Organisational Management and Information Systems: Iryna McDonald Describes How an Organisation Can Optimise Its Performance by Structuring Resources along Four Operational Dimensions

By McDonald, Iryna | Financial Management (UK), December 2008 | Go to article overview

Organisational Management and Information Systems: Iryna McDonald Describes How an Organisation Can Optimise Its Performance by Structuring Resources along Four Operational Dimensions


McDonald, Iryna, Financial Management (UK)


Students often associate the concept of operations with manufacturing alone, but the processes that transform a set of inputs into outputs are also integral to service industries. To compete successfully, organisations need to understand their markets and how they can best serve customers' needs, which in turn depends on how they organise the delivery of their services. So it's essential to structure employees' activities and even to design facilities in a way that aids the efficiency and effectiveness of the business and ensures that its approach to operations is aligned with the overall corporate strategy.

Operations management is mainly concerned with how resources are used to produce goods or services. Depending on the nature of the organisation, the transformed resources could be materials, information or even customers. For example, changing the physical properties of a metal is a fundamental part of car manufacturing; information processing is one of the business practices of a marketing company; and customer processing could be achieved by a beauty treatment. In addition, a company needs to have facilities, such as buildings and equipment, as well as people who maintain, plan and manage the operations.

The balance between facilities and staffing can vary according to the nature of the business. Take the case of Ikea, a chain of stores that specialises in selling furniture and household goods. Its business model requires the company to have large premises, because most of the items it sells are quite bulky. But, instead of occupying city-centre locations where land is expensive, Ikea uses sites on the outskirts of towns. Customers are required to assemble the furniture themselves, thereby helping the company to offer "value for money".

Fast-food retailer Pret A Manger believes that the secret of success is to focus continually on quality not only in food but in every aspect of its operations. The firm goes to some length to ensure that all its produce is fresh and free of additives. Every shop receives ingredients first thing every morning and food is prepared throughout the day on the premises. Pret A Manger relies heavily on its people, too: the quality of its customer service compared with that of other fast-food outlets allows it to charge premium prices.

It is evident from these examples that the firms' operations are similar in that they transform input resources into output products and services, but they do differ in a number of dimensions--namely: volume, variety, variation in demand and visibility.

* The volume dimension involves the systematisation of work, whereby standard processes are set out in an operations manual. The implication of such structuring is that it gives a lower unit cost, since fixed overheads such as rent are spread over a large number of products.

* The variety dimension requires an organisation to be flexible and match its services to customers' needs. For retailers aiming to keep up with changing fashions it is essential to have both well-established supplier contacts and skilled staff who can enact changes promptly.

* The variation dimension considers how demand patterns and seasonality influence sales volumes. Staff may be overstretched in high season and the shops feel crowded, whereas low season gives rise to opportunity costs. Capacity planning is essential, therefore, for optimising turnover.

* The visibility dimension concerns how many of a firm's operations are exposed to the customer. For example, a retailer may decide to open a shop or to sell products online depending on the level of customer contact necessary to clinch the deal.

Companies are using technology to achieve higher volumes while preserving the accuracy, precision and repeatability of their processes. Many car manufacturers use automated assembly lines on which robots work together.

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Organisational Management and Information Systems: Iryna McDonald Describes How an Organisation Can Optimise Its Performance by Structuring Resources along Four Operational Dimensions
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