Operations Management – Operations Performance Notes

Operations Performance

OPERATIONS PERFORMANCE IS VITAL FOR ANY ORGANISATION

• Operations management can either make or break a business.

• The operations function is large and in most businesses represents the bulk of its assets and the majority of its people. It gives the ability to compete by providing the ability to respond to the customers and by developing the capabilities that will keep it ahead of its competitors in the future.

How Operations can Affect Profits

• Operations management can have a very significant impact on a business’s financial performance. Even when compared with the contribution of other parts of the business, the contribution of operations can be dramatic.

The Stakeholder Perspective on Operations Performance

• All operations have stakeholders. These are people and groups that have a legitimate interest in the operations activities.

• Some stakeholders are internal and others are external. Some external stakeholders have a direct commercial relationship with the organisation.

• Although each stakeholder group would have an interest in how organisations operations perform, they are likely to have very different views of which aspect of performance is important.

Corporate Social Responsibility

• CSR is essentially about how a business takes account of its economic, social and environmental impacts in the way it operates – maximising the benefits and minimising the downsides.

• The issue of how broader social performance objectives can be included in operations managements activities is of increasing importance, from both an ethical and a commercial point of view.

Top Managements Performance Objectives for Operations

• Of all stakeholder groups it is the organisations top management who can have the most immeadiate impact on its performance.

• They represent the interests of the owners and therefore are the direct sustodians of the orhganisations basic purpose.

• They also have the responsibility for translating the broad objectives of the organisation into a more tangiable form .

• Effective operations management can give five types of advantage to the business:

  • It can reduce the costs of producing products and services and being efficient.

  • It can achive customer satisfaction through good quality and service.

  • It can reduce the risk of operational failure because well designed and well run operations should be less likely to fail and if they do they should be able to recover faster and with less disruption.

  • It can reduce the amount of investment that is necessary to produce the required type and quantity of products and services by increasing the effective capacity of the operation and by being innovative in how it uses physical resources.

  • It can provide the basis for future innovation by learning from its experience of operating its processes so building a solid base of operations skills, knowledge and capability within the business.

The Five Operations Performance Objectives

• The five basic performance objectives apply to all types of organisations.

  • Quality advantage

    • Quality is consistent conformance to customers’ expectations. All operations regard quality as a particularly important objective. In some ways quality is the most visible part of what an operation does.

    • Furthermore it is something that a customer finds relatively easy to judge.

    • It is clearly a major influence on customer satisfaction or dissatisfaction.

    • A customer perception of high quality products and services means customer satisfaction and therefore the likelihood that the customer will return.

    • When quality means consistently producing services and products to specification it not only leads to external customer satisfaction but makes life easier inside the operation as well.

    • Quality reduces cost – the fewer mistakes made by each process in the operation, the less time will be needed to correct the mistakes and the less confusion and irritation will be spread.

    • Quality increases dependability

  • Speed advantage

    • Speed means the elapsed time between customers requesting products or services and receiving them.

    • The main benefit to the operations customers of speedy delivery of goods and services is that the faster they can have the product or serviced, the more likely they are to buy it or the more they will pay for it ir the greater benefit they receive.

    • Speed reduces inventories

    • Speed reduces risk – Forecasting tomorrows events is far less of a risk that foresting next years, The further ahead companies forecast the more likely they are to get it wrong. The faster the throughput time of a process the later forecasting can be left.

  • Dependability advantage

    • Dependability means doing things in time for customers to receive their goods or services exactly when they are needed or at least when they were promised.

    • Customers might only judge the dependability of an operation after the product or service has been delievered.

    • Operations where internal dependability is high are more effective than those which are not.

    • Dependability saves time

    • Dependability saves money – ineffective use of time will translate into extra cost.

    • Dependability gives stability – if everything in an operation is always perfectly dependable a level of trust will build up between...

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