OPEN UNIVERSITY OF MAURITIUS

OPERATIONS MANAGEMENT

ASSIGNMENT 1
COMMONWEALTH EXECUTIVE
MASTER OF BUSINESS ADMINISTRATION

TISHTA BACHOO
LEARNER ID: 130801213

Table of Contents
Introduction.................................................................................................................... 3
1

Literature Review............................................................................................................ 4
Industrial Revolution............................................................................................... 4
Scientific Management............................................................................................ 5
The Human Relations Movement.............................................................................5
Operations Research (Decision Models and Computers).........................................5
Just-in-time (JIT)....................................................................................................... 6
Total Quality Management (TQM)............................................................................7
Lean Production...................................................................................................... 8
Recent Developments (supply chain management)................................................8
Challenges faced by operations managers............................................................................. 10
Globalization......................................................................................................... 10
Customer satisfaction and Resource productivity.................................................11
Workforce and social trends..................................................................................12
Economic and Environmental................................................................................13
Technology............................................................................................................ 14
Ethical conduct...................................................................................................... 15
Conclusion................................................................................................................... 16
References................................................................................................................... 17

Introduction
The main field which operations management is concentrated on is managing the sources
directly taking share in product manufacturing or providing a service by the organisation
(Horvthov, 2010). These sources are in the form of people, materials, technologies and
information. They are combined together by a number of processes in order to acquire a service
or a product (Horvthov, 2010). Operations management is therefore the transformation process
in which inputs (resources) are by means of this process transformed into outputs (products or
services) (Horvthov, 2010). The operations manager is responsible for managing the resources
involved in this process. Operations management, therefore, refers to performing the
traditional managerial functions (planning, organizing, directing, and controlling) on the
organizations operations (Kumar & Suresh, 2009). This assignment explores changes and shifts
in the field of Operations Management from the evolution era to present age. It also explores the
challenges faced by operations managers in the manufacturing industry and the strategies
adopted by them in order to meet these challenges.

Literature Review
The story of operations management is all about the industrial, economic and social revolution.
Perhaps more than any other business discipline, operations management has shaped the world in
which we work and live (Piercy, 2012). In the earliest days of manufacturing, production of
goods took place in homes and cottages where craftsman directed highly skilled workers to use
simple and flexible tools to produce goods according to customer specifications (Kumar &
Suresh, 2009). Under that system, one worker could make a product, such as a piece of furniture,
from start to finish. However, craft production had major shortcomings. Since products were
made by skilled craftsmen who custom-fitted parts, production was slow and costly (Kumar &
Suresh, 2009). Another shortcoming was that production costs did not decrease as volume
increased; there were no economies of scale, which could have provided a major incentive for
companies to expand (Piercy, 2012).

Industrial Revolution
The arrival of modern operations management, however, occurred with the shift from craft based
production to the industrial factory system (Kumar & Suresh, 2009). That is, the Industrial
Revolution. It emerged in the United Kingdom in 18th century and its impacts then spread to
other European countries and to the United States (Piercy, 2012). A number of innovations
changed the face of production forever by replacing human power by machines (Kumar &
Suresh, 2009). Coal and iron ore were used to generate power and to make machinery. These
machineries were more durable than the simple wooden machines they were using (Kumar &
Suresh, 2009). As days went by, production capacities expanded, demand for capital grew and
labour became highly reliant on jobs (Piercy, 2012). At the beginning of the 20 th century, the one
element which was lacking was the management with the ability to develop and use the facilities
to produce on a maximum capacity to meet massive markets today (Greasley, 2008). Hence, such
a management system was developed by the American efficiency engineer and inventor
Frederick Taylor, who is often referred to as the father of "scientific management"(Greasley,
2008).
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Scientific Management
The scientific management era brought prevalent changes to the management of factories. Taylor
believed in a science of management based on measurement, analysis and improvement of
work methods, and economic incentives (Greasley, 2008). According to him, all equipment,
workers and tasks are part of a manufacturing system whose performance should be maximized
(Greasley, 2008). Taylor also believed that management should be responsible for planning,
carefully selecting and training workers, finding the best way to perform each job, achieving
cooperation between management and workers, and separating management activities from work
activities (Greasley, 2008).

The Human Relations Movement

Until 1920s, operations management emphasized on organisational structure, specialisation,
planning and control but not on human dimension (Piercy, 2012). Workers were expected to
perform like robots. This paved the way for the human relations movement. The scientific
management movement heavily emphasized the technical aspects of work design whereas the
human relations movement emphasized the importance of the human element in job design
(Piercy, 2012). In the following decades, there was much emphasis on motivation. It is believed
that together with the physical and technical aspects of work, giving special attention to workers
is essential to improve productivity (Piercy, 2012).

Operations Research (Decision Models and Computers)

The factory movement was accompanied by the development of several quantitative techniques.
F. W. Harris developed one of the first models in 1915: a mathematical model for inventory
management to solve operations problems such as production scheduling and inventory planning
(Piercy, 2012). In the 1930s, statistical procedures for sampling and quality control were
developed which at first were not widely used in industry (Piercy, 2012). However, the start of
the Second World War generated tremendous pressures on manufacturing output, and specialists
from many disciplines combined efforts to achieve advancements in manufacturing. This era
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became known as Operations Research. After the war, efforts to develop and refine quantitative
tools for decision making continued, facilitated by the introduction of the processor computer in
1951 (Piercy, 2012). This resulted in decision models for forecasting, production planning,
project management, and other areas of operations management (Piercy, 2012). Later on,
quantitative techniques were highly regarded. Even now, the widespread use of personal
computers and user-friendly software in the workplace is very popular (Piercy, 2012). Some
years later, Orlicky proposed Material Requirements Planning (MRP), mainly for assembly
operations (Hsu et al., 2009). MRP relies on a computerized program both to calculate the
quantity of materials needed for production and to determine when they should be ordered or
made (Hsu et al., 2009). Later on, Oliver Wright and George Plossl developed Manufacturing
Resource Planning (MRP II) which is linked to Orlicky's MRP but adds all the activities of a
manufacturing company, including sales, purchasing and maintenance (Hsu et al., 2009). MRP II
goes beyond material planning to help monitor resources in all areas of the company. Such a
program can, for instance, coordinate the production schedule with HR managers forecasts for
needed labor (Gattiker 2007). In the middle to late 1980s; network computing began to increase,
with applications such as Electronic Data Interchange (EDI) (Exploring Business, n.d.). This has
led to more co-operations with the suppliers in the form of partnering, and formation of supply
chains (Gattiker 2007). In the mid-1990s, the Internet began to play a major role in business
operations, and more and more companies are using Enterprise Resources Planning (ERP)
software

to

coordinate

their

sales,

materials

management,

and

production

planning/manufacturing, and accounting/finance activities (Gattiker 2007).

Just-in-time (JIT)
Just-in-time is one inventory control method. The main goal of JIT is to deliver raw materials
and/or component parts in small lot sizes, frequently, and directly to the point of use, eliminating
the need for incoming inspection and warehousing, and reducing material movements (Hsu et al.,
2009). The manufacturer arranges for materials to arrive at production facilities just in time to
enter the manufacturing process (Exploring Business, n.d.). Parts and materials dont sit unused
for long periods, and the costs of holding inventory are significantly cut (Exploring Business,
n.d.). JIT, however, requires considerable communication and cooperation between the
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manufacturer and the supplier (Hsu et al., 2009). The manufacturer has to know what it needs,
and when. The supplier has to commit to supplying the right materials, of the right quality, at
exactly the right time.

Total Quality Management (TQM)

In the 1980s, a new phase of quality control and management started which is known as the Total
Quality Management (Exploring Business, n.d.). This is important to manage the entire
organisation for it to excel in all dimensions of products and services that are important to the
customers (Exploring Business, n.d.). TQM is a proven technique to guarantee survival in worldclass competition and it can become a very efficient weapon against the rivals (Kuruppuarachchi
& Perera, 2010). Quality must be a key objective not only in the operating department of the
organisation but in every department (Exploring Business, n.d). It is important for the customers
to recognise a high quality already from the first contact with either the organisation up to the
delivery of products or services to the customers (Hsu et al., 2009). Every customer can perceive
quality in a different way and that is why it is not firmly given because it continuously changes
and it must be improved all the time (Kuruppuarachchi & Perera, 2010). This eventually causes
growing costs of quality (prevention costs, appraisal costs, internal and external failure costs.
Nowadays, quality is recognised as a crucial element to compete in the market and that the whole
organisation must focus on in order to remain successful in the future (Hsu et al., 2009). Quality
is really important and that is why it is necessary to control it in some way. And it is just
statistical quality control that gives the organisation powerful instruments to be applied in the
process of control and improvement (Hsu et al., 2009). Most often three types of control are
used- process control, acceptance sampling, and traditional techniques (Piercy, 2012). To get
feedback on how well they are doing and about the quality of their products and services,
organisations routinely use surveys and other methods to monitor customer satisfaction
(Exploring Business, n.d.). By tracking the results of feedback over time, they can see where
they need to improve and how to build a stronger position in the market (Horvthov, 2010)

Lean Production
Lean production systems are so named because they use lesser of certain resources than mass
production systems use, such as less space, less inventory, and fewer workers to produce a
comparable amount of output (Cottyn et al, 2011). Lean production systems make use of a highly
skilled workforce and flexible equipment (Cottyn et al, 2011). They incorporate advantages of
both mass production (high volume, low unit cost) and craft production (variety and flexibility)
(Piercy, 2012). Lean production is a broad approach to just-in-time.
The skilled workers in lean production systems are more involved in maintaining and improving
the system than their mass production counterparts (Cottyn et al, 2011). They are taught to stop
production if they detect a defect, and to work with other employees to find and correct the cause
of the defect so that it wont recur. This results in an increasing level of quality over time, and
eliminates the need to inspect and rework at the end of the line (Piercy, 2012).

Recent Developments (supply chain management)

Operations management has been recognised as an important factor in a countrys economic
growth (Exploring Business, n.d). We have progressed from craft based activity into industrial
organisation and now into the post-industrial economy, as service sector has become more
prominent (Kumar & Suresh, 2009). The ideal situation for a business organisation is to achieve
a match of supply and demand (Exploring Business, n.d). Having excess of either supply or
capacity is wasteful and costly; having too little means lost opportunity and possible customer
dissatisfaction. In order to maintain the ideal situation, it is important develop the management of
supply chain (Hsu et al., 2009). Supply chain management stresses the seamless integration of
value-creating activities across organizational boundaries (Hsu et al. 2009).
It enables firms in a supply chain to eliminate waste, leverage synergies and compete more
effectively in an intensely competitive global market (Hsu et al. 2009). It can also play a vital
role in the success of quality management initiatives (Foster et al, 2010). In todays competitive
market, for firms to simultaneously offer goods and services at low cost and high quality requires
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the integration of the operations capabilities of multiple supply chain members (Foster et al,
2010). To gain competitive advantage, firms must develop and make use of their core resources
to develop these capabilities in a manner that inhibits duplication by competitors.

Challenges faced by operations managers

There are many challenges faced by operation managers in the field of operation management.
Operation managers should equip themselves with all the necessary tools and knowledge across
all the business function. Operation Managers need to understand the whole business flows, the
products, the customers, the operation and the technology. With this in mind, they will be able
deal better with various groups to improve the process and operations productivity and
efficiency to the next level, understand problem-solving from technical point of view and be able
to discuss intellectually with technical parties for various operation issues. Managing a service
system has become a major challenge in the global competitive environment (Kumar & Suresh,
2009). Organisations are subject to more ups and downs in their day to day activities. As a
manufacturer today, the basic approaches to managing operations are no longer sufficient to meet
the difficult challenge of continuously achieving and improving manufacturing excellence
(Kumar & Suresh, 2009). Leading companies are turning to a broader type of solution to enable
manufacturing transformation - one that encompasses not just the plant floor, but also the
warehouse, quality and material flow throughout the production process and product supply
network (Exploring Business, n.d). Only then manufacturing excellence can be achieved and
sustained. As such the work of operations managers in the manufacturing industry is becoming
more and more challenging in view of the various factors that will be explained further.

Globalization
It is commonly said that the world is gradually becoming a global village. In 1990s, reduction in
trade barriers and advancement in communications and transportation technology made global
manufacturing networks more effective and efficient (Horvathova, 2010). Globalization is
increasingly becoming a challenge in the manufacturing industry and in turn for operations
managers. It does not only imply that local firm faces competition from abroad, but also means
that the former goes international (Horvathova, 2010). Competing with firms from abroad means
a firm will have to remain competitive by providing quality goods and services at lower prices
(Horvathova, 2010). The operations manager would definitely be concerned with this as he
would have to engage in the four functions of planning, organising, leading and controlling to
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ensure that the product or service remains competitive in the market (Kumar & Suresh, 2009).
Moreover, there would be a demand for the operations manager's creative skills as innovation is
a key factor for the success of the business in this highly competitive world (Horvathova, 2010).
The case whereby more companies are going international, the operations managers will need to
have greater knowledge of international business and different cultures (Horvathova, 2010).
Either products or services need to be adapted to suit the demand in such countries. Again, this
will be a challenge for the operation managers as it would require their creative skills.
To overcome the challenges due to globalization, the operation managers need to set a
specialised product and target market which will keep the uniqueness of a product or service to
be able to compete in the global market. Also, they must have a good understanding of their
competitors. For instance, taking the case of a textile firm, if the management knows which types
of garments are in demand in Australia and after taking into consideration the threat of
competitors, if any, the firm can go global.

Customer satisfaction and Resource productivity

Given a boost by the quality revolution of the1980s, quality is now ingrained in business.
Organisations use the term total quality management (TQM) to describe their quality efforts
(Exploring Business, n.d.). A quality focus emphasizes customer satisfaction and often involves
teamwork (Kuruppuarachchi, D, & Perera). It is a fact that low cost and high quality are key
attributes that a good or service needs to possess (Kouvelis, 2005). To satisfy customers and
remain competitive in the market, a firm must be able to supply the right quantity of goods and
services as high quality, at a low price and at the right time (Koss, 2005). However, there is a
trade-off between cost, quality, quantity and time. It is the responsibility and a challenge for the
operating manager to ensure that this trade-off is minimized (Koss, 2005). The operations
manager needs to make sure that either the product or service is to the standard required by the
customer. Thus, it is important for the operations manager to maintain their engagement in Total
Quality Management and the extent to which he is able to meet the standard required by the
customer will definitely be a challenge for him (Kuruppuarachchi & Perera, 2010). It is crucial
for manufacturers to emphasize on improving productivity (Gattiker, 2007) and hence satisfying
11

customers. Empowering employees by giving them timely information boosts productivity, and
this is exactly what an integrated information system - an enterprise resource planning (ERP)
system does (Gattiker, 2007). For instance, the textile industry is so vast and comprises of many
departments, teams, offices, cities, countries. This makes it very difficult to track the
performance, productivity and usage of employees capability and availability companywide
(Wall & Sirichoti, 2013). This lack of employee visibility may negatively affect smooth work
load distribution, optimization of employee usage and accurate employee productivity and
effectiveness (Wall & Sirichoti, 2013). So it is critical to build up a companywide central system,
which records and displays details about the capability and availability of individual employees.
Hence, the IT software for enterprise resource planning (ERP) is specifically designed for this
purpose (Wall & Sirichoti, 2013).

Workforce and social trends

Changing society values, cultures and interests have a great impact on the work of operation
managers (Exploring Business, n.d.). Since some of the managers have to deal directly with
operating employees, they have to take into account social trends. The managers also have to
bear in mind the demographic changes while planning, organising and controlling (Exploring
Business, n.d.). Nowadays, the large swath of the workforce (boomers) is retiring and a new
wave (millennial /gen Y) is entering the workforce (Ferris, 2012). Hiring qualified workers to
replace the old ones who have been working for 30 years or more is a challenge for many
organisations. This change of guard is seen mostly across the manufacturing industry (Ferris,
2012). Moreover, finding the right employees, and managing these people becomes a constant
battle for operations managers as the younger generation have turned their back on the
manufacturing job (Ferris, 2012). Most of the time, in the textile industry, workers don't stick
with one employer for decades like they used to, and the operation manager may sponsor a star
employee's machine-tool course only to see that worker get lured away by a firm across town
(Ferris, 2012). In order to meet these challenges, firstly, the operating managers should take a
proactive approach to attract and retain quality new hires, who are very well qualified and those
having certain levels of experience in the manufacturing field (Ferris, 2012). Secondly, they have
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to implement effective on-the-job mechanisms to transfer knowledge and retain the older experts
for as long as possible (Ferris, 2012). The manager must also prevent culture clashes and sex
inequalities in order to maintain a friendly working environment.

Economic and Environmental

The dramatic change in the economic landscape also affects the work of operations managers
(Klassen, 2013). Economic variable such as inflation, unemployment, interest rates, exchange
rates, economic growth, or recession have an impact on the price of raw materials and the price
of finished products (Munasinghe, 2013). For instance, in the case of inflation, the operations
manager is torn apart between two extremes: one, the high price of raw materials and second, he
will have to produce at a low cost (Munasinghe, 2013). Natural calamities such as cyclones and
droughts and other unforeseen events also affect the price of certain raw materials and again, the
skills of the operations manager as a resource allocator and negotiator will be put into value
(Klassen, 2013). Operations managers play a critical role in determining the environmental
impact of manufacturing operations through choice of raw materials used, energy consumed,
pollutants emitted and wastes generated (Klassen, 2013). Business organisations are coming
under increasing pressure to reduce their carbon footprint and to generally operate sustainable
processes (Klassen, 2013). Sustainability refers to service and production processes that use
resources in ways that do not harm ecological systems that support both current and future
human existence (Munasinghe et al., 2013). Sustainability measures often go beyond traditional
environmental and economic measures to include measures that incorporate social criteria in
decision making (Munasinghe et al., 2013). Operation management is central to dealing with
these issues. Sometimes referred to as green initiatives, the possibilities include reducing
packaging, materials, water and energy use, and the environmental impact of the supply chain,
including buying locally (Klassen, 2013). Other possibilities include reconditioning used
equipment (e.g., printers and copiers) for resale, and recycling (Klassen, 2013).
One good example is the Sri Lankan tea manufacturing industry. Finlays tea estates have adopted
a more systematic triple bottom line reporting method which covers the full spectrum of
economic, environmental and social impacts (Munasinghe et al., 2013). Finlays factories are
13

now entirely powered by renewable sources of timber and they are in the process of developing a
system of establishing their carbon balance sheet or footprint, with the aim of reducing emissions
of global green house gases. They have launched a project of cultivating tea with a view to
enriching the organic matter content of the soil through mulching, and to minimizing the use of
furnace oils for tea drying. This not only led to savings in foreign exchange owing to fewer
imports, but it provided employment for surplus labour. They have also started hydroelectric
power generation on the plantation, which helps the country to meet its energy needs at low cost
and saves foreign exchange through the low consumption of oil (Munasinghe et al., 2013).

Technology
Technological advances have led to a vast array of new products and processes (Exploring
Business, n.d.). Undoubtedly the computer has hadand will continue to havethe greatest
impact on business organizations. It has revolutionized the way companies operate (Exploring
Business, n.d.). Currently the following technologies are under focus to support operations in the
manufacturing sector: Robotics, Computer controlled manufacturing, Biotechnology and global
positioning systems (Exploring Business, n.d.). Technological advances in new materials, new
methods, and new equipment have also made their mark on operations (Bohari & Zainuddin,
2013). Technological changes in products and processes can have major implications for
production systems, affecting competitiveness and quality, but unless technology is carefully
integrated into an existing system, it can do more harm than good by raising costs, reducing
flexibility, and even reducing productivity (Bohari & Zainuddin, 2013). In order to overcome this
challenge, operations managers will have to adapt his skills in view of the recent developments
that have been taking place in production. It is also important to underline that with the advances
in technology, products are becoming outdated over time (Exploring Business, n.d.). Therefore,
the operations manager has to constantly keep pace with new technology to ensure that the firm
does not lag behind with regards to the product being unique (Exploring Business, n.d.).
Furthermore, it is expected that the operations manager will have to face and cope with an
integration of business needs, people needs and technology (Bohari & Zainuddin, 2013).

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Manufacturing industry such as automotive industry makes use of automation to reduce the need
for human's interaction in the workplace. The use of technology in this particular industry helps
to improve efficiency and effectiveness. New technologies also provide opportunities to create
more flexible work environments. For example, in the automotive industry-- available
technologies include the self-propelled, computer-guided carriers that help to keep the floor clear
of equipment because all equipment is mobile. This technology also makes it possible to change
the layout of equipment to fit particular work organisations.

Ethical conduct
The need for ethical conduct in business is becoming increasingly obvious, given numerous
examples of questionable actions in recent history. In making decisions, managers must consider
how their decisions will affect shareholders, management, employees, customers, the community
at large, and the environment (Horvthov, 2010). Finding solutions that will be in the best
interests of all of these stakeholders is not always easy, but it is a goal that all managers should
strive to achieve. Furthermore, even managers with the best intentions will sometimes make
mistakes. If mistakes do occur, managers should act responsibly to correct those mistakes as
quickly as possible, and to address any negative consequences. Operations managers, like all
managers, have the responsibility to make ethical decisions. Ethical issues arise in many aspects
of operations management, including: safety (product & employee), quality and environment
(Horvthov, 2010).
In the manufacturing industry, business ethics codes are commonly used to keep business
activities legal and maintain the companys public image (Horvthov, 2010). Manufacturing
industry normally adopt a "No Harm" policy. Refraining from harming others is an ethical
consideration that also helps hold society together (Horvthov, 2010). For example, the toy
industry refused to employ child labor and ensure human rights are respected. Fairness is another
important factor that is taken into consideration in this particular industry. For example, in most
manufacturing organizations, the same criterion is being used to determine employee treatment,
such as promotion and firing. Manufacturing firm make use of contracts, handbooks and code of
conduct to set out the standard, rules and regulation to follow (Horvthov, 2010).
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Conclusion
We can conclude that many evolutionary terms and shifts have led the need for Operations
Management. It can be said that the operations function in business organisations is responsible
for producing goods and providing services. After the Industrial Revolution, countries evolved to
an industrial economy. But for a time, manufacturing was more of an art than a science and
element of management was missing. This changed when Taylor introduced the method of
scientific management. The Operations Manager in the manufacturing industry faces many
challenges and these are in the form of: globalisation, customer satisfaction and resource
productivity, workforce and social trends, economic and environmental issues and technology, as
discussed above. Operations managers in the manufacturing industry are being able to meet new
challenges. However, it requires much effort. Firms within this industry are operating in a
dynamic environment and changes are inevitable. Firms are able to adapt to changes by adopting
new technology and combing machine and human power to improve efficiency. To be successful,
the firms are adopting code of ethics and professional standard to improve employee morale and
production level. Quality enforcement like TQM and Lean management are used to continuously
improve process, people and product. More emphasis is being put in recruiting the best people.
Operation management is putting more emphasis on green initiatives for the industry to remain
sustainable. All the strategies discussed above, if well developed and maintained, will overcome
the challenges which the operation managers face in the manufacturing industry. This is how the
industry will also reach a high competitiveness and it will be able to maintain it.

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