Poor operations management

Domingo A commodity, be it a product or service, can be thought of as having three dimensions:

Poor operations management

Domingo A commodity, be it a product or service, can be thought of as having three dimensions: Quality is the attribute desired by the user or buyer that renders the product its primary value and Poor operations management to him.

Proper tolerances, specifications, features, and varieties are examples of quality indicators. Cost, the second dimension, refers to the cost of producing and delivering the product to the customer; it has an impact on another cost: Cost Poor operations management the marketability of the product and the profitability of the producer.

Delivery involves bringing the finished goods or services to the customer at the right time, at the right quantity or amount, at the right place. Now, these three dimensions of a commodity, or QCD, are like the three legs of a stool on which the customer would sit.

Figure 1 A problem in at least one of them means 1 there will be no product 2 there will be no buyer. One cannot be sacrificed for the sake of the other two dimensions. The buyer wants a three dimensional product - not two, surely not one. He wants a good quality product at the right cost, at the right time and quantity.

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All are equally important to him. A good quality, reasonably-priced product which is delivered late is for practical purposes useless to the customer and unsalable.

Poor operations management

A quality product which is promptly delivered but is outrageously priced because its manufacturing cost is similarly outrageous cannot be sold. The low competitive price and on time delivery of any merchandise cannot offset its lack of quality and change the decision of the customer to reject it.

To stay in business, therefore, it is important for any company to maintain the QCD balance and harmony of its final output, be it a manufactured product or service. The quality, cost, and delivery of the finished goods, or output QCD, is the outcome of the efforts of the production manager in managing the processes and inputs that go into the making of the output.

This job is the crux of what we call "operations or production management". Output is nothing but the proper processing of the necessary inputs such that the desired output QCD is achieved.

Operations management makes sure this transformation takes place. Quality is the result of the efficiency and discipline of the entire production system of men, machines, and material.

That quality is a production responsibility is illustrated by the fact that the production people are immediately blamed whenever there are customer complaints, product returns and recalls due to defects. Ironically, they are rarely congratulated whenever there are no quality problems, though they are equally responsible for the success and failure of meeting quality targets.

There are only two quality problems that do not concern the production staff: In both cases, the production department can come out with a high quality workmanship of the wrong product with the wrong design.

In both cases, the customer will perceive a quality problem and not patronize the product. Production has direct responsibility for managing, controlling, and reducing manufacturing cost, the biggest cost in most business concerns.

Though production decisions may not significantly affect the other principal costs like selling and administrative costs, they could have a large impact on financing costs. The production manager makes inventory decisions, good and bad, and recommends necessary or unnecessary capital equipment acquisitions; both actions may require huge financing and interest charges.

The production people may not have the final say in product pricing the cost to the buyerbut it should be remembered that manufacturing costs can influence the extent to which the marketing people can competitively and profitably price the product.

Delivery of finished goods to the customer is largely determined by the availability of inventories, the length of the manufacturing lead time, and the available capacity - all within the control of the production department. The production plans and production schedules it makes essentially determine the delivery performance of the company; of course, a terribly wrong forecast from marketing can wreck havoc on the best laid-out production plans and confound delivery schedules.

The three factors are seldom at acceptable or optimum levels simultaneously. They are always in a state of flux - one factor will be much more problematical or critical than the other two at any one time. Figure 2 The production manager is often subjected to tremendous pressure from inside and outside the company to correct and control just the runaway element.

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Unfortunately, he cannot simple juggle the three and do some trade-offs, for they are mutually interdependent on each other. Some trade-offs or single factor adjustments are tolerable; many are dangerous and may worsen the problem by causing unexpected, undesirable changes in the other two factors.

Let us look at some of the "expected" repercussions of trade-off, "band-aid" solutions: Since the cost of the resulting scrap and defects is spread out over the good ones, manufacturing cost likewise increases. Similar consequences await the production manager who tries to solve delivery problems by shipping old, unreliable inventory or stock.

In the examples above, the original problem may have been solved, but the fundamental problem still remains: Given this dilemma, the production manager has two options: The difficult task of adjusting and isolating the problematical factor such that the other two are unaffected.IT Operations Management (ITOM) solutions integrate service management, application management and systems management for a holistic view of your IT environment and business services.

About Strategos.

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For more than 25 years the Strategos team has helped clients understand and improve business and manufacturing operations. Based in Kansas City, Missouri, USA, we travel the world for training and consulting.

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