INTRODUCTION TO STRATEGIC OPERATIONS MANAGEMENT

THE FIELD OF STRATEGIC OPERATIONS MANAGEMENT

Operations managers have responsibilities that extend beyond management of assets, costs and human resources in the transformation
process. In the contemporary business environment, operations must be managed in a manner that will allow the firm to participate
against extensive and growing competition from around the world. This way managing operations takes on completely diverse
requirements to how it was carried out in the past. In short, operations management becomes strategic operations management.

Strategically, operations management entails the long-term planning and structuring of work. In reality, the task of operations
strategy is to plan the operating system, which is the combined configuration of resources and processes, such that its resultant
competencies are made parallel with the organization's desired competitive position. Simply, operations strategy centers on how to
best enable and put into practice the organization’s strategy. The so-called best" for profit organizations, can be measured as
maximize the net present value of profits. On the other hand, for not-for-profits, it could denote minimizing cost subject to
strategically specified constraints on quality, time, flexibility, and other non-financial metrics. Organizations that take the design of
their operations sincerely and better equal supply with demand will get a significant competitive advantage greater than their
adversaries.

Operations and operations management are of strategic importance to an organization. This is because all modern-day organizations
have to stand out in mass customization, lean production, agile manufacturing and customer-centric prerequisite among others.
Organizations' success on these targets depends on the ability of the organization to actually do these things and such capabilities exist
within operations.

The competence to penetrate and contend equally in new and existing markets is extremely reliant on operations capabilities.
Although, other areas are also vitally important like marketing, finance and other major functions. However, it is true that operations
management is about uniting these other areas and functions into a central core of capabilities for the organization in both
manufacturing and service settings. All capabilities depend, to a Very large extent, on managing operations in a strategic manner.
Forming an operations strategy that links into, and forms part of, the overall business strategy can also be a vital factor in uniting the
organization.

OPERATIONS AS SERVICE
Many companies have effectively transformed their manufacturing, research and development, and other business functions by
improving their performance while reducing cost. However, fewer organizations have optimized their service operations, even though
they can have a big effect on customer acquisition and retention. When service levels and costs are well balanced and optimized, they
can convey a sizeable and sustainable competitive advantage that competitors will uncover to be tough to compete.

By their nature, service operations are a lot labour intensive and difficult to manage. Repetition and consistency, usual features of
excellence in service operations, can work not in favor of an organization that is trying to achieve step-- change improvements in
processes and behaviours. Moreover, executives across many industries are finding it ever more challenging to maintain service costs
in check while maintaining service levels. Latest technology advances like self-service kiosks normally in airports, banks, and hotels
have helped improve overall productivity, but technology is only one part of the solution.

Designing a tailored set of service models based on customer segments is a requirement for granting the preferred service with no
overspending. Whether the business is a retailer trying to optimize sales floor coverage; a hospital seeking to improve care delivery
through better allocating nurses and beds; a hotel working to speed up check-in times; or a manufacturer delivering technical support
in global markets, the leaders of the organization must carefully and holistically manage the factors that affect service delivery and
costs.

PRINCIPAL DRIVERS OF SERVICE QUALITY AND COST

Service operations leaders must be in a position to spot and capture opportunities for progress. There are several factors that determine
quality and cost in service which are:

Product and Process Design

The basis for high-quality, cost-effective service operations is established far upstream of the point of service delivery during product
design or, in the case of services companies, process design. Design affects quality and total service costs in significant means. In
particular, it can diminish service costs early in product life cycles by reducing defects. It can reduce total service costs by lessening
the time it takes for a product to shift from infancy to a stable, mature stage.

Streamlining product architectures and configurations, for instance, can have a beneficial effect on service. One computer equipment
company saved on repair, order processing, and technical support costs merely by installing its largest hard drive in every unit sold.

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Analysing quality at the product level can also aid determine problems that can lead to higher service costs. Through detection of
notable differences in mean time between failures (how often a product breaks) and mean time to repair (how long it takes to fix it)
between products developed internally and those developed by a third-party, another computer manufacturer was able to take steps to
close the gap by improving design and technician training for the inferior products.

Embedding remote diagnosis and repair capabilities in products and processes can simultaneously reduce service costs (right part,
right place) and enhance customer satisfaction and loyalty.

Service-level Labor Requirements

Typically, labor is the largest cost in service operations and a key driver of customer satisfaction. Matching service requirements to
customer needs, desires, and expectations is job number one. Some customers may want a lot of hand-holding, whereas others may be
content with self-service options, for example, bank ATMs, grocery self-checkouts, and automated tech support online or via phone.
Matching customer expectations with the service delivery method increases revenue and simultaneously lowers the cost-to-serve.

Service operations leaders study usage patterns and consider them in light of corporate targets, like market share and revenue goals, to
guarantee the proper service coverage. One company with a huge and active email room embarked on such an investigation and
discovered that misalignments in its service coverage resulted in preventable idle time at some times of the day and backlogs at other
times. Through realigning coverage with demand, the company had proficiently process incoming demand within the agreed-upon
service level. It was able to shrink labor costs by lessening coverage during slow periods also. This alteration enabled the company to
enhance overall productivity, and better customer satisfaction resulting in increased revenues.

Service Network Structure

Eventually, as business and economic growth rates differ, mergers and acquisitions take place, and companies modify their product
mix and market focus, service costs can get out of whack. Management layers become unnecessary, processes become less
standardized, workloads not anymore align with staffing levels, and unneeded facility expenses are incurred. At times it is essential to
reorganize how a service delivery network is structured. To illustrate, one service outsourcer was keeping two isolated organizations
to offer hardware installation and repair in similar geographic areas. This model had permitted speedy response in the past, but as the
volume of service requests lessened, partly due to design and quality improvements, it made more logic to combine the two
organizations.

The efficiency of service operations also is apt to differ very much among, geographic locations. By means of putting in place the
appropriate tracking and reporting processes, companies can even out variances and improve overall service performance. Then again,
companies can use shared-services models to notably trim down overhead costs.

Outsourcing will frequently generate short-term cost savings, but if it pessimistically affects customer satisfaction and the company's
competitive position, outsourcing can be counterproductive in the long term. The correct combination of sourcing, balances low costs
and service quality in a manner that enhances a company's competitive advantage.

Service Process Management

Service processes are seldom fixed. They vary in answer to the needs of the business and its customers. This being the situation, they
call for constant monitoring and adjusting to maintain costs in check and make certain their continuing effectiveness. Continuous
improvement is a broadly established idea, but in many companies, the culture does not simply support it. in addition, service
processes require gatekeepers who have decision rights for process changes and are responsible for their performance.

Meanwhile, companies can observe to discover any process steps that can be standardized across customers and geographies. Process
standardization, possibly -automation can lessen labor requirements and boost customer satisfaction. To illustrate, one hospital
reduced the wait time for fresh admissions from four and a half hours to one and a half hours by standardizing the admissions approval
process.

Workforce Management
The productivity of employees is a chief concern in all service operations. order to optimize employee productivity, decision makers
have to first compute the total labor hours they require in each location, either in a bottom-up manner or top-down manner. Bottom-up
manner means identifying labor drivers and creating a model for determining task times and frequencies. While top-down manner is
based on comparisons of operational performance to labor hours. Either method works, except that the bottom-up approach presents
an added benefit in that it permits labor hours to be further adjusted as input drivers change easily. In one case, one company created
a detailed model, based on unique store demand patterns, to estimate the necessary staffing essential to manage its truck tire service
centers, producing a 12% savings in labor costs.

Once labor hours per location are known, management can reflect on how the hours should be allocated between fulltime and part-
time employees. Management also can determine how these employees should be scheduled to meet customer demand and fulfill
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operational activities. To illustrate, when one hotel studied its check-in process, it was revealed that many guests were experiencing
check-in waits of more than 20 minutes. A large number of guests waited so long that they said they did not plan any more to stay at
the hotel again. Yet, with the adding of just five part-time employees only during peak periods, a tiny additional spending in the hotel's
budget, more than 90% of guests could be checked in with less than a 15-minute wait.

Measurement and Compensation

Regrettably, not many service operations and companies have sophisticated performance measurement and compensation structures.
The majority fall into one of these three groups:
1. those that follow metrics in a steady way at all levels, but have not make parallel their compensation systems to the metrics
2. those that follow metrics, although make use of not consistent definitions across levels and
3. those that do not follow metrics at all

The end result of imaginary, improper, or incoherent measurements are missed improvement opportunities, the incapability to
comprehend whether process changes are effective, and unproductive decision making.

Meanwhile, most service organizations, particularly in the retail sector, are drowning in data and gathering more every day, however
are still eager for insights. In order to rise above this problem, companies must recognize the data that is really applicable to the
performance of their service operations and make certain that it is correctly collected and utilized. It is vital to gather nonfinancial
data, like customer profitability and customer satisfaction, in addition to key financial and operational indicators.

After this step the service company should align compensation and reward systems with desired employee behaviors. With clearly
identifying compensation and rewards, and communicating the metrics that determine them, service operations can inspire employee
motivation and offer the transparency that people want to modify their behaviors.

In addition, service operations managers ought to work with Human Resource (HR) to take a more upbeat role in Instituting and
supervising compensation and reward systems. They must know that tenured workforces come at a higher cost frequently that cannot
be warranted in terms of performance; the absence of salary caps and compensation bands can generate extensive variations in cost
between similarly skilled employees; and market-based salary reference points are a lot overstated and therefore provide as a poor
guide to compensation. In order to deal with the problems that result from unproven assumptions, companies can take action with
varying levels of aggressiveness to lessen labor costs. Levels of reduction will be based on internal and external factors that consist of
individual performance, salary benchmarks, the financial condition and goals of the company, and labor supply conditions.

Service Strategy Approach

Service strategy success always boils down to execution. In service operations, leaders should approach the quality and cost challenge.
They ought to give particular attention to the first two drivers: product and process design and service-level labor requirements. Too
frequently, these drivers are ignored for the reason that they must be activated in the design stage of products and processes, a stage in
which service managers customarily have not partook. The remaining four drivers which are service network structure, service process
management, workforce management, and measurement and compensation are the levers that service leaders can pull to get better the
quality and cost of existing operations. Knowledgeable service leaders are aware of the interrelated character of these four drivers and
use them in an integrated and holistic way.

High-quality, cost-effective service is indispensable to corporate success, except it is particularly challenging to realize. Defining
unique customer segments and models to gainfully serve them necessitates regular study. Service workforces are likely to be big and
have high turnover rates and so they are hard to mobilize. Service processes are difficult and regularly reliant on the dependable
execution of many detailed steps. And immense, dramatic solutions to too much cost are uncommon. Nevertheless, companies that
obtain a measured and complete technique to delivering service can develop their bottom line and achieve a hard-to-match competitive
advantage in the marketplace.

HISTORICAL DEVELOPMENT OF OPERATIONS MANAGEMENT

Operations in some forms have been around as long as human endeavour itself but, in manufacturing at least, it has changed
dramatically over time. There are three major phases in the development of operations management namely craft manufacturing, mass
production and the modern period.

Craft Manufacturing Phase

The first major phase is craft manufacturing and service shop delivery. Craft manufacturing describes the process by which skilled
craftspeople produce goods in low volume, with a high degree of variety, to meet the requirements of their individual customers. Over
the centuries, skills have been transmitted from masters to apprentices and journeymen, and controlled by guilds. Craftspeople usually
worked at home or in small workshops. Such a system worked well for small-scale local production, with low levels of competition.
Some industries, such as furniture manufacture and clock-making, still include a significant proportion of craft working.

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Some craft manufacturing still remains today. Craft manufacturing is still present in markets where exotic products and services are
being sold due to their distinctive features or high level of desirability. In house building, furniture making and clock and watch
making, the process of craft manufacturing is still done by skilled workers with single or few items of output at a time. The processes
and techniques used in craft manufacturing is highly inefficient, yet the exceptional quality the products commands a premium price.

In services the craft era still continued. The adoption to new technologies and new systems is the main reason for the slow pace of
change in service. Only services that need little skill at the operating level (like fast moving consumer goods) or processing huge
amounts of information (like financial services) are notably different now from what they have been like several decades ago. Despite
new technologies many services like hotels, schools, hospitals, hair salons, vehicle repairs and transportation have changed due to
their core nature.

Mass Production Phase

In numerous industries, craft manufacturing began to be substituted by mass production in the 19th century. Mass production engages
producing goods in high volume with low variety. This is the opposite of craft manufacturing. Customers are anticipated to buy what is
supplied, rather than goods made to their own specifications. Producers are determined on keeping costs, and thus prices, down by
minimizing the variety of both components and products and setting up large production runs. They developed aggressive advertising
and engaged sales forces to market their products.

An important innovation in operations that made mass production possible was the system of standardized and interchangeable parts.
Instead of being produced for a specific machine or piece of equipment, parts were prepared to a standard design that could be
employed in different models. This really reduced the amount of work necessary in cutting, filing and fitting individual parts, and
destined that people or companies could specialize in particular parts of the production process.

A second innovation was the development by Frederick Taylor (1911) of the system of “scientific management”. This system wanted
to revamp jobs using similar principles to those used in designing machines. Taylor argued that the role of management was to
analyse jobs in order to find the "one best way" of performing task rather than allowing workers to determine how to perform their
jobs. By breaking down activities into tasks that were sequential, logical and easy to understand, each worker would have narrowly
defined and repetitious tasks to perform, at high speed and therefore with low costs.

A third innovation was the development of the moving assembly line by Henry A Ford. Instead of workers bringing all the parts and
tools to a fixed location where one car was put together at a time, the assembly line brought the cars to the workers. Ford thus
extended the ideas of scientific management, with the assembly line controlling the pace of production. This completed the
development of a system through which large volumes of standardized products could be assembled by unskilled workers at
constantly decreasing costs. This is the apogee of mass production.

The Modern Phase

Mass production worked well as long as high volumes of mass-produced goods could be produced and sold in predictable and slowly
changing markets. However, during the I970s, markets became highly fragmented; product life cycles reduced dramatically and
consumers had far greater choice than ever before. An unforeseen challenge to Western manufacturers emerged from Japan. New
Japanese production techniques, such as total quality management (TQM), just-in-time (JIT) and employee involvement were
emulated elsewhere in the developed world, with mixed results.

More recently, the mass production paradigms been replaced, but there is as yet no single approach to managing operations that has
become similarly dominant.

The different approaches for managing operations that are currently popular include:
1. Flexible specialization in whit h firms (especially small firms) focus on separate parts of the value-adding process and
collaborate within networks to produce whole products. Such an approach requires highly developed networks, effective
processes for collaboration and the development of long-term relationships between firms.
2. Lean production which developed from the highly successful Toyota Production System. It focuses on the elimination of all
forms of waste from a production system. A focus on driving inventory levels down also exposes inefficiencies reduces costs
and cuts lead times.
3. Mass customization seeks to combine high volume, as in mass production, with adapting products to meet the requirements
of individual customers. Mass customization is becoming increasingly feasible with the advent of new technology and
automated processes.
4. Agile manufacturing emphasizes the need for an organization to be able to switch frequently from one market-driven
objective to another. Again, agile manufacturing has only become feasible on a large scale with the advent of enabling
technology.

In various ways, these approaches all seek to combine the high volume and low cost associated with mass production with the product
customization, high levels of innovation and high levels of quality associated with craft production.
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CURRENT ISSUES IN OPERATIONS MANAGEMENT
Despite all the tools and systems at their disposal, operations managers face extensive challenges when it comes to managing an
organization's resources. The global marketplace is characterized by its large size and dynamic makeup. The operations manager must
grab this truth to maintain optimal process performance in a shifting global landscape. Successful operations managers stay updated of
these trends and implement proactive systems to take advantage of them. Globalization, technology advancements, and redefined
marketplace priorities are among the many challenges at hand today.
Globalization has radically altered the way operations managers carry out their day-to-day activities. Landforms, distances, and time
zones no longer disconnect people from information. Because of this, modern corporations can and, in some competitive instances,
ought to base their operations in any number of countries to minimize costs and maximize performance efficiency.
The instantaneous availability of information is directly attributable to modern technological advancements. Technologies such as
global positioning systems (GPS) and radio-frequency identification (RFID) have revolutionized inventory management. Corporations
can now account for inventory in real time, no matter how detached it is. What's more, these technological advancements have made
planning systems more accurate, thus lessening operations managers' margins for error. Technology is moving at quick speed.
Keeping up can be rewarding, but failing to do so can be disastrous.

The global marketplace has been, and is continuing to be, redefined by new priorities. With a rising population depending on a present
amount of resources, companies are being obligated to make sustainability a main concern. Customer priorities are changing, too,
especially when it comes to health. Changes such as these are impacting the ways businesses must perform operations management
and will continue to generate operational challenges. The companies with the most knowledgeable operations managers will be able
to embrace the adversity challenges present and alter the marketplace in the process.

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