Question

1. What is operations management and how has it evolved since World War II in the United States?

2. What impacts have technology and the global economy played on operations management?

3. How does operations management help firms compete?

4. Why are business units bundling manufacturing with services in their market offerings?

5. Describe Value Added Chain Management. Why is it important to an organization? How does it impact an enterprise’s competitive edge?

Answer 1

1. Operations management is the process of turning an organization’s resources (materials, labor, land, entrepreneur) into products and services. During World War II, enormous quantities of resources (personnel, supplies, equipment, etc.) had to be deployed.

• Military OR teams were formed to deal with the complexity of deployment.
• After the second world war, operations researchers found their way back to universities, industry, government, and consulting firms.
• OR helped the operations managers make decisions when problems were complex and wrong decisions are costly.
• OR greatly helped in solving the problems of Linear Programming, Assignment Problems, Transportation Problems, Queuing Theory, Decision Theory, PERT and CPM.

Services revolutionised after world war 2 in the following ways:

- The creation of services by organizations accelerated sharply after World War II.

- Today, more than two-thirds of the United States workforce is employed in services.

- About two-third GDP of the U.S. is from services and there is a huge trade surplus in it.

- Investment per office worker has now exceeded the investment per factory worker.

- Therefore, there is a growing need for service operations management also.

(The above five points can be used for question 4 as well)

2. Technological advances have significantly improved operations management and lowered the cost of doing business. All the physical barriers to communication over distances have been overcome by the internet. Within most organizations around the world, in every single industry, technology investment is growing faster than revenues and, in many cases, even faster than the GDP of any country. It is clear to all companies that technology is vital to the successful operations of the organizations and, mainly, to the global economy, but being able to manage technology expenditure properly within a few years ahead will require a sophisticated way of looking at the world and at a company’s performance.

3. Operations Management helps compete firms in the following ways:-

• OR helps the operations managers to make decisions when problems are complex and wrong decisions are costly.
• OR helps in solving the problems of Linear Programming, Assignment Problems, Transportation Problems, Queuing Theory, Decision Theory, PERT and CPM.

5. A famous business blogger Peter Chisambra in his article on Value Chain analysis writes: “Competitive advantage is not just about matching or surpassing what your competitors are doing, but finding out the expectations of your customers, profitably meeting those expectations and even going one step further of surpassing them. Your organisation’s overall competitive advantage derives from the difference between the value you offer your customers and the cost of creating that customer value."

Understanding the daily activities and the value that they collectively add in the process, allows the management to fine-tune the business and look objectively to where improvements can be made. Improvements may be reducing costs or improving production efficiency. The added value development contributes to consumers of a company deriving the most profit from the company's goods at the lowest cost

It is feasible to take VCM a stage up further and apply it like procurement, HRM, technological development, infrastructure, etc. to the secondary support services that also bring value to the chain. It is also where efficiencies can be increased and improvements can be made, be that in reducing the costs, increasing capacity and eventually leading to increased profit.