Trends in Operation Management

Recently several developments that affect operations management practices have taken place in the market place. These changes have been due to economic policies at the national and international levels, advent of new sectors of industry and new technologies. The following represent a brief projected perspective on what operation managers should look at when they think of future. These are the emerging trends and future challenges which will have a profound impact for operation strategy.

  • Dismantling of Trade Barriers: One of the recent developments which could potentially affect the operation management practices in the country is the opening up the Indian market to foreign competition Beginning 1991, the Union Government brought new reforms for easy import of foreign goods in India. In addition to cost pressures from overseas players Indian manufacturing firms had to face large scale dumping of goods. Therefore the new market scenario sets new priorities for operation management and manufacturing firms need to face up to the new challenge. Besides this new challenge, Indian manufacturing firms have greater chances for market expansion, on account of liberalized economy, for two important reasons. The first is the overall attractiveness of Indian firms due to factor cost advantage, because of relatively low cost of labor. The second advantage for India is the large installed base of technical manpower, manufacturing know-how and experience in manufacturing and operation management .These developments are likely to affect operation management practices in the country.
  • Shift in Economic Activity: In the beginning of the 21’st century the global economy shows significant structural changes with a swing of service sector. Reserve Bank of India Annual Report for the year 1998-99 notes that the services have emerged as the fastest growing sector. From 41.3%share in 1990-91 of services the real gross domestic product has increased to 51.2% in 1998-99. Increasing economic activity in service sector that employment pattern will shift from manufacturing sector to service sector.
  • Out sourcing as a major wave: India is the direct beneficiary of the phenomenon of dismantling of trade barriers. Based on the successful experience of outsourcing software jobs in India, firms in developed countries are increasing variety of other jobs, thus creating an ‘outsourcing wave’ .Business process outsourcing (BPO) is an arrangement by which some of the business processes are done by a third party on behalf of the organization. The key motivation for a firm to outsource some of its processes stems from three factors: (i) Cost (ii) – Capacity (iii) Competency. Excellence in operations is a prerequisite for being successful in the BPO sector. Since the primary consideration for a BPO is cost operation strategy thus a BPO firm must emphasize cost leadership, otherwise the BPO activities may be shifted to competitor. Another critical performance measure is quality. Since an organization often outsourcers the entire operations pertaining to business process to third party, quality considerations are followed as per stringent norms. Therefore, developing strategic planning for high level of quality is another important implication for BPO organizations. In several other cases, in addition to cost and quality requirements, stringent delivery requirements may also have to be met as the processes may be in the intermediate stages of value creating process.
  • Collaborative Commerce through the Internet: One of the most recent developments is the advent of Internet in commerce and trade. Using the huge IT infrastructure, consisting of network connectivity, client-service architecture and several computers, it is possible to connect remote trading partners. Collaborative commerce opens up new areas for consideration in the operations management. Many of traditional methods of operation management can either be replaced or supplemented by new procedures using the electronic methods. Two important areas of significant interest are (i) procurement and supply management practices using electronic means (ii) design and new product development by means of CAD.
  • Technological Change: There is a tremendous growth in the use of robots in automatic machine loading. The robot is used to load position and then unload and transfer work pieces. Welding processes use robots extensively. Project management techniques of PERT/CPM are very effective tools of planning and control of various projects. Computer simulation, computer-aided design and manufacturing (CAD/CAM), group technology (GT) and cellular manufacturing systems (CMS) are being introduced in future. Lean Manufacturing concept conceived by Toyota Corporation in Japan is widely adopted. Lean redefines the organization’s means, methods and mission. In lean philosophy non-value added activities (NVA’s) are excluded.
  • The Environment: Technologies, to make products more earth friendly will be developed. Stringent legislations and their compliance will be mandatory. Recycling and reuse of waste will be adopted in many industries. New technologies will be developed to provide benefits to the organizations.

In an organization production manager has to administer a great variety of activities. He assembles appropriate resources and direct the use of resources, be they people, machines, processing etc. in transforming material and time of people into products and services. Managers also have to respond to others forces from the external environment such as government regulation, labor organization as well as local, regional, national and international economic conditions Thus managers have to pay more attention to not only what their customers might buy but also to increasing government regulations and behavior of consumers and environment protection groups.

  • Production manager should concern himself with production planning: In every enterprise the Production Manager is responsible for producing the required quantity of produces in time to meet the stipulated delivery date. The quantity to be produced depends upon the magnitude of the demand whereas the time by which the production should be completed is determined by the delivery date. Besides, the production department has to make arrangements for input factors and. Also has to produce in economic lot quantity. To achieve all these objectives proper production planning is necessary. Production planning involves the generation and identification of alternative courses of action and to select the optimum alternative. This can be done by; (i) Assessing the requirements of various factors of productions on the basis of demand forecast. (ii)Formulating demand schedule for factors of production to permit purchase of raw material and production of products in economic lot sizes.
  • Production Control: It is the duty of the production manager to use the resources at its disposal in the best possible manner as well as to regulate the operations in such a way that the desired delivery schedule is maintained. This is done by routing, scheduling and inspection during the production process.
  • Production manager should concern himself with Quality Control: It is the responsibility of the production manager to manufacture the goods and services of the desired specifications. Though the quality of the finished goods can be ensured by inspection of the finished goods, but it is better to employ measure which minimizes the likelihood of producing defective items.
  • Method of Analysis: There can be a number of ways in which some operations can be executed. Production manager should select the most efficient and economical method to perform the operation.
  • Plant layout and material handling: The physical management of manufacturing components and the equipment for handling the material during production process has considerable effect on cost of production. The material handling system and the plant layout should be most efficient for the given situation.
  • Proper Inventory Control: Inventory implies all the materials, parts, supplies, tools and in-process or finished product kept in stock for some time. The procurement policy of these items requires a careful consideration and analysis. The purchases should be planned in economic lot sizes and the time of purchase should be so scheduled that the investment in inventory is at the lowest possible level. This implies determination of economic lot size and re-orders level.
  • Work Study: Method study and work measurement techniques are applied to find the relationship between output of goods and services and inputs of human and material resources. The production manager should try to find the most appropriate method of performing various operations involved in the production process so as to obtain the optimum use of the resources as well as increasing the productivity. Production manager should be able to generate the interest of the workers to increase their efforts by providing them wage incentives. This will result in an increase in labor productivity.
  • The cost of production varies with different methods of production: The production manager is responsible to follow a systematic approach to control capital and expenditure designed in a way that the desired profit is ensured. The nature of problems associated in the production management is such that the production manager should have the capacity as well as the aptitude to use qualitative and quantitative methods of analysis to get the desired solution. ‘’

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