The main objective of this chapter to enable to students about
production and operation issue relating to
Production/Operations Concerns When Implementing Strategies
Strategy in action means implementation requires complete
transparent process. Production/operations
department that mainly concern with the achievement of
organization goals and targets. Production
processes typically constitute more than 70 percent of a firm's
total assets. Production department plays a
crucial role for implemeting organization strategy.
Production-concerned decisions on plant location, plant
size, , product design, choice of equipment, size of inventory,
inventory control, quality control, cost
control, use of standards, shipping and packaging, and
technological innovation, job specialization,
employee training, equipment and resource utilization. All these
factors place an important impact on
success and failure of the strategy.
The following examples of adjustments in production systems that
could be required to implement various
strategies are provided in Table for both for-profit and
nonprofit organizations. For instance, note that
when a bank formulates and selects a strategy to add ten new
branches, a production-related
implementation concern is site location.
Strategy Implementation and Production and Service Management
Hospital Adding a TB center (Product
Purchase specialized equipment
and add specialized people.
Bank Opening ten new branches (Market
Perform site location analysis.
Purchasing a retail distribution chain
Alter the shipping, packaging, and
Acquiring a fast-food chain
Improve the quality control
Just In Time (JIT)
is an inventory strategy implemented to improve the
return on investment
business by reducing
and its associated costs. The process is
driven by a series of
that tell production processes to make the next
part. Kanban are usually simple visual
signals, such as the presence or absence of a part on a shelf.
JIT can lead to dramatic improvements in a
return on investment,
quality, and efficiency when implemented correctly.
New stock is ordered when
reaches the re-order level. This saves
space and costs.
However, one drawback of the JIT system is that the re-order
level is determined by historical
demand rises above the historical
planning duration demand, the firm could deplete
customer service issues. To meet a 95%
a firm must carry about 2
demand in safety stock. Forecasted shifts in demand should be
planned for around the Kanban until
trends can be established to reset the appropriate Kanban level.
In recent years
manufacturers have touted
a trailing 13 week average is a better predictor than most
forecasters could provide.
Just-in-time (JIT) inventory systems are not just a simple
method that a company has to buy in to; it has a
whole philosophy that the company must follow. The ideas in this
philosophy come from many different
disciplines including; statistics, industrial engineering,
production management and behavioral science. In
the JIT inventory philosophy there are views with respect to how
inventory is looked upon, what it says
about the management within the company, and the main principle
First off inventory is seen as incurring costs instead of adding
value, contrary to traditional thinking.
Therefore, under the philosophy businesses are encouraged to
eliminate inventory that doesn’t add value
to the product. Secondly, it sees inventory as a sign of sub par
management as it is simply there to hide
problems within the production system. These problem are many,
they include: backups at work centers,
lack of flexibility for employees and equipment, and inadequate
capacity among other things.
In short, the just-in-time inventory system is all about having
“the right material, at the right time, at the
right place, and in the exact amount.”
Just in time (JIT) production approaches have withstood the test
of time. JIT significantly reduces the
costs of implementing strategies. With JIT, parts and materials
are delivered to a production site just as
they are needed, rather than being stockpiled as a hedge against
The factors that must be study while pacing a pant are:
transportation costs related to shipping and
receiving, the location of major markets, availability of major
resources, availability of skilled labor , wage
rates, political risks in the area or country.
For high-technology companies,
production costs may not be as important as
because changes in a product are needed often. Industries such
as biogenetics and plastics rely on
production systems that must be flexible enough to allow
frequent changes and rapid introduction of new
They too slowly realize that a change in product strategy alters
the tasks of a production system. These
tasks, which can be stated in terms of requirements for cost,
product flexibility, volume flexibility, product
performance, and product consistency, determine which
manufacturing policies are appropriate. As
strategies shift over time, so must production policies covering
the location and scale of manufacturing
facilities, the choice of manufacturing process, the degree of
vertical integration of each manufacturing
facility, the use of R&D units, the control of the production
system, and the licensing of technology.
Cross-training of employees,
can facilitate strategy implementation and can yield many benefits.
Employees gain a better understanding of the whole business and
can contribute better ideas in planning
sessions. It some time create problems both for manager and
1. It can necessitate substantial investments in training and
2. It can be very time-consuming.
3. Skilled workers may resent unskilled workers who learn their
4. It can thrust managers into roles that emphasize counseling
and coaching over directing and
5. Older employees may not want to learn new skills.
Human Resource Concerns When Implementing Strategies
The other important concern while implementing the strategy is
human resource. Human resource is the
backbone of any organization with out efficient human resource
organization can not perform well and
fail to achieve the organizational strategy. Staffing need of
the organization and its cost is an important
function of the human resource manager. The other main concerns
include health, safety and security of
the workers. The plan must also include how to motivate
employees and managers during a time when
layoffs are common and workloads are high.
The human resource department must develop
that clearly link performance and
pay to strategies. The process of empowering managers and
employees through involvement in strategicmanagement
activities yields the greatest benefits when all organizational
members understand clearly how
they will benefit personally if the firm does well. Linking
company and personal benefits is a major new
strategic responsibility of human resource managers. Other new
responsibilities for human resource
managers may include establishing and administering an
employee stock ownership plan (ESOP),
corporations owned in
whole or in part by their
employees. Employees are usually given a
share of the
corporation after a certain length of employment or they can buy
shares at any time. A corporation owned
entirely by its employees (a
will not, therefore, have its shares sold on public
corporations often adopt
profit sharing where the profits of the
are shared with the employees. These types of corporations also
often have boards of directors elected
directly by the employees.
A well-designed strategic-management system can fail
If insufficient attention is given to the human resource
dimension. Human resource problems that arise
when businesses implement strategies can usually be traced to
one of three causes:
(1) Disruption of social and political structures,
(2) Failure to match individuals' aptitudes with implementation
(3) Inadequate top management support for implementation
Inadequate support from strategists for implementation
activities often undermines organizational success.
Chief executive officers, small business owners, and government
agency heads must be personally
committed to strategy implementation and express this commitment
in highly visible ways. Strategists'
formal statements about the importance of strategic management
must be consistent with actual support
and rewards given for activities completed and objectives
reached. Otherwise, stress created by
inconsistency can cause uncertainty among managers and employees
at all levels.
Perhaps the best method for preventing and overcoming human
resource problems in strategic
management is to actively involve as many managers and employees
as possible in the process. Although
time-consuming, this approach builds understanding, trust,
commitment, and ownership and reduces
resentment and hostility. The true potential of strategy
formulation and implementation resides in people.