OPERATION MANAGEMENT : A performance improvement process in Manufacturing

    Nowadays, companies need to operate in highly competitive environment where uncertainty in demand is very high and market is very unstable. This imposes high pressure of improving efficiency, reducing cost and increasing responsiveness on any organization. For achieving this goal companies are preferring more implementation in their industrial engineering and focusing to gain knowledge and skills to improve their productivity and stay in market. Small and Medium size enterprises (SMEs) are now focusing toward the process of learning by doing strategy, the nature of SMEs can push them into being very operative and taking ideas from practical issues in order to access i formation and to develop specific skills and that skills can be accompanied by bringing expertise in an organisation. Therefore employee training can become extremely important, even if it often disregarded by many leading small businesses. Competition puts them to adopt new learning model and high value of relationship patterns.
    Because of their nature, SMEs are often concentrated toward their primary business. Accordingly OPERATION management activities should for most part engage with firm that are a part of manufacturing system.

  Operation Management(OM) identifies all the activities necessary to plan develop and improve the business process involved in manufacturing (including logistics and development) of the product or provisions of the services.

 By OM practices , it refers to every process or methodological solution which is carried out on the shop floor and which is meant to improve the efficiency of production and logistic process for industrial goods. It can be implemented through various approaches as follows:

1. WCM- It means world class manufacturing which embrace detailed tools conceived to optimizes workplace organization and professional maintenance.
2. TQM- It means total quality management and approaches with regard to quality management and also includes specific tools as statistical process control, six sigma, etc.
3. TPM-  it means total productive maintenance and regards to maintenance practices and just in time approaches (JIT) with regard to production operations.

OM practices delivers a positive impact on performances both directly and indirectly. Researches shows that there are 7 areas that are decisive for success of OM:

• relationships with customers
• human resources
• relationship with suppliers
• e-commerce
• enterprise software
• advance manufacturing technologies
• advance manufacturing system

With regard to operations, four KPIs are commonly used; vaiue speed, flexibility and innovations. These factors are major elements of good result in :

• improving quality and reliability and reducing cost
• reducing production and delivery times
• flexibility adopting the productive capacity
• reducing time for new product development and commercialization

Survey:

   In administering 72 chinese enterprises operating in manufacturing sectors, it was revealed that OM practices by Structural Equation Modelling SEM and path analysis, have a mediating function in improving market performances, therefore even if they did not find a significant confirmation of direct impact, they were able to demonstrate that the better implementation of OM practices and  high importance given to operations department are positively and indirectly linked to performance. Path analysis also allows for a deeper understanding of the relative influences among each element in the models. In any case the model has strong limitation due to nature of sample and to the peculiarities of the Chinese market.

    SMEs are heterogeneous and operate in a complex and dynamic system, therefore it is recommended to follow a two step approach in the analysis;

1. check the non coorelation between size and perceived importance of OM practies
2. test the relationship between the importance accredited to OM practices and the firm performance.

With regard to OM in supply chains four items were used;

• the company analysis and actively responses to customer needs and systematically makes use of adhoc practices
• the company has stable relationship with its clients and is considers as a reliable partners.
• the customer management system is able to collect valuable information and to effectively interface with production processes
• suppliers and customers needs are taken into account in development phase of new products.

Here are few basic definition of SEM that helps in visualizing the use of it in OM

Structural equation modeling (SEM) 

• It is a comprehensive statistical approach to testing hypotheses about relations among observed and latent variables (Hoyle, 1995).
• It is a methodology for representing, estimating, and testing a theoretical network of (mostly) linear relations between variables (Rigdon, 1998). 
• It tests hypothesized patterns of directional and nondirectional relationships among a set of observed (measured) and unobserved (latent) variables (MacCallum & Austin, 2000). 

Two goals in SEM are:

    1) to understand the patterns of correlation/covariance among a set of variables and

    2) to explain as much of their variance as possible with the model specified (Kline, 1998). 

       

Moreover its increasing prominence in the field leads to deeper infusion of theory into emperical Operation Management research.

References:

• Intoduction to SEM by J.J. Hox
• International journal of Engineering Business Management