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Operations Management. How process and quality can be improved by strategic project management

Term Paper 2011 21 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Table of Contents

Table of Figures

1. Introduction

2. Theoretical background
2.1. Definition of Operations Management
2.2. Reasons for the importance of Operations Management
2.3. Functional areas of Operations Management

3. Actual state with Bäckerei X GmbH

4. Measures for improvement

5. Recommended action plan

List of Literature

Table of Figures

Figure 1: Definition of a project

Figure 2: Different aspects of quality

Figure 3: Meanings of quality

Figure 4: Structural organization of Bäckerei X GmbH

Figure 5: Order process of Bäckerei X GmbH

Figure 6: Strengths and weaknesses of current order process

Figure 7: Targets of order process improvement

Figure 8: Characteristics of an effective ERP system

Figure 9: Benefits of ERP implementation

Figure 10: ERP implementation process by Wallace/Kremzar

Figure 11: Project action plan for implementation of ERP system

1. Introduction

The increasing role of operations management is based on globalization, strong competition, changing market structures, shorter product life cycles as well as increasing customer needs and demands. Due to the fact that Operations Management concerns every product and service and it’s increasingly importance for all product or service providing companies the following essay focus in that topic. In the first step the essay will provide theoretical foundations regarding operations management and particularly considering its main functional areas project management, process management and quality management. The essay will continue with practical implementation on Bäckerei X GmbH, a German manufacturer of bakery products. The company’s main problems and challenges concerning its order process will be pointed as well as measures for improvement regarding quality and process issues via project management. The recommended action plan given in the last chapter will show why and how a strategic project can put the company on the essential basis for further quality and process development measures.

2. Theoretical background

2.1. Definition of Operations Management

Writing about Operations Management requires an intensive study of what Operations Management means and how it can be defined. In general Operations Management concerns everything that is done to produce goods and services. Every producing or service providing company has to deal with managing its operations in order to offer products that fit and satisfy customer needs and demands in terms of quality. Therefore Operations Management has to be defined in a narrower sense. Because of the large number of various business functions and business processes it is difficult to formulate a universal definition (cp. Khanna 2007:6). Khanna understands the term as “planning, scheduling and controlling of the activities that transform inputs by way of raw materials, capital, machinery labour, information and time into outputs in the form of products and services of higher value than the outputs.” (Khanna 2007:6)

A similar but more general definition is presented by Rowbotham/Masoud/Galloway who define Operations Management as transformation process by which inputs (resources: people, materials, technology, information) are brought together by a series of processes to deliver outputs, in particular products or services of an organization (cp. Rowbotham, Masoud, Galloway 2007:2).

2.2. Reasons for the importance of Operations Management

The raise and fast development of information and communication technology as well as the ongoing globalization have had a significant impact on organizations’ ways of doing business (cp. Khanna 2007:10). Today's business environment is dominated by the structural change in markets and therefore by increased and more regulated competition. Information technology systems increase customer power and lead to changing customer preferences as well as to shorter product life cycles. Organizations are often forced to cut traditional hierarchical and function-oriented organizational structures and ways of thinking in order to ensure competitiveness by achieving flexibility, innovation, cost, time and quality targets. For this reason a lot of new management techniques like i.e. process management, business process reengineering, lean management, change management, (total) quality management came into existence. All these concepts even so operations management shall provide guidelines for organizations and managers to prosper on new and existing markets.

The corporate strategy given by the management based on one or more of these techniques comprises all activities an organization takes in order to survive in its environment (cp. Barnes 2008:37) but it is the operational strategy that is concerned with all actions and decisions of managing operations to produce effective and efficient outputs (cp. Bicheno, Elliot 1997:10) in order to achieve competitive advantage (cp. Barnes 2008:37). Hence Operations Management comprises all “key decision areas concerned with the structure (i.e. the physical attributes of facilities, capacity, process technology and supply network) and infrastructure (i.e. planning and control, quality organization, human resources, new product development and performance measurement) of operations.” (Barnes 2008:37)

2.3. Functional areas of Operations Management

Barnes’ summarized definition clearly illustrates the relevance of project management, process management and quality management as key issues of Operations Management. In order to clarify why these functional areas are of high importance within Operations Management it is necessary to define them. When defining the terms project and project management most authors refer to the definitions made by Project Management Institute (PMI) whereupon a project can be understood as:

“a temporary endeavour undertaken to create a unique product, service, or result.”

(Rolstadas 2008:5 with reference to PMI 2004)

Turner formulates a more detailed definition by saying:

“[A project is] an endeavour in which human, financial, and material resources are organized in a novel way to undertake a unique scope of work, of given specification, within constraints of cost and time, so as to achieve beneficial change defined by quantitative and qualitative objectives.” (Turner 2009:2)

Turner’s definition of project is illustrated in following figure:

illustration not visible in this excerpt

Figure 1: Definition of a project

Source: Turner 2009: 3.

According to PMI’s definition of project management it can be defined as

“the application of knowledge, skills, tools, and techniques to prject activities to meet project requirements.” (PMI’s definition, quoted in Schwalbe, 2009, p. 7)

In conjunction with standardizing quality management the term process has been defined by the ISO 9001:2000 guideline which in its origin is a norm for international quality standards. According to ISO 9001:2000 a process is “a collection of activities that uses resources to transform inputs into outputs. In every case, inputs are turned into outputs because of some kind of work, activity, or function is carried out.” (Plenkiewicz 2010:44 with reference to ISO 9001:2000)

Hammer/Champy, who also involve the customer view into their definition defined the term process at the early 1990’s as “a collection of activities that takes one or more kinds of input and creates an output that is of value for the customers.” (Hammer, Champy 2003:38)

The word quality has a lot of meanings (cp. Figure 3) which can be summarized to come to following definition:

“[Quality is] the degree to which a set of inherent characteristics fulfills a need or expectation that is stated, general implied or obligatory.” (Hoyle 2007:10)

In accordance with this definition quality management “is concerned with the plans, decisions, tests, design, performance and all other aspects of a product’s quality.” (Armstrong 2006:143)

Furthermore quality can be referred to product, process or project quality.

illustration not visible in this excerpt

Figure 2: Different aspects of quality

Source: Noé 2006:57, 59, 67; author’s design

illustration not visible in this excerpt

Figure 3: Meanings of quality Source: Hoyle 2007:10

In conclusion, there are some key words, which strongly combine the three above mentioned functional areas: quality, process, project, product, resources and strategy. Neither project management nor process and quality management can’t by successfully implemented without considering interdependences assembled under Operations Management.

3. Actual state with Bäckerei X GmbH

The family enterprise Bäckerei X GmbH was founded in year 2000, grew very fast and meanwhile employs a staff of 60 people. The company has got a head office with production location, three regional stores and five sales vehicles. Furthermore there are five franchise stores which are managed independently by the respective franchisees.

The head office houses all main business departments: purchasing, production, finance, personnel, marketing and logistics, some of them are partly subdivided. The company structure and main functions can be figured as follows:

illustration not visible in this excerpt

Figure 4: Structural organization of Bäckerei X GmbH Source: author’s design

The company’s product portfolio includes various kinds of breads, rolls, cakes and pastries. Modern production facilities manufacture fresh bakery products on six days a week. Depending on orders made by company’s own and franchise store staff as well as by customers (via online-shop, directly in stores or with mobile sales personnel) products are baked for immediate delivery and produced to be stored briefly or delivered deep-frozen. Frozen products are only stored for two days and will be delivered to company’s stores to get baked and sold. Only the mobile vehicles get fresh baked breads, rolls, cakes and pastries every day. Stores’ purchasing managers can decide if they want to get fresh bakery products or frozen ones to be baked in the stores. Orders have to be placed via special fax forms, online or telephone call at least two days in advance. The company’s management understands freshness and permanent production on customer’s demand as key quality factors although it requires higher efforts for all involved departments. The order process starting with incoming and taking order via manufacturing, delivering and accounting is described in following figure:

illustration not visible in this excerpt

Figure 5: Order process of Bäckerei X GmbH Source: author’s design

1. Customers order products of their choice online via company’s web page or personally in one of the shops or at a sales vehicle.
2. Store or sales vehicle staffs order bakery products via fax form or phone call to administrations department.
3. The orders will be evaluated and confirmed by the person responsible towards customer (in case of online ordering) or towards the store/ sale vehicle employees.
4. Store/ sales vehicle employees will confirm order towards customer personally or via phone call.
5. Orders will be collected, prepared by administration department and handed over to production department.
6. Orders will be collected and prepared by administration department and handed over to logistic department.
7. Products will be manufactured and transferred to logistics department.
8. Purchasing department will be informed by production department about consumption of material, stock rotations and required materials procurement. Accounting department will be informed by production department about orders in order to charge executed orders towards stores and sale vehicles.
9. Purchasing department will inform finance department of times and costs of material purchasing.
10. Logistic department delivers ordered or required products to stores and sales vehicles.
11. Logistics department informs accounting department about delivered products in order to update invoices in case of need.
12. Invoices are sent to stores and sales vehicles.
13. Customers are informed by stores and sales vehicle staffs that orders/products are available for collection.
14. Customers will collect and pay their bakery products in the store or at a sales vehicle.
15. Stores and sales vehicle managers pay invoices mainly via bank transfer within the time given by accounting department.
16. Finance and accounting department will report towards management about results and development of operating earnings.

The order process shows some main strengths and weaknesses which are illustrated in figure 6.

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Details

Pages
21
Year
2011
ISBN (eBook)
9783668175105
ISBN (Book)
9783668175112
File size
1 MB
Language
English
Catalog Number
v316104
Institution / College
Prifysgol Cymru University of Wales
Grade
B
Tags
operations management bäckerei gmbh

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Title: Operations Management. How process and quality can be improved by strategic project management