Manage Operations Efficiently

Do you manage operations processes effectively and efficiently?
A. No.  Management of operations is a real challenge for us.
B. We manage operations processes relatively effectively and efficiently.
C. We understand the linkage between efficiency and providing value to the customer … we’re working hard to achieve improvements.
D. We manage operations processes to provide our customers with an attractive value proposition.
E. We manage operations processes effectively and efficiently to provide our customers with all the elements of an attractive value proposition: competitive price, low-cost-of-supply, perfect quality, timely delivery and excellent selection and service.
[Score:  A=0, B=1, C=2, D=3 and E=4]

 

Why is this question important?

Managing operations effectively and efficiently enables a company to offer their customers key vital elements of an attractive value proposition:

  1. Competitive prices, lower total cost of supply – lower costs to customers, thus increasing the customer’s profit
  2. Perfect quality – deliver zero-defect products and services to customers
  3. Speedy, timely purchase – deliver products and services on time
  4. Offer excellent selection to customers

Operating processes produce and deliver goods and services to customers, and while operational excellence alone is not the basis of a sustainable strategy, managing operations remains a priority for all organizations. Without excellent operations, companies will find it difficult to execute strategies.

Operations management focuses on carefully managing the processes to produce and distribute products and services. Major, overall activities often include product creation, development, production and distribution. Related activities include managing purchases, inventory control, quality control, storage, logistics and evaluations of processes. A great deal of focus is on efficiency and effectiveness of processes. Therefore, operations management often includes substantial measurement and analysis of internal processes. Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of the products or services in the organization and varies widely from retail, to manufacturing and wholesale.  It will include some or all of the following:

  • Purchasing & Supply Chain Management
  • Control and Coordinating Production Function
  • Product and Service Management
  • Quality Management
  • Inventory Management
  • Logistics and Transportation Management
  • Facilities Management
  • Enterprise Resource Planning

Production & Operations – Managing Quality

Achieving high quality does not happen by accident. The production process must be properly managed to achieve quality standards. Quality management is concerned with controlling activities with the aim of ensuring that products and services are fit for their purpose and meet the specifications.

There are two alternative approaches to managing quality.

Quality control

Quality control refers to the process of inspecting products to ensure that they meet the required quality standards

This method checks the quality of completed products for faults.  Quality inspectors measure or test every product, samples from each batch, or random samples – as appropriate to the kind of product produced.

The main objective of quality control is to ensure that the business is achieving required standards.

Quality control involves setting standards about how much variation is acceptable.  The aim is to ensure that a product is manufactured, or a service is provided, to meet the specifications which ensure customer needs are met.

At its simplest, quality control is achieved through inspection.  For example, in a manufacturing business, trained inspectors examine samples of work-in-progress and finished goods to ensure standards are being met.

Advantages of Quality Control

  • With quality control, inspection is intended to prevent faulty products reaching the customer. This approach means having specially trained inspectors, rather than every individual being responsible for his or her own work.

Disadvantages of Quality Control

  • A major problem is that individuals are not necessarily encouraged to take responsibility for the quality of their own work.
  • Rejected product is expensive for a firm as it has incurred the full costs of production but cannot be sold as the manufacturer does not want its name associated with substandard product. Some rejected product can be re-worked, but in many industries it has to be scrapped – either way rejects incur more costs.
  • A quality control approach can be highly effective at preventing defective products from reaching the customer.  However, if defect levels are very high, the company’s profitability will suffer unless steps are taken to tackle the root causes of the failures.

Quality Assurance

Quality assurance puts in place processes that ensure production quality meets the requirements of customers.

This is an approach that aims to achieve quality by organising every process to get the product ‘right first time’ and prevent mistakes ever happening.  This is also known as a ‘zero defect’ approach.

In quality assurance, there is more emphasis on ‘self-checking’, rather than checking by inspectors.

Advantages of Quality Assurance

  • Costs are reduced because there is less wastage and re-working of faulty products as the product is checked at every stage
  • It can help improve worker motivation as workers have more ownership and recognition for their work.
  • It can help break down ‘us and them’ barriers between workers and managers as it eliminates the feeling of being checked up on.
  • With all staff responsible for quality, this can help the firm gain marketing advantages arising from its consistent level of quality.

Total quality management (“TQM”) is a specific approach to quality assurance that aims to develop a quality culture throughout the firm.  In TQM, organisations consist of ‘quality chains’ in which each person or team treats the receiver of their work as if they were an external customer and adopts a target of ‘right first time’ or zero defects.

Quality Control or Quality Assurance?

Which approach to managing quality is best?  Here is a summary of the main considerations:

Quality Assurance

  • A medium to long-term process; cannot be implemented quickly
  • Focus on processes – how things are made or delivered
  • Achieved by improving production processes
  • Targeted at the whole organisation
  • Emphasises the customer
  • Quality is built into the product

Quality Control

  • Can be implemented at short-notice
  • Focus on outputs – work-in-progress and finished goods
  • Achieved by sampling & checking (inspection)
  • Targeted at production activities
  • Emphasises required standards
  • Defect products are inspected out