Factors Affecting

Operation Management
Production and Operation Management
 Factors Affecting Operation Management

1. Global Competition
2. Quality, Customer Service & Cost Challenges
3. Rapid Expansion of Advance Technologies
4. Social Responsibility Issues

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Global Competition
 Globalization
A process of interaction and integration among the people, companies, and
governments of different nations.” It is driven by a reduction in trade barriers, advancements in
information technology, and transportation technology. Operation managers face competition
from the company across the street, as well as, from across the country and across the world.
Tishta Bachoo, Accounting Professor at Curtin University in Australia, explains that companies
who compete with others abroad will have to improve quality while lowering prices to remain
competitive.
This falls on the operations manager as he or she is the one who “engages in the four functions
of planning, organizing, leading, and controlling to ensure that the product or service remains
competitive in the market.”
Batchoo adds that the operations manager must tap into their creative skills as innovation will
be a key factor of success as will knowledge about international business and the myriad
cultures of the businesses around the globe.

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 Global Competition
Companies must be competitive to sell their goods and services in the
marketplace. Competitiveness is an important factor in determining whether a
company prospers, barely gets by, or fails. This competition can be related to price,
quality, product or service differentiation, flexibility, time to perform certain activities,
service, and managers and workers by companies.
• Price is the amount a customer must pay for the products or service. Organization
that compete on price may settle for lower profit margins, but most focus on
lowering costs of goods or service.
• Quality refers to materials and workmanship as well as design. Usually, it relates to a
buyer perceptions of how well the product or service will serve its intended purpose.
• Product or Service differentiation refers to any special features that cause a product or
service to be perceive by the buyer as more suitable than a competitor’s product or
service.
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 Global Competition
• Flexibility is the ability to respond to changes. The better a company or department is at responding to
changes, the greater its competitive advantage over another company that is not a responsive. The
changes might relate to increase or decrease in volume demanded, or to change in the design of goods
or service.
• Time refers to a number of different aspects of an organization’s operations. One is how quickly a
product or service is delivered to a customer. This can be facilitated by faster movement of
information backward through the supply chain. Another is how quickly new products or service are
developed and brought to the market.
• Service might involve after sale activities that are perceive by customers as value added, such as
delivery, setup, warranty work, technical support or extra-attention while work is in progress, such as
courtesy, keeping the customer informed, and attention to a little details.
• Managers and workers are the people at the heart and soul of an organization, and if they are
competent and motivated, they can provide a distinct competitive edge by their skills and the ideas
they create. The drive to be more competitive is the importance of ethical behaviour ; it is something
that all managers should adhere to and stress to their subordinates.
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Quality, Customer Service
& Cost Challenges
 Quality
Approaches to Quality
Quality affects a company in a variety of ways, from productivity and profitability to
customer satisfaction and public perception. In addition, quality affects the overall operating costs of a
company. Focusing on quality can help a business maintain a satisfied customer base.
In turn, this means the business might continue turning a profit. If a business is not
profitable, examining the quality of the product or service is an important step to finding a solution.
When focusing on quality, it must be a team effort, with everyone within the company committed to
implementing any quality changes managers mandate. Although the initial cost might seem expensive,
the overall costs of ensuring delivery of quality products and services might prove to be less than
expected.
There are three main approaches to maintaining quality.
Quality Control –is where a product is inspected at the end by specialist quality controllers who look
for detective products. This can mean a lot of waste, so to some extent has been succeeded by quality
assurance where he product is designed and produced in a way to maximise quality. It is the
responsibility of all staff to maintain quality, not just the inspectors.
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 Quality
Total Quality Management
is where the business develops a whole philosophy of quality and continually seeking ways to
improve it. It may be associated with some of the techniques raise in lean production. All staff must be
involved in it and all must see each other as their customers as well as the final external customer.
International Standards (such as ISO9901) are an independently verified means of showing customers
that the business has set procedures for ensuring quality.
Causing Problems with Productivity
Poor quality costs a company money in terms of productivity problems. If a company uses
low-quality parts, systems break down, regardless of any high-quality parts also used. Low-quality
parts can cause mechanical breakdowns, as well as work slowdowns or even stoppages.
Impacting Company's Profitability
Quality increases profitability. When employees are engaged in a work environment in which
teamwork is emphasized and where quality products are the goal, the work environment flows more
smoothly than one in which quality is an afterthought.
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 Customer Service
Customer Service
customer have a large multitude of choices in the market and this affects their behaviours:
they want to acquire goods and services quickly and in more efficient way than before. They also
expect high quality and low prices. All these expectations need a response from the company,
otherwise sales of company will decrease and they will lose profit and market share. A company
must always be ready for price, product and service and customer preferences because all of these
are global market requirements.
Influencing Customer Satisfaction
Quality has a direct bearing on customer satisfaction. If a company produces a quality
product, satisfied customers will rank that company higher in surveys than companies that fail to
provide quality products or services. In addition, dissatisfied customers are more vocal in their
criticisms of a company with quality problems. Various websites will rank different companies
according to customer satisfaction and quality products. Poor companies may get an initial sale of a
product or service but it will not create repeat customers.

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 Cost Challenges
Directly Affecting Costs
Quality directly affects costs in a business. While using less expensive parts
and equipment might cut costs in the short term, the long-term effects might be
far more expensive. For example, using certain software that costs less might save
a company money in the short term, but that software might be more complicated
than more expensive software or lack customer service. In that case, employees will
take longer to understand how to use the software. On top of that, if a problem
arises with the software, the lack of customer support means it takes longer to
accomplish the job, thereby costing the company more money than if it had used a
more expensive, higher quality software product.

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 Rapid Expansion of
Advance Technologies
Rapid Expansion of Advance Technologies
Technology can be facilitating factor in bringing about change in operations and production
management. Usage of technology in operation management has ensured that organizations are able to
reduce the cost, improve the delivery process, standardize and improve quality and focus on
customization, thereby creating value for customers.
Technology -- including everything from physical devices to information technology networks -- has a
deeply transformative influence on the modern world and economy. From changing consumer
preferences to reshaping the way businesses produce and market goods, technology can be seen even in
the smallest details of day-to-day business operations, increasing the productivity of workers and
investments, accelerating economic activity, promoting interdependence between industries and
allowing for the continual deployment of new technologies -- and also creating new business risks.
As technological innovation makes consumers want new types of products, businesses have to adjust
their operations to meet new market demands. Businesses integrate new technologies, such as
computers and software packages, into their daily operations and production cycle and provide new
products such as increased mobile compatibility for a line of electronics. Driven by consumer desires for
new technological goods and more convenient technological services, businesses can compete with each
other based on their pace of innovation and adoption of new technologies.
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 Rapid Expansion of Advance Technologies
The Internet and E-business
Electronic business, or E-business, involves the use of the Internet to transact business. E-
business is changing the way business organizations interact with their customers and their suppliers.
Most familiar to the general public are consumer-business transactions such as buying online or
requesting information. However business-to-business transaction such as e-procurement , represent an
increasing share of e-business . E-business is receiving increase attention from business owners and
managers in developing strategies, planning, and decision making.
Risks
Although adopting new technology can be very beneficial -- even necessary -- for a business, every new
technology also presents a unique set of new risks. Without proper employee training in how to use a
new software system, for example, technology can actually decrease productivity and even reduce
employee satisfaction. The rapid migration of personal and corporate operations data to online databases
also makes companies more vulnerable to cyber-attacks that can adversely affect operations or shut down
a business altogether.
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Social Responsibility Issues
 Social Responsibility Issues
Social responsibility is related to sustainability, but this function of the operation manager
looks specifically at how the business engages with its local community beyond trying to get consumers
to buy it products. Many businesses choose to get involved with non-profit organizations, to sponsor
local sports teams or to volunteer in local schools. While these can be challenging projects to organize, a
business’s community involvement gives its neighbour a sense that the company cares about its
surroundings and its customers on more than just profit level, and its raises awareness of the business
and its brand. Social responsibility, therefore, is a from of marketing and public relations.
Ethical Conduct
Education site ManagementStudyGuide.com takes special note of the role ethics plays in production.
Ethics is defined as a subset of business ethics that is “meant to ensure that the production function
and/or activities are not damaging to either the consumer or the society.” In particular organizations
should consider the effects new technologies, defective services, animal testing and business deals have
on people, safety, and the environment.

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 Social Responsibility Issues
Unethical behavior has significantly contributed to the demise of successful corporations
like Enron, Tyco, and many varied firms doing business on Wall Street. Being ethical across all
business functions such as accounting, human resource management, marketing and sales, and
production are clearly within the purview of the operations manager. Unethical behavior,
regardless of its origin, becomes a stain on the company as a whole. The recently noted ethics
breach at Wells Fargo is just one poignant example.

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Thank You!