PART 1: Operations Strategy vs. Operations Management
Operations management can be defined as the efficient and effective implementation of the policies and tasks necessary to satisfy a firm’s customers, employees, and management. Operations strategy, on the other hand, focuses on the measures or guidelines that enable the careful management of the processes involved in the production and distribution of products and services (, 1998).
More often than not, small companies don’t really have the capabilities to implement operations strategy and operations management. Instead, these companies engage in activities that various schools of management typically associate with operations strategy and management. These activities include the manufacturing of products, product development, production and distribution.
However, operations strategy and management deals with all operations done within companies and organizations. Activities such as the management of purchases, the control of inventories, logistics and evaluations are often related with operations strategy and management. A great deal of emphasis lies on the efficiency and effectiveness of processes. Therefore, operations strategy and management includes the analysis and management of internal processes.
The occurrence of operations management within the economy reflects the growing difficulty in the management of organizations that require the effective use of valuable resources such as money, materials, equipments, and people. And even successful multinational organizations are no exception to these. This is the reason why operations management and strategy is being done by companies and organizations in order to determine the most effective ways to coordinate these resources through the application of analytical methods derived from fields of studies such as mathematics, science, and engineering
Through this process, problems are solved in different ways and alternative solutions are then relayed to the company’s management. The management then selects the appropriate course of action in line with the company’s goals. More often than not, operations management and strategy are concerned with complicated issues such as top-level strategy, resource allocation, designing of production facilities and systems, pricing and the analysis of large databases.
PART 2: The changing nature of customer-supplier practices
A. Customers
Gone are the days when customers work on their desks for eight hours a day. Today’s employees want to become as productive as possible while in their offices and interact with different individuals and groups in different settings. The technological advancement in technologies has allowed customers to access communication tools in new settings. Because of this rigorous and hectic schedule of customers, it became imperative for them to indulge in relaxing products to help them ease the pressure after every day’s work.
It is interesting to know the basic innate characteristics of the present-day customers which contribute towards the development of their effective image.
· Mental Stability
Mental stability is crucial especially in the pursuit of the correct purchasing decision as well as the management and development of the processes accompanying it. It is important for customers to remain updated with the latest developments to be able to stay aware and knowledgeable in all issues.
· Planning and Strategy Formation Capabilities
Planning and strategy formation nowadays has created the need for customers to become aggressive especially in the area of knowing which products are good and not.
· Decision-making abilities.
Upon arriving at the correct purchasing decision or choice, the customer now gains confidence in his / her ability to make critical decisions or choices especially when his / her integrity is on the line. Thus, this customer will now search for even more challenges and opportunities where he / she could further enhance his / her decision-making abilities regarding financial and economic issues.
· Holistic Mindset of Issues
Through the exposure to various puzzling economic issues, the customer along the process is able to develop a holistic mindset regarding the issues surrounding him / her. The customer now becomes a keen observer of the truths and lies surrounding the economic issue being tackled, instead of relying on mere hearsays. The continuous pursuit of the truth behind the puzzling economic issues enables the customer to consistently practice and enhance a healthy and holistic mindset which makes it difficult for detractors to give influence. Because of this holistic approach, the customer is able to effectively select the right choice and continue to maximize this potential for future use
B. Suppliers
Wal-Mart has been showing steady signs of growth and progress for a couple of years now. This consistent progress can be attributed to the change in strategic directions that was implemented several years ago and is still being further structured up to now. Basically, the critical element of the strategy was that Wal-Mart started looking at things from the perspectives of the consumers and the customers.
Wal-Mart has nearly more than a million outlets in the US where their products are allowed to be sold. If one would consider the sizes of the US, it would seem like that the “getting closer to the market” strategy would not work. Add the fact that it is very difficult to get detailed information about the performances in terms of sales of every independent supermarket in the US( , 2002). But Wal-Mart still took up the challenge. Under the leadership of their management, large-scale operations were initiated. Business units were started to be established to initiate the change process needed to bring Wal-Mart closer to the market. In the part of marketing, the decisions taken in recent years already established positive impacts such as portfolio management and ethnic marketing.
The supermarket industry possesses a strong market that enables it to be easily targeted by leading companies like Wal-Mart. Their market value has even increased over the recent years especially with the steady increase of their presence. Convenience stores and Petrol Stations when combined can become one of the largest markets in the world. For instance, these markets earned an estimated sales volume of 250 million in 2003. Add the fact that with stores of nearly a million, convenience stores are certainly one of the largest and wealthiest markets especially in the United States. This is a crucial initial step made by Wal-Mart, and they remain positive about the prospects of striking more deals with convenience stores in the United States to fortify its number one position in the supermarket industry.
Wal-Mart Supermarket Key Ratios
Key Ratios
Valuation Ratios
P/E
23.23
Price to Cash Flow Ratio
17.05
Price To Sales (TTM)
1.25
Price To Book
2.55
Per Share Ratios
Book Value Per Share
0.00
EPS Fully Diluted
1.29
Revenue Per Share
24.77
Profit Margins
Operating Margin
6.32
Net Profit Margin
5.23
Gross Profit Margin
30.00
Growth (%)
5 Year Annual Growth
7.66
Revenue – 5 Year Growth
3.73
EPS – 5 Year Growth
0.00
Financial Strength
Quick Ratio
1.58
Current Ratio
1.72
LT Debt to Equity
6.02
Total Debt to Equity
6.02
Return on Equity (ROE) Per Share
0.00
Return on Assets (ROA)
8.81
Return on Invested Capital (ROIC)
0.00
Assets
Asset Turnover
1.39
Inventory Turnover
34.85
Supply Chain analysis in Wal-Mart involves working across multiple enterprises in an effort to limit the supply chain time of delivering products to the consumers.
The uncertainty of demands in supply chains within Wal-Mart is easily solved through the implementation of faster response times. Wal-Mart’s product supply chain has the luxury of longer lead times in terms of batch production of products in order to meet the demands. Most supply chains, including Wal-Mart’s, are moving in a position to support faster changes of demand by the consumers (, 2001).
Because of the agile supply chain of Wal-Mart, they are able to enjoy so many advantages. As mentioned above, the supply chain analysis tends to shorten the supply chain itself. Also, this will significantly reduce company inventories. Forecasting, scheduling and planning, on the other hand, will significantly improve.
PART 3: Applications of strategies in supply chain management:
A. Vendor Managed Inventory
Under the system of Dell Corporation, the Vendor Managed Inventory (VMI) works when a consumer who purchase one of their products. After the purchasing act, the consumer can then contact a specific supplier which would serve as the medium for establishing an inventory of the product with Dell.
Because of the reciprocal relationship that WMI promotes, it becomes close to impossible that Dell Corporation will suddenly lose supplies of a particular product. Also, the suppliers will be able to help Dell by adding additional places where their products can be portrayed and easily purchased. And with reliable sales personnel handling all the sales talk for the Dell products, Dell Corporation is safe and secured of its financial gains.
Figure 1. Dell Corporation’s Market Status in the Industry of Hand-Held Computers
The management of Dell determines the best ways to utilize VMI together with company’s basic factors of production. These resources include Dell’s people, materials, information, and energy needed in the implementation of VMI. Dell Corporation believes that VMI is the bridge that links the goals of management and operational performance. The implementation of VMI helps in the increase in productivity through the proper management of people and choosing the appropriate methods of business organization.
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Figure 2. Dell Corporation’s Market Status in the Industry of Hardware
The company’s engineers perform the careful analysis of the Dell products that will be supplied and their requirements. In this process, they make use of various mathematical methods in its operations research to meet the requirements. They also develop systems of management control in order to aid in the planning of finances and cost analysis. These systems are eventually subjected to improvements for the effective distribution of goods and services.
Dell’s engineers perform the tedious task of selecting which among the various supplier locations have the best combination of raw materials availability and costs (, 1994). This time, engineers make use of computers for simulations and robots for controlling various activities and devices. They also are in charge of the development of wage administration systems and programs for job evaluation. The winery’s engineers have enough flexibility to move into management positions.
One of the critical aspects of VMI is the fact that it involves shared risk. In extreme cases where the Dell products won’t sell that much, the supplier will buy out the product from Dell. In other situations, the Dell products are still under their ownership until the VMI transaction is completed. The role of the suppliers is to help in the sales and supplies of the Dell products for an agreed profit.
VMI is one of the few business models that have brought success to Dell Corporation as a powerhouse mobile computing retailer. VMI enables Dell Corporation to establish a harmonious relationship between them and their potential suppliers. Dell achieves this through the utilization of Electronic Data Interchange to predict and monitor the appropriate inventory in their supply chain. Therefore, Dell is able to take advantage of the supplier’s capabilities and enhances their employees’ work ethics, of course aside from minimal risk and lesser display maintenance efforts. Dell customers, on the other hand, are pleased with the excellent Dell sales personnel, which gives them the best Dell product options which best suit their needs.
B. Postponement
Postponement is just a normal occurrence within Dell Corporation. Because of the intensity of rivalry in their industry, Dell Corporation normally produces only a limited amount of a new patent or product in order to test its marketability among the consumers. If it happens to click, then batch productions of that product would surely follow next. If the product receives only a mild following among their customers, then expect the product to either be totally quashed or modified to correct any abnormalities. Postponement method is generally utilized by companies whose products are most of the time high in demand (, 1994).
Even if it is effective for Dell Corporation, postponement needs a very intensive production planning process. In fact, this step is a must, a necessary function within Dell. In manufacturing companies this process is often very difficult because of the fast rate of change and the occurrences of unplanned events. Dell uses several methodologies depending on the rate of demand of the customer and the price of the product being postponed. Nevertheless, the objectives of the company for the postponement process do not change: efficiency and effectiveness.
The analysis for the implementation of postponement actually may vary according to the structures and philosophy of the company. But in Dell Corporation’s case, it centralizes postponement planning activities in one department. Postponement analysis may also have the possibility of working closely with top level managers in order to identify and solve a variety of problems.
No matter what the type or structure of the company is, postponement activities operate under similar sets of methodologies in order to carry out the analysis to support the company’s goal to improve its overall performance. The process is started by the description of the symptoms of a problem, followed by the formal definition of the problem. For example, an analyst for Dell Corporation might be questioned regarding the most effective inventory level for every needed part on a production line. Also, the analyst might be asked to determine the optimal number of computers needed to be kept in inventory.
Production planning for postponement is being implemented by Dell in order for its activities and resources to be coordinated over time. This enables the company to achieve its postponement goals with minimal resource utilization. Production planning also enables Dell to monitor the progress of their plans at regular intervals and maintain their control over operations in spite of the postponement. Production planning within the postponement process involves four elements: scheduling, labor planning, equipment planning, and cost planning (, 1999).
- Scheduling involves the specification of the beginning, the length or the duration, and end of the planned postponement activities.
- Labor planning involves allocating the necessary personnel and delegation of responsibilities and resources
- Equipment planning involves identifying the types and needs in terms of equipments.
- Cost planning involves determining the costs and the possibility of their occurrence.
REFERENCES
Credit:ivythesis.typepad.com
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