The role and importance of Operations Management

Published Date: 23 Mar 2015

Operations Management is directly related to the study of production. Operations management of an organisation has a wide range of responsibilities such as monitoring existing productions and assigns new productions tasks etc. The whole organisation is a production system which converts a set of inputs like raw materials, labour, and equipment into one or more outputs such as computers, automobiles, health care services etc. The outputs of a production system may be tangible or intangible and they are commonly known as products. In the general terms, "Operations Management is a discipline and profession that practices the process of planning, designing, and operating production systems and subsystems to achieve the goals of the organisation." Every organisation is having more than one goal like to earn profits and maintain the demand for their products in the long-term. For every organisation, the operations management is a strategic weapon which will help them to achieve their goals. The organisation should implement all the decisions taken by the operations management in order to achieve its goals, mission and vision.

The role and importance of Operations Management in an organisation is very wide and can not ignore. The main roles are planning and design, operation and control.

Planning and Design: It is the first level of procedures of operations management in any of the organisation. It is very important and crucial responsibility of operations management in the organisation since it is going to give the fortune of the organisation in the near future. It mainly includes;

1) Product Design: It is the heart of all operational decisions taken by the operations management in the organisation and it starts before actual production starts to produce. The design of product will affect the way the production system should be designed and operated. For example, it is clear that depending on the materials used for the production of products will affect the machines to be used. Also it will affect how well employees are to be appoint, how other production equipments to be adjusted etc. An organisation can produce products at lower cost, it they consider production implications while designing the product.

2) Capacity Planning: After completing product design, the next step is capacity planning. It deals with how much capacity the production plant requires. In order to plan the capacity of the plant, first we have to identify how many products are required in the market every day. According to this finding, the operations management will plan the capacity of the plant.

3) Process Design: It is the process of designing production process. It is very important to the entire organisation to produce low cost products. The process design requires the decisions to be made regarding the arrangement of individual production activities.

4) Choice of Technology: The selection of technologies for the production process is very important factor for the success of that particular product.

5) Facility Location: It is the process of identifying the suitable place to construct the plant. It is very important factor for the successful of the products in the market. While selecting the place, operations management has to consider the availability and supply of raw materials and other facilities.

6) Facility Design and Layout: This is another very important factor like facility location. While designing the plant, the movement of machineries, labour and raw materials should be considered.

7) Job Design: The choice of production process directly affects the number of skilled employees required to the production process. The design of job, organising the job, developing work standards, and appointing employees for producing high quality products are the major issues faced by the operations management.

8) Product Quality assurance: Quality checking is very important process of every organisation. All the outputs are gone through quality checking and those are passing will come out as end user products. If any end user products are failing the quality standards they should moved to re-work or some other use. If the product is going to market without conducting quality checking, the reputation of the company will loose.

Operation & Control: It is the next steps of procedures that are done by operations management. Here actual productions starts and controlling of the same is done. It mainly includes;

1) Coordinating Production Resources: The operations can be start very effectively since all the operation planning and design is completed very early. Here the operation managers will decide about the hiring of employees and their training, layoffs and overtimes etc.

2) Materials and Inventories Management: The operations management will devote much of their time to inventory and material management, scheduling operations, and personnel. Here the questions of what to buy, where to buy, how much to buy are coming up and the operations management has to take decision on all of these issues.

3) Scheduling Personnel, Equipment, and Work: The scheduling of employees, machines, production jobs and projects are very important functions to an organisation. While scheduling these things, the operations management has to consider the costs, customer service, and quality.

Task 19.1.b

An organisation's "strategy is the map, compass, and rudder for the organisation. It tells members of the organisation where it wants to go and how to get there, and it provides a mechanism for steering the organisation."

Strategic Objectives of Toyota Motor Corporation

Toyota Motor Corporation is the world's largest automobile maker by sales. In order to sustain this position, the company recruited around 320,000 employees worldwide. In the past few years the company is reported a record annual loss. Also the company recalled around 1.8 million cars across the world. Recently the US government collected US $16.375 million as penalty from the company. In these circumstances, Toyota Motor Corporation has to focus its strategy on qualitative and financial objectives.

Qualitative Objectives: Toyota Motor Corporation has to focus mainly on quality matters than quantity. The company has to improve the quality of its cars. The preference of Toyota cars among the people came down due to the recall cars having defective accelerator pedals. Toyota has to work on these defects in the accelerator pedals and changing the technology of the same can come back strongly. Introducing innovative car models after the proper and efficient quality checking can attract consumers worldwide. Being world's biggest automobile maker, it is very easy for the company to market its innovative products in the market. If the company is introducing the products having standard quality and competitive, people will come forward to use the same.

Development Objectives: Toyota is facing big problem due to the defects and other related issues. This can be solved out by focusing on the development objective. The R&D division of Toyota has to be improved to face the competition and other difficulties. Research & Development division of Toyota was number one in the world, but due to some technological reasons it lost its reputation. So investing more on R&D division, Toyota can introduce new innovative automobiles as well as develop the existing products.

Financial Objectives: It is very important objective of every organisation in the world. At Toyota this matter is very important due to its recorded annual net loss, recalling of cars, and penalty levied by the US government. In order to attract investments, company has to rearrange its operation which can attract investors. Price of the car will not be a matter to the customers if it has high standard quality, innovative model, competitive design compared to other cars available in the market. Toyota can increase its revenue and profit only by introducing automobiles without defects.

Quantitative Objectives: The number of cars to be produced is depending on the demand in the market. Reducing the inventories will help the company financially and protect from over productions. Bye using the technology of JIT (Just in Time) the company can manage demand and supply of their products in the market.

Task 19.1.c

Performance Objectives of Toyota Motor Corporation

The organisational objectives of Toyota are to achieve competitive advantages over other automobiles in the world. Their organisational objective is not limited with Japan or, two or three countries, but spread over the world. These objectives will help to evaluate the performance of the company and to remain highly competitive.

Quality: Quality can be defined as "providing defect free goods and services at right time to meet customer demand and making them satisfy." Toyota Motor Corporation's organisational objectives mainly focused on producing high quality products which can use worldwide. The engineering department is working on this objective which will help the company to provide innovative products with high quality.

Cost: It is one of the important operations objectives of Toyota Motor Corporation since they are facing lots of competition based on price. It is a universal truth that customers are easily attracted to low price and it can achieve by producing products at lower costs. Toyota is trying to attract customers by influencing the cost of its products by shifting its plants to convenient places globally. This will help the company to produce high quality automobiles at affordable prices.

Speed: By using innovative technologies and simplified machines, Toyota could minimise the time between placing the order and delivering the finished goods. Rearranging plant layout and process layout the speed of production can improve very well.

Flexibility: It is the performance objective of changing the products and services of an organisation depending on the changes in the market/ business environment. This may cause to change the way how the company was doing its operations. Toyota could achieve "flexibility" of its products by producing different models of automobiles with small in numbers. So the company could offer a range of products to its customers worldwide. In the near future, the company increased the production of cars which led to the recall of the defected products.

Dependability: It means the delivery of goods and services on time which is promised to the customers. Toyota, by using Just-in-time (JIT) production method and talented workers could fulfill their promises made to the potential customers by delivery cars on time. The quality and efficiency of the automobiles depends on the cooperation of all the managers and employees of the company.

Task 19.2.a

Business Process: It is "a group of related, well defined tasks which produces a particular output in the form of service or finished goods for a specific customer or customers." Since it deals with most of all the functions of Toyota Motor Corporation, it is very important to apply certain standard tools which will help the process very easy to the management.

The following are the important resources, system, and tool used at Toyota Motor Corporation.

Resources: Toyota Motor Corporation is using several resources for its business process such as raw materials, human resources, machineries, financial resources, plants and other physical resources. Raw materials are the most important resources used in Toyota for the production process. Like every company, human resources are important and they are the core factor of process. Without the use of hi-tech machineries and sound finance, the production process of Toyota can not complete.

Toyota Production System (TPS): It is an "integrated socio-technical system" developed by Toyota. The term "Toyota Production System" is born from Lean Manufacturing system which gives importance to the eliminating wastes from non-value add activities. The important benefits of Toyota Production System are;

Reduced inventory

Reduced cycle time

Reduced delivery lead-time

Increased productivity

Reduce in the number of defects

Savings in work space

Improved on-time delivery

Just-in-Time (JIT): This is a "production scheduling and inventory management tool where the products are produced only to meet actual demand and materials are received or produced only for to meet the each stage of production."

Kaizen - Continuous Improvement: It is very important tool of Toyota Production System. This tool is used to eliminate waste and improve efficiency by using both human and stadardised machineries. All the Toyota family members have to follow these work guidelines and also to ensure the continuous improvements.

Task 19.2.b

Quality Audit and Review Systems

Toyota uses quality audit and review system which help the company to evaluate and enhance the performance. This system is very helpful to the company in order to pointing out the defects in the product and corrective measures. This system can be divided into two such as "internal audit and review system", "external audit and review system." Internal audit and review system is the company's own system which is controlled by the top management. This internal audit and review system will help the company to identify the defects in the products before sending out from the factory. External audit and review system is controlled by external agencies who are appointed to verify second level audit and review. These agencies will not have any wrong intentions on company and thus the report will be clear and genuine. This system will provide accurate picture about the quality and defects of the products.

Quality Audit and Review Systems in Toyota Motor Corporation

Internal Quality Audit and Review System of Toyota is well established system which works in a separate division. It deals with business process and risk management internally. But, recent recall of company's defected cars globally shows that still some improvement is required for the quality audit and review system. The external audit and review system is also appointed by the company who gave the report about the defected cars. By that time, such a number of defected cars are sold globally.

Audit & Review Committee: This committee is formed by the board of directors of Toyota Motor Corporation which include talented group of auditors. This committee conducts audit and reviews and directly giving all the findings and reviews to the board of directors.

Task 19.2.c

Quality Culture

Quality can be defined as "providing defect free goods and services at right time to meet customer demand and making them satisfy." Such goods and services can meet or exceed the requirements and expectations of the customers. Quality requires employees' contribution by doing right things at the right time. It is ultimately depends on how skilled workers are, how well they are trained to do their jobs, and how well they work. The final component of quality is the operation of production system itself. Quality culture means the development of systems and tools that can be used by all the employees to ensure high quality in all kinds of outputs. Quality is a commitment to the organisation and most importantly to the customers.

Quality Culture at Toyota Motor Corporation

Toyota's philosophy about quality is an explicit component of their strategy. Even the best production processes will experience problems. The secret of maintaining good quality conformance in spite of such failures is to have a monitoring and feedback system that identifies quality problems and initiates corrective action as soon as possible. The recent incidents show that the company has to develop their quality culture. Quality culture is very important to Toyota and it is very easy for the company to develop the existing culture. The company has to encourage the innovative ideas from the part of employees which can contribute to create a standard quality control and thus culture. This will help and assure the continuous monitoring and development process to the company.

Task 19.3.a

Systems and Work Activities of TMC

Toyota Production System is the base of Toyota Motor Corporation's systems and work activities. This is works on a continuous flow of production based on the demand changes in quantities and variety which are effectively managed by two very important concepts like Just-in-time and Autonamation.

Major Problems

Toda, from the global markets every multinational company are facing threats which can not be avoided. Normally these threats are from the competitors, political parties, socio-economic factors, culture and beliefs etc. Being a multinational company Toyota Motor Corporation also facing such threats globally. They are;

Competition: This is an unavoidable threat to Toyota Motor Corporation. Globally spread completions are actually an opportunity for the company to grow in the market by rectifying its errors and improving its standards. The main competitors of Toyota are General Motors, Ford, Cheverle, etc. Increasing the competition globally compels the company to compromise with the price of its products which will lead to reduce the revenue of the company.

Decreasing Profit: Due to the tough competition and increased cost of production the profitability of the company decreased. In order to face competition the company spends more money on research and development activities and hi-tech technologies which highly increased the production costs. Apart from these matters, the low demand for the products due to the recall of defected cars led the company to a record annual loss.

Shutdown: Another big threat to the company is the shut down of its plants. Due to bad sales the company has shutdown its plants in Britain and France recently. Such halt of productions will lead to the huge loss and may negatively affect the brand value in those countries.

Quality: It is one of the important factors which will lead every company into heights. Toyota is facing big problems with quality even though the company has rich quality analysing experts. Recall of defected cars globally and the penalty made by the US government are due to the fault in the quality analysis of the end user products.

Opportunities

Toyota has important opportunities in the world markets. They are;

Expansion of Plants: The Company's products and services have much demand all over the world and thus it can expand its activities by opening more plants globally. Now the company is decided to open its production plants in Africa.

Introduce Innovative Products: Toyota has an opportunity of introducing innovative automobile products which can use all over the world. Today most of the automobile companies are producing different products to different countries. By introducing unique products globally will reduce defects and help to market brand very easily.

Concentrate on Financial Services: Toyota already have presence in financial services through its division called Toyota Financial Services. By concentrating financial services, the company can reach to each and every corners of the world. Also this will help the company to sell its automobile products to all the corners of the world by financing form its financial services division.

Task 19.3.b

Recommendations for Toyota

Toyota can improve its production which will help to reduce defects, achieve organisational objectives and goals. Toyota was world's one of the largest automobile company by sales. After the recent recall of defected cars globally, company lost its position and brand value. These brand value, reputation, ranking Toyota can easily take back. The following are the recommendations for the company to improve its production

Develop a Quality Culture: As earlier explained, quality is very important factor which can attract the customer even if the price is high. The competition from the strategy of producing low priced automobile can be easily overcome by high quality products. So if Toyota can concentrate on quality matter, the company can sustain its presence globally by holding a high position.

Diversification: The diversification of its production from passenger cars to multi utility automobiles will help the company to acquire more market share globally. By expanding its automobile and other products in different categories will help the company to spread its risk and reduce defects.

Identify the talent of Employees: This will help the company to introduce innovative products and services to the global markets. Toyota can utilize their employees talents and ideas to overcome its defects and other production related issues.

Task 19.3.c

Evaluation of Recommendations

All the recommendations given above are for the improvement of Toyota's products and services. The company is facing a big threat from its quality issue due to the recall of 1.8 million cars globally. In this situation it is very important to develop a quality culture in the company. A strong quality culture will lead the company to grow globally and there will not have any further defects in the products or services. Quality culture is a long lasting factor which will not expire if maintained properly.

Diversification of its production in multi utility vehicles category and financial services will help to over come the loss of incurred by the company for the last year. Now Toyota is actively focusing on the production of forklifts which will provide more mileage to its products worldwide. Concentrating on the financial services will help the customers to buy more Toyota products which will lead the company to receive two benefits form that process. So it is very clear that by activating its financial services will improve the sale of its automobile products.

Identifying and promoting talented employees in the company will help more employees to come forward with innovative ideas and productions. Once the company is awarding or encouraging an employee for his/ her innovative idea, then it is very easy to promote and encourage all other employees who can help the company to manage changes. The employees are the people who are getting chance to mingle with customers directly. So they are well aware about the taste, demand, and requirement of those customers very clearly. By making such employees cooperation, Toyota can improve its products and services. The innovative manpower will enable Toyota to reinvent its models continuously to match with the expectations and requirements of consumers globally.

Task 19.3.d

Implementation and Evaluation

The feasible recommendations given above are to be implemented properly in order to achieve the results to the company. It is a critical and long lasting process and it require the participation of all the employees and well wishers of the company. It is requires several changes in the organisation which will raise resistance from employees. So it is very important to educate the employees about the necessary changes required in the company. Plant layout, process layout, and if require the location of the plant are to be changed accordingly. The important processes of implementation are;

Approval of Stakeholders: It is very important to discuss the above recommendations and necessary actions with stakeholders. They have to inform about the expansion of its production into multi utility vehicles, and should discuss how to build a quality culture in the organisation. The discussion is very important since they were the people who stood with the company during its recall of cars, the penalty from the US government, and recorded loss.

Prepare the products lists: Diversification of company's products and services has to prepare very carefully. This process requires lots of market analysis and research. Depending on the market trends, company has to design its products and services with patent right and get all the necessary sanctions before starting any other process.

Make Aware of the Changes: It is very important to make all stakeholders and employees aware about the changes planning in the company. This will help Toyota to avoid resistance and objections among the people who involves in the process of production. Also the stakeholders can bring their ideas about the expansion and diversification of Toyota's production.

Allocate Fund: It is very important step in the implementation of recommendations in Toyota. Every expansion and diversification require huge financial support to the company. Here diversification, expansion, and quality assurance require huge financial support. The company can depend on its stakeholders and banks in order to arrange necessary funds.