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Introduction

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

This free course, Introduction to operations management, provides you with a short introduction to operations management and strategy, clarifying some key themes and terminology, and exploring how operations managers can influence the short- and long-term success of their organisation. There are five sections:

What is the role of operations management?
The input–process–output model
What do operations managers really do?
Why is operations management important?
Are you an operations manager?

This OpenLearn course is an adapted extract from the Open University course B207 Shaping business opportunities.

The full course explores how organisations work by looking at their internal functions (operations management, human relations, finance and marketing). You will also learn about the external environment for businesses and how the economic and political context helps shape how businesses respond to global challenges.

Learning outcomes

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

After studying this course, you should be able to:

understand the input–process–output framework, the extensions of it, and apply them to a wide range of operations
examine the types of transformation processes occurring within operations
define the roles and responsibilities of operations managers and the challenges they face
reflect on your own operations management responsibilities, if applicable
understand the content of an operations strategy and the decisions involved.

1 What is the role of operations management?

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

Imagine some of the challenges of running a large restaurant. Each day the restaurant manager has to ensure hundreds of customers are served on time with food of good quality while maintaining a friendly, helpful service. They are responsible for a team of employees ranging from chefs to front of house waiters etc., checking that the employees arrive on time and work effectively. Operations managers are responsible for ordering and arranging deliveries of food, drink and other supplies. The building also needs to be utilised and maintained efficiently. This scenario is typical of an operations manager’s role.

The operations management function is usually responsible for a high proportion of an organisation’s assets. Inefficient management of these assets can have very detrimental consequences. In the short term the operation needs to be configured to meet market requirements; this is a challenge in itself. Even bigger challenges can occur during periods of change when new products and services are introduced, new markets are provided for or new technologies are used. It is common for new ideas to be generated outside of operations but it is the role of the operations manager to implement those ideas.

Activity 1: Introduction to operations management

Allow around 50 minutes for this activity

Read ‘Introduction to operations management’ (Walley, 2017).

This reading introduces the input–process–output model that you will explore in the next section, looks in more detail at the responsibilities of operations managers (which is the focus of Section 3), and explores how operations management can impact on an organisation (as discussed in Section 4).

2 The input–process–output model

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

The reading (Walley, 2017) introduced you to the operations input–process–output model.

Figure 1: Operations input–process–output model

Long description

This framework shows that the operations management role is divided into three areas:

Managing input resources – Operations managers must ensure that the right resources, such as people, equipment and materials, are available in the right quantity at the right time for the operation’s needs.
Managing processes – All operations managers are responsible for processes. Processes are defined as a series of interlinked activities or steps that consume resources to meet a goal or output.
Managing outputs – The operations function is responsible for meeting customers’ needs by delivering required products or services. The effectiveness and efficiency of the operation dictates how much resource is needed and this feeds straight through to unit cost and (where relevant) profitability.

2.1 Extensions to the input–process–output model

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

One of the leading operations management texts, Operations Management (Slack et al., 2007), has extended the basic process model by dividing operations management tasks into three distinct areas: design tasks, planning and control, and improvement. The framework also relates the operations function more closely to market requirements. This helps us understand how the different operations tasks link together. Screencast 1 will help you to understand the main themes of the operations management function.

Note: the video below was originally created for the OU module B207 Shaping business opportunities, so please ignore any reference to the module.

Download this video clip.Video player: Screencast 1: Extending the input–process–output model >

Screencast 1: Extending the input–process–output model

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Transcript: Screencast 1: Extending the input–process–output model

INSTRUCTOR

In the first part of this session, the tasks associated with Operations Management were represented by a simple input process output framework. This model has been extended by Nigel Slack and his team in his operations management text.

The basic structure of the framework is the same. Operations managers are responsible for resources. Both the transformed resources, including the material, information, and customers. And they also manage the transforming resources, such as facilities and staff.

The key difference with the Slack et al. framework is the focus on the right hand side of the model. Operations managers are not only responsible for the outputs from the process itself but the entire set of practises is dictated by the market. In other words, the customers. When a customer purchases a product or service, it is not only the actual output the customer helps define. They also dictate how the operation itself needs to perform.

Customers define the performance objectives that the operation needs to meet. These objectives include aspects of quality, process flexibility, or speed of response.

The session also includes descriptions of other performance objectives that the operation needs to consider. The general philosophy is that this type of performance cannot simply be managed in. Instead, it has to be designed in through a series of long term structural decisions. These decisions collectively are referred to as the operations strategy.

The operations strategy includes decisions such as facility size and location, the level of use of technology, and the design of the supply network that feeds the process with the input resources.

Once the infrastructure is in place, operations managers can then focus attention on managing the process. Three main elements of process management can be identified. First, operations managers need to design their processes consistent with the performance requirements.

Second, they need to plan and control their process to decide what work to do when, monitoring the system, and taking corrective action if things start to go wrong.

Finally, and a key role in a modern operations management context, is process improvement. Operations managers drive much of an organisation's performance improvement over time. This can feed through to changes in how the organisation competes in a market.

This framework acts as a good summary of the overall content of the operations management elements of your module, and shows how they link together. You will see many of these topics discussed in this and later sessions on the module.

End transcript: Screencast 1: Extending the input–process–output model

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Screencast 1: Extending the input–process–output model

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This screencast emphasises one of the main features of the Slack et al. framework: namely operations management’s market-driven perspective. Operations management is about serving markets effectively and efficiently, rather than simply hitting output targets. The framework also highlights a major change in the last decade where system improvement and development have become a much greater part of an operations manager’s role.

2.2 Transformation processes

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

Walley (2017) identifies three types of transformation processes:

material processing
information processing
customer processing.

There are also listed six types of transformational change that occur within processes:

physical transformation
informational transformation
possession transformation
location transformation
storage transformation
physiological or psychological transformation.

The reading provides two worked examples of transformation processes and transformational change. Example 1, transformation processes at a library, is mostly an information processing operation; Example 2, transformation processes at a bakery, is predominantly a material processing operation.

In the next activity, you will be asked to apply a similar analysis to identify the transformation processes at a hotel.

Activity 2: Transformation processes at a hotel

Allow around 30 minutes for this activity

Revisit the section ‘What is operations management?’ of the reading (Walley, 2017), exploring the two worked examples provided.

Now think about what transformation processes and transformational changes would occur at a typical hotel and fill in the table below with examples.

Transformational processes

Transformational change	Material processing	Information processing	Customer processing
Physical	Transformational processes 1	Transformational processes 2	Transformational processes 3
Informational	Transformational processes 4	Transformational processes 5	Transformational processes 6
Possession	Transformational processes 7	Transformational processes 8	Transformational processes 9
Location	Transformational processes 10	Transformational processes 11	Transformational processes 12
Storage	Transformational processes 13	Transformational processes 14	Transformational processes 15
Physiological/ psychological	Transformational processes 16	Transformational processes 17	Transformational processes 18

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Feedback

Your answer might include some of the transformation processes and transformational changes listed in the table below.

Transformational processes

Transformational change	Material processing	Information processing	Customer processing
Physical	e.g. Food processing in the hotel kitchen.
Informational		The hotel booking process transforms customer information.
Possession	e.g. Selling of drinks in the bar.	The hotel may exchange information with customers or suppliers.
Location	Movement of luggage to customers’ rooms.		Customers are moved between different parts of the hotel.
Storage	Items belonging to customers can be stored in safes or luggage rooms. Back office activities such as cleaning will require materials to be stored in anticipation of use.		Customers are ‘stored’ in their rooms overnight.
Physiological/ psychological			Good customer interaction has psychological benefits. Physiological transformation could happen in hotel spa or in-house salons.

3 What do operations managers really do?

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

In the next activity, you will take a practical look at the activities that operations managers perform as part of their daily duties. The interviews provide a good opportunity to study what operations managers do in practice, and compare the operations manager role across different sectors.

Activity 3: Assessing what operations managers do

Allow around 90 minutes for this activity

Before you watch the interviews in the videos below, look again at the input–process–output model and the section ‘What do operation managers do?’ of the reading (Walley, 2017).

Now watch Video 1, Video 2 and Video 3 in which different operations managers are interviewed about their role. Then answer the questions below.

Download this video clip.Video player: Video 1: Interview with an operations manager in the private sector (Robin Howlett from Britvic) >

Video 1: Interview with an operations manager in the private sector (Robin Howlett from Britvic)

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Transcript: Video 1: Interview with an operations manager in the private sector (Robin Howlett from Britvic)

ROBIN HOWLETT

The sector I work in here is what’s known as fast-moving consumer goods, FMCG, particularly beverages, soft drinks. In FMCG, we have customers and we have consumers. So the consumer is the individual who’s enjoying the drink, and the customer is the retailer.

So you might have grocery, you might have at home, you might have on-the-go. So we have customers in all of those. The biggest area is the grocery, which here are big supermarket chains. They are very demanding.

And in today’s environment, quite often we are set up to take an order and fulfil that order within 24 hours. And that can be on approaching 80% of our output. So that’s what we’re geared up for, and we’re very successful at it.

The volume will change seasonally throughout the year. Christmas is a big spike. Summer is a longer burn, but, yeah, it’s a big uplift. Our quieter times tend to be January after Christmas, January through to March. And that’s when we plan in quite a lot of our more intrusive maintenance on our lines to combine that, so the machines are always there available to run when they need to run.

Given the volumes that we deal with and the speed of response, a lot of it is organised well in advance, although our stock levels are very small. So we will have almost daily deliveries, sometimes during the day. It’s not stockless production, but we don’t have a huge raw material stock.

It’s planned through, I suppose you would call it, an enterprise resource planning, not wanting to mention which particular one. So you have bills, material, set-up. And then, when the planning is-- the planners will schedule things to happen during the day. We might plan a week in advance, but then on the actual day itself, restructure that plan.

It’s all done via computers. It’s done via ERP systems. There’s telemetry systems as well with some ingredient suppliers, so they know exactly how much we might have in a silo or a tank, for instance. Yes, it has to be specially coordinated.

Recently, we’ve had some environmental considerations to deal with. Just yesterday, we had a storm go through the UK, which caused some congestion on motorways. Local things like that do require a lot of intensive effort to ensure we don’t either starve of materials or cause a blockage because we can’t deliver.

There are lots of materials involved in the drinks. There are materials that go into the drain itself. There are materials that go into the packaging to ensure the integrity of the drink until they can get to the consumer. And there are other materials used actually in that transport process.

So if we took a few, so you’d have fruit juices, you’d have CO2 to give the fizz if it’s a carbonated drink. Obviously, there’s water. There may be some additional flavours. There are, on some drinks, some stabiliser and preservative systems. On other drinks, it’s entirely aseptic, so the main ingredient there is no bugs in the manufacturing environment.

So primary ingredients, that’s the liquids and the syrups. The primary packaging will be your preforms for you PT bottles, the caps, the labels, adhesives, also cans, and with the can comes the lid. Then the secondary packaging will be the packaging that holds those containers through to the retailer. It makes the case.

So it could be the tray, cardboard tray, a plastic shrink film on top of that. They get collated onto a pallet. The pallet, itself, could have a tertiary or third-level packaging around it, a shrink film, so that it doesn’t collapse when it’s being moved from, say, the warehouse onto the vehicle and during the vehicle’s run to the customer.

The process is extremely automated. On a typical production line, from the beginning of the syrup makeup to the goods being ready to go into the warehouse, you may have typically four or five people for the entire shift on that line. So now, you’re talking very small numbers.

So a typical day for an operations manager would comprise – we have a plan today. Some people call it Leader Standard Work. So the day will start, normally, with a shift handover meeting. So if you was a shift manager, you would be in a shift handover meeting.

Then, about an hour or so after that, you’d have the 24-hour daily meeting. And throughout the day, we have short-interval control meetings. So roughly every two or four hours, there will be a line side meeting as well.

So the day for a manager is fairly well-scripted. The meetings aren’t very long. They’re short and punchy with very clear agendas and clear outputs needed. In between, the managers have the time, then, to do whatever improvement activity needs to be done, or other planned tasks – maybe recruitment, maybe dealing with a supply issue. So the days, themselves, are fairly well-scripted.

The quality when you’re dealing with, especially, food ingredients, there’s a lot of regulation there, as you would expect. And that quality side begins way down the supply chain, so it’s very important when we’re dealing or thinking about a new item to bring in. There’s a lot of work gets done by the quality teams to assure that supply source. If they are established ingredients, then there’s an ongoing surveillance.

The quality side will also pick up to check that the blend is right so that there’ll be a recipe. It certainly involves some automated testing, as well, from the process streams, things like CO2, bricks, which is the sugar levels, can be automatically sensed in real time. But then, products might be taken samples, taste-tested as well.

There is automated fill levels. There’s lots of automation involved to sense that it is actually right every time. We couldn’t operate this sort of process without knowing precisely what’s going on.

Continuous improvement, certainly in our industry – and I guess it goes everywhere – is extremely important for all sorts of reasons. There’s always pressure on cost, so you have to continually improve to hold your margins. There’s changes in the external environment with, maybe, competition work, so you have to strive and work hard to maintain your position. So continuous improvement’s a given there. And of course, extra effort’s required to gain market share and to gain value for your shareholders.

Most of it’s team-based. So I mentioned earlier in the structured meetings a technique called short-interval control. That’s the start point, in a way. So every two hours or more, people are thinking about the previous two hours, they might be thinking about the next two hours, and what can they change and improve even at that level.

Then there are weekly forums across all the shifts for looking back and looking at trends, how things are going. And we always involve the process operators, whether it’s in an office or on the line, in the improvement of their task. They are the very best-placed people to do it.

So we don’t have so much specialists. We have to involve, and use, and utilise all of our people doing it. It’s very much a team-based thing.

End transcript: Video 1: Interview with an operations manager in the private sector (Robin Howlett from Britvic)

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Video 2: Interview with an operations manager in the service sector (Kate Bailey)

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Transcript: Video 2: Interview with an operations manager in the service sector (Kate Bailey)

KATE BAILEY

My background in operations is working in manufacturing. So I have experience of working in both contract electronics for a global contracts electronics manufacturer, but I also work for Toyota as well. I now work in management consultancy. And I work with clients in the service sector, so retail, financial services. And I support clients in delivering better processes to meet their customer needs.

The work that I’m involved in is often where a client has a particular challenge. So for example, in retail, they may not be delivering on time to their particular customer. So often, they ask me to come in and help and understand what barriers they have in their operation in meeting what it is that their customer’s asking for.

Yes, I do see myself as an operations manager. I have to manage my own operation in delivering the service that the clients want from me.

[MUSIC PLAYING]

So the clients, they are often demanding. Often, they’ve got a very – or they’re at a crisis point, so they need to make real improvements to their business, because they’re failing to meet the demands of their customers, or they’ve got a serious problem that they’re trying to solve. So my job is, actually, to help them understand what that problem is, to work their way through that crisis, and actually allow them to deliver better operations to serve their customers better.

[MUSIC PLAYING]

First of all, we have to understand what the client’s problem is. So that will involve diagnostic – understanding their processes, understanding what’s happening in their particular operations, and what’s going wrong for them.

So my background is in lean thinking. So I use the lean framework, often, to diagnose problems. So often, this is actually just trying to understand the processes, what the actual processes are, what the inputs to those processes are, and whether those processes are performing.

So for example, if it’s they’re trying to deliver a service to the customer in a particular time, is that process actually delivering it in that time, on-time delivery. A lot of the time, we’re mapping out the process. We’re mapping out, what’s the inputs to that process, what’s actually going on in that particular process, and then what are the actual outcomes of that process? Is it delivering whatever’s needed for the customer?

[MUSIC PLAYING]

What I find is that the common mistakes in any operation is that they look at the financial outputs of the process. So they often look at how much money we’re making, what’s the revenue, or what’s the cost of the process, rather than actually looking at how well the actual process is actually performing. So it’s often looking at metrics which have passed, rather than looking at how the process is actually currently capable of delivering value.

Sometimes it’s even not measuring quality, or not really, sometimes, understanding what quality means for their particular operation. So often find, they don’t even have quality measures. So it’s really sometimes difficult to understand how well that process is actually delivering that quality if you don’t measure it.

So yeah, there is common mistakes around process design. Often, operations is overlooked in any organisation, and they expect the processes to, sometimes, emerge, rather than thinking strategically about how those processes should deliver the value to the customer, how they should be constructed.

A common mistake is, they’re not designing a process for the people who are actually going to deliver that process. And often, the processes can be overly complex or too administrative, and people often, then, find it very difficult to follow a particular process. And it’s then no surprise that the operation doesn’t meet its objectives.

[MUSIC PLAYING]

I support the idea that continuous improvement is absolutely vital for any operation today. The markets, whichever market you’re in – retail, financial services – all highly competitive markets. And the only way that you can actually keep ahead of your competitors is to continually improve. So any operations manager has to consider continuous improvement as a core part of their role.

[MUSIC PLAYING]

A day in the life of an operations manager in a service environment is very much around, what does the customer need on a day-to-day basis? So if you’re a manager of a contact centre, for example, you are ensuring that the calls are being answered in a timely manner, that the customers’ needs are being met, so whatever queries or questions that they have, that they are being answered successfully.

So on a day-to-day basis and on an hours-by-hour basis, there will be a set of metrics that they will be looking at. They’ll be looking at how many calls are coming in, how many calls have been answered, and the average time for those calls to be answered. And it’s trying to understand, in the hour-to-hour, what issues are actually rising, and how, then, can they fix them there and then to make sure that they continue to deliver the service to their customer.

End transcript: Video 2: Interview with an operations manager in the service sector (Kate Bailey)

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Video 3: Interview with an operations manager in the public sector (John Nelms, Hertfordshire Police)

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Transcript: Video 3: Interview with an operations manager in the public sector (John Nelms, Hertfordshire Police)

JOHN NELMS:

I’m what’s called the Force Duty Officer, in a police control room. So I’m responsible for the operations of any policing operation running across the whole county. So, anything that requires a police response, it is my responsibility to make sure that we deploy the right resources to it in the right time and we get the right result out of that.

So my role as the operations manager, if you like in, the police control room is to monitor all the jobs that are coming in, make sure that my team have applied the correct priorities to it – so they’ve assessed the threat, the harm, and the risk of every job – and, based on that, make sure we prioritise the jobs and we’re sending the right people to do the right job at the right time. So we’re sending people to do the high-risk jobs first, and anything that’s low-risk is put to the back of the queue. It’s still kept an eye on, but it’s not dealt with in the same priority as something as a high risk. So my job, really, is to check on the prioritisation of the jobs and make sure that we minimise the risk to people by sending the right resources for the right jobs.

We have to make sure we assess the risk of the job properly, to make sure the job is done right. If we get the assessment of the risk wrong, the whole job goes wrong. The resources within the operations centre, again, vary greatly on the amount of demand we’re expecting to get. So, at our peak times, when we’re expecting a lot of phone calls, usually again Friday and Saturday late turns, we can have up to 20, 25 people taking calls in here, a similar amount of people dispatching the resources and controlling the jobs, plus supervisors. At our low-demand periods in here, we can run down to probably four or five call handlers taking the phone calls and anything around 10 people actually dispatching and controlling the resources.

The range of resources we control are very extensive. So, right from a foot patrol officer walking the streets of one of the towns, any patrol cars, anything on the motorway, some motorway patrol cars, right up through dog units, firearms, up to helicopters, anything that the police can deploy to an instant is deployable to myself, through the operations centre.

The amount of resources we control on a daily basis depends greatly on how many calls we’re expecting to come in and what is happening. So that can vary from Friday late turn, when we’ve got a lot of nighttime economy issues with pubs and clubs. And we can have anything up to 200 officers available to be deployed outside, whether it be on foot, in cars, dogs, firearms, helicopter, whatever we need. That can then vary greatly to 2 o’clock on a Sunday night, when there are very few calls coming into the operations centre, when we can have maybe as low as 20, 25 officers available across the county to deploy.

The reason for being, for any police force, is protection of the public, reassurance of the public, and preventing and detecting crime. So the output is that we do those things, that we protect the public, the public feel reassured by what their police force is doing, and that we prevent and detect crime. So, everything we do is designed to do one of those things.

They expect us to respond to their phone call. So, when they ring us, we should be answering the phone call as quickly as possible. We should understand what they want from us and ask them the right questions, so that we can get the full details, so that we can assess what’s going on and what the risk is. And then, the reassurance to the public is making sure that they know what we’re doing, and why we’re doing it, and they feel we are taking it seriously and acting on their behalf to deal with whatever problem they might have.

There is no typical day in what we do in policing. It is purely based on what happens when that phone call comes in. It can be a very, very quiet day, with no crimes being reported, no antisocial behaviour being reported, no traffic accidents coming in, or all things can happen at the same time.

So we have had days when we’ve had serious crimes come in at the same time as we’re dealing with a motorway accident. We’ve had high-risk missing people at the same time as we’re dealing with a petrol tank had broken down on the motorway. It depends greatly on what happens at any one time. You cannot predict what is going to happen at any one time, in this job.

So, if I run you through a job, from start to finish. So we may have a call from a supermarket, saying that someone’s stolen some food from the supermarket and they’ve run off down the street, being chased by the store detective. Fairly common. Happens in most town centres, three or four times a day, every day.

We would send foot officers and officers in cars, to try and find the person. We’d also send an officer to the supermarket, to check the crime scene. A theft in a supermarket is a fairly low-level crime.

But if the crime’s just happened and the offender is running away, there’s a good chance of catching them and detecting their crime straight away. So we treat it quite important. So we send the officers to it. They would try and find the person and hopefully find them and arrest them.

They then have got to take that person to a police station, to the custody unit. And, as well as doing that, we’ve also got to get people to go to the shop and take statements, look at CCTV, find other witnesses to the crime, to make sure we can prove the case later on.

End transcript: Video 3: Interview with an operations manager in the public sector (John Nelms, Hertfordshire Police)

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Apply the input–process–output model to each of the operations discussed.

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By now you should be able to apply the input–process–output framework well to each of the operations described in the videos. You can see that Robin Howlett has to manage a small number of people but the factory and distributions centres are highly automated, with lots of capital equipment. The focus is very much on keeping the plant running so that it meets its market demands and return-on-investment obligations. Robin also has to deal with input resources from outside the organisation in what is called a supply chain. You may have been surprised how many separate ingredients and packaging items there are within this supply chain. In this example, the process is readily identifiable and you can see the resources flowing through steadily. The outputs are fairly easy to define (packs of drinks).

The police example shows the real contrast between the manufacturing and the pure service process. John Nelms provides a list of inputs to the process, showing the range of resources they control both inside and outside of the operations centre. They have resources such as dog units and helicopters within their range of resources. John also describes of one of their processes – the detection and arrest of a shoplifter. You may have realised that there is much more variety in both processes and outputs in this service compared with the FMCG.

In the case of public sector operations, outputs can be tricky to define and there can be problems defining who the customer is. For a police service, who is the customer? The person being transformed is often someone who has been arrested, not the general public who pay for the service. This separation of participant, payer and beneficiary is one of the additional complexities of public sector operations.

Kate Bailey’s discussion allows you to think about management consultancy as an operation, with the inputs of skilled people, complex processes of interacting with clients and the wide range of customised outputs of solutions and advice to customers. Kate also highlights one of the biggest mistakes that managers make – they frequently don’t pay sufficient attention to the design of their processes.

What tasks do the three managers spend time on most days? Does this vary by type of operation in any way?

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You can produce an extensive list of tasks that the operations managers have identified and the generic problems can be very similar in each of the operations. One good way of listing these is to follow the example of Slack et al. (2007) and use the three types of activity – design, planning and control, and improvement – to classify these operations management tasks. You will have seen this in the reading.

Design tasks	Planning and control	Improvement
Product/service design	Workforce planning	New product introduction
Layout and flow	Shift patterns	Continuous improvement
	Work allocation	Team-based working
	Scheduling of orders
	Capacity plans
	Stock control
	Quality planning and control
	Error correction

All the operations managers mention some aspects of planning and control. The police operations involved rapid response to high risk incidents and prioritisation of work. The FMCG example showed how the operation was often only given 24 hours to respond to an order from a large retailer. All of the operations experienced fluctuation in demand, often through seasonal patterns, based on factors such as time of day, day of week and weather patterns. All of this complexity and variety needs to be managed. All of these operations would be easier to manage if there was no seasonality or variety. This highlights that operations managers often see change and innovation as a disruption to an otherwise stable process.

Robin Howlett explained the changing role of the operations manager where there is now much more emphasis on continuous process improvement.

What do the managers say about coping with innovation and change?

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One thing is clear from each of the interviews: operations managers much prefer stability and repetition to constant change of processes and outputs. In the case of the manufacturing example, the introduction of new products or platforms means that parts of the process need to be entirely reconfigured over a considerable period of time. During the transition period, there are problems with coping with much greater complexity and variety in the process. In the service operation the managers need to think about employee knowledge and skills, any redesigning of the process or layout (because this often includes a change to the service concept) and issues of obsolete stock.

A key issue is that the external environment often changes faster than operations can adapt. Similarly, there are internal pressures to cope with new ideas or innovation, such as new product introductions. As Walley (2017) states, operations managers are often responsible for the delivery of strategy or ideas, even when they have had little or no involvement with them. Those outside the operations function have to understand the time, skill and effort it takes for operations to be adapted to these change requirements.

4 Why is operations management important?

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

It is essential to develop a clear understanding of the impact of good or bad operations management practice on the performance of an organisation as a whole. In this section you will study the Hayes and Wheelwright model of operations strategy that classifies the impact that operations capabilities have on the ability of an organisation to compete in the marketplace. It allows us to start addressing the following questions:

What are the benefits of getting operations management right?
What happens if your operation is not managed correctly or appropriately?

4.1 The Hayes and Wheelwright four-stage model

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

One framework that helps to address these questions is the four-stage model of operations strategy by Hayes and Wheelwright (1984).

Figure 2: The four-stage model of the operations function’s contribution to organisational competitiveness

Long description

At the lowest levels of capability (Stage 1) the operation is seen as holding the organisation back. This is because the operation regularly underperforms, relative to its market requirements, and/or regularly makes mistakes that can deliver low quality product or service to the customer at tremendous cost of loss of reputation and rework.

A high proportion of operations are probably at Stage 2: they are striving to adopt best practice in their industry and are usually as good as their competitors at serving their market. These operations are good enough to help implement the organisation’s strategy but the operation itself does not convey any competitive advantage.

At Stage 3 the operation offers the best capabilities in the sector and so the competitive strategy can be linked to operations. The organisation can exploit the operations’ capabilities to offer better prices, differentiated products, faster deliveries or greater flexibility to maximise returns and increase market share.

Very few organisations ever operate at the levels described in Stage 4 of the model, where operations convey such a competitive advantage through their performance and capability that the entire organisation strategy can be built around the operation. In these situations the market expectations of what can be achieved are changed by the operations performance.

4.2 When operations are not managed well

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

There are, of course, many examples of operations that have not been managed well. Here, you will study two examples of organisations that have suffered the consequence of a lapse in good operations management practice.

The following activity looks at the impact of a failure of operations management on a single operation.

Activity 4: Deepwater Horizon – surviving the oil spill

Allow around 30 minutes for this activity

Look again at Example 1 in the section ‘The importance of operations management’ of Walley (2017).

Now watch Video 4 and answer the questions below.

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Video 4: Deepwater Horizon – surviving the oil spill

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Transcript: Video 4: Deepwater Horizon – surviving the oil spill

NARRATOR:

In these waters on the night of April 20, the drill rig Deepwater Horizon exploded. The blown out well continues to spew oil into these pristine waters.

SUE GALLIANO:

There was this overwhelming sense of something really bad happened here. They were doing this live feed of the oil coming out of the ground and them spraying the Corexit on it, and we all kind of glued to that on TV watching it.

Everybody realised right away it was going to impact us. It was just coming in, little globs, little – floating in right on the water. And as far as you could see, little globs of it. Then the dread really started. But what are you going to do now? What’s going to happen now?

[MUSIC PLAYING]

The oil spill presented a challenge to everybody. The first year that April – when it hit May, June, July, many of the boats were put into service. BP actually paid them to help skim water and to aid in the cleanup. They did miss a whole season. They went back out last year, though.

So LSU’s been studying this propagation of oysters for some time, looking at other ways to grow oysters in a controlled situation. In the long run, it’s what’s going to save oystering in Louisiana.

[BIRDS NOISES]

JULES MELANCON:

The oyster is the substance that I crave for. And it’s like my favourite food. And that’s why I’m here now. The oyster farming has been way in my life since I was a little bitty kid. I remember oystering, oh – from the first time I ever knew what life was about was the oyster business.

Before the spill, I was getting my boat ready to fish. The oysters I had, they were wiped out from Katrina. We had to start from nothing. Then around 2008 and 2009 the oysters started really coming back. And I was in the process of getting my boat ready to fish the 2010 season.

For the oil spill, when they opened up the flood plains, it wiped out the oyster industry. We’ve been struggling. There’s no more oyster farming, so that’s why I started with this cage culture. Because I had time to invest in it and try it out.

This cage culture is kind of new to me. But you see the oysters right there. That’s our way of life, they’re going to be coming back. That will suit for me.

Now I had a little revenue from this this winter, but it wasn’t the revenue I usually make. You’ve got to have a lot, a lot of cages to make a lot of money. But I made enough money to pay back my equipment. I’m still in recovery, and it’s going to be three years from the spill next month.

I’m 55 years old. I’m in it till the end. And I’m just going to keep doing it as long as I can make a living out of it. It’s going to take a little investment, but I’ll be there.

SUE GALLIANO:

Grand Isle is one of the places that was easy to work in the offshore oil industry out there. When the oil industry came in, back in the ’30s and the ’40s, it afforded a new way of making a living for people who quite possibly couldn’t work daddy’s boat.

Most of the people who work in the oil industry here that live on the island, their jobs were maintained. They didn’t lose their jobs.

[MUSIC PLAYING]

Now offshore – there’s a lot of people that work offshore. Those folks don’t work here, but they come through here. You know, they buy gas, they eat lunch. Every little bit of that helps. It may not look like a lot right away, but if you were to take those jobs away, you’d feel it.

CHET CHIASSON:

Our tenants are not the oil and gas companies. It’s the service industry for the oil and gas industry. That’s our base of our local economy here. We had a pretty rough year and a half post-oil spill. And we’ve been on the incline since then.

There was a lot of regulation that came down. And there was an interpretation period of, what do those regulations mean? How does it impact the industry? So no permits were being issued, no plans were being approved for new drilling. So that took a long time.

And that’s why we had such a lull. We’re continuing to grow, our port is continuing to grow, the Port Commission is moving forward on expansion plans.

This is our newest area. We’re kind of like Dubai, but we’re not building palm trees. We’re building land for industrial development. This here was open water six to eight months ago. The flip side of it, though, is that this is actually taking place a year and a half or two years after we thought it would be taking place. There was a time when we didn’t know what we were going to have to do or where the port was going to be.

We know with some of the plans that are in place now, there’s going to be a demand for about another 500 jobs. We have so many jobs available that we can’t fill them all. The deep water side of the industry is doing well and has a huge upside right now. As far as the port itself and our business, we’re doing very well. We’re back at a 100 per cent of what we were prior.

SUE GALLIANO:

Tourism was affected really badly the first summer. I mean, it was terrible. The spill was in April. Well, June, July, and August was not good. Lots of folks have had camps here for years and years. And generations of families have been a part of Grand Isle’s makeup.

People come down on the weekend. And if they all stopped coming because of the oil spill, I mean, the island would just dry up. If you’re a tourist town, you have to have tourists. Subsequently, it’s coming back as the word gets out that we’re OK and viable and the beach is good.

[MUSIC PLAYING]

MARLENE CHAPPELL:

Have you been over to the beach?

I’m no spring chicken, let’s face it, you know. And if I’m going to be doing something, I want to be where I want to be. I had a big family, four girls, and lots of people in the family. So I treat everybody that comes here like just an extension.

During the spill, we had all of BP’s cleaners and workers and everything, so we stayed real full. But then whenever you got your place full, when you have people that keep coming back every year, they find someplace else. They were very scared of the oil.

So it’s taken probably two years for them to even start calling again. And the first words out of their mouth is, how bad is the oil spill? How bad is the tar balls? You know, is it safe for my children?

Unfortunately, there are some people on this island that has said everything is fine. Don’t worry about it. Adults, I feel like, can take care of themselves. They will be able to see for themselves. But children should be protected. And you tell them, you know, what you honestly think.

It’s gradually picking up. I’m getting a few. Generally, by this time I have all of Easter all of Memorial Day. And I have probably half. A lot of them just found other places to go, and it’s taking them a while to get out of that. But I am gradually getting my people back. I’m not going to be destitute. I may not be as busy as I was, but I do have people coming in.

The people that owned houses, a lot of them just said they wasn’t going to fight no more. You know, a storm, you come in here and you get all the mud and the dirt and you go back up. But this stuff right here, it’s got stuff in the soil. You don’t know what it is and you’re scared. The dumb ones like me that just want to be here, they haven’t given up.

[MUSIC PLAYING]

SUE GALLIANO:

So we’re happy that it’s kind of in the past a little bit, but we’re still waiting to see what the final outcome will be. The people have kind of moved on, but the environment, it’s going to take a while to correct itself.

[MUSIC PLAYING]

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To what extent was this a failure of operations management practices?

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There is no doubt that this failure was a direct consequence of poor operations management practices. The disaster was not caused by a single mistake, but a whole series of decisions and actions by BP staff and suppliers Halliburton and Transocean. These decisions and actions accumulated and lead to the eventual explosion and oil leak. There were failures in both the design of processes and systems as well as poor monitoring and control:

The technical design contained a number of flaws where several rig components could not cope with the combination of events. Two mechanical valves designed to stop the flow of gas and oil to the surface failed, allowing the oil to leak. Another valve on a device, called a blowout preventer, did not work properly. A mud−gas separator also failed but this device should not have been used at the time.
A range of safety and control procedures were either absent or failed. One blowout preventer had a flat battery and another a defective switch, indicating poor maintenance or repair. The gas detection system did not trigger an alarm when the gas leak occurred. There were a number of staff failures indicating poor attention to safety and poor training. Staff misinterpreted the results of a pressure test, thinking the process was in control. The increase in pressure and consequential leak took 50 minutes to detect. Staff failed to use venting pipes to take the mud and gas away from the rig.
Materials used, such as the sealing cement, proved to have not met the requirements of the job.

You should think about the reasons why managers may have made these mistakes. Sometimes it is not clear who has responsibility for particular decisions especially where tasks are subcontracted. Some decisions will be made under time or cost pressure. Put yourself in the position of a rig operations manager who is measured on the productivity of the assets. To what extent can you consistently make decisions that are based on what you consider to be low risks or ethical decisions?

What impact did this failure have on the organisation?

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Feedback

When you look at the impact of these failures the main consequences were the tragic loss of life on the rig during the accident as well as the ecological and social impacts of the oil pollution. The company experienced a number of other effects over the following years:

The company had to agree to an $18.7bn legal settlement to cover the costs of the disaster clean-up and compensation for businesses.
It lost the opportunity to bid for new contracts with the US government.
It threatened access to new and existing oil field opportunities for BP to develop.
There was a considerable loss of reputation and this fed through to lower market appeal for its products and services.
The company had to redirect its efforts during and after the crisis, potentially losing other market development opportunities.

This list shows the extent of the longer-term impact of the failure of operations management.

The following activity examines what happens if operations are not managed well across an entire supply chain.

A supply chain involves various participants who perform a sequence of activities in moving physical goods or services from a point of origin to a point of consumption.

(Crandall, 2014, p. 6)

Activity 5: Horse meat in the supply chain

Allow around 30 minutes for this activity

Review the section ‘The importance of operations management’ of Walley (2017) and watch Video 5, which describe the issues around the horse meat scandal, and answer the questions below.

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Video 5: Horse meat scandal – the journey food makes from farm to plate

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Transcript: Video 5: Horse meat scandal – the journey food makes from farm to plate

ORE ODUBA

Now then there’s is a food scandal which has spread right across Europe. After horse meat was found in Findus lasagnas last week, France and Sweden have now joined the UK in withdrawing some meat products from their shelves. The government here says it doesn’t believe there’s any threat to human health. It’s due to give more details on developments later this afternoon. But what does this scandal tell us about the food we eat, where it comes from, and how it gets here?

BBC NEWS REPORTER

Horse meat found in burgers sold in British and Irish supermarkets.

ORE ODUBA

It’s the food scandal that’s been going off for a month. And, since traces of horse DNA were found in burgers back in January, things got more serious when some Findus lasagnas sold here were found to contain up to 100% horse meat. From farm to plate, our food often takes a long and complicated journey through many different countries, which explains some reasons behind how the food was contaminated.

This is what’s thought to have happened here. Findus is a Swedish company, but the meals were made for them by a French food supplier – not in France, but at a factory in Luxembourg. The meat in the meals was bought from a Cypriot trader. That trader bought it from the Netherlands, but it’s suspected the meat came from slaughterhouses in Romania. The authorities there are still investigating.

Despite pressure to do so, there are no plans at the moment to ban meat imports from the EU, as the government says there’s currently no risk to human health.

OWEN PATERSON

All the evidence of the products so far is that they are safe, but they’re not as labelled. So this is a case of fraud and mislabeling. There is nothing we’ve seen so far which represents a health threat.

ORE ODUBA

Later today, Owen Paterson will update MPs on the latest developments in the scandal spreading across Europe.

PRESENTER 2

Our main news this morning – a year on from the horse scandal, it’s emerged that many local authorities across the UK are failing to carry out basic food-safety checks.

PRESENTER 3

A study by the consumer organisation Which? has found that, in some areas, councils hadn’t carried out any hygiene tests on food served in places like restaurants, schools, and hospitals. The government says an independent review is underway to improve food safety.

PRESENTER 2

Well, Professor Christopher Elliott, the director of the Institute for Global Food Security at Queen’s University, is leading the review. And he joins us from our Belfast studio now. Professor, thanks very much for joining us. If your job is to undertake a wide-ranging review of the supply train and try and ensure that our food is presumably safer in future, it must be alarming to you to discover that many local authorities aren’t carrying out basic checks on food hygiene in places where the public go to eat.

CHRISTOPHER ELLIOTT

Yeah. I think the first important thing to start off with is to say that the food supply systems in the UK are very safe. Compared with other parts of the world, we’re one of the safest food supply systems in the world. But I think what the Which? report is indicating very clearly that, because of the pressures that are on local authorities in relation to budget cuts, they are finding it very difficult to deliver the quality of service that is required.

PRESENTER 2

A year on since the scandal broke, what’s changed?

CHRISTOPHER ELLIOTT

There’s been a massive effort, both by the UK food industry and the UK government, to put in place measures that will stop these types of food crimes happening again.

PRESENTER 2

For instance?

CHRISTOPHER ELLIOTT

The amount of checking of products, particularly testing by the multiple retailers, is actually performed now at an enormous scale, whereas previously a lot of the supplies of materials was done on paper-based audits and basically trust. That trust is now converted into much more rigour of the materials that they buy.

PRESENTER 2

Every day of the week, though, there are about 25,000 different foodstuffs sold. So, looking for things may be unsafe or wrong is like looking for a needle in a haystack, isn’t it?

CHRISTOPHER ELLIOTT

The point you make is a very good one. 25,000 products, different products, sold each day in the UK retail sector, so it’s an enormous task, making sure that that material is safe and authentic. And what is happening now, both in industry and government, is those types of food materials which are most vulnerable to fraud are getting the highest level of attention. Obviously it started off with red meat, but there are many, many other food commodities now that must be checked regularly to make sure that what we are buying as consumers is actually what it says on the label.

PRESENTER 2

So, can people today who are buying processed-meat products, ready meals, that sort of thing, the sort of things that were in the spotlight a year ago as containing horse DNA – can consumers be confident that what they are buying now is safe to eat?

CHRISTOPHER ELLIOTT

Certainly, I think we can all be much more confident now than a year ago. It was very clear that, a year ago, that there was very little rigour was put into the system to check authenticity of foodstuffs. And what I have called for in my report is a complete change in culture, not only in the food industry but in regulators, to make sure that what we buy as consumers is genuine.

PRESENTER 2

All right, Professor Chris Elliott, thanks very much.

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To what extent was the size and complexity of the supply chain a contributing factor in the food contamination?

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Discussion

The case details the levels of complexity within the supply chain. Meat moves across Europe in a relatively unregulated way. The commentators in these videos indicate that the high-quality products tend to be traceable from farm (or even animal) through the entire supply chain to customer. However, at the ‘value’ end of the market, the supply chain is more complex and there is less traceability. Price competition seems to make meat processors look more widely for meat supply: this increases the number of suppliers and therefore sources of meat for their processed product. Given that the market is price sensitive, suppliers are reluctant to spend more money developing traceability mechanisms. The commentator in the video states that local government authorities have had to restrict the levels of checking they can do because of financial pressures. This places more of a burden on the companies within the supply chain to check for themselves.

Ideally, the entire supply chain should be designed so that price, quality and traceability can be achieved. The main challenge is to find one organisation that is part of this supply chain where managers are willing to take responsibility for the design and control of the entire supply chain.

To what extent should food retailers manage and control the entire supply chain to prevent problems like this from occurring?

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Most large retail chains do have sophisticated merchandising and supply chain functions, such as the one described in the earlier video. Managers within these departments choose which products to stock on the shelves and where to source them from. This sourcing decision would normally include a supplier selection process whereby potential suppliers are assessed for their ability to provide products of the right quality, in the right quantities, to specific delivery schedules. In sophisticated assessments there could also be checks on suppliers further back in the supply chain (the supplier’s supplier etc.).

5 Are you an operations manager?

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

At this point, you will reflect on the relevance of this topic to you, either as an employee/manager or as a participant in a service process. Now that you are being introduced to operations management theory, you will most likely start to analyse operations that you experience from a new perspective. You are encouraged to do this as a way of embedding your understanding of the subject.

The final activity of this course provides you with an opportunity to reflect on your own situation in relation to this subject.

Activity 6: Reflecting on operations management – your own perspective

Allow around 30 minutes for this activity

Many people will be able to readily apply the framework to their own role, even if they do not work in the organisation’s core operations that deliver their main products, or services, to external customers. Departments conventionally classed as ‘non-operations’ will still contain processes with outputs, each with corresponding processes. For example, a finance manager has outputs such as financial reports, and a HR manager has outputs such as recruited or trained staff. It is important, therefore, that you apply the concepts explored in this course as much as you can to your own situation.

Review the reading (Walley, 2017) one more time and read the final sections ‘Are you an operations manager?’ and ‘Summary’.

If you are reflecting on the role of operations management as an employee/manager, you should answer the questions in Part 1 of this activity. If you are approaching this activity in your role as a participant, you might want to go straight to the questions in Part 2 of this activity.

Part 1

For an operation of your choice, address the following questions:

What input resources are involved?

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What processes can you identify?

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What outputs are you asked to deliver?

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Discussion

If you apply the operations frameworks to your own work, you should be readily able to identify your own input resources, processes and outputs. It is useful to think about how your own operations must perform in terms of dimensions such as quality and cost.

Part 2

For those of you who analyse your role as a participant in operations, answer the following questions for any operation of your choice:

Are you an input resource in the process?

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What processes do you participate in?

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What transformation process is taking place?

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Discussion

Looking at operations from the perspective of the customer can yield some insights. You should think about how you assist in the process of service delivery. Examples include:

providing information or filling in forms
performing duties such as carrying or packing items that you purchase
contributing to the overall service experience by helping create ambiance or atmosphere in a restaurant or part of a crowd at a sports event.

When you think about yourself in a service process, are you moved from stage to stage just like a product in a factory? Self-service restaurants, for example, have a sequence of carefully timed steps that allow the smooth flow of customers through the ordering process.

Finally, you may be able to identify the transformation process that is taking place. Are you being psychologically or physically transformed in a healthcare-related process? Is there a location transformation on a flight? Many examples are quite complex because different types of transformation can take place at the same time. Does the flight transform you psychologically or physically at the same time as the location transformation? Is this something important for airlines to consider and even manage?

Conclusion

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

Congratulations! You have now reached the end of this free course, Introduction to operations management. This course has introduced the operations management function to you. After studying this course, you should now feel that you can:

define the roles and responsibilities of operations managers and the challenges they face, with them usually controlling most of an organisation’s assets, and being responsible for the design, planning and improvement of their processes
understand the input–process–output framework, and extensions of it, and apply it to a wide range of operations
examine the types of transformation processes occurring within operations, converting input resources to value-added outputs
understand that well-designed and well-run operations can impact on the long-term competitiveness of an organisation, and badly run operations expose the organisation to many risks – sometimes relatively simple errors in management can lead to very costly failures that go beyond simple rework or waste
analyse the content of an operations strategy
know that if you manage any type of resource, you can consider yourself to be an operations manager as you will be responsible for some kind of process.

This OpenLearn course is an adapted extract from the Open University course B207 Shaping business opportunities.

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References

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

Crandall, R. E. (2014) Principles of Supply Chain Management, 2nd edn, CRC Press.

Hayes, R. H. and Wheelwright, S. C. (1984) Restoring Our Competitive Edge, New York, John Wiley.

Slack, N., Chambers, S. and Johnston, R. (2007) Operations Management, 5th edn, Harlow, Pearson Education Limited.

Walley, P. (2017) ‘Introduction to operations management’, in The Open University (2017) B207 Readings Block 1: Big ideas in Organisations, Milton Keynes, The Open University.

Acknowledgements

The Open University — Thu, 05 Oct 2017 14:16:44 GMT

This free course was written by Paul Walley.

Except for third party materials and otherwise stated (see terms and conditions), this content is made available under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 Licence.

The material acknowledged below is Proprietary and used under licence (not subject to Creative Commons Licence). Grateful acknowledgement is made to the following sources for permission to reproduce material in this free course:

Images

Introduction to Operations Management, Walley 2017 includes Figure 3: US Coast Guard Photo / Alamy Stock Photo.

Figure 2: Adapted from Hayes and Wheelright in Neely, A. (1998) Measuring Business Performance, British Books for Managers, Cambridge, Cambridge University Press.

Videos

Video 1: Interview with Robin Howlett from Britvic, Britvic History, Britvic.

Video 2: Interview with Katherine Bailey, ***Nuance Open Plan Office: K2 Space on flickr.com. This file is licensed under the Creative Commons Attribution Licence http://creativecommons.org/licenses/by/2.0/

Video 4: ‘Deep Water Horizon’, Still Gulf of Mexico map showing areas contaminated with oil, BBC; Hanging tree, First Digital Music BMI, ZFC Music ASCAP; Artifacts, Seven Mile Lane Music ASCAP; Fiddlers Moon, First Digital Music BMI, ZFC Music ASCAP.

Video 5: ‘Horse meat scandal – the journey food makes from farm to plate’, Worries about the journey food makes from farm to plate, BBC; Horse meat scandal one year on - BBC Breakfast, BBC.

Every effort has been made to contact copyright owners. If any have been inadvertently overlooked, the publishers will be pleased to make the necessary arrangements at the first opportunity.

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