Today’s global economy has forced companies to focus on how they deliver their product or service to their customers. Operations Management is an integral part of this process because it focuses on the transformation of needed inputs to desired outputs. This transformation includes office, production, manufacturing, and vendors or suppliers, as well as other things that affect the company’s ability to deliver superior quality products. Operations Management is the core of any business. It is the management function that coordinates all the activities in relationship to product/service reliability, quality, efficiencies, delivery and meeting customer’s expectations. Operations Management includes the use of the facilities, equipment, materials, technology, and most importantly the employees. These operational activities are designed relative to sustainability concerns. In this unit we will study the importance of Operations Management.
In the Five Forces Behind the New Business Reality, we see how businesses have been affected by today’s global economy. This has forced companies to continuously evaluate better ways to reduce cost, improve quality, and give the customer more than they expected. Understanding Operations Management will allow you to see the flow of the product or service as we use the project to gain the understanding of how companies do business. Relating the core of the business to the strategy needed to compete in today’s highly competitive markets while being environmentally responsible.
To successfully complete this learning unit, you will be expected to:
Describe operations management and its importance to all businesses.
Analyze the relationship between operations management and the company’s strategy.
Explain the impact of operations management on a company’s competitive advantage.
[u01s1] Unit 1 Study 1
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Read Chapter 1, “Introduction to Operations Management,” and Chapter 2, “Operations Strategy and Competitiveness,” in the Reid and Sanders textbook.
CASE ANALYSIS – PRIME BANK
Case Analysis – Prime Bank Scoring Guide (see attached).
Review the Prime Bank of Massachusetts case study on pages 50–51 of your textbook. After you have carefully read the case, answer questions 1–3 on page 51 as a foundation to meet the scoring guide grading criteria.
Be sure to review the scoring guide in advance to ensure that you have met the grading requirements. Submit your assignment as an attachment in the assignment area.
Operation management is described as a business function that is tasked with planning, organizing and controlling all resources within a business to produce goods or services. This definition tends to summarize the whole concept of operation management. The importance of operation management can, however, be identified in several facets. As discussed by Dan and Sanders (2004), the operation function differs from one industry to another. Prime Bank, a service entity is bound to realize certain benefits by focusing on the operation management.
Strategic operations management decisions that will be made by management in the company are long term decisions that impact a greater scope of the bank’s operations. Hence, better decision making will benefit the entity in the long run. For instance, the solid decision on service design will determine the attractiveness of the bank’s package to its potential customers. Product uniqueness affect the market scope, financing and several other aspects within the banking institution.
The marketing function cannot be well exploited if management lacks a solid operation management plan that is both strategic and tactical. The operation department serves as an input for the marketing department. If the operations department does not create a product that aligns with the marketing strategies and approaches, it is obvious that the organization will not realize its objectives.
Strategic operation management, directly and indirectly, affects financing decisions. Within a scenario of heightened competition and rivalry, minimizing the cost of operations is an organizational strategy. Decisions made by the operations manager should take into account financial capabilities of a given entity. Product design, office layout, and other operational management decisions should not exert a strain on the organization’s financial capabilities.
As postulated above, operations management decisions by Victoria Chen and her team can immensely impact the organization as a whole. Additionally, changes in operation decisions contribute to the bank’s desire to evolve. A tactical decision on the other hand complements strategic decisions in operation management in response to timely competition.
Operations management decisions do not equate to success. There is a likelihood that attempts to improve on certain aspects of operations management may fail. For instance, decisions made in isolation, other departments remain disassociated hence impacting the overall organization function. In extreme levels, a bad decision may affect the cost function, market function, and even the supply chain.
Task Two: Changes in the Operation Function of Prime Bank
A decision on a particular form of layout that will be assumed by organizational facilities may bear several underlying objectives. For a service entity like a bank, communication and customer interaction may be the key objectives that drive a facility’s layout decision. A service company tends to operate on two elements; time and quality. Customers ought to be served within the minimal time and also experience quality service. Prime Bank should consider maximum space in customer waiting bay. Facility layout should also enhance communication up and down the hierarchy. Operation management decisions require constant monitoring and review, and such can be achieved by an open space facility layout.
In operations management, the aim of scheduling is to meet customer demand. Human resource is a critical consideration in scheduling. Proper scheduling ensures that customer services are available throughout a given period and the quality of service is maintained. Victoria Chen and her team are considering a 24-hour service provision. Such a strategy dictates proper scheduling of the available workforce. Management will be forced to split the available workforce based on customer service demand during the day and night. Proper scheduling will respond to several other issues like subordinate staff inclusion in late hours.
The locality and positioning of a business substantially determine success in operation and the entire function of the organization. There are several objectives that can be realized through a well-thought facility location. To increase customer service, a facility ought to proximally be located near potential customers. Banking facilities are highly demanded within the economic zones like urban areas or business centers. Facility locality can be used as the competitive advantage over other entities in the market (Chambers & Johnston, 2010). Prime Bank should conduct an environmental analysis in the course of determining the new location for its services. The environmental analysis should consider security, availability of critical amenities and regulations.
Incapacity may undermine operations management decisions. On the same note, organizational goals cannot be attained if an entity lacks the ability to attain individual and departmental goals. Resource planning is an operational function. The capacity of the workforce ought to respond to forecasted demand. Prime Bank is deploying customer service delivery as an organizational strategy. Considering the cost-based strategy deployed by most of its competitors, it is obvious that Prime Bank will experience an increase in service demand. The entity needs to improve on its operating assets like cash.
Job Design and Human Resource
Service entities majorly rely on human resource and to some extent automation. Human resource forms part and parcel of every operation decision discussed above. Human resource is better described by quality and quantity. Quality refers to the skills and knowledge possessed by members of the workforce. Hence, at the operational level, management ought to determine the skill mix that will be required to support organizational strategies. The quantity of human resource pertains to the number of individuals in the workforce. For Prime Bank to improve the quality of service delivered, the quality and quantity of the workforce must be considered. This strategy interacts with capacity building and scheduling.
Task Three: Focusing on Cost
If Prime Bank would be solely focusing on cost, it is obvious that operational decisions discussed above will be tailored or even totally replaced. The cost of operations is very important. In a scenario of competitiveness, proper management of costs can be exploited to attain a higher competitive advantage. A cost-based approach will focus on eliminating unnecessary expenditure as well as improve efficiency (Wild, 2002). Such an approach is easy for manufacturing companies to attain the set objectives. For service companies, it is challenging to identify and classify costs. The following operation decision can, however, be used by Prime Bank to reduce the cost of transactions as a means of attaining competitive advantage.
As opposed to improving human resource capacity, the business will be focusing on technology. Technology use can contribute towards competitive advantage. This is because the cost of technology operation is relatively lower as compared to human resource. Human resource attracts several costs, some of which can be eliminated with the use of technology (Reid & Sanders, 2004). Prime Bank would decide on automating banking activities that do not require human resource. Subsequently, the bank will have reduced service time of a customer. Total variable costs decline with the number of units involved.
Chambers, N. S., & Johnston, R. (2010). Operations Management. Pearson Education Limited .
Reid, R. D., & Sanders, N. R. (2004). Operations Management. Wiley.
Wild, R. (2002). Operations Management. Cengage Learning EMEA.