Integrated Management Framework
The notion of Operations Management (OM) resembles that of a tree with various branches attached to it; although each of the branches represents a separate icon, their roots are linked. Here, the various branches stand for Logistics, Purchasing, Supply Chain Management (SCM), Management Information Systems (MIS), Accounting, Engineering and Marketing. All have a different persona but play a significant role in the implementation of Operations Management and therefore the executor is required to have adequate knowledge of these functions.
OM is not only about the different operations of a business, it affects every facet of the organization starting from the core business activities to the tiniest detail applicable. For that reason, the traditional approach to encourage the the OM enterprise is not appropriate. Also, other factors such as reporting lines, performance measures, budgets and reward structures accompanied by the cultural aspects continue to sway these functions and the organization as a whole. The failure of Operations Management initiatives to incorporate these factors in the process of implementation reduces its effectiveness. This point has been validated by previous research (discussed below) which states that to avail the maximum benefits derived from Operations Management procedure, we need to work towards reducing the gap between the organization and the different operations, as both normally run on parallel roads with different ideologies. Along with this a thorough understanding of the OM concept and factors influencing its success and failure is vital to its success; otherwise the execution of Operations Management process will go down the tube (Stevenson, 2012).
Suggestions for Operations Manager at Johnson and Johnson Company
Four OM Capability Domains
For Johnson and Johnson Company, the structure of OM can be designed in various ways, but the elements that make up this structure will remain unchanged. The most important element relates to the factors that spur the Operations Management initiatives. These factors are covered under the umbrella of OM capability domains and are classified as forecasting and designing, planning, coordination, understanding, improvement, scheduling and inventory. The way this umbrella influences the OM implementation in various situations is recapitulated and explained below.
Forecasting, design and planning process
As explained earlier, Operations Management is not about a single entity or function. For forecasting and design, the key concept talks about linking activities in a manner such that the output of one activity becomes the input of another. This liaison between different activities or organizations is termed as planning and coordination. For example, we can use collaborative planning and forecast replenishment (CPFR) to reach to a ballpark figure for planned shipments to a customer, in the same way, expected output of one activity can be altered to meet the specifications of another entity’s requirements. This topic has proved to be popular amongst researchers, as each one of them analyzed it from a different perspective and reached to rational conclusions. There is a profuse collection of editorials (Barratt & Oliveira 2001: Dewett & Jones 2001: Frohlich & Westbrook 2001: Frohlich & Westbrook 2002: Hill & Scudder 2002: Lejeune & Yakova 2005: Mentzer, Foggin & Golicic 2000: Shah, Meyer-Goldstein & Ward 2002: Tang & Tang 2002) to evaluate the affiliation between strong coordination and competitiveness. Amongst other researchers, work of Gattiker and Goodhue (2005) is worth mentioning as they focused on manufacturing industry and established the way in which ERP can assist in forecasting, designing and planning to bring a company in line with customer expectations.
Scheduling and Waiting lines
The operational manager needs to understand that every entity has certain boundaries, which limits their ability to improve and be successful. An integrative Operation Management framework can only be effective if an entity is responsive to other entities competence, aptitude and precincts. For example, doubt over supplier’s ability to live up to customer’s expectation can be reduced through introduction of supplier certification programs. An initiative to understand other entity’s potential is demonstrated through SCOR model. SCOR model is based on building blocks used to manuscript the requirements, capabilities and limitations of each department in the company and each organization in the supply chain. Another attempt was the introduction of quality model by Beamon and Ware (1998). Along with this, other researchers (Lejeune & Yakova 2005: Spekman et al. 1998) also emphasize on the significance of understanding requirements, potential and capacity.
The key concepts here are “Understanding” and “Coordination,” which are similar to the extent that both talk about information sharing, and therefore can be placed opposite to each other. Although coordination of wherewithal meets short-term goals and understanding will help the entities in long-term, both are related.
Improvement and Constraints
Improvement is an ongoing process with no end to it. As environment changes and introduces new challenges, entities strive towards removing waste and adding value adding activities in order to survive and remain profitable. An example would be the use of reengineered logical process to reduce packaging waste or to get associated with suppliers that have launched six sigma programs (Lejeune and Yakova 2005).
Product lifecycle and lean operations
An end product or service is produced as a result of combined effort of all entities involved in the process. This can be explained in more detail with the help of an example. If in the process of house building or renovation, supplier assigns an engineer to remain on site at all times to deal with customer issues regarding the design and material specifications, the end result is more likely to meet customer’s expectations. Also, instead of component blue prints, customer can inform the supplier of product requirements and offer support to develop the product according to those specifications. Joint efforts of customer and supplier will never let the project end up in disaster. The end result is more likely to be successful (Bonner 2005: Choy et al. 2004: Petersen et al. 2005: Tracey 2004).
Inventory and capacity management
An ideal situation for an operations manager is when the company output is able to meet its demands. Surplus capacity is not only uneconomical and but also pricey. However, less capacity implies discontent clients and low profitability. Coming up with an accurate figure for capacity building needs having precise forecast of demand and supply. Furthermore, the company also needs the ability to convert forecasts into capacity requirements, and ultimately put a process in place, which is capable of meeting client requirements. Nonetheless, process variation as well as demand variability can negatively influence the realization of equilibrium amid company output and demand. As a result, to increase efficiency, operational managers at the Johnson and Johnson Company need to manage variation as well (Stevenson, 2012).
An Integrated Framework for Operations Management at Johnson and Johnson
As described earlier, all operational activities in an organization are connected. A large number of researchers such as, Boyer et al. (2000) along with Fine (2000), as well as, Stallkamp (2005) have examined the direct and indirect relations between these operational functions and concluded that amalgamation is essential to an organization’s success. Stank et al. (2001a) is an author, who after a detailed study of all aspects of OM procedures, made a distinction between internal and external integration. Internal integration relates to the relationship between different functions of an entity, whereas external integration is concerned with different organizations involved in operational processes. Despite the difference highlighted, both tend to be related. This is confirmed by Stank, Keller, and Daugherty (2001) who emphasized on the fact that an organization whose operational functions are not connected cannot have a strong liaison with other organizations. This raises a vital question, how to integrate the operational functions of an organization to achieve desired objectives? For this, we can refer the influential work of Wheelwright and Hayes (1985) that highlighted the two phases which should be monitored when blending manufacturing strategy with the corporate strategy of an entity. These two phases are focus, which can be inward or outward, and nature which can be either reactive or proactive. Considering this viewpoint, we can also deduce that scope and perspective are two additional factors that can affect the integrated operational management framework. As a result four levels of OM integration have been identified in this paper.
Takala et al. (2006) have termed these levels as a graphical representation of concepts analyzed from all aspects, whether they are multi-dimensional, multi-focused or hierarchical. They developed a sand cone model where structure of sand cone is a symbol of an organization’s ideology. Just as the small particles higher up the cone gain their strength from the steady foundation of large particles on the surface, the core value of customers as shown externally through hierarchy and attitude is based on the internal potency of the organization.
In most organizations, the prime focus has been on integrating operational activities and therefore this is can be the first level of integration termed as functional integration. At this level organizations fail to take advantage of the power that comes from the use of capability domains. This is because although the aim is to be competitive in industry but the ability to add value to activities is restricted. Different functions strive to meet their internal goals on the assumption that the results will be synchronized in the end. For example, sales team will aim to increase sales and shorten the time between production and delivery whereas the focus of production team will be on increasing efficiency of supplier qualification processes. An alternative was to use collaborative forecasts and work together towards the same goal which was not considered due to lack of integration. This lack of cross functional amalgamation confines the benefits of OM initiatives as they are restricted to specific operations only.
When we move down to the second level of integration, organizations break the walls surrounding these functions. Operational Interaction between functions is increased which results in enhanced understanding of each other’s potential and synchronization of goals. Collaboration between marketing and operations department might result in company agreeing to lower product prices and reduced margin if customer is willing to enter into a long-term arrangement. In the same way, company can purchase a substitute lower grade material if the original product ordered exceeds the budget following the integration of engineering and production. At this level, the aim of all functions is the same and they move towards this goal in unison.
The third level is a reflection of one of the capability domains, i.e. design of product. It extends the boundaries of OM beyond the walls of an organization to that of its immediate customer or supplier. Customer and supplier surpass the traditional approach of dealing, which involves handing over the product as required without any step taken to improvise it and work in harmony to produce high quality product. For instance, manufacturer and supplier can work together to design a new inventory container intended to modernize material flow. Combined efforts of both will result in increased efficiency and effectiveness.
The fourth level is the extreme level, where all entities involved in the formation of a product, starting from the purchase of raw materials to the deliverance of product to customer are connected. For example, a retail store might approach the organization manufacturing the product to negotiate better prices, reducing the need for wholesaler in between.
Combining Integration Levels and Domains to form an integrated operational management framework for Johnson and Johnson Company
The innumerable procedures and activities under Operations Management can be summarized in a premeditated agenda. For this purpose, the operational manager at Johnson and Johnson can merge the four OM capability domains (such as planning, forecasting and designing, inventory management etc.) with the levels of integration outlined in the paper. This will help develop the ground work for Operations Management integrated framework.
Functional Efficiency Level
Johnson and Johnson Company is likely to excel in its core business activities; therefore, functional excellence is placed at the core of integrated operational management framework. As for sand cone, this is the foundation providing support to all other tiers and layers of organization. Functional excellence has been perceived to be of utmost importance to organizations as it is essential to an entity’s survival. The size of an organization in terms of market share and the prolonged existence of an organization in the industry further validate this point (Andersen et al., 2006).
In this level, all the domains are combined with second level of integration; understanding, forecasting and design, improvement and constraints, planning and coordination etc. The focus is process oriented as compared to being functional oriented. This is because all departments work together towards improving the way in which product is delivered to customers, information is shared, weakness of one department is surmounted by the strength of another. Integration with respect to forecasting and design can be termed as “design for manufacturability” program, as the objective is to deliver high quality product that meets customer requirements at a reasonable cost. Integration with respect to improvement and constraints entails the use of problem solving techniques to overcome the weakness of one department and to change it into strength. Integration with respect to planning and coordination highlights the fact that any decision taken impacts the whole organization. Traditional approach focuses on a decision’s impact on that particular department only. OM techniques show the way in which the decision will affect other departments. For example, any decision taken by the production department will affect the marketing and sales strategy; inventory planning and control, and also the projected cash flows and financial reporting concerns. At this point, it is worth mentioning that mostly steps taken for improvement involve the use of IT and therefore integration between departments can act as an arbitrator to the effect of new strategy on all domains (Andersen et al., 2006).
As mentioned earlier, functional excellence is perceived to be the originator of cross functional effectiveness. Integration involves overlooking the weakness of a department to achieve desired objectives. For this purpose, OM improvement initiatives should be sequenced in a manner that the limitations of any department do not affect the organization as a whole. Organization will face hurdles when it strives to achieve functional integration, but these hurdles should be dealt with at the first level of integration. Therefore, an organization should constantly monitor its functional capabilities, improvements in this area is essential at all stages as this is the foundation for all other OM initiatives (Andersen et al., 2006).
This tier is an imitation of the third level of integration. It is concerned with company’s relationship with that of its immediate suppliers and customers. Activities of both these parties are essential to an organization’s survival. This tier emphasizes on this point highlighting the firm’s potential to integrate its decisions with that of its immediate suppliers and customers. This includes having a thorough understanding of their procedures, technologies, limitations and capabilities. During the process of inventory and capacity management, an entity can also ensure whether they comply with quality control standards, such as ISO 9000, QS 9000, ISO1 4000, etc. If supplier complies with any of the quality control standards, it will reduce the need of company to go through the procedure of inspection of material purchased. Along with this, senior management can think of ways to improve the processes and procedures and company can enter into a win-win situation with its suppliers and customers. To make this work, CPFR, EDI along with RFID technology and other tools of collaborative decision-making initiatives can be introduced throughout the management of operations. Cross functional effectiveness is a foundation for company-customer-supplier relationship and any loophole in the foundation can ruin the whole building. Company-customer-supplier relationships can also be viewed as horizontal and vertical process oriented perspectives. The horizontal perspective moves from supplier to company to customer and the vertical perspective goes vice versa. For example, supplier’s marketing department should be aware of the customer’s requirements and priorities of company, therefore interaction of its marketing department with that of operations and procurement department will be of great help. It will bridge the gap between actual and deemed expectations; deemed expectation being what supplier perceives customer requirements to be. Summing up, a firm striving to achieve cross functional effectiveness should focus on building company-supplier-customer relations effectively along with concentrating on functional excellence (Stallkamp, 2005).
At times, the management of operations extends beyond the immediate supplier and customers to their supplier and customer and so on. The fourth tier emphasizes on integrating all the organizations in supply chain, including the second and third suppliers too. The extensive supply chain demonstrates the degeneration of and the supply chain is viewed as various organizations working towards the same goal. With the addition of companies in supply chain, the concept of integration and domains will also change slightly. Integration with respect to planning and coordination reveals that company-based certification programs can now be swapped with industry-based quality control standards, such as QS 9000 or SCOR model. With respect to forecasting and design, we can use a wide variety of approaches that will consider both upstream and downstream problems. These approaches include Lifecycle analysis, Economic value added (EVA) and Design for environment (DFE). In the same manner, ideas related to improvement and constraints now consider the whole industry and not just a single organization. The ways of improvement are bound to change and the initiative has to be taken by industrial and trade organizations. Promotion of technology improvement councils and supplier conferences for example will prove to be a success. Also, joint enterprises can cooperate with each other to form an electronic market place. Every industry has certain rules and regulations and is regulated by a specific framework. Therefore, coordination at this level is influenced by the shared technology platforms (for example, RFID, XML) and these platforms reduce ambiguity over planning and decision making (Chen and Paulraj. 2004).
As with any other integrated framework, there has to be a base over which other levels effectiveness stands. For Johnson and Johnson, we can assume this base to be effective company-supplier-customer relationship. Effective company-supplier-customer relationships promote the sharing of resources and reduce the element of jealousy and unhealthy competition. These are the prerequisites to integrated operational management framework effectiveness. If the bond between immediate supplier, company and customer starts to tumble, it is nearly impossible to maintain a strong and healthy relationship with indirect suppliers and customers. Therefore, if an organization wants to develop and maintain an integrated framework, it has to focus on all operational areas and accomplish effectiveness in each level and domain before moving on to another.
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