1 – The use of operational management approaches and models

Operational management is a crucial aspect of any business, as it helps ensure that the organisation’s day-to-day operations run smoothly and efficiently. One of the key tools used in operational management is the use of models and approaches. These models and approaches can be used to improve performance, reduce costs, and increase overall effectiveness. Some of the most common operational management models include the Four Dimensions of Operations, the Transformation Process Model, the Lean Model, the Six Sigma Model, the Theory of Constraints, Total Quality Management, Business Process Reengineering, the Agile Model, the Resource-Based View Model, and Operations Strategy Model. Understanding and using these models can greatly benefit any organisation. In this topic, we will look closely at some of these operational management models and how they can be applied in the real world.

Operational management approaches and models

Operational planning is the process of determining how a business will achieve its goals and objectives. It involves setting specific targets and identifying the resources and actions needed to reach those targets.

Operational planning is closely related to strategic planning, which involves setting long-term goals and identifying the strategies and actions needed to achieve those goals. While strategic planning focuses on the overall direction of the business, operational planning focuses on the specific actions required to achieve those goals on a day-to-day basis.

Operational planning has a significant impact on the achievement of a business’s purpose. It helps to ensure that the company focuses on the right priorities and uses its resources effectively to achieve its goals. This can involve optimising the cost of a product or service, improving quality, increasing customer satisfaction, maximising revenue, and maximising profit.

Operational planning typically involves planning for different time horizons, such as short-range, intermediate-range, and long-range. Short-range planning generally covers a period of up to one year and focuses on immediate goals and actions. Intermediate-range planning covers one to three years and focuses on longer-term goals and actions. Long-range planning covers three years or more and focuses on the overall direction of the business.

By effectively aligning operational planning with strategic planning, businesses can ensure that they are working towards their long-term goals and maximising their chances of success.

Operational management approaches

There are several operational management approaches:

  • Lean manufacturing is an approach to production that aims to eliminate waste and improve efficiency by streamlining processes and removing unnecessary steps. It involves identifying and eliminating waste in all areas of the production process, including transportation, inventory, motion, waiting, overprocessing, overproduction, defects, and unused talent. Lean manufacturing aims to produce only what is needed when needed and in the required amount while minimising waste and maximising value.
  • Agile manufacturing is an approach that emphasises flexibility and adaptability in the production process. It involves quickly responding to changes in customer demand or market conditions by rapidly modifying production processes. This can include using modular or flexible production systems, as well as being able to switch between different products or production lines quickly.
  • Flexible specialisation is an approach that involves producing a wide range of products in small quantities using specialised production processes and technology. It is based on the idea that businesses can be more efficient and competitive by focusing on a narrow range of products and using specialised processes and technology to produce them quickly and at a high quality.
  • Mass customisation is an approach that involves producing products or services that are customised to meet the specific needs and preferences of individual customers while using mass production techniques to keep costs low. This can involve using technology such as 3D printing or advanced robotics to customise products quickly and efficiently.

These approaches can all be used to improve efficiency and competitiveness in the production process and can be used alone or in combination, depending on the needs of the business.

Operational management models

Four dimensions of operations

The four dimensions of operations, also known as the four “Vs” of operations, are:

  1. Volume: This refers to the quantity of goods or services produced. High-volume operations may involve producing large quantities of standardised products, while low-volume operations may involve producing smaller quantities of customised products.
  2. Variety: This refers to the range of products or services produced. High-variety operations may involve producing a wide range of different or customised products, while low-variety operations may produce a narrow range of standardised products.
  3. Variation: This refers to the degree of change or fluctuation in demand for goods or services. High variation operations may involve rapidly changing demand, while low variation operations may involve more stable demand.
  4. Visibility: This refers to the degree to which the production process is visible to customers or other stakeholders. High visibility operations may involve producing products that are visible to customers, such as finished goods. In contrast, low visibility operations may involve producing products that are not visible to customers, such as components or raw materials.

Understanding these four dimensions is essential for operations managers because they can impact the efficiency and effectiveness of the production process. For example, high-volume operations may be more efficient because they can take advantage of economies of scale. In contrast, high-variety operations may be more complex and require more flexible production systems. Similarly, high variation operations may require more flexibility and adaptability in the production process, while high visibility operations may require more attention to quality and customer satisfaction.

Transformation process model

The transformation process model is a conceptual framework that describes how a business converts inputs (such as raw materials, labour, and capital) into outputs (such as goods or services). It is often used to understand and analyse the production process to improve efficiency and effectiveness.

The transformation process model consists of four main stages:

  1. Inputs: This stage involves acquiring and assembling the resources needed for production, such as raw materials, labour, and capital.
  2. Conversion: This stage involves converting the inputs into the desired output through a series of production processes. This may include manufacturing, assembly, or other types of processing.
  3. Output: This stage involves delivering the finished goods or services to customers.
  4. Feedback: This stage involves collecting and analysing data on the performance of the production process to identify areas for improvement.

The transformation process model helps to illustrate the flow of resources and information through a business and can be used to identify bottlenecks or inefficiencies in the production process. By understanding and optimising each stage of the transformation process, companies can improve efficiency, reduce costs, and better meet the needs of their customers.

The Lean Model

The lean model, also known as lean production or the Toyota Production System, is an operational management approach that emphasises the elimination of waste, continuous improvement, and empowering employees. Toyota originally developed it in the 1950s, and it has since been adopted by various organisations in various industries.

One of the core principles of the lean model is the identification and elimination of waste, also known as “muda” in Japanese. This includes anything that does not add value to the customer, such as excess inventory, unnecessary movement of materials, and defects in the final product.

Another key principle is continuous improvement, or “kaizen” in Japanese. This involves constantly looking for ways to improve processes, products, and services to increase efficiency and customer satisfaction.

The lean model also strongly emphasises empowering employees and giving them the tools and training they need to identify and solve problems independently. This includes involving employees in decision-making and giving them autonomy to change their work processes.

The lean model is often associated with manufacturing and assembly line production, but it can be applied to a wide variety of industries and processes, including healthcare, software development, and service industries. Some key tools and techniques used in the lean model include value stream mapping, kanban, and visual management.

The Six Sigma Model

The Six Sigma model is a data-driven methodology used to improve business processes by identifying and reducing defects and variability. Motorola developed it in the 1980s and it has since been adopted by many organisations worldwide. The name “Six Sigma” refers to the goal of achieving near-perfection, or a process with no more than 3.4 defects per million opportunities.

The Six Sigma model is based on the DMAIC (Define, Measure, Analyse, Improve, Control) process, which systematically identifies and eliminates defects in a process. The model also incorporates statistical tools and techniques, such as statistical process control and the design of experiments, to help identify and eliminate the root causes of defects.

One of the key features of the Six Sigma model is the use of designated roles and responsibilities. The Six Sigma model uses Black Belts, Green Belts and Champions to lead and support Six Sigma projects. Black Belts are full-time Six Sigma professionals who lead projects, while Green Belts are part-time Six Sigma practitioners who support Black Belt projects. Champions are senior leaders who provide resources, support and sponsorship for Six Sigma projects.

Six Sigma is a highly effective approach for improving business processes and increasing efficiency, but it does require significant investment in training and resources, including dedicated personnel. The Six Sigma model is most often used in manufacturing and service industries, but it can be applied to any organisation or process.

The Theory of Constraints

The Theory of Constraints (TOC) is an organisational management methodology that focuses on identifying and managing the constraints that limit an organisation’s ability to achieve its goals. The TOC approach aims to optimise the entire system’s performance by identifying and addressing the one constraint preventing the system from achieving its goal.

The TOC has five steps:

  1. Identifying the constraint(s): This step involves identifying the constraint(s) that are limiting the organisation’s ability to achieve its goal.
  2. Exploiting the constraint(s): This step involves maximising the constraint’s capacity to produce what is needed.
  3. Subordinating all other processes: This step involves ensuring that all other processes are aligned with the constraint to ensure that it is not wasted.
  4. Elevating the constraint: This step involves improving the constraint’s performance or capacity.
  5. Repeating the process: This step involves repeating the process of identifying, exploiting, subordinating, and elevating the constraint until the goal is achieved.

One of the key benefits of the TOC approach is that it helps organisations to focus their resources on the most important constraint rather than spreading resources thinly across multiple issues. This can lead to more efficient use of resources and improved performance. It’s often used in manufacturing, distribution and supply chain management

The Total Quality Management Model

Total Quality Management (TQM) is a management approach that seeks to optimise the quality and efficiency of an organisation by involving all employees in a continuous improvement process. The TQM model is based on the principles of quality management first put forth by W. Edwards Deming, who is considered the father of the TQM movement.

TQM focuses on the following key elements:

  1. Customer focus: TQM is centred on meeting customers’ needs and expectations by delivering high-quality products and services.
  2. Employee involvement: TQM encourages all employees to be involved in the improvement process and to take ownership of their work.
  3. Process-oriented: TQM focuses on improving the processes used to produce goods and services.
  4. Data-driven: TQM uses data and statistical tools to measure and analyse processes’ performance and identify improvement areas.
  5. Continuous improvement: TQM is an ongoing process that seeks to improve the efficiency and effectiveness of an organisation over time.
  6. Leadership: TQM requires strong leadership and a commitment to quality from top management.

TQM is implemented in different ways depending on the organisation, but it generally involves creating a culture of quality, setting quality goals, training employees on quality techniques and tools, and using data to track progress and identify areas for improvement. Some of the key tools and techniques used in TQM include Total Quality Control, Statistical Process Control, and Continuous Improvement

The Business Process Reengineering Model

Business Process Reengineering (BPR) is a management approach that involves redesigning or rethinking the way an organisation operates in order to achieve significant improvements in efficiency, productivity, and effectiveness. The BPR model is based on the idea that organisations can achieve breakthrough performance by fundamentally rethinking and redesigning their business processes.

The BPR model is based on the following key principles:

  1. Identify the business processes that need to be re-engineered: This involves identifying the processes that are critical to the organisation’s success and that have the greatest potential for improvement.
  2. Gather and analyse data: This involves collecting and analysing data on the current state of the business processes, including how they are currently performed, how long they take, and what problems they encounter.
  3. Develop a new process design: This involves redesigning the business process to eliminate waste, improve efficiency and productivity, and reduce costs.
  4. Implement the new process design: This involves implementing the new process design and training employees on the new procedures.
  5. Monitor and improve the process: This involves monitoring the performance of the new process and making adjustments as necessary to improve its performance over time.

BPR can be a powerful tool for organisations that want to improve their performance and competitiveness, but it can also be a complex and challenging undertaking. It requires a deep understanding of the organisation’s business processes, the ability to gather and analyse large amounts of data, and the ability to implement and manage change effectively.

Agile model

The Agile model is an iterative and incremental approach to software development and project management. It emphasises flexibility and rapid response to change and is often used in situations where requirements are likely to change frequently or unpredictably.

The Agile model is based on the Agile Manifesto, a set of guiding principles for software development that prioritise individuals and interactions, working software, customer collaboration, and responding to change over processes and tools.

The Agile model is often implemented using specific frameworks, such as Scrum and Kanban. These frameworks provide a structure for planning and executing projects and a set of roles, events, and artefacts to guide the development team’s work.

One of the key features of the Agile model is the use of short development cycles, called sprints, that typically last between 1-4 weeks. At the end of each sprint, the team delivers a usable product increment that can be shown to stakeholders for feedback. The team then uses this feedback to plan and prioritise the work for the next sprint.

The Agile model is commonly used in software development, but it can also be applied to other types of projects. It is particularly well-suited to projects with high uncertainty or complexity and where the end-users are closely involved in the development process.

The Resource-Based View Model

The Resource-Based View (RBV) model is a strategic management approach that focuses on a firm’s internal resources and capabilities as the key drivers of competitive advantage. It posits that a firm’s resources and capabilities, if properly managed and utilised, can provide it with a sustainable competitive advantage over its rivals.

The RBV model emphasises the importance of a firm’s unique resources and capabilities in creating and maintaining competitive advantages, such as its intellectual property, brand reputation, and organisational culture. It also emphasises the importance of aligning a firm’s resources and capabilities with its external environments, such as its customers and competitors, to ensure they are used effectively to create value.

One of the key concepts in the RBV model is the idea of “resource immobility,” which states that a firm’s resources and capabilities are often difficult to imitate or replicate by rivals, providing the firm with a sustained competitive advantage. Another key concept is the idea of “dynamic capabilities,” which refers to a firm’s ability to continuously improve and adapt its resources and capabilities to changing market conditions.

Overall, the RBV model provides a framework for understanding how a firm’s internal resources and capabilities can be leveraged to create and sustain a competitive advantage in the marketplace.

The Operations Strategy Model

The Operations Strategy Model is a framework for aligning a company’s operations with its overall strategy. This model focuses on identifying and addressing key operational issues that can impact the company’s ability to achieve its strategic goals. The model typically includes the following steps:

  1. Identify the company’s strategic goals and objectives.
  2. Analyse the company’s internal and external environment to identify key operational issues that may impact the ability to achieve the strategic goals.
  3. Develop an operations strategy that addresses the key operational issues identified in step 2. This can include changes to processes, systems, and organisational structure.
  4. Implement the operations strategy, including the necessary changes to processes, systems, and organisational structure.
  5. Monitor and evaluate the performance of the operations strategy to ensure that it is achieving the desired results and making the necessary adjustments as needed.

The Operations Strategy Model is used to drive the alignment of operations with strategy, to improve operational performance and the organisation’s competitiveness. The key focus is on identifying the key operational issues critical to the company’s success and addressing them through an operations strategy aligned with the company’s overall strategy.

Developing an operational plan

Components of an operational plan

An operational plan is a document that outlines the specific actions and resources needed to achieve the goals and objectives of a business. It typically covers a specific period, such as a year or a quarter, and is used to coordinate the activities of the different departments and functions within the organisation.

The components of an operational plan can vary depending on the specific needs of the business, but some common elements include the following:

  1. Goals and objectives: The operational plan should outline the specific goals and objectives that the business is working towards, as well as the key performance indicators (KPIs) that will be used to measure progress.
  2. Action plans: The operational plan should include specific action plans outlining the steps and resources needed to achieve each goal or objective. These action plans should be detailed and have deadlines and responsibilities for each task.
  3. Resource allocation: The operational plan should include a plan for allocating resources, such as budget, personnel, and equipment, to support the action plans.
  4. Risk management: The operational plan should include a plan for identifying and managing potential risks that could impact the ability of the business to achieve its goals and objectives.
  5. Evaluation and review: The operational plan should include regularly reviewing and evaluating progress towards the goals and objectives and making necessary adjustments to the plan.

By effectively planning and coordinating the activities of the business, an operational plan can help to ensure that the company is working towards its goals and maximising its chances of success.

Evaluating effectiveness

Evaluating the effectiveness of objectives and key performance indicators (KPIs) is essential in managing a business. It helps to ensure that the company is on track to achieve its goals and objectives and can identify areas where improvements are needed.

There are several key considerations when evaluating the effectiveness of objectives and KPIs:

  1. Establishing measures: It is essential to establish clear, measurable goals and KPIs aligned with the business’s overall strategy. This can involve setting targets for specific performance indicators, such as revenue, profit, customer satisfaction, or efficiency.
  2. Alignment with organisational strategy: The objectives and KPIs should be aligned with the business’s overall strategy and support achieving the business’s long-term goals.
  3. Responding to changing circumstances: The business environment is constantly changing, and the business needs to adapt and respond to these changes. This may involve adjusting the objectives and KPIs to ensure they are still relevant and achievable in the current environment.

To evaluate the effectiveness of objectives and KPIs, it is essential to review and track progress against the established targets regularly. This can involve collecting and analysing data, comparing performance to industry benchmarks, and seeking customer and stakeholder feedback. By periodically evaluating the effectiveness of objectives and KPIs, businesses can make informed decisions about adjusting their strategy and activities to achieve their goals.

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