May 11, 2019 199
May 11, 2019 199
Operation management is the process of transforming certain inputs (resources) into products and services. It consists of various activities for creating products and services to satisfy our wants. Every meal you have eaten every treatment you have ever received at a clinic or hospital and every book you have ever read are the outputs of a transformation process, that is, conversion of certain inputs, such as materials, people, energy, information into products and services that can satisfy human needs.
Transformation process may involve a chemical change of inputs, fabrication or change of shape or form, assembly of parts or materials, the transformation of information as in computer processes or transportation of products and materials.
Operations management is important to an entrepreneur because it accounts for a high percentage of all the expenditure of the business. It is where most of the costs of the business are incurred. Whether the business will succeed or not depends largely on how and at what cost most of the activities of operations management are carried out.
Operations management addresses problems of location and site selection, capacity planning, product design, process design, layout, quality, materials management, maintenance, and safety. These are the issues that must be carefully addressed in creating products and services to satisfy customers and to ensure the profitability and growth of the enterprise.
Location and site selection decisions must be carefully made since they have long-term effects on oil the cost of operations. A good location and site are important for the success of any small business. Most small businesses do not have enough resources to engage in extensive marketing to attract customers outside their immediate locality. Furthermore, changing a location and site after the facilities have been installed can be very expensive. Apart from the cost of acquiring a new site, existing facilities would have to be dismantled, moved and re-installed in the new site. Not only would some equipment be damaged, some customers who are used to the existing location might be lost in the process.
Capacity planning is an important area where decisions have to be carefully considered because excess capacity ties down scarce resources, increases overhead costs and reduces profitability. It is the highest output that a business enterprise can produce with the facilities (buildings, plant, equipment and manpower input) available to it.
Generally, these production facilities cannot be expanded in the short-run. In the case of small businesses, in particular, the expansion of facilities is difficult because of the limited resources available to them. Similarly, inadequate capacity results in crowded facilities, poor product and service quality, inability to meet the demand of customers and loss of sales. Capacity should, therefore, be planned such that within the first three years or so, the business enterprise is able to satisfy the demand of its customers with the existing facilities.
To determine the appropriate capacity for a business enterprise for the medium or long-term, the sales forecast for the period’ is done. On the basis of the forecast, the physical facilities and manpower needed to support the sales are determined.
In capacity planning, these questions needed to be asked and answered in different areas:
Decisions in these areas determine the capacity of the business enterprise to meet its expected sales.
Design is the conceptual process which generates the noticeable features of a product or service that are meant to satisfy some functional, quality and aesthetic requirements of individuals groups or organizations. The design has to do with translating the expectations of customers into the physical attributes of a product or service.
The design begins with studying and understanding the expectations of the target customers, their characteristics and behavior. On the basis of this understanding, product or service features that are expected to satisfy the needs of customers are developed, tested and modified if necessary.
There are different approaches to designing products or services:
A design is feasible if it is cost effective and easy to implement given available physical, managerial and financial resources. The design options should be evaluated on the basis of feasibility, acceptability, and risk. Acceptability has to do with whether the product will meet the expectations of the target market, and also whether the product design is socially and legally acceptable. Risk is concerned with whether the product design is a good or poor business proposition.
This is the choice of the preferred sequence of operations needed to produce a product or service efficiently. An entrepreneur can select any of the following processes depending on the one that suits his circumstances better:
Project Process: A project is a unique or one-of-a-kind operation with a clear beginning and ending point. An important element of a project process facilities are assembled at the product site at the beginning and removed again on completion. Examples of the project process are found in the construction of buildings bridges, factories, and borehole drilling. In the project process, the machines are such that they can be moved from one site to another.
The layout decision is important because it has serious implications for the overall cost of production. A layout is the general form of the arrangement of facilities in the operation. It is the logical arrangement of all the physical facilities of business such that operations are efficient. A wrong layout results in poor scheduling, customer queues, risk of fire and accidents, employee dissatisfaction and rising costs. To correct a wrong layout decision can be very difficult and very expensive because facilities already in position will have to be repositioned. It must, therefore, be got right the first time.
There are certain factors to consider in developing a layout:
The basic layout type is developed after the process design has been selected.
In order to ensure high productivity, it is important to carefully plan operations.
When the volume of operations is low, these can be achieved through direct monitoring and supervision. But as the volume of production increases, therefore, careful operations planning become critical if efficiency is to be achieved.
Basically, production planning involves finding answers to the following questions:
One of the major problems most African entrepreneurs face is the difficulty of penetrating the market with their products and services. Consumers resist purchasing the products/services of these entrepreneurs because they perceive the products/services to be of poor quality.
As the continent embraces globalization – the free flow of goods and services across national borders – the products/services of African entrepreneurs must be able to compete with the products/services of other countries especially in the area of quality. That is, firms that provide consumers with superior products/services at a satisfactory price are more likely to attract and retain consumer loyalty.
Quality is the degree of goodness or worth of something. In operations management, quality is defined as “the totality of features and characteristics of a product/service that bears on its ability to satisfy stated or implied needs.” It is good to notice here that quality is seen as the ability of a product/service to meet the expectations of consumers and to satisfy their needs.
Customers may use certain indicators to judge the quality of a product. For instance, they may use the reputation of the manufacturers to judge quality. Therefore, if a product is manufactured by a firm that is not known or which, in the mind of the consumer, has a low capacity or poor reputation for producing quality products, the consumer is likely to believe that the product is of poor quality. Some other indicators used by consumers are price and the image of the outlet through which the product is distributed.
The processes involved in the determination, and control of quality in a business enterprise are:
One problem with the quality control processes described above is that they focus on ensuring that the existing standards are met. They also tend to accept that the production of defective products/services within tolerable limits is normal and acceptable. Total Quality Management (TQM) rejects these notions of quality control. TQM is about “constantly improving every process and product by progressive methods”.
There are different types of materials. These raw materials and components are those that are transformed in the process of production. Retail stocks are those that are bought for resale. Finished products are the output of the production process while a factory and office supplies include fuel, grease, stationery, etc. in most small businesses, purchasing of materials is handled in an informal manner by the owner-manager.
But in some businesses, purchasing and managing of inventory may constitute a major cost element. Takes for instance, in poultry businesses the stock of birds, feed, and drugs constitute up to 80% of costs. In retail businesses, stock of goods may engage up to 90% of the available capital.
Careful purchasing and managing of inventory have a significant effect on costs and profits. Attention to the purchasing and inventory management function also reduces risks associated with materials – deterioration of stock, theft by employees and customers, destruction in the event of accidents and minimization of scarce working capital tied down in inventory.
As can readily be observed, all items of materials used in production operations are not all equally important. Some are of high value in terms of the amount involved in purchasing and storing them. Some, although inexpensive, may be so critical to production operations that their non-availability can stop production operations for long periods. Others are low-cost and non-critical to production operations. This suggests that the owner-manager can do an analysis of materials used in production operations so that he/she can focus attention on monitoring and controlling those items that are of high value and critical to his/her operations.
Establishing and building a good relationship with suppliers is an aspect of the management of materials that should engage the attention of owner-managers of small businesses. Since the order-size and value of materials purchased by a single small business are often small, the relationship between a small business and its supplier is usually supplier-dominated. This means that it is more in the interest of the small business to have a strong relationship with the supplier. Therefore, the small business should put itself in a position to initiate the establishment and maintenance of a good relationship with its suppliers in order to enjoy their support. Such support comes in the form of delivery of materials promptly and on schedule, credit facilities, preferential treatment in the event of shortages of raw materials, training of employees, etc.
The strategies that can be adopted by a small business to achieve a good relationship with its suppliers include:
Irrespective of the type of machine and equipment finally purchased, the facilities will periodically need servicing and occasionally major repairs to keep them functioning at optimum levels.
Poor maintenance facilities result in poor quality product and dissatisfaction of customers who are unable to get a regular supply of the firm’s product. Lack of maintenance of machines and equipment results in frequent breakdowns reducing production capability. The cost of production also increases since employees are idle while the machines are being repaired. Faulty machines and equipment may cause accidents and injury to employees.
Most of these problems are preventable by adopting a policy of preventive maintenance. This policy requires that at regular intervals, even though the machines and equipment are functioning well, they are serviced by qualified and experienced persons. Most vendors of machines and equipment also provide maintenance services. As much as possible, the owner-manager of a small business should use such services because they are more likely to have genuine spare parts to replace faulty parts.
However, machine operators’ must be trained to clean, lubricate and repair minor faults in the machines. Besides, they must be trained and encouraged to report such minor repairs and other observations they have of the functioning of the machines.
An associated policy that facilitates maintenance services is the practice of recording the history of all major or critical machines and equipment on a card. This card indicates the date of purchase, all maintenance activities carried out on the machine, parts replaced, etc. This card provides essential information about the machine that would enable the owner-manager to plan for the replacement of the machine at a future date.
Whatever the owner-manager does, machines have a tendency to breakdown at one time or the other. This necessitates corrective maintenance. It is important to utilize the services of known and experienced firms to undertake major repairs of machines and equipment.
In every workplace, there are safety and health hazards. Employees and other people in the premises may sustain injuries, such as burns, cuts, bruises, electric shocks, death, etc as a result of faulty machines, broken furniture, exposure to chemicals, poisonous liquid, dangerous fumes, and other dangerous events. Sometimes employees may become ill due to the conditions in which they work. Their health may deteriorate because of the nature of work that they do or the materials they work with. For instance, continuous exposure to toxic substances dust, excessive noise, etc may result in ill-health on the long-run.
Therefore, employers have a duty to provide a safe and healthy work environment for their employees by ensuring:
Employers are liable to pay compensation to employees and third parties in the event of injuries, damage to property or ill-health attributable to default or negligence of employers in maintaining safety and health standards at work.
Recently, governments and the community have become more concerned with the impact of the operations of the business on the environment. Several businesses produce wastes that have a negative impact on the environment if not properly and effectively disposed of. For example, the environment may be polluted by smoke from incinerators; offensive odor from poultry farms sited in residential neighborhoods, solid waste from barbing saloons, restaurants, and sawmills noise from carpentry workshops, etc.
In Nigeria, the Federal Environmental Protection Agency (FEPA), which is now part of the Federal Ministry of Environment, was established to formulate policies, prescribe standards, monitor and enforce the standards, guidelines, regulations, and schemes designed to protect the environment.
The following are the regulations made by the Federal Ministry of Environment:
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