must define which resources to acquire( procure), e. g raw materials, labour, capital or information. This must be aligned to the core purpose of the organisation, the mission as defined in the strategy. The process of transforming inputs into outputs of great value is mapped through the value chain. Technology, physical infrastructure, facilities, procurement processes, finance, primary transportation, human resources form the support system. There are many models that can be deployed in the transformation of the inputs to create value to customers. Such may include focus on volumes, variety, variation and visibility, as designed from the customer value proposition. These determine the design and execution of the input transformation processes to final products.
Operations management deals with every aspect of creating competitive advantage. This brings into play cost, quality, speed, responsiveness towards market positioning. Optimised processes are a key area in operations management. Quality control and continuous process improvement assures organisation of effective conversion of input resources. This includes elimination of waste, using lean or agile methods, deploying technology to monitor, detect and control defects, production simulation methods, demand forecasting, capacity planning, and inventory decisions( reorder levels, raw materials, work in progress, upstream inventory, downstream inventory etc to manage all inventory risks and costs). Inventory has costs that can be avoided e. g. handling costs, obsolescence, rework, storage, stock out costs, disposal of waste and by-products. Optimising these costs falls under the purview of operations management. This is strategic too!
Upon completion of the transformation process, key decision on where to store the products, how to move them, how to have customer orders processed, which effective route to market to deploy, how to manage customer experience with the product, how to manage returns( reverse logistics) come into play. This is a critical interface with the selling process, transportation, warehouse management, product quality and parameters management while in transit. Additionally, regulators come into play for quality standard checks and certification before products are released to market. Interaction with customs and tax regulators are critical touch points in this process. This interaction is also there for imported input materials and has cashflow impact especially on duty and shipping costs. Transport management, sales and order processes become part of operations management. Support functions like finance play a key role here in making payments and for liquidity planning. Supplier performance management, which is linked to the procurement processes determines heavily the final customer satisfaction and competitiveness. The coordination of plans and players in the process is a key function of operations management. This is execution of strategy.
The application of operations management in service industry is different from manufacturing industries. However, the core principles are the same. The process of input, transformation, value addition and delivery services to meet customer needs to create sustainable competitive edge applies here too. Customer experience is key. Service delivery is characterised by being intangible and inseparable from the provider. Service delivery is challenged by location and opportunity for delivery may not be stored for future like goods. A missed opportunity is a lost sale. The customer is involved in the sale process whose delivery is usually labour intensive.
Technology as a key driver of customer experience has come into the core of service delivery where customer experience can now be delivered through digital platforms. However, this may not apply for patient treatment processes where physical involvement of nursing care direct to the customer is critical. In service industry this is where operations management may be relegated to support function like infrastructure management, finance processes, stores management, procurement of consumables, de linking this from the core service providers, the“ professionals” like doctors, lawyers, auditor etc.
However, these create the value and experience with customers and therefore are the strategic link in delivering wholesome operations management. They drive customer satisfaction and experience directly and create opportunities for repeat sales and referrals. As operations managers, they must create flexibility to suit diverse customer needs. Each customer is unique and deserves or should perceive the quality of service as personalised to their circumstances. The service may not be standardised as compared to products on a production line.
Operations management is the core function in organisations that have full view of strategy, linking it to suppliers of inputs, while being deeply involved in the transformation process to deliver value adding outputs( products and services) to customers to drive competitive advantage and to provide assurance of sustainable businesses. Operations management determines the organisations’ ability to compete within the industry and internationally.
Who then is an operations manager? Who in the organisation fits into this role or job? Is it everyone’ s job? Well, while leadership is required, everyone has a role in operations management. We have both internal customers and external customers. Outputs from one process is always consumed in the next. With this mindset, operations management principles can be applied across all functions to deliver the overall corporate strategy.
At the end of the day, customer centricity determines the reason why organisations exist and why others are more competitive. How strategic then, is your operations management? In essence, strategic operations management is the engine that turns strategic plans into real-world results, making an organization more efficient, responsive, and competitive.
CPA Michael Maithya Nzule is a specialist in Finance & Strategy, with extensive experience in the Logistics Industry, FMCG industry and Corporate Strategy advisory services in Eastern Africa. He holds an MBA in Accounting and a Bachelor of Commerce( Accounting Option Hons) from the University of Nairobi. Views expressed here-in are personal. You can commune with him via mail at: Mikemaithyanz @ gmail. com.