Concepts of Operation Management
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Introduction to Operation Management in Business
Operation management is one of the most important department of an organization which plays an important role in producing goods and services for its customers. It has significant impact on other departments of the organization (Bakliwal, 2011). The current study also focuses on operation management in a furniture supplier company. Research will try to understand the concepts of operation management and its associated functions which are significant for success of the company. Further, it shed lights on relationship between operation management and strategic planning of the company. It comprises production process of different products of furniture supplier using different tools and techniques of operation management. Along with this, relevant techniques to the production of an operational plan for a furniture supplier is also describing in the following paragraphs of the report. The present study has chosen Global furniture supplier company for entire investigation which is one of the leading organization of the furniture organization of UK. It offers different furniture products to retailers and uses appropriate techniques for managing its operations of production departments.
1.1 Importance of operation management for Global furniture supplier
Operation management department of Global furniture supplier company influences the other departments of the company such as, finance, marketing and production also. Major importance of operation management for organization is described as follows:
Reducing costs: Operation management department is beneficial for reducing cost of the company by deleting unnecessary activities of Global furniture Supplier
Managing inventory: It is helpful for managing inventory of the company as well as assist in maintaining economic order quantity and reducing ordering, holding and total cost of inventory of furniture production
Optimum allocation of resources: Operation management of Global furniture supplier organization is important for optimum allocation of resources of the company using different mathematical and statistical techniques such as Linear programming, assignment and transportation, etc (Vaidya and et al, 2013).
Attaining aim and objectives of organization: Management of different operations are also important for attaining all aims and objectives of the firm such as time and cost and success of the company, etc.
Others: It is also important for designing production process, layout and deciding location and pounding furniture goods and services to furniture retailers. Therefore, operation management of the Global furniture supplier is important for managing different functions of the com[any from converting input to output (Simmons, Bland and Wojciechowski, 2012).
1.2 Operation functions of Global furniture supplier
Major functions of operation management of global Furniture supplier company are as follows:
Selection of production process: Major function of the operation management department of the Global furniture supplier company is selection of an appropriate production process for producing goods and services for customers of the company which satisfy their needs and requirements. In addition this function is also helpful for increasing the value of money of customers of the organization (Anand and Ward, 2004).
Capacity planning: In this function global furniture supplier company tries to manage demand and supply of the furniture retailers by appropriate planning of capacity. This function plays an important role in maximizing the utilization of available resources for increasing the capacity of organization.
Quality and cost management: It is included in the most important function of the Global furniture supplier organization (Johnston, 2005). Operation management of company focuses on total quality management of entire production and operational process of association. It also tries to do sufficient effort to reduce defects and increase the quality of furniture products and services of organization.
Management of inventory: For managing contingency situations Global furniture supplier keeps sufficient stock of raw material. So, management of inventory is also one of the important function of operation management of organization. In this function association focuses on maintaining holding, ordering and totals cost of the inventory. Further, this function also include different activities for managing safety stock, reorder level and lead time for inventory management of the company (Foss and Knudsen, 2013).
1.3 Evaluation of operation management of Global furniture supplier using process model
After evaluating the operation management it has been reflected that Global furniture supplier is accomplishing all functions of this department in effective way but it is very complected task for company. There are different systems and models for evaluating the performance of operation management function of the company; these are open and close ended system, random theory, probabilistic method and deterministic theory, etc (Prahalad and Krishnan, 2002).
Evaluation of operation management using process model has reflected that company is operating different functions using open and close ended system. In this system different functions are incorporated because company needs to interact with the different elements of external and internal environment of organization. Production process of the company also include the functions of assessment of demand, needs and requirements of furniture retailers, current market trend of furniture industry of UK. Further, evaluation of operations has reflected that production process of organization has probabilistic nature because company can forecast the future requirements of products and services using past records and results. It can be done by using simulation and other operation management tools. Therefore, all these functions of the production process of the company has reflected that global furniture supplier is managing its operation management department effectively (Young, 2009.).
1.4 Explanation of three Es of operation management (economy, efficiency and effectiveness)
Three E's analysis is a very important tool for determining health of the operation management of the Global Furniture supplier. These elements are very efficient for improving the overall quality of production by which company can provide appropriate value for money to furniture retailers. Three E's include economy, efficiency and effectiveness of the operation management department of the company.
Economic elements focuses on the reducing cost of the furniture products of the company with required quality of products. Low cost products lead low sales price which help in increasing satisfaction level of furniture retailers who are the major customers of Global furniture supplier. Further, this element also assists in saving the money at different operations of production process (The 4 E's of Excellence, 2013).
Efficiency reflects the smarter way of company to accomplish different operations. In addition it also focuses on reducing the total number of defects from production process of the organization. Further, efficiency also differentiate products and services of Global furniture supplier to its leading competitors which leads effective competitive advantages of the company.
Effectiveness focuses on the different operations of production process and different aspects of effectiveness help in producing those products and services which satisfy the expectations of all furniture retailers who purchase products to Global furniture supplier. Including this, effectiveness is also significant for developing position of the company to meet the future requirements of all customers (Slack, Chambers and Johnston, 2007).
1.5 Impact of tension between cost minimization and quality maximization on Global furniture supplier
According to the above discussion economic analysis of Global furniture supplier focuses on reducing the overall cost of the company. But, on the other hand both efficiency and effectiveness elements shed lights on the quality management of production process of the organization. Global furniture supplier focuses on both cost and quality but sometimes it creates tension for production process which has some negative impact on organization. At the time of cost minimization operation planning includes the low investment in the latest technologies and uses the existing machinery and equipment because it helps in minimizing the total cost of technological investment. But, on other hand it reduce the quality of products and services of the company because of the poor and old technological equipment (Lowson, 2004). In contrast wen company focuses on the quality improvement than operation financial and operation planning includes high investment of financial resources in latest technological equipment because it is necessary to follow the market trends of furniture industry of UK. But, it has negative impact on the budget and future cash flow of the organization because it increases the total cost of the products and services. Therefore, tension between cost minimization and quality maximization has negative impact on Global furniture supplier (Anh and Matsui, 2011).
1.6 Evaluation of the significance of the five performance objectives that underpin operations management
There are five performance objectives of the Global furniture supplier those are underpin operation management of the organization such as cos, dependability, flexibility, quality and speed. Significance of all these objectives are described as under:
Cost: Minimization of cost of products and services is considered as a major objectives of Global Furniture supplier. This objective is significant for organization because it attracts large number of customers as well as assist in improving profitability, financial performance and total income of the association (Olhager, Rudberg and Wikner, 2001).
Quality: Production of qualitative products and services is also one of the important objectives of Global furniture supplier. It is important for organization because is improves efficiency and effectiveness of the entire production process of the furniture supplier company. Further, it is significant for company because it increases the satisfaction level of customers as well as augments the value of purchase money of furniture retailers.
Speed: Management of the speed in production process is also essential for accomplishing different operations of process on time. Further, it is significant for managing demand of products and services on time with any delay.
Dependability: It is also included in the major objectives of company because large number of operations and activities of production process depend on other activities. So, accomplishment of each dependent activity is necessary for completing entire project on time and cost. This objectives helps in augmenting overall performance of operation management of Global furniture supplier (Anh and Matsui, 2011).
Flexibility: Developing a flexible production system is also included in the major objectives of Global furniture supplier. It is important for organization because it helps in changing time and cost of each and every activity of production process as per the needs and requirements of products.
2.1 Explanation of linear programming and evaluation of critical path analysis and network planning
It is one of the important mathematical technique for minimizing and maximizing the company objectives. As per the above objectives Global furniture supplier wants to increase its profitability and minimize cost of products and services (Linear Programming: Introduction, 2012.). At present organization is offering three types of furniture products to furniture retailers; these are chairs, bed and tables and company is earning sufficient amount of profit from these products 12,14 and 17 pounds respectively. Production process of these products includes four stages; forming, machining, assessing and testing.
As per the above calculation maximum profit for the Global furniture supplier is 265 pound which can be earned by company by producing 5, 3 and 10 units of chair, bed and tables. Linear programming has also reflected that Global furniture supplier is earning maximum profit from production of tables.
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Critical path analysis:
It is one of the best technique of operation management for identifying the lengthy path for completing the project of Global furniture supplier with minimum duration or accomplishment time. It provides assistance in managing the entire project and different activities in effective manner (Stevenson and Hojati, 2007).
According to the above discussion of the objectives cost minimization and profit maximization Global furniture supplier needs to focus on appropriate network planning. It includes time, cost, activities and their relationship with other operations. 2.2 Need for operation planning and control in producing a furniture
Operation planning is estimating future demand of furniture products and services of the Global furniture supplier. Further, it is necessitate for identifying the needs and requirements of customers as well as future market trends of the organization. Including this, it is needed for estimating volume of sales, inventory and purchase of furniture products and services. Along with this it is necessary for optimum allocation of resources of the organization on different activities of production process (Gadde, Håkansson and Persson, 2010).
On other hand operation control includes appropriate monitoring of project progress of the Global furniture supplier. It is needed for supervising that each and every task will be completed on specified time and cost. Operation control is also essential for maintaining quality and inventory of furniture products and services of the organization. Gnatt chart is one of the important tool for operation monitoring which helps in completing each activity of project one time (Olhager, Rudberg and Wikner, 2001). Gantt chart for the above discussed network planning is as follows:
2.3 Possible layouts (Product category) for producing furniture and outcomes
For Global furniture supplier company process based layout will be best for producing the tables. In this layout organization will arrange all functions of production process as per the requirements of the process. It is important for producing tables because in this layout there is no needs to move tables from one place to another for different functions. In process based layout production process starts with the input and end with the outcomes. In this manufacturing process if any function is required two times for producing tables then company will include two functions at different stages (Gadde, Håkansson and Persson, 2010). So, it is appropriate because it will help in reducing defects and improving outcomes. As per this production layout, outcome of Global furniture supplier company will include the production of qualitative goods and services which help in attracting large number of customers. Outcomes also include increment in profitability and overall income of the Global furniture supplier.
2.4 Network plan and Critical Path Method
As per the above calculation of critical path the entire project will be completed in 50 days and it is the maximum duration of completing the project on time. Along with this, it also provide the longest path for accomplishment of project on minimum duration. As per the network planning estimated time for project completion was 58 days and critical path has reflected that this project of Global company will be completed on time (Foss and Knudsen, 2013). Critical path for the project is as follows:
A+B+C+D+F+G+I+J= 5+15+15+10+10+12+16+5=50 Days
2.5 Approaches can be used for project management and quality control in sales, stock or purchase process
There are different approaches for quality control and project management of Global furniture supplier. In which Six Sigma analysis and Total quality management will be appropriate for managing project and quality. Explanation of these two approaches are discussed as follows:
Six Sigma analysis: It is helpful for getting the defects per million opportunities as well as assist organization in analyzing the quality of their products and services. Six Sigma analysis has reflected that company is producing total 10000 units of furniture products and in which 200 products has some different kinds of defects. Company has taken 8 trials for testing their products. As per these data sigma level of Global furniture supplier is 4.31 which shows the medium quality of production of the company(Prahalad and Krishnan, 2002). So, company should focus on improvement in the quality of finished goods. Organization should also needs to pay attention towards reducing the total defects in production process of the company.
Total Quality management: Total quality management is also one of the significant approach for managing quality and project management of Global furniture supplier. It includes quality analysis, control and improvement. Thus, it helps in improving the overall quality of furniture products of the organization (Total Quality Management (TQM), 2014).
The current research report has concluded that Global furniture supplier is managing all functions of operation management department in effective manner but it needs to focus on improving the quality of products and services of the company. Along with this, report has also found that operation management department of the company provides assistance in attaining all objectives of furniture supplier such as cost and time minimization, maintenance of speed, quality improvement and profit maximization, etc. Further, study has described six sigma analysis and total quality management for quality control and project management of organization.
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