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The Role of Operations Management in Achieving Strategic Objectives

17 Pages 4261 Words 32 Downloads

INTRODUCTION

Operation management plays a pivotal role in the development of the economy as it focuses upon the production and management efficiency. Operation management improved the world of business through its activities and techniques. The transformation within the organization is part of the operation management as it adds value to services and production. The management activities are interrelated to serve the organization better owing to operation management benefitting the organization and economy. For the success of the objectives and business organization operation management plays a fundamental role. The intention is to create new policies and services for the augmentation of company. Operation management is required in both manufacturing organizations and service industry in order to meet the challenges due to globalization. Operation in this regard is defined as “all those activities required to create and deliver a product or services, from procurement through conversion to distribution” (Ramanujan College of Management, n.d.p.1). Therefore, operation management is vital as it creates value by transforming input into valuable output to augment profitability. The intention is to increase value of products enhance profitability with the increase in production and services. The fundamental part is to manage people and product in an organized manner to drive stakeholder’s attention towards the company. In the year 2011, the success of the CEOs was based upon the successful implementation of operation management (Ramanujan College of Management, n.d.).

The intention is to manage and administrate human resources and materials in an organized manner for better fundamental results. Maximizing efficiency and minimizing wastage is one of the prime objectives of operation management that positively impacts the strategic objective. Operation management makes effective decision for the long-term stability of the organization considering upon resources and management commitment. Owing to operation management strategic actions are planned and are met successfully. The goals of the company are linked with the operation management to augment profitability by focusing upon low cost and high values. Every organization focuses upon maximum profit and tends to deliver services on time. Thus, the use of operation management with strategic plans is integrated to meet the objectives.

The objective of the paper is to determine the importance of operation management and its relation to strategic objective. The success factors that affect organization based upon the concept of operation management. The paper tends to focus upon the importance of operation management in attaining the strategic objectives.

Importance of Effective Operation Management in modern day organization

Modern day organization tends to serve customer better by satisfying their wants. Organization executes policies and plans by aligning the goals of the business with customer. The importance and effectiveness of operation management is determined as it controls the entire process and designs actions of business operation. This helps in increasing the production and services of the business in the long run. Contextually, the field of operation management is gaining relevance in the modern business because of its various operational functions. Earlier organization focused upon finance and marketing but today business realizes the need for operation management. Operation management is important and effective in the global market as operation strategy supports the corporate mission and vision. The importance of effective operation management is high because it helps the business to work right. The efficiency of the modern organization is dependent upon the operation management and its integration with the organizational resources (Roy, 2005). For the success of the business it is vital that the services and production is on time and reduces wastage. Operation management is effective as it integrates higher degree of process by resourcing products at the right place and right time. Globalization has increased the competitiveness of business therefore the need for innovation on a regular basis is important. Thus, the effectiveness is considered by considering operation management as it creates value through managing resources. In modern day, the effectiveness of operation management in the business is reflected on the basis of capacity management and output. Resources are managed efficiently and the operations are schedule so that no time is wasted and the effectiveness is achieved. Operations ensure speed and increase the dependability along with flexibility in business operations. Furthermore, the effectiveness in the business is managed by maintaining quality standards through gauging technical abilities. Capacity management and output operations are also part of the operation management thus increasing the effectiveness of modern day business. Employee performances and customer relationship management improves the process of business and increases output of the business (Roy, 2005).

Operations management supports various business activities by developing products by understanding customer requirements for increasing market potential. The specification of products and budget utilization impacts business and helps in managing market segmentation. The salient features of operation management are to enhance the productivity in order to compete in the global market. The increase in the assets and reduction in the cost is also due to effective operation management. The quality of the resources is maintained and the process of operation is controlled and managed efficiently. Moreover, for the success of the business organization operation management is widely used as it not only manages resources but also focuses upon time along with quality. Business performances are augmented as every operation is managed in an organized manner in a planned manner with effective tools and techniques. The decision-making process is more organized as services and products are delivered efficiently. Furthermore, the importance is that it helps in managing mass production and services (Kumar & Suresh, 2009).

Different Practices of Operation Management in Modern Organization

Operation management has various approaches in the present day to meet the ever changing internal and external environment. The strategic objectives of the organization are met by increasing the value of product in the market. This increases the competitive advantage of the business over others and increases profitability. The essence of operation management is to transform resources efficiently into outputs that are delivered on time. Employees, equipments of the business are the inputs that are managed efficiently using various strategies of operation management.

One of the most vital approaches is Just in Time (JIT) approach that is implemented strategically to augment efficiency by reducing waste. JIT approach is used by business in the modern day to meet the changing demand of people by maintaining cost of goods. The approach mainly manages time of production so that goods are provided to suppliers on time. Toyota is one of the leading organizations using JIT approach to reduce the time flow of the production system. The goods are manufactured on time by controlling and monitoring resources and reducing the resources wastage along with time. The production and services are on time thus meeting the demand of customers through effective supply chain management. It is a continuous process of improvement that added value to products and enhanced quality by eliminating wastage. Overproduction of products is minimized and the waiting time is also reduced augmenting the business profitability (Rios & Rios-Solis, 2011). The practice of JIT also reduces transportation wastage, processing and product defects by monitoring the resources on a regular basis. The main motive of the approach is to maintain inventory and avoid wastage. The burden of extra inventory is managed in an effective manner thus helping to reduce extra loss of the company. The demand of products is maintained using JIT in modern organization so that storage cost is managed and monitored. Moreover, the risk regarding inventory is managed to minimize potential wastage and excess production. The benefit of JIT approach is received not only by the organization but other stakeholders as it leads to value creation. Thus, today JIT is being used by business organization to maintain competitive advantage and standard. The growth of the modern organization is based upon the operation management approach (Rios & Rios-Solis, 2011).

Another approach that is being used in the modern organization to meet the business success is Total quality management (TQM). TQM focuses upon the quality and performances of business. The improvement of every functions and process is being monitored under TQM approach so that customer achieves the expected products. The motive of the approach is to enhance the quality of the products by ensuring strong and quality management in the organization. Expansion of quality helps in strategic approach so that higher quality of business is ensured. Moreover, this approach helps in making effective decision through proper inspection and authority over management. In order to maintain the quality standards employees are well trained so that higher quality is attained. It is noteworthy that business origination with TQM have higher market share and profitability due to customer satisfaction and organizational integrity. The strategic approach of business is based upon TQM because it helps in determining products and services to be customer centric (Mukherjee, 2006). TQM approach is implemented by keeping in mind the changing needs of customers along with employee involvement. One of most vital aspect of this approach is that it considers upon continuous improvement. Every function within the organization is well integrated because the focus of TQM is upon quality work to attain competitive edge. Moreover, it is noted that human resources play a crucial role in managing resources and quality as integrated management leads to greater success and integrity. Contextually, quality is a powerful instrument that positively impacts the success of the organization. Knowledge about the operation management approach leads to positive development in the business. Furthermore, JIT and TQM help to meet the strategic objective of the business by maintaining various functions in an organized manner. The image of the business such as Toyota is maintained using such approaches because the intention is to enhance efficiency by managing time and ensuring quality (Powell, 1995).

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Strategic Role of Operation Management in Business

Operation management is about controlling resources and transforming process so that labor along with raw materials are managed effectively to augment sales and profitability. Leadership the modern organization in the present day is based upon the operation management. The strategic role of operation management is witnessed through quality management and value creation. Value creation is about managing resources and converting raw material into finished goods by adding value. Every function and the value chain perspectives augment the business success. The strategic role is to manage production and productivity in order to enhance economic growth (Mindran, n.d.). The management provides high wages to quality employees and appoints right people at right place as a part of the strategic role. Operation management plays strategic role by implementing quality audit system to have a standard base. The standard of products and work environment is taken into account so that employees are satisfied. Human resources are the backbone of every organization therefore effective management is also a strategic role. The intention is to train employees to work efficiently so that customers are satisfied and management enjoys loyalty. Strategic role is to integrate the functions for proper control and monitoring of resources. Operation management integrates both services as well as manufacturing by ensuring quality standards. Productivity of resources is managed in an organized manner so that competitive success is attained in the long run. The key attributes of strategic role is implementing, supporting and driving for appropriate innovative contribution (Mindran, n.d.).

Subsequently, the strategic role is to maintain competitive cost structure so that prices of products in the market are attractive along with competitive. As a part of the strategy the motive was to manage resources and human resources so that productivity ensures time and quality to meet customer demand. Every operation is integrated with one common goal to attain success and profitability. The role of operation management is to integrate business organization and to ensure global leadership by transforming input into quality output. Moreover, value chain is one of the main perspectives of operation management because it considers the aspects of manufacturing, supply chain and customer satisfaction. The role is to ensure smooth transformation of resources by improving productivity. Logistic evaluation, IT support and quality control are important factors of business. Therefore, the strategic role of operation management is to ensure performance by ensuring cost efficiency. Success of business depends upon the aspect of dependability wherein timely delivery, reliability of products and flexibility in volume augments business. The operational goals are to ensure service quality by maintaining employee relations and labor cost through proper utilization of material and facility. Customer service ensures greater profitability because the motive is to meet the demand through timely delivery of products with quality (Horváthová & Davidová,2011).

Contextually, the business organizations consider operation strategy framework so that people attain information about products and every function of business is interrelated for better results. The strategic framework for modern organization is depicted hereunder:



Figure 1: Operation Strategy Framework
(Source: Kumar & Suresh, 2009)

As per the framework the strategic role of business is to integrate policies for profitability in the long run.

Importance of Operations Management in Achieving Strategic Objectives with Examples

In the current competitive business environment, an organization can only succeed and deliver value to the customers if it has efficient and well-organized operation management that effectively plan, monitor the organization’s resources and its competitive capabilities according the prevailing market demand. Thus, operation management in the contemporary business organizations is one of the key activities, which the organizations need to recognize and understand, particularly, the new and emerging business organizations that are faced with challenges of increased competition and in the wake of the risks associated with the volatility of current business environment. Unfortunately, several business enterprises in the current business environment often underestimate the value and importance of operation management in delivering quality products and services as a result of which, these companies fail to survive for a longer duration. Moreover, it has been argued that the leaders and owners also lack considerable knowledge and understanding regarding the operation management, which increase the risks exposure for their business and increase their overall cost of production and distribution, which tends to adversely influence their success and competitiveness (McFarlane, 2014; Bala, 2014).

It is thus important that leaders and managers to recognize that the 21st century business environment is transforming rapidly and is becoming more complex for the businesses to operate profitably. Furthermore, companies and leaders need to strategically plan their operations so as to embrace value practice and to effectively deal with the changing nature of the business. Moreover, companies in the present context must appreciate the operation management and strategically align their operations with the long-term objectives of the business. This is because operation management is strategically related with almost all activities and functions of the modern organization. Companies and leaders must develop competencies and knowledge regarding the application of operation management concepts and principles along with its strategic process so as to achieve the strategic objectives of the organization efficiently and successfully (McFarlane, 2014).

Concept of Operation Management—Past and Present

Operation management in general sense is recognised as all activities and process involve in the production of the goods and services. However, in real sense the meaning of operation management is much broader and encompasses wide range of management activities such as production, supply chain and distribution management among others. According to Cohen et al. (1993), the concept of operation management first emerged in the pioneering work of Professor Buffa during the 1950s and 1960s (Cohen & Kleindorfer, 1993). Initially, the concept of operation management largely focus on areas related to cost management and production control and were recognized as integral to manufacturing businesses. However, the authors argued that over the years there has been a considerable change in the way operation management is perceived today. Evidently, it has been postulated that while in the initial years of development of the concept of operation management, it was predominately viewed as a manufacturing discipline but today, the concept is applied across diverse sectors beyond the manufacturing sector to service sector as well. At the same time, it has been observed that different scholars have offered different definitions of the operation management (Cohen & Kleindorfer, 1993). According to Morris (1978) the concept of operation management is composed of two distinct words that include ‘operation system’ and ‘management. As per the author the operation system is defined as “configuration of resources combined for the provision of goods and services”. Thus, the author has defined operation management as “the design and planning, operation and control of operating system” (Morris, 1978, p. 116)

Similarly, many business experts have defined operation management as “set of activities that creates value in the form of goods and services by transforming inputs into outputs.” Based on these definitions of operation management, it can be noted that operation management is nothing but the effective management of people, process and system so as to produce useful products and services to the customers. Thus, the primary goal of the operation management is to efficiently manage the process involved in the production of goods and services and distribute those finished products and services in such a way that would add value to the input and convert into a profitable output. In the current business environment operation management is considered as an integral element of the contemporary business organizations (Ramanujan College of Management, 2013).

The concept of operation management has gained immense importance in the last few decades, particularly because of its successful use and implementation by the Japanese companies. More specifically, Toyota which is a Japanese multinational automobile company is recognized as one of the few companies in the world that has developed efficient operation management, which to improve the performance of its business not only in Japan but across its worldwide area of operation (Ramanujan College of Management, 2013). As a result, the contemporary business organization can be seen to place equal importance on operation management just as their financial and marketing activities. Notably, business across the world are not only focusing on operation management for improving in their production and distribution activities but are working towards enhancing their operation management to attain greater competitive advantage to realize their strategic objectives (Hayes et al., 2005).

In this regard, it is worth to note that operation is often recognized as the costly part of the of any business enterprises and thus irrespective of the types of business, every business organizations including large and small organizations are continuously exerting their efforts to improve their operation management capabilities to make efficient use of the organization’s resources and to attain economies of scale for ensuring greater profit margin. In the recent years, there has been an increasing trend among the global business organizations where they can be identified to closely align their operating management activities with that of strategic objectives (Manuka & Haddud, 2016; (Ramanujan College of Management, 2013).

Strategic Objectives in the Contemporary Business Organization

The notion of strategy in the current business organization has become a buzzword. Every organization in the current context can be identified to focus of variety of strategies to cope with the business threat and risks, and to achieve corporate goals. In other words, the notion of strategy is deeply rooted in the contemporary business organizations and several new concepts have developed in over the last few decades to demonstrate organization’s strategic intention such has strategic management, strategic planning and strategic vision among others. However, the recent development in this regard can be associated with the growing popularity of strategic objectives. Notably, in the current highly dynamic and volatile business environment, it is argued that there is a greater need for the organization to establish strategic objective so as to ensure success of business strategies. Accordingly, strategic objective in its broadest term is defined as the most important goals which the organizations intends to achieve outside the organization (Pacific Crest Group, 2012). Moreover, strategic objectives are recognized as one of the integral components of the organization’s strategic operational plan and are set based on the evaluation of strengths, weaknesses, opportunities and threats to the organization. Accordingly, Peter Drucker, a well-known management scholar has classified strategic objectives into eight common areas of the business goals that include:

  • Profitability (identifies the how an organisation intends to achieve financial growth)
  • Financial Resources (deals with determining the capital sources and also identifies how these sources, can be used)
  • Market Position (postulates the current position of the company in the given market as well as its new position that it intends to achieve in the new target market)
  • Innovation (deals with developing and designing new products and services and includes the approaches required to deliver those products)
  • Productivity (deals with how the external resources can be used to produce output).
  • Physical Resources (deals with new equipment and new plants and how it can contribute in improving the operation)
  • Human Resources (relates activities such as recruitment of personnel and how they can contribute in achieving the goals of the organisation)
  • Social Responsibility (relates to improving awareness about the impact of the organisation on the wider community)
    (Pacific Crest Group, 2012).

In addition, organizations are argued to select strategic objectives in order address and deal with the problems and challenges faced by it. At the same time, prioritizing strategic objectives is considered to be crucial for ensuring effective management of the strategic objectives. Moreover, it is worth to note one should not be confused with strategic vision as strategic objectives and strategic visions are two different concepts and have relatively different in terms of their goals. Notably, strategic visions are argued to be related with logical reasoning for developing effective future plan and directions for the organizations and it largely communicates the aspirations of the shareholders. On the other hand, strategic objectives are argued to be highest goals that are formulated by the business organizations to ensure the success of its broad strategies. Nevertheless, it can be argued that strategic objectives are closely linked with the organization’s visions and missions but it may not communicate the same goals or aims as articulated in the mission and vision statement of the business organization (WebFinance Inc., 2017; Madu, 2012).

Conclusion

From the overall analysis, certain key conclusion can be made with regard to the topic of the study, which one way or the other would contribute towards answering the research question in concern. In this regard, it can be determined with the increase in the level of competition in the global market, there has been change in the manner in which companies are approaching towards conducting their business operations. Correspondingly, there are various functions within the business domain that impacts the performance of the companies among which operations management is one of the prime. This study focuses on importance of operations management in achieving strategic objectives. In the contemporary era, operations management is largely characterised by aspects such as leadership along with transforming the business as per the needs and demands of the customers within the external marketplace. One of the major influence of operations management is relevant within the domain of attaining the strategic objectives of the business. It helps in strategically aligning the operations of the business with the strategic goals of the business at large. In general, operations management includes the aspects such as goods and services being organized in a manner that can influence the overall operations of the business in terms of attaining the operations goals sufficiently. The study has mainly stressed towards understanding how strategic objectives in the contemporary can be coped up on the basis of the operations management approach of the business. This can mainly be done through improving the overall operations of the companies on the basis of effective operations management within the dynamic and volatile business environment. This aspect also includes defining the important goals and objectives of the business and likewise can be able to attain the desired business goals and objectives. Hence, it can be conclude that operations is indeed an important part in terms of attaining the strategic goals of the business.

References

  • Bala, K. (2014). Supply Chain Management: Some Issues and Challenges - A Review. International Journal of Current Engineering and Technology, 4(2), 946-953.
  • Cohen, M. A. & Kleindorfer, P. R. (1993). Creating Value Through Operations: The Legacy of Elwood S. Buffa. Perspectives in Operations Management, 3-21.
  • Hayes,R. H. et al. (2005). Operations, Strategy, and Technology: Pursuing the Competitive Edge.UK: Wiley.
  • Horváthová, P. & Davidová, M., 2011. Operations Management as Practice of Organizations' Strategic Management in Relation to the Environment. International Conference on Financial Management and Economics, pp. 8-12.
  • Kumar, S.A. & Suresh, N., 2009. Operations Management. India : New Age International.
  • Mindran, No Date. The strategic role and objectives of operations. [Online] Available at: http://mindran.com/operation/027370849X_pp02.pdf [Accessed March 23, 2017].
  • Mukherjee, P.N., 2006. Total quality management. India: PHI Learning Pvt. Ltd.
  • Madu, B. C. (2012). Vision: the relationship between a firm’s strategy and business model. Journal of Behavioral Studies in Business, 5, 1-8.
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