisation to know is capacity management. Capacity management is a one of the key planning responsibility for any operation managers. ‘As defined by Wild (1995) capacity management is concerned with the matching of the capacity of the operating system and the demand placed on that system’ Nevan Wright (1999). Every organisation will measure the capacity differently as most likely they will all require different amount of capacity to get the most of their production and service. ‘The key resource is the most crucial resource for the provision of a service and it may be determined by factors such as being the most costly, the most used, or the most in demand.’ Nevan Wright (1999). Organisations can control the capacity in two different ways, one of the ways is to manipulate the capacity. With his first approach to control the capacity, ‘The capacity is planned ahead to meet the expected demand, and if or when demand changes capacity is juggled to meet the new demand.’ Nevan Wright (1999). This is because if the capacity is inadequate, it will lead to the customers having to either wait for the service, but if they decide not to do that then they will be lost to the system. The second approach to controlling the capacity is to manipulate the demand. To carry out this second approach the capacity will have to be fixed and demand will need to then be manipulated to match the available capacity. ‘The common methods for manipulating demand are advertising, promotions, cheaper fare/rates in the off season, cheaper meals for early diners, happy hours in bars and more’ Nevan Wright (1999). An example of a capacity management strategy is adjustment or variation of capacity, because generally system capacity can be changed to an extent as the staff can work overtime and any unskilled people can be employed during busy periods to fill up space to free up skilled staff and staff can then be re-allocated from their normal duties to help in the front office Nevan Wright (1999). An example of this is use is, in busy periods supermarkets like Tesco could open up extra check-out counters, and any office staff including the manager can help out with this process to give service to the customers, and during days that aren’t busy everyone goes back to what they normally do, such as some staff can be re-assigned to stocking shelves, and the front office can go back to their normal duties and responsibilities, Nevan Wright (1999). Using this concept has its benefits, such as budgeting, scalability, growth and dynamic change. This is because Doing this will allow you to closely estimate how much your expenses will be, making it much easier to develop financial projections Root III (1985). It helps growth because ‘capacity planning becomes an integral part of business planning because it helps you determine how your company will grow based on your projections.’ Root III (1985).
In this assignment I have showed a range of different concepts and theories of operation management within an organisation, while also providing examples of the beneficial and drawbacks of the concepts to certain industries. It shows how having knowledge of operations management is required to allow an organisation to be more efficient and help the business understand what their main concept is. All concepts that I have talked about in this assignments come with its benefits and drawbacks, but if an organisation uses the concepts smartly and correctly then the results will remove any drawbacks and the results will mainly be positive and in conclusion it shows that all three concepts, Just-in-time (JIT), Supply Chain Management (SCM) and Capacity Management all work to benefit an organization, however they all still have their drawbacks and risk when using the concepts and to make sure an organisation gets the best out of the different concepts they have to choose wisely which concepts fits their company the most to get the most out of it.