2 An introduction to the process view of business operations
As we touched on in Section 1, the course that this unit is taken from is concerned with how best to manage the set of business processes that are directly responsible for converting a variety of resources (such as materials, money and the effort of people) into outputs (such as manufactured goods and/or delivered services).
This part of the unit deals with the strategic aspects of these operations management issues, covering:
why the operations function is so critically important to the organisation;
what the organisation should be seeking to achieve from effective management of its business processes; and
the crucial role played by the design of the operations system.
To start, here are three examples of ‘operations’ in the words of their managers:
A supermarket manager
We serve customers in the locality – provide them with the range of goods they want at prices they find attractive and at times that fit in with their other commitments. This particular branch is a large one and we carry a wide range of goods – lots of different lines including food, household goods, clothing. The logistics of keeping everything stocked is a critical aspect – a lot of this is handled by our computer systems. Staffing is important too – making sure we have enough checkout staff at peak times, enough people keeping the shelves filled. Opening hours have extended a lot in recent years but we don't do 24-hour opening here – there just wasn't the demand to justify the costs at this branch.
Managing facilities to keep costs down is also important – we've had an energy management initiative and we have targets of consumption to meet. A recent suggestion has been a similar waste management programme, as it costs us to dispose of waste as well as losing the value of the mostly food products that end up in the waste bins or skips.
Manager of a printing services firm
We provide the full range of services – everything from copying a dog-eared black and white photo of someone's granny through to 4-colour printing of a thousand copies of a glossy brochure. We're in the town centre, so we have quite a bit of what you might call passing trade – we're useful when the office photocopier breaks down, for example!
Most of our business comes from regular clients. We have a few quite large contracts with companies who use us for almost all their printing except low-volume photocopying. For example, for one customer, we are currently working on their training manuals – 200 loose-leaf pages in a customised ring binder. They provide us with the content electronically and we do the rest. We're also working on a marketing leaflet for them – that's the design of the leaflet as well as the production.
At the moment we've more work than we can handle comfortably on the design side, as we've only one person who can really use the software properly. But at the same time we could do with more high-quality printing jobs – we spent a lot of money on printing equipment last year and it needs to earn its keep. You always want more business, but it doesn't take much to tip the balance – the phone could ring now and if one of our regulars wanted a large job doing quickly we'd be pushed – but we'd manage it somehow because they need to know they can rely on us.
Dental practice manager
Smooth running of the practice revolves mainly around scheduling appointments appropriately, and staffing. That involves matching clients to the dentist and to a lesser extent to the equipment and the room. We have some specialist equipment available in just one of the treatment rooms. There is a certain amount of emergency work to be fitted in at short notice but otherwise the length of appointments is fairly predictable, and we keep to time pretty well.
I suppose the main problems arise from staffing. Unexpected absences can create a lot of problems as it is usually difficult to cover the work of one dentist or hygienist at short notice and I really hate having to cancel appointments – but sometimes there's no option.
Patients failing to turn up for appointments is a perennial issue for us, but two years ago we started ringing people to remind them of their appointment one or two days beforehand and that improved things a bit. So we always make sure we have full contact details for patients – home and work telephone numbers if possible.
As these examples illustrate, any enterprise exists in order to provide a set of particular benefits to its customers. This is just as true for a dental practice as it is for a printing services firm, for a university as for a manufacturing unit or a supermarket. The outputs are on the face of it very different (filled teeth, printed products, sold grocery items) but the ultimate aim, satisfied customers, is the same in each case. Each enterprise operates a particular set of processes. In the case of dental practice operations, these include the scheduling of appointments, the dental operations themselves such as the filling of teeth, updating of patient records – linked and coordinated activities that together result in the ‘product’, that is, some combination of goods and services. The effectiveness and efficiency of these processes determine how well the enterprise satisfies not just its customers but also its other stakeholders (defined as any individual or group with an interest – financial or otherwise – in the organisation and its activities). For example, owners seek profits and/or growth in capital value; employees seek remuneration and job security; government seeks compliance with regulation, or satisfactory delivery of a public service. The overarching goal of business operations can be thought of as the delivery of these various types of ‘value’, although the emphasis in formal definitions of operations management is on delivering products to customers. One definition is:
Operations management is concerned with the design, planning, control and improvement of an organisation's resources to produce goods or services for customers.
(Johnston et al., 2003, p. 15)
And operations have been defined in the following terms:
At the heart of every organisation are the activities that make its products. These activities are the operations. To put it simply, the operations describe what the organisation does … operations are the activities that are primarily concerned with making an organisation's products.
(Waters, 2002, p. 4)
or more simply:
Operations transform inputs to outputs.
Effective operations systems don't just happen. Whether or not stakeholders gain the value they seek from an operation depends on the design of the operations systems and the ways in which those systems are operated. In other words operations management is about both ‘doing the right things’ and ‘doing things right’.
The way in which customers benefit from operations is via the products. Goods and services need to be designed to provide the features that customers want. These are often at least partly, and sometimes entirely, a function of the processes involved in making and delivering the products. Clearly, the quality of the printed items produced by the print service firm, for example, is directly affected by the printing processes employed. Internet-based services such as travel booking or music download consist almost entirely of the processes involved (the exchanges of information in the form of digital data). Consequently, product and process are closely intertwined concepts, and operations processes are critical in ensuring that products achieve customer satisfaction.
Technology plays an increasingly important role in operations systems and is strongly associated with both product and process. Advances in technology and new ways of applying technology to meet the demands of the market place give rise to entirely new products as well as new ways of producing and providing traditional goods and services. Advanced manufacturing processes, the internet, and other aspects of information and communications technologies do not just enhance existing processes, they offer radically different ways of doing business and innovative ways of creating value for all stakeholders. Computerised manufacturing processes, for example, have provided the means of ‘mass customisation’ whereby an individual item can be tailor-made for a particular customer, but without the prohibitively high process costs that traditional techniques would have required. An understanding of how technology can best be deployed – designed or selected, implemented and managed – to serve operations is therefore crucial to effective design and management of operations systems.
Operations management, then, is fundamentally about the management of processes – that is, their design, planning, operation and control – and for this reason is sometimes referred to as business process management. The implications of taking this process-based view of operations will be explored more fully in Section 3.
Whatever terminology is used, the unit team's stance is that operations is a key function, one of fundamental and strategic importance to the enterprise. Indeed, for the purposes of this unit at least, the unit team wants to place operations in the ‘starring’ role, with the other functions such as finance or marketing as support – essential but not the defining characteristics of the organisation. This view is probably at odds with most perceptions of operations. Operations tasks are often treated as the backstage activities, with marketing or strategy more usually in the limelight taking the plaudits of the audience. Operations is the area that marketing and strategy blame when things are not going well! This unit puts the design and management of the business processes making up the operations function centre-stage. You can decide whether this is deserved after you have studied this unit.
Perhaps you work in a finance, IT, marketing or some other non-operations function. If you are studying this unit as a taster for the full course, and wondering whether it is indeed the right choice for you, then fear not! Everyone is an operations manager (or business process manager) and this field offers principles and practices relevant to every department as well as to the organisation as a whole. The marketing department's ‘products’, for example, might include demand forecasts, leads, and sales figures, rather than goods or services designed for external customers. In effect the marketing, finance, IT and other departments have internal customers for their outputs, as well as being concerned to a greater or lesser extent in satisfying external customer needs. Operations principles, or business process management principles, apply at the level of the department as well as to the enterprise overall. And many operations managers have job titles other than ‘operations manager’ that reflect the specific nature of their operations – transport manager, service manager and so on.
Write your own ‘mini-case’ along the lines of the earlier examples but based on an organisation or department that you know well. Aim to identify the main outputs, the key processes responsible for producing them, and some of the problems that face managers of these processes.