Operations Management in Business

Mohammed Suhel
ID: 9130332

Table of Contents
Introduction........................................................................................................... 1
Task 1..................................................................................................................... 2
1.1 Importance of Operations Management.......................................................2
1.2 Analysis of Operations Functions..................................................................3
1.3 Evaluation of Operations Management.........................................................4
Task 2..................................................................................................................... 5
2.1 Importance of the Three Es........................................................................5
2.2 Cost Minimization & Quality Maximization....................................................7
2.3 Significance of the Five Performance Objectives..........................................9
Task 3................................................................................................................... 10
3.1 Linear Programming................................................................................... 10
3.2 Critical Path Analysis & Network Planning..................................................11
3.3 Operational Planning & Control..................................................................12
Task 4................................................................................................................... 13
4.1 Operational Outcomes................................................................................ 13
4.2 Network Plan & Resultant Critical Path.......................................................14
4.3 Quality Management Techniques................................................................17
Conclusion........................................................................................................... 18
Bibliography......................................................................................................... 18

Introduction
Operations management is of utmost importance for both profit and not-for-profit
organization. This concerns itself with efficient and effective use of resources to the highest
achievable degree. These resources are used to manufacture and deliver the products or
services of a company so that a high net operating profit is obtained. This report contains a
discussion of the many aspects of operations management.

Task 1

1.1 Importance of Operations Management

The necessity of operations management is paramount as it facilitates sustenance of an

organization. Organizations are under huge pressure to improve output while maintaining and
uncompromising on quality due to a jump in number of well-informed and conscious
consumers as well as increase in competition and wide advancement in technology sector.
Operations management helps in this case.
Operations management is the chief business function of an organization as it strategizes
monitors, arranges and controls the manufacture of inputs required in order to manufacture
final output of an enterprise. It forms a key part of todays management.
Organizations such as IKEA use operations management for a multitude of reasons. It
enhances productivity and reduces errors. By cutting down wastage, it helps in cost reduction
thus enabling the firm to become more competitive. Top-notch products and services that
meet customer demands garner customer satisfaction help in increasing revenue. High
production coupled with quality products ensure financial sustainability of company.
Facilitation management, which is an aspectof operations management, ensures effective and
efficient management of equipment, computer, buildings, etc so that company can meet a
sudden surge in demand. It aids in achieving organizational goals. In addition, less capital has
to be invested due to proficient and novel use of resources. Operations and knowledge based
innovation is also encouraged.(Needham, Dransfield, Coles, Harris, & Rawlinson)

1.2 Analysis of Operations Functions

There are a number of essential functions related to operational management. It is concerned

with inputs (human resources and raw materials) and participating in supply and purchase
decisions. Looking after inventory is also a part. For example, at a company like Prt A
Manger it has to be ensured that sufficient raw materials are at hand for food preparation.
Company outline and services ought to be observed to ensure maximum usage of equipment
and human resources. It also has to determine if more employees are needed and if so,
arrangements must be made to hire people with competency, knowledge and values
congruent to that of the firm. Monitoring employee activities, motivating them, assessing
performance and providing training opportunities, paving way for employee progression, etc
are also its duties.
Management of supply chain, participating in budget formation and reducing expense are
included in its responsibilities. Analysis of financial statements, sales report, forecasting (an
example, the probable number of customers an outlet of Prt A Manger can expect in a day),
are essential. Cost-benefit analysis or other such mechanisms are needed to augment
efficiency.
Operational management has to outline organizational objectives, as well as put policies in
place for different departments. Maintain quality is vital for an organization to thrive.
Customers must be dealt with in a polite manner. Co-ordination of processing or technical
department has to be handled. Operational management at Prt A Manger would be
concerned efficient service to consumers and maintaining their quality.
Since operation management is involved with inter-related tasks, it may have to address
conflicts, support communication between departments and establish a co-operative
organizational culture. It also involves formulating decisions along with top management.
It can be said that without operational management, profitability would suffer and would
eventually lead to bankruptcy. (Daft & Lane)

1.3 Evaluation of Operations Management

There is need for constant evaluation of operations management so that should any
mismatching of objectives occur, corrective measures can be taken as soon as possible. The
transformation process is suitable for evaluation purpose. This depicts use of input resources
by operations, next comes output like product or service through transformation process.
Let us look at British Airways as an example. The chief inputs of this company are their
employees, the 290 aircrafts that they have in possession, the freight they deliver and of
course, their passengers. These inputs pave the way for occurrence of operations and offering
of output, that is service in case of this organization. The inputs that have been transformed
are made use of in two ways. First is employees who have a role in operation and second
comes facilities such as machinery, building, etc. Passengers are primary output of
transformation method. Also important are the shipment that British Airways carry to an
approximate number of 3000 places. This signifies that output is intangible in this case.
(British Airways)

Task 2

2.1 Importance of the Three Es

The Three Es are essential components in operations management and are meant for
evaluation and augmentation of performance within a company. They are elaborated below.
(Dawn)

Economy

This E is concerned with financial factors. It describes financial condition of the country
where a company operates. It also discusses if inputs have been acquired during time of need,
if they have been brought in at the correct place-that is, at the place of demand, if they have
been procured at the correct quantity and at the correct expense, which means reducing
expenses that are needless. By considering expense involved in procuring inputs and the
value of outputs, economy can be ascertained. It also serves as a vital checker of feasibility.

Efficiency

The second E is concerned with how work is done. An evaluation of efficiency can be done
by taking into account inputs that are converted into goods and amenities. Efficiency shows
highest possible work completed in unit time. For deducing efficiency, the process via which
an activity is done must be described and each level should be scrutinized to deduce exactly
what resources are needed and by what quantity. This is called benchmark of measurement.
Subsequent work can then be measured to check increase and decrease in inputs needed as
well as changes in efficiency can be checked. Efficiency rises if same work can be completed
with fewer resources. Via checking for efficiency, budget formation, pricing of goods and
services, quality maintenance, etc are benefitted. Higher efficiency means more success in
product delivery and high profit. Without efficiency, an organization cannot thrive.

Effectiveness

The third E deals with whether or not goals of a company are realized. A manager must see to
it that correct work is done and work is done on time. A bitter truth is that hard work with no
result is undesirable and ineffective. Ineffectiveness even in part of one department can slow
down work of others. This reduces production and causes loss of business and profit.
Employees must be made aware of goals. Then it can be checked whether or not goals have
been accomplished which serves as a measure of effectiveness.
An organization should put importance on the Three Es so that quality goods or services can
be delivered at minimum expense and for such products clients would pay a good price. Thus
the Three Es will aid IKEA to accomplish their profit goal b utilizing resources in the
correct manner, for the correct things and keeping loss to minimum.

2.2 Cost Minimization & Quality Maximization

The tension between cost minimization and quality maximization is inevitable. A company
has to think about minimizing cost. However, this does not mean compromising on quality of
product or service is acceptable. IKEA Company is a follower of the saying that highest
possible gain should be made at least possible expense. The necessary things that are of
consideration are elaborated below.

Material Cost

Life estimate of a product influences material cost. Materials that are redundant but expensive
do nothing but contribute in raising the cost of product and expenses incurred by the
company. And if the extra material remains unused, eventually it will waste away.

Efficiency & Predictability

Efficiency plays a big part in manufacturing a product unharmed and flawlessly. Proper use
of efficiency means a product can be designed again making it easier to manufacture.
Efficiency of process and safety margin can be benefitted to a great extent by process
engineering.

Modularity

This focuses on which unutilized resources could be put to use in other merchandise
produced that differ slightly. The responsibility of this task lies with the engineer who designs
goods or service cost and other cost incurred during the manufacture process.

Improvement of Product as per Market Demand

Customer intention is to purchase those goods they actually want to purchase. IKEA
Company must conduct a market research to find out demand of target customers so that
goods can be manufactured according to customer demand. Care should be taken to define
value as a perfect match to customer demand.

Efficiency of Energy

Cost is incurred by manufacturing products or amenities that prove to be more energy

efficient for customers. It is of essence that other costs should also be related to efficiency
and energy.

2.3 Significance of the Five Performance Objectives

Five performance objectives underpinning operations management are quality, speed,

dependability, flexibility and cost. These are elaborated below.(Robbins)

Quality

For any business quality plays an important role. It entails producing goods or services
appropriately and fittingly. It should be remembered that quality is not a onetime factor. It
should not be compromised on and maintained continuously. Managers should keep an eye
on products so that no injurious product reaches customer. Product of inferior quality would
be unable to survive in the market. IKEA should emphasize on quality in all their products.

Speed

General definition of speed is performing things correctly. This entails manufacturing

standard goods within specified time while plummeting the lag time. By increasing efficiency
and reducing lag at the value chain, speed benefit can be obtained. Time wasted in the course
of a process is influenced by lean manufacture.

Dependability

Customers stand at the heart of an enterprise. Dependability is when an organization keeps its
promise and delivers customers with the right product within allotted time. Dependability
factor influences a companys reputation.

Flexibility

At present, customers desire goods and services tailored to their demand. So, organizations
must be flexible and tweak needed product requirements as demands change continually. It
would be beneficial to launch new products in the market from time to time.

Cost

Cost depicts doing things in an economic manner. Since cost of manufacture depends on a
multitude of costs, expense would be reduced and contribution margin will lie at the top.
Decrease can be done in two methods-per product unit and total quantity of product.

10

11

Task 3

3.1 Linear Programming

Linear programming can be stated to be the method of garnering highest possible profit at the
least possible cost in a mathematical model, where requirements are depicted by linear
relationship.
Linear programming greatly helps in managerial decision making. An enterprise can
manufacture an array of outputs but resources are scanty in amount. It facilitates deciding on
what amount of a product to manufacture keeping in mind inputs used up and marginal
contribution. This augments total contribution. With its aid, operations cost is plummeted by
considering workforce, constraints in manufacture, resources, etc. In addition time wasted
while putting products together is decreased. It can depict least cost for manufacturing a
product that can be manufactured using interchangeable methods and resources. (Krajewski
& Ritzman)
An example could be as follows. An organization wants to obtain seven trucks with a
minimum capacity of 14 tonnes. Cost of Model A is $6,500 and its capacity is 4 tonnes. Cost
of Model B is $9,500 and its capacity is 5.5 tonnes. So what combination of vehicles must be
purchased in order to achieve minimum cost?

12

3.2 Critical Path Analysis & Network Planning

The critical path method (CPM) was introduced by DuPont. It is of essence to operational
management and it has no substitute. Critical path analysis describes management of
operational process and appraisal of the simplest accessible relevant to operational
management in the process of production. In case of operational management network
planning is vital. The reason is operational management process can go smoothly because of
appropriate network planning. It has been seen that firms that desire success in the corporate
domain, they have put a great focus on network planning process. Network planning
facilitates in creating prospective base of customer and contributes in supply chain
acceleration. Apposite network planning system can wholly alter a companys interface.
There is no substitute to appropriate network planning when it comes to facilitation of
operations management.

13

3.3 Operational Planning & Control

Operational planning is known as the system of tactical goals, aims and objectives that are
relevant to the operational process. Generally budgets for operation and tactical plan in case
of operational planning are formulated for subsequent five years. Implementation of plan
would occur during operational period. It is the responsibility of operational plan to formulate
the budget and other tasks for every single part of a company for current year as well as
subsequent two to three years. Operational planning raises a few questions listed below.
(Bartol & Martin)

Our position at present

Where is it that we desire to go?
What method can be used to reach there?
What ought to be our development?

Not only is operational planning a method of controlling but it is also an amalgamation of

plan and trail that is utilized for managerial information. The chief use for operational
planning is business plan for present year as well as later years. The plan aids in obtaining
required data regarding financial consequences in a fiscal year. (Bettley, Mayle, & Tantoush)
IKEA Company needs both operational planning and controlling as these will aid in keeping
the budget under control. In addition execution of activities that need to be performed will lso
be aided.

14

Task 4
For the next sections, WH Smith, a renowned British book retailer has been chosen.

4.1 Operational Outcomes

A set of plainly defined operational outcomes are as follows.

During time of execution the next data set was made of use.

People who are involved in a whole host of service ought to be recognized.

The extent to which their tasks represent a large of small chunk of their role must be

determined.
What other services they are a party to has to be ascertained following which its
impact on numerous reshuffling choices should be determined.

15

4.2 Network Plan & Resultant Critical Path

While preparing their promotional campaign, WH Smith can put the following constituents to
use.

Task A- planning of advertisement campaign

Task B- creating a TVC
Task C- designing of poster
Task D- test marketing of the TVC prepared
Task E- fittingness of the poster designed is evaluated
Task F- board of directors are given a presentation of the campaign and their feedback

is recorded
Task G- the campaign is unveiled to all employees of the company

An estimate for time required for completion of each activity, as well as the order of
performing them are depicted below.

Activity

Order

Estimate of time taken in

A
B
C
D
E
F
G

It is the first task to be completed

A must be completed and then B can begin
A must be completed and then C can begin
D can begin after B has been completed
E can begin after C has been completed
F can begin after completion of both D and E
After D, E and F has been completed, G can

hours
6
8
7
9
12
7
4

begin

16

Tasks on a network are illustrated below.

Earliest Start Time (EST)

Since earliest beginning time of A is zero, B and C would take 0 + 6= 6 hours as shown in up
right of node 1 and 2. After A and B, D would occur and it would take 0 + 6 + 8= 14 hours as
shown in node 3. After A and C is done, E will begin and would require 0 + 6 + 7= 13 hours
as depicted in node 4. During EST calculation, the path that takes longest time is determined.
After D and E is completed, F will begin and it takes 0 + 6 + 7 + 12= 25 hours depicted in
node 5.

Latest Finish Time (LFT)

Latest finish time has to be calculated next. This has to be done via back calculation and
commences at node 7. In node 7 we see that G must be finished within 36 th hour. For F, LFT
is 36 4= 32 hours. LFT for A is 13 7= 6 hours. We are discarding 16 8= 8 hours as for
LFT calculation path that takes least time is chosen.

Critical Path

Critical path is the one where nodes have EST and LFT values that are equivalent. Equal
value signifies an activity begins as soon as previous one ends. This indicates no time lag
occurs and campaign can be wrapped up within least possible time. A, C, E, F, G is the

17

critical path and it is depicted in diagram above with lines struck across activities. If a task in
critical path takes more time than usual, resources may be re-assigned.

Float

Float is the duration of time a task can be postponed without having an impact on other ones.
Activity
A
B
C
D
E
F
G

Time
6
8
7
9
12
7
4

EST
0
6
6
14
13
25
32

B and D can be postponed by 2 hours.

LFT
6
16
13
25
25
32
36

Total Float
0
2
0
2
0
0
0

Free Float
0
0
0
2
0
0
0

18

4.3 Quality Management Techniques

Quality must be upheld continuously. Products and services must not be detrimental to
clients. Inferior goods would ultimately lose out in the market place. (Bartol & Martin)
Program monitoring and service supervision must be taken into account while outsourcing
control and quality preservation. A quality program should

Match the needs that form the root of its very existence.
Be congruent with objectives, philosophy and mission of company.
Consider culture and provisions of target consumers

19

Conclusion
Operational management cannot be done without if success is to be grasped in business
sector. Without apposite use of this, an enterprise may even face the threat of bankruptcy.
Knowledge regarding this will facilitate managers in making the right choice and make
maximum use of resources.

Bibliography
Bartol, K., & Martin, D. Management. McGraw Hill.
Bettley, A., Mayle, D., & Tantoush, T. Operations Management:A Strategic
Approach.
British Airways. (n.d.). Retrieved from www.britishairways.com:
http://www.britishairways.com/
Daft, R. L., & Lane, P. Mannagement.
Dawn, B. (n.d.). Retrieved from suite: https://suite.io/dawn-brewer/2zfk2qk
Krajewski, L. J., & Ritzman, L. P. Operations Management.
Needham, D., Dransfield, R., Coles, M., Harris, R., & Rawlinson, M. Business for
Higher Awards.
Robbins, S. P. Management. Pearson.