Overview and Analysis of Operations Management. Lean Operations, Quality Management and Inventory Management

Table of Contents

Abstract

Quality Management
Overview
Analysis
Conclusion

Inventory Management
Introduction
Analysis
Conclusion

Lean operations
Introduction
Analysis
Conclusion

BIBLIOGRAPHY

Abstract

This essay will analyse the key factors which determine ‘success’ and ‘failure’ of quality management (QM), lean operations and inventory management. These three areas of operations management are significant and can dramatically improve a firm’s efficiency, responsiveness and reduce costs. This essay will illustrate how theoretical frameworks can help explain the actions of organisations past and present, and the success of these actions will be evaluated.

Managers often fail to understand for operations to be successful, a company wide approach or cultural shift must occur. There is much literature on the application of these operations in a small number of sectors, namely, manufacturing. This essay will analyse the appropriateness of these operations across many sectors and will draw upon case studies as well as my own experience.

Quality Management

Overview

QM is a company wide approach of continuous improvement to enhance the ability to produce high quality products at lower cost (Spector, 1994). It refers to not only the quality of the finished product, as perceived by the consumer, but of the entire corporation (Ishikawa, 1985). The aim of QM is to maximise the “long-term success through customer satisfaction, as well as benefit all members of the organization and society” (ISO 8402, 1992).

TQM became popular in America during the 1980’s due to the competitive onslaught of Japanese firms in the electronics and auto industries (Hayes, 1980). This threat and the belief QM can enhance the firm’s competitiveness led to a “flurry of activity” (Business Week, 1992) by many organisations in manufacturing, service, profit, and nonprofit industries to adopt QM techniques. In fact 93% of America’s largest firms adopted TQM in some form in this period (Little, 2001).

Analysis

Garvin (1984) proposed five approaches to define quality. Firstly, the transcendent approach which is synonymous with innate excellence. This definition of quality cannot be defined, and one can only recognise quality through experience. The second definition is a product based approach where quality is a precise and measurable variable, such as quality ice cream having greater butterfat content. The third definition is a ‘user based approach’ which users view of quality is subjective; “beauty is in the eye of the beholder. The fourth definition is manufacturing based, viewing quality as conformance to requirements (Crosby, 1979). Any deviation from this suggests defects are created, which should be avoided. The last definition is the value based approach which defines quality in terms of cost and priceindicating quality can be viewed as a measure of worth.

Garvin (1984) identifies eight dimensions of quality: performance, features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality. These dimensions are not necessarily equally weighted for every product. For example, computer chips are deemed ‘quality’ if they are durable, reliable and conform to specified performance. However, a hand bag's quality may be deemed by its aesthetic appearance alone. For a company to determine their product’s quality, they must define quality in their industry, and understand how to measure quality. The company can then set in place controls to ensure consistent quality and minimal defects. A popular method is Total Quality Management (TQM) whicha strategy to enhance competitive performance and better meet the needs of customer while improving the quality of products and operations. TQM is an integrated management philosophy and outlines practices which emphasise continuous improvement, long term thinking, team work, process redesign, and closer suppliers relations (Ross, 1993).

Deming (1982) set out 14 points which he believed would increase the competitiveness of US manufacturing. Deming emphasised the role of management in the successful implementation of TQM as managers can inspire a company-wide cultural shift towards quality. DiMaggio & Powell (1983) support this view and suggest that management must be committed to QM for it to be successful. If TQM is adopted merely to imitate others, the understanding of TQM and how it can improve performance will be low. If understanding is low, commitment will be low, which leads to abandonment. Indeed, The Wallace Company, an oil company in Texas, filed for bankruptcy after winning the Baldrige Award for QM (Hill, 1993).

Juran (1993) argues QM is not simply identifying and reducing variation; it is a company-wide focus to best serve the customer’s needs. Grant et al. (1994) goes on to suggest that TQM visions the convergence of the long term interests of customers, employees and shareholders. By increasing quality, organisations can achieve both economic and social goals; reduce costs while benefiting customers through improved performance at a lower price. The authors explain TQM recognises the human need to create; quality has intrinsic value and quality products embody human's quest for perfection. They argue that TQM demonstrates a return to craftsmanship which suffered in the last few decades.

Ford Motor Company utilised strategies including TQM and more recently Six Sigma to increase quality and competitiveness. Ford developed extensive supplier evaluation systems, ensuring consistently quality. As a result, warranty claims declined 60% (Dan Dobbs, Ford Motor Company). Six Sigma, developed by Motorola in 1985, aims to reduce defects in manufactured products. Hong (2003) suggests this strategy works best in repetitive processes, such as high volume car manufacturing which is low variation and low visibility to customers. Deming (1986) put forward the DUMAIC (acronym) methodology of six sigma’s implementation. This stands for: define the problem, measure relevant data, analyse data relationships, improve current processes, and lastly: control future processes to ensure variations are corrected before they result in defects. One method of error avoidance is “poka yoke”, where processes are designed so that human error is minimised or highly unlikely to occur resulting in fewer defects and increased quality. Examples include visual cues given to factory workers when a computer part has been successfully assembled at that stage of production. These are highly effective measures which reduce waste, however some implementations may increase lead time in some cases.

Quality management and quality control process such as six sigma clearly work well in the manufacturing industry, however some academics question if it is as applicable in other sectors (Naj, 1993). However it is generally agreed that the framework of quality management frameworks can be applied to any industry where customers are involved (Juran, 1993).

Conclusion

The majority of literature suggests (QM) reduces costs, increases market share, customer satisfaction and productivity. Strategies to achieve these include TQM which aims to eliminate waste in production processes. This strategy is particularly effective in low variation processes and has allowed firms including Ford and Toyota to increase the reliability of its cars, a key quality aspect as perceived by its customers. The reduction of variation in the production process is key to delivering quality products to the next downstream customer. Strategies such as SIx Sigma have been utilised successfully to reduce defects and waste. In particular, poka-yoke prevents variations occurring by error proofing processes. The key to their implementation is understanding and measuring relevant data in the operation, as argued by Deming (1986).

Much focus has been made on QM in manufacturing industries, however Naj 1(993) argues that the fundamental frameworks of QM can be applied to any customer oriented sector, including services and retailers. However, successful implementation of QM relies significantly on management’s commitment and understanding that QM should implemented as a long term strategy to raise product quality, increase customer satisfaction and increase shareholder value.

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