Operations Management and Operational decisions
Increase Organization Efficiency, 3 ways to optimize Operations System
Operations Management Decisions
The term, operations, embraces all the activities required to create and deliver an organization's products (goods and services) to its customers or clients. A company's operations are the core activities that produce and deliver a product. Operations function is the term used to describe how the core operation of the organization design and functions. Operations functions refer to the departments in an organization that keep the day-to-day activities that keep the business on track. The operations function focuses on maintaining the efficiency of the value creation processes and helps the different functions involved in the value chain make smart decisions.
Every organization has an operations function, whether or not it is called operations or not, and it is mainly responsible for producing goods and services. It however, needs support and input from other areas of the organization such as: product management, supply chain, inventory, forecasting (production/sales), scheduling, quality management, and facilities planning and management. The functions of operations management outline the essential duties of the operations team
Operations Management Functions
Operations Management is an area of management which is concerned with the management of the operations function of the organization. operations management is that part of management looking at all the processes and activities, as a whole, on one hand, and the daily activities on the other hand. Operations management involves the administration of business practices to create the highest level of efficiency possible within an organization. Operations management is concerned with maintaining a steady workflow, whether for producing your products or administration. It is a continuous decision-making process that takes place within the context of the management functions of planning, implementing/(organizing and leading) and supervising/controlling the production of goods and services.
The basic role of operations management in a company is its role in managing the process of converting raw inputs such as raw materials into finished goods and services. In its transformation role operations management is directly responsible for many decisions and actions that give rise to design and delivery problems/issues of strategic and operational relevance.
The direct responsibilities of operations management include managing both the operations process, embracing design, planning, control, performance improvement of all processes in an efficient way to transform resources into quality goods or services; and managing development of operations strategy. The indirect responsibilities include interacting with those managers in other functional areas within the organization whose roles have an impact on operations, such as marketing, human resources, finance, etc. The primary functions/activities of operations management include:
Operationally management spans over different areas such as designing, monitoring, administrating, (re)structuring business building blocks, resources, and activities in such a way to create products - goods and services - that can meet market expectations. Operations management involves managing processes, resources such as materials, machines, technology, and people to produce products - goods and services - that the marketplace wants. It is concerned with converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization. The whole chain of events must be well managed for a business to be competitive and profitable in efficiently producing goods and services. The goal of operations management is to maximize efficiency while producing goods and services that effectively fulfill customer needs.
Operations Management Decisions
Operations management focuses on the control of the means - processes and resources - by which organizations create and deliver value. Operations management focuses on how best to use the organization's production resources, capabilities, and competencies to create and deliver value to customers. Operations management takes place within the context of of the broad policies and objectives set out by strategic decision-making. It involves structured decision-making concerned with how efficiently and effectively resources are utilized, and how well operations units are performing. Operations management involves strategic, administrative, and operational decision-making focused on operational control of the organization's capacity to efficiently carryout the tasks set forth executive and middle management. Operational decisions, unlike strategic decisions, are repetitive, routine and involve definite procedures for handling, so they do not have to be treated each time as if they are new. Operational control decisions involve determining which organization units will carry out the tasks, establishing criteria for completion, resource utilization, and evaluating outputs.
The term, operations, embraces all the activities required to create and deliver an organization's products (goods and services) to its customers or clients. A company's operations are the core activities that produce and deliver a product. Operations function is the term used to describe how the core operation of the organization design and functions. Operations functions refer to the departments in an organization that keep the day-to-day activities that keep the business on track. The operations function focuses on maintaining the efficiency of the value creation processes and helps the different functions involved in the value chain make smart decisions.
Every organization has an operations function, whether or not it is called operations or not, and it is mainly responsible for producing goods and services. It however, needs support and input from other areas of the organization such as: product management, supply chain, inventory, forecasting (production/sales), scheduling, quality management, and facilities planning and management. The functions of operations management outline the essential duties of the operations team
Operations Management Functions
Operations Management is an area of management which is concerned with the management of the operations function of the organization. operations management is that part of management looking at all the processes and activities, as a whole, on one hand, and the daily activities on the other hand. Operations management involves the administration of business practices to create the highest level of efficiency possible within an organization. Operations management is concerned with maintaining a steady workflow, whether for producing your products or administration. It is a continuous decision-making process that takes place within the context of the management functions of planning, implementing/(organizing and leading) and supervising/controlling the production of goods and services.
- Planning - Planning activities includes operations planning, production planning and scheduling, and sales planning. and capacity planning. Operational planning is the foundational element of operations management. Operations planning is the foundational function of operations management. Operations planning establishes the basic objectives for work in each of the major functions. It is based on the best trade-offs for the firm as a whole, weighing sales and marketing objectives, manufacturing costs, scheduling and inventory objectives, and the firm's financial objectives. All these must be integrated with the strategic view of where the company wants to go. Scheduling ensures work will be finished on time. It involves setting beginning and end times for each step in the production process, checking the use of resources such as labor, material and machinery so that production moves smoothly.
- Organizing - This encompasses the activities that establish structure of tasks, roles and responsibilities, authority, and the flow of information within the operations function. Operations managers determine the activities required to achieve the goals and assign authority and responsibility for carrying them out.
- Leading - Leading is stimulating high performance by members of the organization. Leading involves is getting members of the organization on board with your plan. Normally, this means connecting with direct reports or teammates on a personal level.
- Controlling - This refers to the activities that assure the actual performance is in accordance with planned performance with respect to cost, quality, and efficiency. Operations managers exercise control by measuring actual outputs and comparing them to planned operational output. Operational Control involves control over intermediate-term operations and processes but not business strategies. Operational control systems ensure that activities are consistent with established plans. Mid-level management uses operational controls for intermediate-term decisions.
The basic role of operations management in a company is its role in managing the process of converting raw inputs such as raw materials into finished goods and services. In its transformation role operations management is directly responsible for many decisions and actions that give rise to design and delivery problems/issues of strategic and operational relevance.
The direct responsibilities of operations management include managing both the operations process, embracing design, planning, control, performance improvement of all processes in an efficient way to transform resources into quality goods or services; and managing development of operations strategy. The indirect responsibilities include interacting with those managers in other functional areas within the organization whose roles have an impact on operations, such as marketing, human resources, finance, etc. The primary functions/activities of operations management include:
- Planning - This is the process of turning your strategic plan into detailed map that outlines exactly what actions your team will take on a weekly basis or sometimes on a daily basis. The duties within this function may include: Monitoring daily production of goods and services; Managing and controlling your inventory; Keeping tabs on team members performance and well being; production planning. The management objectives of production planning is to develop an integrated game plan where the operations portion is the production plan. The production plan then links the firm's strategic goals to operations (production functions) as well as coordinating operations with sales objectives, resource availability, and financial budgets.
- Finance - This refers to the aspects of finance relevant to production such as: creating budgets to meet production goals; finding investment opportunities; allocating budgets and managing resources;
- Product Design - This refers to the aspects of product design relevant to customer needs and marketing trends. The tasks performed include: consolidating market research into digestible results; communicating results to product design; offering design direction to help designers devise a product.
- Quality Control - The quality control function is responsible for testing the product to guarantee there are no defects before releasing it to the public. Quality control goes hand in hand with product design. After the production team create a product, operations will ensure it meets quality standards. The quality control tasks include: performing risk analysis to identify potential problems; inspecting products to make sure they meet quality standards; creating tests to control product quality; documenting any defects or deficiencies of the product.
- Forecasting - Operations management uses forecasting to predict the demand for a product. Forecasting involves trying to answer hypothetical questions such as: what will the demand for the product be in the future? what marketing and promotions should be plan for this product? what sales initiatives should we plan for this product? can we estimate the storage costs we will need for inventory? can we determine the cost of sourcing and raw materials. The goal of strategic management is to make sure
- Strategy - This is a broad function of operations management that can involve operations planning, monitoring and analysis. The goal of strategic management is to make sure production decisions align with business goals. A company's business objectives may include: prioritizing customer satisfaction; controlling costs; improving production systems. The operations managers job is to find ways (strategies) to meet these objectives. Operations management handles various strategic issues including determining the size of manufacturing plants, and project management methods, and implementing the structure of of the organization and information networks.
- Supply Chain Management - This refers to supply chain issues internal to a company. The supply chain is cyclical and involves: sourcing raw materials, supplier, production/manufacturer, distributor, retailer, and consumer.
Operationally management spans over different areas such as designing, monitoring, administrating, (re)structuring business building blocks, resources, and activities in such a way to create products - goods and services - that can meet market expectations. Operations management involves managing processes, resources such as materials, machines, technology, and people to produce products - goods and services - that the marketplace wants. It is concerned with converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization. The whole chain of events must be well managed for a business to be competitive and profitable in efficiently producing goods and services. The goal of operations management is to maximize efficiency while producing goods and services that effectively fulfill customer needs.
Operations Management Decisions
Operations management focuses on the control of the means - processes and resources - by which organizations create and deliver value. Operations management focuses on how best to use the organization's production resources, capabilities, and competencies to create and deliver value to customers. Operations management takes place within the context of of the broad policies and objectives set out by strategic decision-making. It involves structured decision-making concerned with how efficiently and effectively resources are utilized, and how well operations units are performing. Operations management involves strategic, administrative, and operational decision-making focused on operational control of the organization's capacity to efficiently carryout the tasks set forth executive and middle management. Operational decisions, unlike strategic decisions, are repetitive, routine and involve definite procedures for handling, so they do not have to be treated each time as if they are new. Operational control decisions involve determining which organization units will carry out the tasks, establishing criteria for completion, resource utilization, and evaluating outputs.
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Strategic Decisions
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Operational Decisions
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Administrative Decisions
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Competitive Priorities
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OPS Decision Areas
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Operations Management Strategic Decisions
Operations management decisions of strategic relevance can be guided by the organization's competitive priorities, and categorized in terms of operations structure and infrastructure decision areas. Some common examples of these decisions include:
These strategic decisions in operations management are common and can be applied to organizations of any size. The level of consistency between the competitive priorities emphasized by the organization and matching decisions concerning operations structure and infrastructure contributes to the organization's operations strategy.
Operations Management Decision Areas
Operations management decisions of strategic relevance can be guided by the organization's competitive priorities, and categorized in terms of operations structure and infrastructure decision areas. Some common examples of these decisions include:
- Location - A company's objective in this strategic decision area is the selection of a location to allow for example, optimum transportation of its products to distribution channels; optimum transportation of material an parts to manufacturing facilities, etc. , Operations management decision makers must give due consideration to the supply chain and how the facility location will receive supplies, the movement of goods and services to customers, and the role of marketing and public relations in the location choice. These decisions involve huge investments, made by the firm, in acquiring building(s), arranging and installing plant and machinery, etc.
- Layout Design and Strategy - This decision area of operations management is concerned with the company's design of its workflows and facilities. Decision makers must give due consideration to, for example, the placement of desks, workstations, and how materials are delivered and used.
- Process and Capacity Design - This decision area in operations management is concerned with design strategies which support production goals including technology nd resources. Decision makers must give due consideration to strategies to flexibly increase capacity if the organization has to scale production to match increase in demand. Process technology decisions on how to structure the conversion processes and methods used in execution. A company's main objective in this area is on how to maintain optimum production process.
- Design of Goods and services - This decision area of operations management is applied based on market research, trends and forecasting. The company's objective in this strategic decision as it relates to Operations Management is to support the strategic positioning of the company's products - goods and services. This includes looking for ways to implement consistency in costs, quality, and resources across business divisions or brands.
- Quality Management - Quality management is the systematic control process of keeping an intended level of quality in the goods and services, in which the organization deals. It attempts to prevent defects and make corrective actions (if they find any defects during the quality control process), to ensure that the desired quality is maintained, at reasonable prices. The objective in this area is to maintain Operations Management practices towards the course of maximizing quality of output and matching the company's brand image with the expectation of consumers. This decision area in Operations management at organizations is applied through quality assurance and control programs. This is the process controlling, measuring and improving the quality of an organization's processes, goods and services.
- Human Resources and Job Design -This decision area of operations management is concerned with recruiting good talent and continuous improvement programs and training and institute employee satisfaction programs to achieve success.
- Supply Chain Management - This decision area in operations management is concerned with determining the best strategies to streamline be cost effective and to develop trusted partners.
- Inventory Management - This decision area of operations management is concerned with planning and strategies for effective inventory control subject to influences of weather, supply shortages, and labor on how an organization maintains its inventory.
- Scheduling - This decision area in operations management is concerned with scheduling resources for production and other company activities to ensure efficient and effective achievement of operations goals.
- Maintenance - This strategic operations area guides operations management decisions concerned with maintaining people, machines, processes needed to create and deliver value to customers. These decisions relate to what the organization needs to do to maintain quality and keep resources reliable and stable. Machinery, tools and equipment play a crucial role in the process of production. So, if they are not available at the time of need, due to any reason like downtime or breakage etc. then the entire process will suffer.Hence, it is the responsibility of the operations manager to keep the plant in good condition, as well as keeping the machines and other equipment in the right state, so that the firm can use them in their optimal capacity.
These strategic decisions in operations management are common and can be applied to organizations of any size. The level of consistency between the competitive priorities emphasized by the organization and matching decisions concerning operations structure and infrastructure contributes to the organization's operations strategy.
Operations Management Decision Areas
Operations Management Operational Decisions
Operational management decisions are determinations made in regard to the routine, ongoing activities in the functional areas of an organization. These involve the daily business decisions that are done in high-volume by every business. It’s in the nature of operational decisions to be easily repeatable, because one of its primary characteristic is being consistent at following defined rules or guidelines. Another characteristic is that these decisions should often be made as quickly as possible and sometimes they are made while clients are waiting. While these decisions are often made about customers, they can also involve suppliers, employees and products.
Operational decisions are made within the context of longer-term strategic decisions, so that an organization’s strategy is always supported by its operating decisions. Operational decisions are taken in accordance with strategic and administrative decisions; and are related to the efficient production of goods and services. For example, to reduce cost is a strategic goal which is achieved through operational decision of reducing the number of employees; and how we carry out these reductions will be administrative decision. While these decisions are often made about customers, they can also involve suppliers, employees and products.
Some examples of these decisions include:
In operational decision making, the decision makers have to consider factors such as volume, latency, variability, managing risk, self service and personalized. It’s in the nature of operational decisions to be easily repeatable, because one of its primary characteristic, is being consistent at following defined rules or guidelines. Another characteristic is that these decisions is, they should often be made as quickly as possible and sometimes they are made while clients are waiting. Good operational decisions help eliminate wasteful activities and costly reports. They reduce fraud and prevent fines. They help people in your organization be more productive, and spend their time where it really matters.
Operational management decisions are determinations made in regard to the routine, ongoing activities in the functional areas of an organization. These involve the daily business decisions that are done in high-volume by every business. It’s in the nature of operational decisions to be easily repeatable, because one of its primary characteristic is being consistent at following defined rules or guidelines. Another characteristic is that these decisions should often be made as quickly as possible and sometimes they are made while clients are waiting. While these decisions are often made about customers, they can also involve suppliers, employees and products.
Operational decisions are made within the context of longer-term strategic decisions, so that an organization’s strategy is always supported by its operating decisions. Operational decisions are taken in accordance with strategic and administrative decisions; and are related to the efficient production of goods and services. For example, to reduce cost is a strategic goal which is achieved through operational decision of reducing the number of employees; and how we carry out these reductions will be administrative decision. While these decisions are often made about customers, they can also involve suppliers, employees and products.
Some examples of these decisions include:
- Which customer orders/jobs to schedule for production - [Production]
- Which components and raw materials to buy from suppliers, - [Purchasing]
- Which production equipment to schedule for use, [Production Scheduling]
- The nature of a marketing campaign - [Marketing]
- Where to invest excess funds - [Finance]
- Determining how much inventory to keep on hand. [Operations]
In operational decision making, the decision makers have to consider factors such as volume, latency, variability, managing risk, self service and personalized. It’s in the nature of operational decisions to be easily repeatable, because one of its primary characteristic, is being consistent at following defined rules or guidelines. Another characteristic is that these decisions is, they should often be made as quickly as possible and sometimes they are made while clients are waiting. Good operational decisions help eliminate wasteful activities and costly reports. They reduce fraud and prevent fines. They help people in your organization be more productive, and spend their time where it really matters.
Operations Management Administrative Decisions
Administrative decisions are taken in accordance with strategic and operational decisions; and are related to workings of employees in the organization. Administrative decisions and thinking fleshes out top-level strategic plans and breaks them up actionable chunks for operational decision makers. Administrative decision making is contextual both in terms of the type of decisions a position holder must make as well as how they should be made (style). The type of administrative decision is a function of administrative level, and the style is a function of organizational culture. Administrative decisions are routine decisions which help or facilitate strategic decisions or operational decisions.Administrative decisions may be as mundane as refilling the water cooler, to as stressful as fulfilling a customers order within minutes.
Administrative decisions are taken in accordance with strategic and operational decisions; and are related to workings of employees in the organization. Administrative decisions and thinking fleshes out top-level strategic plans and breaks them up actionable chunks for operational decision makers. Administrative decision making is contextual both in terms of the type of decisions a position holder must make as well as how they should be made (style). The type of administrative decision is a function of administrative level, and the style is a function of organizational culture. Administrative decisions are routine decisions which help or facilitate strategic decisions or operational decisions.Administrative decisions may be as mundane as refilling the water cooler, to as stressful as fulfilling a customers order within minutes.
Operations Management Competitive Priorities
In operations management, competitive priorities are a crucial decision variable that focuses on building specific capabilities in operations/production that can improve the organization's positioning with an advantage vs its rivals in the market. Such focus may guide decisions with regards to the operations structure - facility, technology, production processes, etc. and operations infrastructure - planning, control, etc. The level of consistency between emphasized competitive priorities and how they match decisions concerning operations structure and infrastructure determines the strength of operations strategy. Fitting operations/manufacturing practices to the competitive priorities is important to developing operations as a competitive advantage.
Competitive priorities in operations are the ways in which operations management focuses on the characteristics of cost, quality, flexibility, delivery performance, and innovativeness. A firm's customers will determine which of the competitive priorities are emphasized. We have to make trade-offs within competitive priorities. In a competitive market, no business can normally be on top in all aspects. The purpose of the competitive priorities is to assist in the mission of positioning an organization with an advantage versus its rivals.
According to Porter, there are two (2) primary routes for business competitiveness: cost leadership, and differentiation leadership. In contrast, according to Leong, there are five (5) dimensions of competitive priorities at the operations/manufacturing level, such as:
On a high-level the competitive priorities can represent a manufacturing strategy. To develop a manageable strategy, the priorities must be split into decision categories. As a way to prioritize among the list of competitive priorities, the idea of Order Winners and Order Qualifiers may be utilized. Order qualifiers are the qualities requires to be able to compete in the marketplace. Order winners are the qualities of a product - goods/service - which make an organization receive a new order. The main objective of analyzing a company's order-qualifiers and order-winners is to establish a basis for the manufacturing strategy.
In operations management, competitive priorities are a crucial decision variable that focuses on building specific capabilities in operations/production that can improve the organization's positioning with an advantage vs its rivals in the market. Such focus may guide decisions with regards to the operations structure - facility, technology, production processes, etc. and operations infrastructure - planning, control, etc. The level of consistency between emphasized competitive priorities and how they match decisions concerning operations structure and infrastructure determines the strength of operations strategy. Fitting operations/manufacturing practices to the competitive priorities is important to developing operations as a competitive advantage.
Competitive priorities in operations are the ways in which operations management focuses on the characteristics of cost, quality, flexibility, delivery performance, and innovativeness. A firm's customers will determine which of the competitive priorities are emphasized. We have to make trade-offs within competitive priorities. In a competitive market, no business can normally be on top in all aspects. The purpose of the competitive priorities is to assist in the mission of positioning an organization with an advantage versus its rivals.
According to Porter, there are two (2) primary routes for business competitiveness: cost leadership, and differentiation leadership. In contrast, according to Leong, there are five (5) dimensions of competitive priorities at the operations/manufacturing level, such as:
- Cost - Monitoring costs and distribute it effectively on the different products.
- Flexibility - Capability to manage volume and product mix changes; equipment and workforce related.
- Quality - Making sure that the product and its process perform and comply with specification.
- Delivery Performance - Reliable and quick delivery of goods; stock availability.
- Innovativeness - Time to market, how quickly new products or processes can be implemented.
On a high-level the competitive priorities can represent a manufacturing strategy. To develop a manageable strategy, the priorities must be split into decision categories. As a way to prioritize among the list of competitive priorities, the idea of Order Winners and Order Qualifiers may be utilized. Order qualifiers are the qualities requires to be able to compete in the marketplace. Order winners are the qualities of a product - goods/service - which make an organization receive a new order. The main objective of analyzing a company's order-qualifiers and order-winners is to establish a basis for the manufacturing strategy.
Operations Structure and Infrastructure Decision Areas
Operations management strategic decisions are concerned with shaping the long-term capabilities of any type of operations and its contribution to the organization's overall strategy. The areas of decisions that must be included in the operations function can be defined as a bundle of practices that constitutes the entire operations strategy, and contributes to get operations competitive priorities and achieve general firm's objectives. Organizations are only well positioned when competitive priorities are strongly supported by operations decisions. The areas of operations strategy decisions can be organized around a conceptual framework comprising two (2) categories: structure and infrastructure.
A competitive and coherent strategy of operations management can be achieved by the management of any company when making clear linkage between structure and infrastructure decisions, (Boyer and McDermott, 1999). A company's structure is related to the physical attributes of operations. A company's infrastructure is composed of its policies and systems governing a number of activities such as capital budgeting, equipment selection, organizational structure, etc. Each of these systems choices has repercussion and implications for other infrastructural and structural elements.
Structural decisions are the ones that define the shape of the building blocks associated with a particular operation. They are directly related to the tangible aspects of operations, such as: process technology for manufacturing, vertical integration, facilities - location, capacity, and variety of product manufacturing. Infrastructure decisions affect organizational culture control systems, workforce, quality management and leadership. Management has to pay attention to the right balance between structure decisions and infrastructure decisions.
Structural decisions define the overall tangible shape and architecture of the organization. The elements of operations structural decisions may include:
Structural decisions have several remarkable strategic implications, they require substantial financial investments, and have great effects on physical assets. They have long term impact, and are not easily reversible, once they have been taken.
Infrastructural decisions or practices comprise just operational practices or decisions that correspond to operations managers exclusively. These decisions may be considered as strategic or tactical choices because they refer to the people, systems, policies, practices, procedures and organization which support the value creation processes (i.e., manufacturing) and enable them to perform their function. The elements of infrastructural decisions and practices may include:
Infrastructural decisions relate to systems used to enhance enhance the utilization of structural resources, and the control of those resources so the business achieves a high level of productivity. Their cumulative effects can be difficult and costly to change, just like the structural ones are.
Competitive Effects of Structural and Infrastructural Decisions
Competitive priorities are key value attributes that are influenced by operations management.
Structural decisions relate to tangibles such as building, equipment, and the way equipment and personnel are organized in processes, and how the business links to other businesses. Structural decision areas includeL
Infrastructural decisions and practices have operative effects on current costs, and have short-term effects on the firm's performance because they do not require large capital investments.
Operations management strategic decisions are concerned with shaping the long-term capabilities of any type of operations and its contribution to the organization's overall strategy. The areas of decisions that must be included in the operations function can be defined as a bundle of practices that constitutes the entire operations strategy, and contributes to get operations competitive priorities and achieve general firm's objectives. Organizations are only well positioned when competitive priorities are strongly supported by operations decisions. The areas of operations strategy decisions can be organized around a conceptual framework comprising two (2) categories: structure and infrastructure.
A competitive and coherent strategy of operations management can be achieved by the management of any company when making clear linkage between structure and infrastructure decisions, (Boyer and McDermott, 1999). A company's structure is related to the physical attributes of operations. A company's infrastructure is composed of its policies and systems governing a number of activities such as capital budgeting, equipment selection, organizational structure, etc. Each of these systems choices has repercussion and implications for other infrastructural and structural elements.
Structural decisions are the ones that define the shape of the building blocks associated with a particular operation. They are directly related to the tangible aspects of operations, such as: process technology for manufacturing, vertical integration, facilities - location, capacity, and variety of product manufacturing. Infrastructure decisions affect organizational culture control systems, workforce, quality management and leadership. Management has to pay attention to the right balance between structure decisions and infrastructure decisions.
Structural decisions define the overall tangible shape and architecture of the organization. The elements of operations structural decisions may include:
- Facilities: Size, Capacity and Location - Facilities operations decisions refer to size, capacity and plant location(s). Factory capacity refers to the level and variety of manufacturing output.
- Location - Plant location may depend on a number of factors, such as: location of raw materials, location of markets, availability of transportation and communication systems, qualification of workforce, etc. Globalization can also affect location decisions as firms have to be competitive within a unique market.
- Process technology - This may refer to manufacturing process technology. Firms may produce either high volumes of standardized homogeneous and undifferentiated products, or low volumes of differentiated products, specific to customers' preferences by using general equipment or manufacturing machines. Innovative information technologies let firms develop and exploit new automation manufacturing technologies that give these firms more flexible and efficient solutions to material requirements planning or operations engineering.
- Vertical Integration - Managers have to decide which raw materials or components are necessary to be internally developed and which ones must be externally bought. Vertical integration can be useful choice to get economies of scale.
Structural decisions have several remarkable strategic implications, they require substantial financial investments, and have great effects on physical assets. They have long term impact, and are not easily reversible, once they have been taken.
Infrastructural decisions or practices comprise just operational practices or decisions that correspond to operations managers exclusively. These decisions may be considered as strategic or tactical choices because they refer to the people, systems, policies, practices, procedures and organization which support the value creation processes (i.e., manufacturing) and enable them to perform their function. The elements of infrastructural decisions and practices may include:
- Quality Management - This defines the expected quality from the consumers view point as well as established policies and procedures that the company intends to adopt towards attaining such quality levels. Quality management can be defined from two (2) points of view. A simple quality control process oriented towards reducing the number of defects in final products; It is just an inspection process. The other view is considering quality management as an operations philosophy on trying to erode any source of defects. :
- Workforce/Human Resources - This relates to decisions on how to recruit, motivate and retain the staff with necessary skills and talents.
- Inventory Management - This relates to decisions about inventory ordering and holding, and how to optimize the process in order to ensure consumers' satisfaction, enhanced supplier capabilities and effective production schedule.
- Organizational Structure - []
- Planning and Control Systems - Production planning and control systems contribute to the productivity of resources by ,making it possible to accurately match the supply of capacity and inventory to demand.
- New Product/Service Design - Product/service design processes dictate the product or service attributes that will provide the customers the value they seek.
- Process Capacity and Design - This defines how the product - good or service - is produced (i.e., the production processes utilized and the specific technology, quality, human resource, and capital investments that the management will undertake in order to determine majority of the company's basic cost structure.
Infrastructural decisions relate to systems used to enhance enhance the utilization of structural resources, and the control of those resources so the business achieves a high level of productivity. Their cumulative effects can be difficult and costly to change, just like the structural ones are.
Competitive Effects of Structural and Infrastructural Decisions
Competitive priorities are key value attributes that are influenced by operations management.
Structural decisions relate to tangibles such as building, equipment, and the way equipment and personnel are organized in processes, and how the business links to other businesses. Structural decision areas includeL
- Capacity Decisions - These decisions are related to output rate and volume. Capacity decisions affect design cost and
- Facility Decisions - Facility decisions can influence cost in a number of ways: location of facilities close to suppliers/customers positively affect transportation costs; Upkeep of facilities can increase cost. Cost is affected by design capacity and unit cost as well as match between design capacity and load. Quality is affected by the match between design capacity and demand.
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Infrastructural decisions and practices have operative effects on current costs, and have short-term effects on the firm's performance because they do not require large capital investments.
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