Page 478 - Fundamentals of Management Myths Debunked (2017)_Flat

CHAPTER 15 • Operations Management 477
Corporation’s purchasing office improved productivity by reducing purchase order entry
times anywhere from 50 percent to 86 percent, decreasing voucher processing by 27 per-
cent, and eliminating 14 financial systems. Its information technology department slashed
e-mail traffic in half and implemented work design improvements for heavy PC users such
as call center users. The human resources department cut the time to process benefit enroll-
ment by 156.5 days. And the finance department now takes two days, instead of six, to do its
end-of-month closeout. 6
Organizations that hope to succeed globally are looking for ways to improve
productivity. For example, McDonald’s Corporation drastically reduced the time it takes
to cook french fries—65 seconds as compared to the 210 seconds it once took, saving
7
time and other resources. The Canadian Imperial Bank of Commerce, based in Toronto,
8
automated its purchasing function, saving several million dollars annually. And Skoda,
the Czech car company, improved its productivity through an intensive restructuring of its
manufacturing process. 9

Productivity = People + Operations variables

Productivity is a composite of people and operations variables. To improve productiv-
ity, managers must focus on both. The late W. Edwards Deming, a renowned quality expert,
believed that managers, not workers, were the primary source of increased productivity.
He outlined 14 points for improving management’s productivity (see the From the Past to
the Present box on p. 481 for more information). A close look at these suggestions reveals
Deming’s understanding of the interplay between people and operations. High productivity
can’t come solely from good “people management.” The truly effective organization will
maximize productivity by successfully integrating people into the overall operations system.
For instance, at Simplex Nails Manufacturing in Americus, Georgia, employees were an
10
integral part of the company’s much-needed turnaround effort. Some production work-
ers were redeployed on a plant-wide cleanup and organization effort, which freed up floor
space. The company’s sales force was retrained and refocused to sell what customers wanted
rather than what was in inventory. The results were dramatic. Inventory was reduced by more
than 50 percent, the plant had 20 percent more floor space, orders were more consistent,
and employee morale improved. Here’s a company that understood the important interplay
between people and the operations system.

3 What Role Does Operations Management Play
in a Company’s Strategy?
Modern manufacturing originated more than 110 years ago in the United States, primarily
in Detroit’s automobile factories. The success that U.S. manufacturers experienced during
World War II led manufacturing executives to believe that troublesome production problems
had been conquered. These executives focused, instead, on improving other functional areas
such as finance and marketing and paid little attention to manufacturing.
However, as U.S. executives neglected production, managers in Japan, Germany, and
other countries took the opportunity to develop modern, technologically advanced facilities
that fully integrated manufacturing operations into strategic planning decisions. The competi-
tion’s success realigned world manufacturing leadership. U.S. manufacturers soon discovered
that foreign goods were being made not only less expensively but also with better quality.
Finally, by the late 1970s, U.S. executives recognized that they were facing a true crisis and
responded. They invested heavily in improving manufacturing technology, increased the
corporate authority and visibility of manufacturing executives, and began incorporating exist-
ing and future production requirements into the organization’s overall strategic plan. Today,
successful organizations recognize the crucial role that operations management plays as part
of the overall organizational strategy to establish and maintain global leadership. 11
The strategic role that operations management plays in successful organizational per-
formance can be seen clearly as more organizations move toward managing their operations
from a value chain perspective, which we’re going to discuss next.