BUSINESS ADMINISTRATION 1

Operation Management

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Introduction to Operation Management

Businesses exist based on the sole element of customer satisfaction. The process of

satisfying the various customer needs and preferences is facilitated by delivering quality products

and services for which businesses exist. The whole process of delivering quality products and

services is hinged on administering business practices through maximizing efficiency and

aligning the various business strategies with customer needs. The whole process of enhancing

effective and efficient business activities entails operation management (OM) (Ord, Fildes &

Kourentzes, 2017). Therefore, operation management would be defined as the management of

the different processes within an organization to transform different inputs into goods and

services to facilitate value addition to the customer.

Competitiveness, Strategy, and Productivity

Primarily, the prime goal of operation management is to maximize efficiency in the

production process to effectively realize the fulfillment of customer needs, a critical aspect in

customer satisfaction, a feature that critically determines the sustainability and profitability of a

business. Combining different functions and processes is vital in facilitating the operation

management's goal of customer satisfaction. Both the functions and processes are strategically

guided to ensure that both effectiveness and efficiency are realizable (Ord, Fildes & Kourentzes,

2017). The levels of effectiveness and efficiency within an organization are critical in

determining and applying the different aspects of competitiveness, strategy, and productivity.

A marketplace is usually a crowded place where different sellers meet with their sellers to

deliver their products and services. To sell effectively, create, and maintain a niche in the market,

companies must be competitive. The level of competitiveness of a business determines its

success or failure in its respective industry. Competitiveness is the phenomenon through which

businesses strive to meet their customers' needs and preferences relative to what similar

businesses or their competitors offer in the market. Competition among businesses is usually

achieved through the respective businesses applying different aspects of both marketing and

operations. Marketing influences a business's competitiveness in different ways; one-way

marketing influences business competitiveness is to identify the customer's needs and wants. The

marketing ideal for identifying the needs and wants of the customers is to essentially create a

perfect match between the wants and needs with the goods or services that the business produces.

Secondly, marketing is critical in the promotion of competitiveness through establishing the

existing trade-off decisions by customers based on the products' prices and quality (Smith &

Reece, 1999). Advertising and promotion is another critical way through which marketing

impacts a business's competitiveness. Through advertising and promotion, potential customers

are attracted to understand the existence of products and their respective features, thus turning

them into buyers.

Product and Service Design

Competitiveness is also achievable through operations. Operations bring to the fore the

application of both independent and interrelated aspects such as; product and service design, the

costs, quality, location of the business, and the levels of flexibility. The product and service

design should reflect both the internal capabilities and processes involved between production

and sales while at the same time meeting the needs and wants of the customers through the right

features of the products or services. To remain competitive, the business has to be able to

produce its products or services at the lowest possible costs while at the same time delivering

high quality and optimally producing to meet the demand created by the customers (Smith &
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Reece, 1999). As part of remaining competitive, the location of the business is critical in several

ways, and it facilitates ease of accessibility for the customers. At the same time, it could also be

critical in cost-cutting, especially concerning inputs and market access. Locating a business close

to both input sources and the market is essential in reducing costs associated with transportation

and distribution. Convenience in the location of a business is a competitiveness enhancer,

especially in specific industries such as retail. Consumers are usually focused on the quality of

their products; to be competitive, businesses must uphold quality production and delivery.

Usually, customers will strive to pay more for quality products. Therefore, it will be prudent for

businesses to use quality raw materials, workmanship, and designs to be more satisfied. Being

flexible to changes in market trends and customer preferences will facilitate the level of

competitiveness of business (Ord, Fildes & Kourentzes, 2017). More rigid businesses to aspects

of change are more likely to fail and become extinct, especially in the ever-competitive, evolving

business world.

Operations form one of the critical strategies of any company. Strategically, operations

are essential in the management and accomplishment of the different organizational strategies

critical in ensuring the survival of any organization in an industry (Smith & Reece, 1999). A

strategy is usually a roadmap that provides directions to reach the destinations, which are the

goals set and pursued by different businesses. Operation s decisions essentially involve strategic

decisions whose objectives lead to long-term consequences concerning the management of

expenses and resources committed to running given organizations ( Ord, Fildes & Kourentzes,

2017). In achieving sustainability and profitability, operation management facilitates businesses

in applying strategies and tactics that complement each other in attaining efficiency, the main

goal of operation management.

Forecasting

While strategies mainly provide the focus for decision making, especially on the

organizational goals or objectives, tactics, on the other hand, are the individual actions and

methods applied to facilitate the realization of the organizational strategies (Smith & Reece,

1999). Tactics apply to the processes and measures of facilitating each of the functional areas

within the organization for the ultimate goal of achieving the organizational strategy set for a

period or to achieve a specific business agenda (Ord, Fildes & Kourentzes, 2017). Tactics are

more specific than strategies, and therefore provides for the guiding directions in achieving the

actual operations relevant decisions for the organization.

Operational management is primarily concerned with transforming inputs, including

labor and other capital goods, into outputs, goods, and services for creating value for the

customers. Productivity as an index of operations critically measures the quantity and quality of

the outputs (goods and services) relative to the inputs (raw materials, capital, labor, and other

resources). Productivity ratios in operations can be computed for departments and the whole

organization( Ord, Fildes & Kourentzes, 2017). The resulting production ratios are vitally

applied in various decision-making processes concerning labor planning, scheduling of the

equipment, and financial planning. From the productivity ratio results, managers will be best

positioned to make judgments on the performance levels and derive the right improvements for

the whole organization.

Forecasting is critical in smoothing the complexities associated with operation

management, and forecasting achieves the smoothening process by ensuring that resources are

adequately meet the demand. Forecasting refers to the process of making predictions on future

business events based on the existing data from similar or related past events. Relying on both
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past and present data facilitates managers of organizations to precisely forecast the right volume

of products to produce to meet the current market demand. The forecasts are therefore enabling

sound planning around different trends and effects. Through forecasting, effective operational

management and planning of an organization can be perfectly made to cover short-range events;

events in three months, medium-range events; events lasting between three months to one year,

and long-range events; forecasts covering three years beyond. The most vital forecasts for

businesses include; economic forecasts, forecasts covering economic factors such as inflation,

money supply, and income changes, all the factors that are likely to impact the business and its

operations (Smith & Reece, 1999). Technological forecasts, tracking the various signs of

progress within technologies applied by a company and how there may be possible changes that

could require the company to acquire new facilities and equipment. Demand forecasting

essentially enables a business to make accurate estimations of the volumes of its products or

services that the customers will require over a given period (Ord, Fildes & Kourentzes, 2017).

With the precise estimation, businesses are facilitated to plan their production, thus plans for the

required inputs alongside ensuring that the customers' needs are met throughout the short,

medium, and long term.

Relationship between Operations Strategy and Sustainable Competitive Advantage

Operational strategies are the techniques or tactics used by a business to achieve its

objectives. The sequence of decisions used to operationally strategies is used to ensure and enact

long-term capabilities of the business strategy. Operational tactics are to drive the overall

business strategies to acquire a substantive market share in the competitive market orient

(Sullivan et al., 2018). The operational tactics used in business strategy are;

Product and service design is a core operational tactic used to achieve the business
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strategy to enhance profitability by ensuring customer satisfaction. This strategy can be split into

two; product design and service design. Product design is a process that entails the creation of a

product in the customer's best interest, what the customer wants. This is achieved through

imagining, creating, and emphasize products that solve and address the customers' problems or

specific needs in the market (Kuncoro & Suriani, 2018). The product is created with the

understanding of the end-user or customer.

Service design is the process of harmonization and fusion of individuals, communication,

and the substantial components of a business to create quality services that satisfy both the

employees and the customers (Kuncoro & Suriani, 2018). Product and service design is

significant in attracting a vast market share for the business through customer satisfaction,

making it competitive and offers a valuable opportunity to maximize profits for the business.

Capacity Planning

Capacity planning is the operational procedure of determining the production volume

needed by a business to meets its ever-growing and changing demands for its products. A good

capacity planning management evaluates and incorporates the forecast demand of business

products, the cost of producing products, adequacy of funds, and the business management

policy (Sullivan et al., 2018). Capacity planning is significant in helping the business forecast

and keeps up with the customers' present and future demands on its products. Helping the

business reduce its operational costs and maximize sales influences the profitability level for the

business.

Process Selection
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Process selection refers to the decisions made on how the production of goods and

services will be assembled or classified. The processes aim to transform the inputs into outputs.

There are four types of process layouts; process layout, product layout, hybrid layout, and fixed-

position layout. Process layout is where the operations that are alike are harmoniously grouped.

Product layout is a design in which the inputs needed to produce an item are aligned in one place

as per the pattern and series of operations. Fixed-position layout is used in conditions that can't

move; hence the workers and equipment come to it; it may be too big and heavy or too fragile to

move (Sullivan et al., 2018). Hybrid layout seeks to combine the process, product, and fixed

position layout to improve operations.

Facility Layout

Facility layout refers to the positioning of different production components in a reliable

design to attain the preferred production outcomes. Facility layout has to consider the adequacy

of space, output, the safety of workers and facility, and the ease of operations. Process selection

and facility layout are significant in maximizing the success of the production process and

meeting the worker's needs in the process (Kuncoro & Suriani, 2018). Most importantly, the

layouts aim to enhance effortless workflow and offer effective transfer or distribution of

information through the stages of operations and the whole business system (Sullivan et al.,

2018). Process selection and facility layout help the business increase productivity, reduce

operational cost, and improve product quality, making it able to compete for the market share

available fully.

Design of Work System

Work system designs are the process of structure examination of the mechanisms of

undertaking activities to achieve effective and efficient use of available resources and lay down

performance standards when articulating duties (Kuncoro & Suriani, 2018). The significant

aspects of the design of work systems are; job design, mechanism analysis, and work assessment.

Job design specifies what, how, and why the individual employees undertake an assignment

(Sullivan et al., 2018). Practical job design aims to satisfy business objectives by motivating and

ensuring employee satisfaction in the process.

Mechanism analysis or method analysis aims at removing unnecessary assignments and

improving the process and time of completing essential tasks. Work assessment is determining

the amount of time required by a worker to complete a unit of a task. This helps determine the

level of performance of an individual, hence maximizing labor productivity (Sullivan et al.,

2018). Design of work systems aims to increase business productivity and quality of work, hence

making the business competitive in the market and maximizing profits for the business in the

long run.

Location Planning and Analysis

Location planning and analysis are essential in determining the success of a business.

Business location is done with operation research that aims to optimally place a business at

appointing that facilitates minimum transportation in accessing inputs, workers, and customers.

Location analysis is an array of methods to find, evaluate, and critically speculate the best place

to set up business activities (Sullivan et al., 2018). Location models help conduct location

analysis since they offer accurate and perfect data on current and preferred local arrangements.

The significant factors that affect the location of a business are; labor characteristics,
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cultural affiliations, environmental implication, and political factors. Location planning and

analysis help ensure continuity and success of the business by maximizing the demand for its

products and reducing the operational cost incurred in accessing and producing raw materials

(Sullivan et al., 2018). Hence, location planning and analysis helps the business achieve

sustainable competitive advantage by increasing sales, resulting in profit maximization for the

business, making it able to compete in the market.

Effective Management of Manufacturing and Service Operations

To study the Fundamentals of Stocks / Inventory Valuation

In producing goods and services for fulfilling the satisfaction of the customer's needs in

achieving delivery of value, several decisions and trade-offs are arrived at or developed through

the process of operations management. The critical decisions and balances are arrived at through

interpreting and applying several phenomena relevant to manufacturing products and delivery of

services (Qamar Hall, Chicksand & Collinson, 2020). The different aspects applied and affected

through operations management related to a business's different internal processes and

procedures.

Effective production of goods requires adequate planning alongside adequate inventories.

Operations management requires that effective inventory management be applied at all times by

all the respective departments and managers in producing products. Effective inventory

management involves maintaining optimal amounts of inventory that would facilitate optimal

production while ensuring that there are no budget deficits for fulfilling other operations and

ensuring that minimal losses are realized from either stored finished products, work-in-progress,

and materials awaiting processing (Qamar Hall, Chicksand & Collinson, 2020).
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Quality Control

Quality control is one critical function in the path of operation management. Applying

operation management in quality control and management ensures that processes and end

products are consistent. With consistency in the products' quality, customer retention is

achievable through continuous and maintained customer satisfaction. Operations management

ensures the attainment and maintenance of the quality of manufactured products through

different activities that are implemented in the business throughout the production processes

(Olsen & Tomlin, 2020). The activities essentially applied include; quality planning, the process

through which relevant standards to a product or service are identified, and decisions made on

how the standards will be met. Quality improvement, a purposeful change in the processes to

improve the confidence and reliability levels, especially of the product or service that a business

deals in. Quality control is a process undertaken to uphold the integrity and reliability of a

product or service for a company (Qamar Hall, Chicksand & Collinson, 2020). Quality

assurance, actions that are systematically planned to offer adequate reliability so that certain

goods or services qualify for set standards, specifications, performances, and requirements.

TQM and Quality Tools

Effective delivery of both services and products requires operation management to create

a balance between the process of quality improvement and desirable business goals on its

products or services. Application of total quality management (TQM) is critical in integrating the

business strategy, data, and the different communication channels into making them a part of the

quality principles of a business (Olsen & Tomlin, 2020). Through TQM, employees within an

organization can continuously improve their abilities to ensure the delivery of products and

services with the qualities that would provide the customers' preferred values (Qamar Hall,
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Chicksand & Collinson, 2020). The whole process of TQM is guided by a set of principles,

focusing on the customer, commitment of the employees, process approach, an integration of the

whole system, and the application of both strategy and systematic approaches.

Supply Chain Management

Complete, timely, and cost-effective delivery of both goods and services requires the

application of robust operations management systems. Effective supply chain management is a

critical aspect in delivering value on the products and services to the customers (Olsen &

Tomlin, 2020). Through operations management, the supply chain strategy should be aligned to

the business strategy. Aligning the two strategies creates a seamless connection between the

policies of the suppliers and those of the business, which thus ensures effective relationships

between the business and its customers, therefore, enhancing sustainability (Qamar Hall,

Chicksand & Collinson, 2020). Effective supply chain management involves streamlining the

businesses' supplies, processes, and deliveries, maximizing the customer value creation, thus

enabling the business to gain a competitive advantage.

Aggregate Planning, MRP and ERP

Aggregate planning as part of operations management enables businesses to adequately

work out the production requirements for different periods based on the forecasts. The process of

aggregate planning allows businesses to adequately attain their financial goals, enhance

maximization of the production facilities, facilities customers delight in the company's produced

since there is reduced waiting time for deliveries, and the company is saved from inventory

overstocking (Olsen & Tomlin, 2020). Facilitating aggregate planning is the application of both

material Requirement planning (MRP) and Enterprise Resource Planning (ERP) tools, which are
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critical in resource allocation and scheduling to achieve the forecasted demand and other goals of

the business (Qamar Hall, Chicksand & Collinson, 2020).

Conclusion

Operation management critically forms part of the success of a company. The application

of operation management principles facilitates a business to be in touch with the customers’

needs and preferences, a vital part in the sustainability of the company. Besides achieving

internal efficiencies for a business, operations management facilitates the competitive

positioning of the business in its industry. Competitiveness is achieved through different aspects

of management such as through application of forecasting to facilitate production of the right

quantities and quality demanded of a product or a service. In improving the internal systems and

operational activities, businesses improve the quality and value for their commodities thus

fulfilling their customers’ expectations and gaining competitive advantage in their respective

industries.
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References

Kuncoro, W., & Suriani, W. O. (2018). Achieving sustainable competitive advantage through

product innovation and market driving. Asia pacific management review, 23(3), 186-192.

Olsen, T. L., & Tomlin, B. (2020). Industry 4.0: Opportunities and challenges for operations

management. Manufacturing & Service Operations Management, 22(1), 113-122.

Ord, K., Fildes, R. A., & Kourentzes, N. (2017). Principles of business forecasting.

Qamar, A., Hall, M. A., Chicksand, D., & Collinson, S. (2020). Quality and flexibility

performance trade-offs between lean and agile manufacturing firms in the automotive

industry. Production Planning & Control, 31(9), 723-738.

Smith, T. M., & Reece, J. S. (1999). The relationship of strategy, fit, productivity, and business

performance in a services setting. Journal of Operations Management, 17(2), 145-161.

Sullivan, K., Thomas, S., & Rosano, M. (2018). Using industrial ecology and strategic

management concepts to pursue the Sustainable Development Goals. Journal of Cleaner

Production, 174, 237-246.