The Operations Challenge Chapter – 21

Today operations face many types of challenges. Security as a challenge

Internet as a Challenge

Competition is a challenge

Global warming or environmental challenges

Challenges for operations

There are Five major challenges faced by any operational managers as follows

Five of the challenges for operations managers Globalization Corporate social responsibility Environmental responsibility Operations strategy Design Improvement Planning and control Technology Knowledge management

Globalization The world has become a smaller place. Almost all operations. Almost all operations are connected to the international market. Operations find either supplier or customer around the globe, in most cases both. Environmental protection – the responsibility of operations to the environment. The failure in this challenges leads to a disaster.

Corporate Social Responsibility – Operations Management affects customers, employees, suppliers and local community. So balancing the relationship between each is another challenge. Technology awareness – understand the implications(opportunities and threats) of fast developing technologies. Knowledge Management – the key resource in business is the knowledge. This knowledge comes through the practice of activities. So, the next challenge is to manage this knowledge.

Globalization Two main factors behind globalization are 2 Ts – technology and telecommunication. As world became a small place to do business with, the operations finding, customers, suppliers, and even production teams around the globe. This is a great opportunity, however there are two main problems related to this such as corruption and exploitation.

Globalization and Operations management Decisions Cultural and economic differences have an impact on the day – to – day activities of operations management decision making. Page 681 Table 21.1

Some globalization issues Decision area Some globalization issues Product/service design Transferability of product/service design Adaptation of design to fit culture and legislation Network design Location of global network of facilities Ownership and capacity change legislation Layout of facilities Cultural reaction to work organization Process technology Serviceability and maintenance of technology Skills availability Job design Cost of labour Cultural reaction to work requirements Planning and control (including MRP, JIT and project planning and control) Cultural reaction to necessity for planning Cultural reaction to need for flexibility

Some globalization issues Decision area Some globalization issues Capacity planning and control Differences in seasonality and demand patterns Legislation on part-time or temporary work contracts Legislation and cultural view of flexible working Inventory planning and control Storage conditions and climatic sensitivity Cost of capital and other storage cost differences Supply chain planning and control Real cost of transportation Differences in contractual arrangements Supplier conformance to employment standards Quality planning and control and TQM Cultural views of acceptable quality Cultural views of participation in improvement groups Safety Failure prevention and recovery Maintenance support Cultural attitude to risk Flexibility of response to failure

The anti-global movement As global business pattern develops the questions are asked about trade liberalizations (import and export relaxations between countries) Ethical Globalization This idea connects globalization trend and its impact on society. Main aims of ethical globalization are as follows:

Accepting equality of individuals. Considering gender problems. Acknowledging the shared responsibilities for addressing global challenges, and assuring that humanity doesn’t stop by national boarders. Accepting equality of individuals. Considering gender problems. Assuring that as world is connected by technology, the trade will be connected by shared values, norms of behaviors.

CSR ( Corporate Social Responsibility) Organizations are having responsibilities to the society, groups, and individuals. Every organization operates in a society of customers, suppliers, and employees, therefore the responsibility of an organization is to develop the society. Every organization operates with different groups of partners, suppliers, customer or employers. And this the responsibility of an operation to consider these groups in the development process.

Every organization operates with individuals in form of customers, suppliers and partners, that too from different cultures and situations. So, an organization must treat them equally and regards them with importance. There are communities around every organization. So, organizations must behave responsibly – I.e. avoiding pollutions, protecting environment and developing communities. Those organizations which understand the importance of social responsibility to operations decisions tend to take a proactive approach to their own ethical stance. This involves developing an explicit set of principles which allow organizations to avoid ethically ambiguous activities and gradually build up a social responsibility framework which becomes accepted within the organizational culture of the operation. Typically such organizations adopt an explicit and public set of values. For example the mission statement for East Midlands Electricity, a regionally based electricity company in the UK. It states ‘adopting and promoting safety and safe working practices in all our activities’.

Corporate social responsibility ‘CSR is the business contribution to our sustainable development goals. Essentially it is about how business takes account of its economic, social and environmental impacts in the way it operates – maximising the benefits and minimising the downsides. Specifically, we see CSR as the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society.’ (UK Government)

Corporate social responsibility ‘Corporate Social Responsibility … is listening and responding to the needs of a company's stakeholders. This includes the requirements of sustainable development. We believe that building good relationships with employees, suppliers and wider society is the best guarantee of long-term success. This is the backbone of our approach to CSR.’ (Marks & Spencer, retailer) ‘[Our vision is to] … enable the profitable and responsible growth of our airports. One of our six strategies to achieve that purpose is to earn the trust of our stakeholders. Corporate responsibility is about how we manage our social and environmental impacts as part of our day to day business, in order to earn that trust.’ (BAA, airport operator)

Environment responsibility The pollution, is considered to be the biggest issue for any operation. This is the result of an operational failure. Again, producing non-recyclable products and processes, that consumes large amount of energy is another issue that operations face. The environment management is the key point of any operations. It is known as EB = Environmental Burden

Environmental burden (EB) One way of demonstrating that operations, in a fundamental way, are at the heart of environmental management is to consider the total environmental burden (EB) created by the totality of operations activities: EB = P × A × T where P = the size of the population A = the affluence of the population (a proxy measure for consumption) T = technology (in its broadest sense, the way products and services are made and delivered, in other words operations management)

Environmental considerations for operational decisions Environmental responsibility is connected with day – to – day activities of operations. Many of these are concerned with the waste.

Some environmental considerations of operations management decisions Product/service design – recyclability of materials, energy consumption, waste material generation Network design – environmental impact of location, development of suppliers in environmental practice, reducing transport-related energy Layout of facilities – energy efficiency Process technology – waste and product disposal, noise pollution, fume and emission pollution, energy efficiency Job design – transportation of staff to and from work, development in environmental education Planning and control (including MRP, JIT and project planning and control) – material utilization and wastage, environmental impact of project management, transport pollution of frequent JIT supply

Some environmental considerations of operations management decisions (continued) Capacity planning and control – over-production waste of poor planning, local impact of extended operating hours Inventory planning and control – energy management of replenishment transportation, obsolescence and wastage Supply chain planning and control – minimizing energy consumption in distribution, recyclability of transportation consumables Quality planning and control and TQM – scrap and wastage of materials, waste in energy consumption Failure prevention and recovery – environmental impact of process failures, recovery to minimize impact of failures

Identifying waste minimization in packaging Reduce packaging Yes Can packaging be reduced? Yes Reuse Yes Can packaging be reused? No Recycle Yes Is packaging necessary? Eliminate unwanted packaging No Can packaging be recycled? No Minimize packaging No Source: Awe Inspiring Images/Photographers Direct

Green reporting Green reporting is about providing information regarding the environmental practices and performances. Green reporting has some advantages for business as follows: Green reporting helps to be analytical and disciplines in understanding the nature of their processes. This helps to identify opportunities for cost saving and enhances the degree of process knowledge. It helps an operation to identify the potential environmental risks. It makes, an operation more attractive to work for. It encourages investors and customers.

ISO 14000 This is an environmental management system.

ISO 14000 The ISO 14000 standard has a three-section environmental management system that covers initial planning, implementation and objective assessment ISO 14000 makes a number of specific requirements: a commitment by top-level management to environmental management the development and communication of an environmental policy the establishment of relevant and legal and regulatory requirements the setting of environmental objectives and targets the establishment and updating of a specific environmental programme, or programmes, geared to achieving the objectives and targets the implementation of supporting systems such as training, operational control and emergency planning regular monitoring and measurement of all operational activities a full audit procedure to review the workings and suitability of the system

Quality management and environmental management Quality management and environmental management have become closely related. Technology Technology plays a key role in operations from processing to delivery. Technology dominates the operations management. Operations manager must consider the following 3 principles to evaluate technologies:

1.Monitor the environment for emerging technologies. 2. Operations must move quickly to adapt to technological change. 3. Operational managers must develop clearer understanding of the relationship between potential of technologies and the way they manage an operation. Technology issues Page 690 table 21.4

Sustaining technology VS disruptive technology Sustaining technologies improve the performance of products and services, and increase customer satisfaction. Disruptive technologies are not matching customer expectations, in the short term. Example an electric car in today’s situation is not a challenge to combustion engines, but in long term it may pause threats. Floppy disk gave way for CD’s and CD’s to DVD’S, again DVD’s to mass storage devices.

Technologists and operations managers are likely to take different views of technologies: Technologist’s View Operations Manager’s View Concerned with…. Functionality Technical performance Reliability Capital cost Stand-alone performance Technology learning Upgradability Novelty Concerned with …. Usability Service levels Maintainability Life cycle cost Total system performance Operational learning Development Commonality

Knowledge Management An organization is connected to internal and external operations, where knowledge is exchanged. Every operation consider knowledge as a value – adding process. One company products are better than the other, because of the level of knowledge. Operation Management and Knowledge Management Without knowledge there is no product or service. ( a computer without the knowledge aspect is just a bag of plastic and other materials) Page 693 21.5

Explicit knowledge and tacit knowledge Explicit knowledge – the knowledge that you can explain by writing, verbally, or mathematical form. Tacit knowledge – the knowledge that built up over the time and result of our experience cannot be explained in words. For example driving a car, this knowledge is obtained by experience and practice which cannot be explained in words.