April 23, 2013
The objective of this memo is to discuss and apply with examples key concepts and principles of operations management. The topics that will be covered are operations management and completive advantage, improving responsiveness to customers, improving quality, and improving efficiency.
Operations Management and Competitive Advantage
Operations management is the management of any aspect of the production system that transforms inputs into finished goods and services. A production system is the system that an organization uses to acquire inputs, convert inputs into outputs, and dispose of the outputs. Operations managers are managers who are responsible for managing an organization’s production system. Operations managers are responsible for ensuring that an organization has sufficient supplies of high quality, low-cost inputs, and they are responsible for designing a production system that creates high-quality, low-cost products that customers are willing to buy.
Improving Responsiveness to Customers
Responsiveness to customers refers to actions taken to meet the demands and needs of customers. Organizations produce outputs that are consumed by customers. All organizations, profit seeking or not-for-profit, have customers. Without customers, most organizations would cease to exist because customers are vital to the survival of most organizations, managers must correctly identify customers and promote organizational strategies that respond to their needs.
The credo pf pharmaceutical company Johnson & Johnson’s, for example begins “We believe out first responsibility is to the doctors, nurses, and patients, to mothers and fathers and all others who use our products and services. Given that satisfying customer demands is central to the survival of an organization, an important question is, What do customers want? To specify exactly what they want is or possible because their wants vary from industry to industry. The problem is that other things are not equal.
For example, providing high quality, quick service, and after-sales service and support, products with many features, and products that are customized raises costs and thus the price that must be charged to cover costs. Because satisfying customers is so important, managers try to design production systems that can produce the outputs that have the attributes customers desire. As an example of the link between responsiveness to customers and an organization’s production system, consider the success of Southwest Airlines. It is one of the most consistently successful airlines in the United States and have been expanding rapidly.
Southwest managers created a production system uniquely tailored to satisfy the demands of its customers for low-priced, reliable, and convenient air travel. Southwest’s low-cost production system focuses not only on improving the maintenance of aircraft but also on the company’s ticket reservation system, route structure, flight frequency, baggage-handling system, and in-flight services. Southwest’s reliability derives from the fact that has the quickest aircraft turn-around time in the industry.
One strategy can use to get close to customers and understand their needs is customer relationship management. CRM is a technique that uses IT to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time. For example, suppose that a sales manager has access only to sales data that show the total sales revenue each salesperson had generated in the last 30 days which, doesn’t breakdown how much revenue came from sales to existing customers versus sales to new customers. Important knowledge that is being lost is if most revenues are earned from sales to existing customers, this suggest that the money being...
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