Transformational Properties of Operations Management

The supply chain is a critical area for a business or company. As stated above, the supply chain is an area that can be key in promoting change in an entity. Words like agility, logistics, and efficiency are used to describe the supply chain. The “meat and potatoes” of a business or service is the supply chain. It is the most significant part of the delivery of products or services from the business entity to the consumer. Therefore, it should operate in an efficient manner to ensure cost effectiveness as well as getting the product to the consumer in a timely fashion. Another point I liked was that companies encouraging ideas from the supply chain. Who is more fit to know what needs to be done/changed than those who are hands on in the production process? The people higher up in the company in the offices that aren’t involved in the process? No shot.

Corporate structures are forced to focus on organization management to link the multiple facets of the organization into cohesive operational processes to succeed in highly competitive markets. Gaining efficiencies, delivering demand at lower cost, and satisfying consumer wants are constant challenges in our global market. Decisions regarding centralization and decentralization have to be balanced for efficiencies in this no boundary economy. Research in the cultural diversities must be part of today’s corporate success. Leveraging material availability and price are also key to process improvements and efficiencies.
The globalized economy has created both business challenges and opportunities. Suppliers, markets and consumers are driving competition to a critical level for continued business success. Jim Shimp of Whirlpool said “Innovation and understanding our customer better are “our only hope” of remaining competitive as global product industries come under intense commoditization pressures [1]
[1] Managing the Organizational Impact of Global Operations. Dartmouth.edu

There is a need but sometimes I find it shocking that many supply chains would feed back information to other parts of the supply chain. Globalization and the need to reduce costs by each cent forces supply chains to operate to trim their fat up until a point that it becomes dangerous. Operations management and improving the bottom line can lead to supply chain abuse which causes companies and retailers to force their suppliers to cut their own profit in order to make products cheaper for their buyers. This downward push on the supply chain causes suppliers to place their burden on the company below them until one buckles.
Good operations management as well as supply chain relationships have each company taking the others in the supply chain under consideration each time they make a decision that could impact them all. The purpose of improving supply chains should be to create synergy throughout the network which helps create more insight for each company. Operations management is much more broad than just a supply chain. OM deals with the overall layout of production facilities, resource efficiency, and balancing costs with generating revenue.

Supply chain management manages the flow of goods, and information and services, in order to deliver maximum value to the consumer, while minimizing the costs of the flow. The economic turmoil all over the world in the global supply chain has a serious impact, so difficult times require intelligent supply chain management, and executives should be always worried about how to build resilience in uncertain times. Supply chain management practices can decrease production lead times, reduce costs, speed product development, increase quality.
Operations management is responsible for supplying the product or service of the organization and managing the conversion or transformation process that converts inputs into outputs, the operations function relates to the efficient and most effective use of personnel, machines, and other resources. Says Foster & Ogden “We found that those who identified themselves as supply chain managers utilized and emphasized quality tools and values to a greater extent than those who identified themselves as operations managers.”
References
Foster, S., & Ogden, J. (2008). On differences in how operations and supply chain managers approach quality management. International Journal Of Production Research, 46(24), 6945-6961.

It is obvious that in today’s organizational environment that the market, no matter the business, continues to expand. Businesses are all dependent on the global system to survive. For a company, being able to keep up with how business is being conducting internationally relates directly to remaining competitive. Global companies’ operations are becoming more sophisticated, faster, and more efficient. It is a race to keep up with these quickly advancing companies and it is very easy to be left behind. Operations management is critical in keeping pace in the global system because it has become very apparent what happens to organizations that do not.
According to Sree Rama Rao, a writer for the citeman, operations management is important to an organization’s managers for two reasons. “First, it can improve productivity, which improves an organization’s financial health. Second, it can help organizations meet customers’ competitive priorities.”[1] These are the two very obvious reasons why operations must be at the forefront of management priorities. Expensive, inefficient processes can kill a company in the long run, especially if they do not know it needs to be fixed. This is why operations managers are critical to an organization’s health.
[1] The Importance of Operations Management by Sree Rama Rao

“Create jobs,” buy products only made in America! Sounds like a great idea, however it is not as easy as it sounds. Shortly after World War II the United States manufactured the majority of goods and services provided to the world. The success we found was attributed to several key factors including an educated workforce, readily available natural resources, and most importantly cheap labor. Things have certainly changed. Sure, we still have an abundance of resources, and a highly skilled workforce so what’s the problem? Well, many countries have well educated workers, many whom have studied in the United States. The answer is simple it is our labor cost. Our workers demand higher incomes on average than most foreign workers do. Our labor cost make up approximately 70% of the total production cost whereas most foreign labor cost make up about 30%. In New Delhi 2,500 young college-educated workers process claims for major U.S. insurance companies and they do it at a cost that is 60% cheaper that their U.S. competitors. As MBA students, we should strive to lower operational cost so we can improve our competitive position. I would love to buy items only “made in America,” however for now, “made in America,” just means you paid too much for it!
Engardio, P., Bernstein, A., Kripalani, M., Balfour, F., Grow, B., & Greene, J. (2003). IS YOUR JOB NEXT? (cover story). Businessweek, (3818), 50-60.

The optimistic perspective of American manufacturing is characterized by a statement made by Lawrence Summer, Dec. 2010, “Technology is accelerating productivity in mass production”; and in The Economist, “the shrinkage of industrial jobs—is wrongly perceived as a symptom of economic decline, when it is really a stage of economic development”.
The Information Technology and Innovation Foundation (ITIF) takes the opposing position and states that US manufacturing output has decreased by 11% and manufacturing jobs have decreased 33% since 2000. There are 6,000,000 less manufacturing jobs since 2002 according to Deloitte and a skills gap of 600,000 jobs for machinists, operators, craft workers, distributors, and technicians that are going unfilled according to the Manufacturing Institute.
More labor is required to bring output to its optimal point in the US – along with more efficient operations management.
The Manufacturing Institute. (2011). 2011 Skills Gap Report. Washington, DC 20001. Web accessed 7/8/13. http://www2.itif.org/2012-american-manufacturing-decline.pdf
Deloitte. (2012). Manufacturing opportunity. Deloitte Development LLC. Web accessed 7/8/13. http://www.deloitte.com/assets/Dcom
Atkinson, R.; Stewart L.A. (Mar. 2012). Worse than the Great Depression: What experts are missing about American Manufacturing Decline. The Information Technology and Innovation Foundation. Web accessed 7/9/13. http://www2.itif.org/2012-american-manufacturing-decline.pdf

Dr. Green-
Holistic Approach – Cheap + High Skilled
In regards to “cheap labor”, and considering the points made by the Manufacturing Institute and ITIF cited above, a holistic approach, i.e. increasing both cheap labor and high-skilled labor, is likely required to increase total output. In other words, to make up the ITIF reported 11% drop in total manufacturing output since 2002, a good place to start would be filling the 600,000 high skilled labor vacancies. But also, hiring cheap labor (unskilled to mid-level skilled) jobs might be the very next step.
Hiring Strategy
Since more production per dollar spent will likely be found by hiring high skilled workers, 100% of the 600,000 high skilled vacancies should be filled. Then, hiring 25-75% of the 6,000,000 “cheap labor” vacancies should be filled. Employment wise, and in terms of technology + operations management focus, this hiring strategy would result in a streamlined and efficient version of pre-2002 numbers.
(References found above in, “sam stone, july 9” post.)

The idea of placing the suppliers in a higher regard strikes me as a beneficial solution to a company while also remaining cost efficient. When I think to the improvements of a supply chain, my mind goes to the popular show Undercover Boss. In this show, a top executive wears a disguise and attempts to see where their company is coming up short. They also gain feedback from their employees on areas where they can improve their product/service. As previously said by Ben, who knows what problems are there better than the employees right in the middle?
The supply chain is how the consumers are able to get the product, so their abilities and skills are instrumental in the company’s success or failure. The supply chain is changing as time evolves. The consulting firm known as IDHASOFT (2013) describes the change in the supply chain by saying “it is not simply a tool for reducing cost, but also a tool for increasing sales and generating higher levels of value faster and better than the competition”[1]. Companies need to be more willing to take advantage of this tool and reap the benefits.
1.IDHASOFT. (2013). Supply chain management. Retrieved from http://www.idhasoft.com/business-services-supply-chain-management

Dr. Green – Responsibility of Government and Society:
As noted in the Economist, jobless college graduates didn’t major in Basket Weaving or Puppetry, but rather, are among the 2 million unemployed or underemployed college graduates who majored in architecture, engineering, computer administration management, and international business (WSJ)(Economist, 2011). But also, higher average unemployment rates for college graduates can be found in the Arts (WSJ).
To some degree, it is known that colleges are not teaching the skills needed by industry as made apparent by the “skills gap” in the United States, i.e. 600,000 vacancies that companies can’t hire due to lack of appropriately trained and educated workers (MI, 2011). So then of responsibility becomes, does the government have a responsibility to stop funding loans for underperforming degrees and instead fund loans to fill known market needs?
The Economist. (Nov. 2011). “Those silly young people”. R.A. Washington. Free Exchange. Web Accessed.
http://www.economist.com/blogs/freeexchange/2011/11/unemployment
Wall Street Journal. (Not specified). “From College Major to Career”. Source:
Georgetown University Center on Education and the Workforce. Web accessed.
http://graphicsweb.wsj.com/documents/NILF1111/#term=Engineering
The Manufacturing Institute. (2011). 2011 Skills Gap Report. Washington, DC 20001. Web accessed 7/8/13. http://www2.itif.org/2012-american-manufacturing-decline.pdf

dacissna-
While unemployment is correlated with cheap foreign labor, the skills-gap is a separate issue.
The root cause of the skills gap according to the Manufacturing Institute is that 600,000 jobs remain unfilled simply because companies can’t find people with the right skills (MI, 2011).
With that in mind, Germany, who pays their high-skilled laborers 10 times what China does, has held their share of global markets against China and other emerging countries (Theil, 2012). Germany has rising industrial employment and an unemployment rate of just 5.6 (Theil, 2012).
The point is that Germany is competing with China despite significantly higher labor costs. China cannot compete with Germany on quality. In Germany, high-skilled employees are developed in vocational schools, and highly technical solutions and technology are developed in universities (Theil, 2012). Unlike Germany, companies in the U.S. report that the national education curriculum is not producing workers with the basic skills they need – a trend not likely to improve in the near term (MI, 2011).
Theil, Stephan. (Sept. 2012). “The U.S. Could Learn from Germany’s High-Tech Manufacturing”. Scientific American. Web accessed 7/20/2013. http://www.scientificamerican.com/article.cfm?id=us-could-learn-germany-high-tech-manufacturing&page=2
The Manufacturing Institute. (2011). 2011 Skills Gap Report. Washington, DC 20001. Web accessed 7/8/13. http://www2.itif.org/2012-american-manufacturing-decline.pdf

Global competition brings various advantages like proprietary product technology, economies of scale, and comparative advantage. In globalization, the organization will have to deal with different business environments, different cultures, and government regulations. Institutional, managerial, and economic factors impede on the globalization process (Flaherty, 2012). In order for an organization to expand globally, it needs to change its approaches to management. The organization has to change its business operations strategy in the face of globalization. Because operations management is so important in the organization’s overall business strategy, operations managers will have to analyze various challenges and opportunities in the different countries they operate in, whereas accordingly developing new strategies. Operation strategies necessitated by globalization include the allocation of resources, technology choice, product development, and market selections (Flaherty, 2012).
Flaherty, Therese. (2012). Global operations management. New York: McGraw-Hill.

We know that companies have to make supply chain integration a key initiative if they want to have a successful globalization of their goods and services. The more important question to me is how to ensure supply chain business partners not only recognize but share in the vision and strategies set forth by the company? I think this is where the break down often happens.
When I worked for a global beverage company we used a refrigeration company that also serviced many of our competitors. The company had a tough time being viewed by their supplier as a key partner. In many similar situations supply companies have many customers and also have their own organizational goals to adhere to. This means that companies have to increase their due diligence in the selection of suppliers to ensure that strategies align for both companies to reach their goals. One supply chain article states“ A successful strategic partnership must be based on extreme trust loyalty , a win-win relationship, sharing common goals and cooperation that includes willingness to assist and positive negotiations” Charu Chandra, Sameer Kumar, (2000). In the end companies have to look at suppliers like they are a part of the company and definitely a part of the bottom line.
Charu Chandra, Sameer Kumar, (2000) “Supply chain management in theory and practice: a passing fad or a fundamental change?”, Industrial Management & Data Systems, Vol. 100 Iss: 3, pp.100 – 114