The Operations Management lay the very foundation of any business growth. Procurement of raw materials, inbound and outbound logistics, quality assurance etc are categorized under the umbrella term Operations Management. The decade has witnessed many transformations, notable enough to impact this sector of management. In recent times, the domain is gaining more and more importance due to its huge contribution to exponential business growth.
Since the Industrial Revolution in the late 19th century, the Operations Management systems have taken a shape with the increased machine-aided production, manufacturing, supply chain and logistics. Operations walked a few steps more in the post World War II era. It was accelerated by the invention of computers, highly automated data analysis and data collection and inventory management.
The contemporary era shaped the Future of Operations with its hi-tech mapping, monitoring and developing the operation procedures. Operation Management deals with:
- manufacturing,
- production,
- supply chain,
- inbound and outbound logistics,
- workforce scheduling,
- procuring raw materials,
- inventory management,
- quality assurance, and
- working capital management.
The operations are the very foundation on which the business is developed, it can be both service-based and product-based. With the technological intervention and digitization going on in full swing, software-based operations have managed to take the centre stage.
The booming eCommerce and retail sector have modified the roles and responsibilities in terms of the supply chain, logistics, and meeting customer requirements. Establishing quality assurance processes, contracting with vendors, organizing labour and equipment have undergone major shifts during this decade. Besides this, there are many other changes as well, let us have a look at them.
Two major drivers for the metamorphosis of Operations Management (OM) are Technology and booming of eCommerce sectors. The major changes brought forward are:
Smart Factory and I4.0
Just like smartphones, smartwatches, smart cities, “SMART FACTORY” is developed with the help of :
- Machine Learning,
- Artificial Intelligence (AI),
- Internet of Things (IoT),
- Cloud computing,
- Data Analysis,
- Cognitive computing and
- Industrial Internet of Things (IIoT).
Industry 4.0 refers to the contemporary phase of Industrial Revolution, of the Fourth Industrial Revolution which emphasizes on automation, real-time data, sensors, wireless connectivity and cyber-physical systems (CPS), which paves the way for the accelerated growth of smart factories, smart manufacturing, Lights Out manufacturing or dark factories.
The very term Industry 4.0 or I4.0 was coined in the year 2011 by the German Government during its project execution which followed a hi-tech strategy. The term was publicly announced in Hannover Fair of the same year, marking the fourth stage of the Industrial Revolution. The rising automation and the decreasing and modified human work-force are some of the direct impacts of the development of I4.0.
As per a study published by the Forbes India, the nation is all set to be at par with the rising wave of automated manufacturing, communication between machines and people. The democratization of data brought forth by the technological intervention will make the data easily accessible and also secure at the same time. The Government of India has taken the initiative of Smart Advanced Manufacturing and Rapid Transformation Hub (SAMARTH) for spreading awareness about the I4.0, up-skilling the huge workforce by developing demonstration centres in various parts of India.
Procurement of Raw Materials
The Make in India initiative taken by the Indian Government has influenced many small and large scale manufacturing centres to contribute to the game-changing scenario. The sourcing of raw materials at a cheaper rate can induce cost reduction of the product. Thus motivating the huge Indian user base to invest in indigenous commodities.
The imported products from China at a cheaper rate can give a tough competition to the indigenous products. Due to the highly competitive and volatile market landscape, many manufacturing companies are trying their best to pitch their products at a cheaper rate. This is resulting in a failure to maintain the product.
India, being a developing country, is very much inclined towards “jugaad” (quick, cheap and easy fixes). So judging the consumer trends and reality, the operations management in India is devoted to transforming the inputs (raw materials, labour charges, etc) into outputs (goods/products, services) for providing an added value to the customers.
In 2019, the BJP Government allowed 100% Foreign Direct Investment to the contract manufacturers. As per the norm, they are allowed to sell their products via retail stores and eCommerce platforms without any hassle or obstruction. The norm was made at a time when US President Donald Trump was pushing the American companies to China, to extract business from other locations as well.
In a value chain, both the inbound and outbound logistics are equally important. And, digitization and booming of retail and eCommerce sectors have directly impacted their models. The inbound logistics refer to the sourcing of the raw materials, transportation, material storage and testing. Whereas the outbound refers to the storage, warehousing, delivering the final products to the customers.
The flourishing of the retail and eCommerce sectors, changing consumer needs, the emergence of new-age consumers and demand for higher efficiency has boosted the growth of the inbound and outbound logistics. Massive application of automation, like for example, machines are used to load and unload heavy packages and this has reduced the chances of mishaps in the industrial sectors.
Machines and robots are increasingly popular in the logistic domain, which is a step toward achieving the mission of I4.0. The rising automation can give rise to innovative job requirements, but also erase several employment opportunities as well, triggering the seed of unemployment, as observed by the Economic Times.
Quality Assurance in Operations Management
The operations management gives primary importance to Quality Assurance (QA) as it is directly impacting the business growth and expansion. The International Organization for Standardization was established during the Industrial Revolution 2.0 for monitoring the quality of the products and this is followed worldwide by 164 nations.
The QA is a method designed to prevent defective product manufacturing, avoid problems while the product is delivered to the customers. As per the definition by ISO 9000, “part of quality management focused on providing confidence that quality requirements will be fulfilled”.
Since the last two decades, India has been working hard to achieve the level of excellence in terms of product manufacturing. The journey in India was pioneered by Vikram Cements when it won the Top Quality Management (TPM) excellence award from Japan Institute of Plant Maintenance (JIPM).
Meeting the customer needs and requirements and their satisfaction in the product helps the business to thrive even in this competitive landscape. The operations team of brands of retail, automotive, FMCG sectors etc work in giving the consumers the highest satisfaction and reach a level of excellence, and at the same time control the rates of the delivered commodities. The consumers will be de-motivated by seeing the drastically inflated charges, thus hindering the growth of the business.
Working Capital Management
The Operations team of any organization monitors the assets and the liabilities of an organization for suitable cash flow required to manage the short term operating expenses or any short-term obligation. The efficient use of a company’s resources is required for meeting the business goals at various levels.
Providing compensation to the vendors, contractors and other resources will help the firms in maintaining profitable relations and optimise productivity. The introduction of GST, moderate inflation rates and technological advances are driving the companies in managing the working capital (WC) effectively.
The decade has witnessed a consistency in the cash conversion cycle. But there has been a sharp increase in the number of receivable days. Satisfying the vast and diverse user base of the nation is not an easy task as it may seem. While giving priority to the customers, many firms are stretching the payables for meeting the funds of WC. Thus keeping their relations with suppliers and vendors at stake.
Faulty WC management leads to lower EBITDA margins, which is detrimental for the firm in the long run. Strategic WC management is one of the key responsibilities of the Operations team. The OM looks after the interest of the firm as well as the consumers for creating a strong position in the competitive market landscape.
Conclusion
With a sharp noticeable drift in all the industrial sectors of India, the Operations Management is gaining special attention in all the B-schools of the nation as well as the world. The fast expansion of employment opportunities is prominent in this discipline, which also indicates the growing needs of the businesses to reach the zenith. Even though the diverse field of Operations Management cannot be covered within just one blog, you are able to get all your queries answered by talking to the experts hailing from the same domain.
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