What are some of the current challenges that operations managers face in each decision area?

Operations Management is best understood using systematic approach. It involves understanding the nature of issues and problems to be studied, establishing measures of performance, collecting relevant data, using scientific tools, techniques, and solution methodologies for analysis, and developing effective as well as efficient solutions to the problem at hand.

Operations Management Functions

Operations management (OM) is an intergal part of all types of organizations. To understand various functions of OM, following classification scheme can be used.

Design Functions

Design functions prepare configuration of the operations system and provide an overall framework under which the operations system will function. Various design functions can be product design and development, process design, quality management, location and layout of facilities and capacity planning.

Operational Control Functions

Functions of forecasting, production planning and control, supply chain management, maintenance management are some of the control functions of oerations management.

Most of the design issues are discussed in control functions also. However context may differ in two. Design issues are often strategic in nature while operational issues are tactical in nature.

Take an example of capacity planning. As a design issue, we are interested to know the capacity requirement for meeting targeted business plans but as a control issue, the objective is to match the requirement to the available capacity.

Long Term Functions

Certain operations management functions are rare. Decisions with respect to them is made once every five to ten years. Where to locate a new plant is one such decision. Most of the design-related decisions are made on long term horizon.

Short Term Functions

Short term decisions can be made in fixed cycles of one year. Aggregate production planning, master production scheduling etc. are done once or twice in a year while operations scheduling are done for a very short period, may be one or two weeks.

Challenges in Operations Management

Challenges in Operations management arise as a result of need of efficient and effective systems. Efficient systems are required for making cost effective and sustainable processes. Effective systems are required to support customer requirements.

Challenges in Operations Management are as follow:

Challenges Due to Marketplace Development

The marketplace is now demanding customized products in place of mass-marketed products. This has created a challenge for operations management to develop systems which are capable to produce wide variety of products at low cost.

Secondly, especially in the service industry, the customer is becoming partner – often unwillingly. For example in a self-serving restaurant customer has to pick his order on a beep. This trend is coming to manufacturing also giving pressure to operations management.

Challenges Due to Economic Reforms

This is particularly applicable in Indian Scenario after 1991’s economic reforms. Before the economic reforms, Indian Industry enjoyed undue advantage due to high import tariffs. In some cases tariff rates were as high as 350 percent. Among the many changes effected, tariff reductions demanded a basic shift in the approach of business. “Cost plus some margin is the price” was approach before economic reforms. After reforms prices are guided by market forces. Subtract some margin from this price to get that cost under which a business has to deliver the products. To match the offerings of overseas players, Indian companies were also expected to improve their performance with respect to cost, delivery, quality and service.

Challenges Due to Factors of Production

Factors of production such as managing an increasingly diverse workforce, shortage of skilled workers, availability of raw materials from sustainable sources are challenges to modern systems of operations management.

Challenges Due to Technological Environment

Information technology is one of the most important enablers for developing and easy implementation of tools such as ERP, computer-aided manufacturing, Flexible manufacturing system etc. Now the challenge is investing in the right technology and mastering it. It is difficult for any small and medium company to implement regularly changing technology.

Challenges Due to Regulatory Environment

Global pressure of intellectual property rights protection has created a pressure on developing nation to keep their systems in the alignment of the requirement of these legal provisions. Similarly new financial reporting systems, environmental protection laws are giving challenge to operation managers which are new to this field.

Challenges Due to Innovative Business Models

With the advent of new technology, particularly IT and related e-commerce, new business models are emerging. These new business models such as e – choupal of ITC, Flipkart have posed new challenges to operation managers with respect to supply chain management.

Key Terms

• Operations Management: It is a Systematic Approach for Converting inputs into useful, revenue-oriented outputs.
• Strategic Decisions: Decisions about products, process and facilities. These decisions have long term Significance.
• Operating Decisions: Decisions about planning production to meet demand.
• Control Decisions: Decisions related to day-to-day activities for planning and controlling operations.

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After a difficult 2020, relief for operations-intensive organizations may be on the horizon in the form of COVID-19 vaccines. There’s no doubt, however, that the business environment remains challenging. As the pandemic continues to ravage Europe and the United States, governments, entrepreneurs, and ordinary people are now hoping the situation will ease around the middle of this year.

The crisis continues to impact market ecosystems and supply chains, upending processes, organizations, and long- and short-term strategic visions. But the show must go on — there’s no time for inertia or indecision. Industrial organizations will continue to push forward, relying on operations managers to navigate an environment increasingly complicated by limited supplies, disrupted workforce availability, regulation, and fluctuating demand.

How can operations managers prepare for what’s sure to be a challenging 2021? Let’s focus on five areas:

Cost Management: This is an absolute basic, management’s bread and butter. Managers may face intense pressure in 2021 to further cut costs to ensure the survival of the organization. If possible, however, they should take time to consider which capabilities, skills, and production assets will be needed when the recession is over. They should think of what will be required to innovate processes and products and empower the workforce.

Workforce: Managers should continue transforming selected positions into digital-capable positions. Your colleagues are valuable and experienced workers — don’t let them get lost in the digital age. Implement a strategy to upskill and reskill, utilizing technology like AR/VR to make training even more effective and insightful.

Unlock the power of DIY tools and solutions. Many digital solutions have been simplified to the extent that almost anyone in the plant can become an “engineer lite,” capable of building an app or deploying a basic IoT-based condition-monitoring solution.

Health and safety must remain the top priority. Organizations have robust health and safety procedures and systems, but more can be done. Leverage AI-based digital technology to secure social distancing, comply with health and safety rules, and measure employee body temperatures.

Technology: Managers should make sure they fully understand the key features, technical parameters, and value of enterprise IT and OT. Understanding the world of IT and industrial IoT can help identify meaningful use cases, calculate ROI more precisely, and achieve tangible benefits.

The technology trends of 2021 are not much different from those of 2020. Strategic priorities, like building a business and operational resilience, need to be underlined by digital technology. As in 2020, implementing a collaboration platform, supply chain control tower, digital thread, or digital twin to improve transparency, efficiency, and resilience should be at the center of priorities in 2021.

Understanding AI-powered technology and leveraging its benefits is crucial. Managers should learn the differences between machine learning and deep learning, and between cognitive AI and AI, and map potential use cases for deployment by their organizations. Keep in mind, however, that advanced AI-powered models are mostly not plug-and-play solutions. It takes substantial time to teach them to the point that they provide meaningful value.

Real-time data can be used to enhance operational KPIs like overall equipment effectiveness and asset availability. IoT computing enables the processing of data at the network edge, allowing decisions to be taken in real time at the data source (e.g., a shop floor). Cloud computing-based complex models provide scalability and can process and analyze massive amounts of data. They are powerful tools that can handle predictive maintenance or predictive quality tasks.

Processes: Processes should be redesigned to enable organizations to realize the full benefits of digital technology and automation. Humans are still at the center of most processes, using interfaces like PCs, tablets, and mobile phones to analyze and contextualize data and execute tasks and corrective measures. Managers should ensure that digital technology outputs are properly utilized. Avoiding disconnects between information and action/reaction should be prioritized.

Environmental Sustainability: In 2021, initiatives to shrink carbon footprints, improve waste management, and use environmentally aware suppliers must be among an organization’s top strategic priorities. Digital technology can significantly support automated sustainability reporting and management. Managers should seek to leverage communication and visualization tools, IoT, and AI-based analytical models to track and manage parameters.

For many large enterprises and SMEs, recovery from the COVID-19 upheaval won’t be straightforward. Fluctuating demand driven by market uncertainty is likely to persist for some time.

Despite these and other difficulties, operations leaders remain under pressure to deliver outstanding results. It is important to remember that simply driving efficiency and reducing costs are not everything. Environmental sustainability, human resources development, and digital transformation are also key. Bottom line: To create a truly resilient organization, it is critical to fully align technology with people and processes.

Jan Burian is senior director, head of IDC Manufacturing Insights EMEA and leader of Europe: Future of Operations Practice .