Operations Management and Its Importance
Operations management is the technique that transforms and combines different resources utilised in the subsystem of business operations into value added products or services in a controlled manner in accordance with the organisational policies. Thus, operations management is that portion of an organisation, which is related to transforming a group of inputs into needed output with the requisite level of quality (Anand and Gray 2017).
Operations management play a crucial role for any product or service o be effective and it could have direct impact on the profitability of a business organisation. Without the presence of this technique, it is not possible for the organisation to attain success. The resources are used appropriately in this method for developing products or services in order to meet defined market needs. It deals with product and service development functions so that speed, quality, cost and flexibility related to products and services could be maintained effectively (Cachon and Terwiesch 2017). Moreover, another responsibility of operations management is to maintain stable supplier relationship so that necessary raw materials could be received within time.
The organisation chosen for meeting the purpose of this assignment is Fair Price located in Singapore. The Labour movement in 1973 has resulted in the establishment of this organisation. It deals with providing superior quality groceries and meeting the daily needs of the customers by following competitive pricing strategy. It is considered to be the leading supermarket and the biggest Singapore-based retail chain. As of 2014, the organisation has above 120 supermarkets that include Fair Price Supermarkets, Fair Price Extra and Fair Price Finest and it has convenience stores as well such as Fair Price Xpress and Cheers have above 160 retail stores over the nation. The organisation is still expanding to serve more customers in a better fashion (Fairprice.com.sg 2018).
Operations management consists of five performance objectives and they are evaluated in the context of Fair Price as follows:
Quality is deemed to be the visible portion of an operations and it serves as a consistent indicator of the operations of the customers (Choi, Cheng and Zhao 2016). Quality is incorporated into the operations management of Fair Price as one of the significant elements of performance objectives, which assure superior products, particularly high quality food products and they are delivered in first rate condition. The effective supplier selection plays a significant part in enhancing the product quality (Fredendall and Hill 2016). Moreover, Fair Price assures that the products including food stuffs or goods are not stored in shelves or warehouses for long time. The relevant personnel regularly check the expiry dates of the products of the organisation in order to prevent the sale of substandard products. Moreover, Fair Price conducts occasional audit on its suppliers for maintaining the overall product quality. The audit system of the organisation is prepared in such a manner that the following checks are conducted:
- Capability of the factories of the suppliers
- The system of quality management of its suppliers
- Distribution network and supply chain management
- Checking the hygiene conditions at the time of preparing food
If the suppliers are able to fulfil all the above-stated aspects, Fair Price carries out business with them and it sells their products under its brand name. This ensures the reduction of errors in each process of the operation and thus, the overall costs are minimised, which are deemed to be internally beneficial for Fair Price. Therefore, it could be said that Fair Price only chooses the superior quality products that would enhance its brand value in the eyes of its customers, which would provide external benefits to the organisation.
Fair Price: A Case Study
In the words of Guide and Ketokivi (2015), speed denotes the elapsed time between the customers asking products or services and the time at which they are received. Fair Price has started the online grocery shopping system for assisting its customers with rapid shopping. Moreover, the chance for home delivery is an added benefit of assuring speedy delivery. In the current times, the customers do not like to waste their valuable time by waiting in store for making payments, moving from store aisle to another while looking for a specific product. Instead, the customers could choose their desirable items directly from the official website of Fair Price.
Speed, in the form of a significant performance objective, is enforced within the operating processes respective to the internal customers. Fair Price has complete knowledge that the speed at which the operation is carried out would have direct impact on the other departments (Gunasekaran, Irani and Papadopoulos 2014). Hence, speed has been incorporated within the organisation so that information could be communicated appropriately across the different organisational departments. For avoiding mistakes likely to occur due to poor record keeping, Fair Price has focused on immediate record of sales process. This has been accomplished by installing information system or IT network system, which helps in coordinating the consideration of different internal aspects critical to the success of the organisation.
As cited by Haksever and Render (2018), dependability denotes undertaking suitable and timely actions in order to ensure customer convenience so that the needed products and services are provided to them timely. The customers are involved in judging the dependability of the operations of Fair Price after adequate and timely delivery of products demanded. Moreover, the organisation assures the stock availability at all times in order to answer all the questions of the customers. Therefore, whenever any customer lands up at Fair Price, the organisation has adequate availability of stock. The organisation assures timely and sufficient product supply at any place and time.
Inventory management is considered to be a significant operational challenge for the retail sector. Excessive stock would raise inventory cost and it would lead to waste generation, while lower inventory would minimise product availability influencing the dependability factor. This might result in loss of customers for the organisation (Harvey, Heineke and Lewis 2016). For dealing with this situation and in order to maintain dependability, Fair Prices undertakes scientifically reasonable estimate with its network for assuring suitable inventory amount in relation to uncertain product demand.
Flexibility signifies the ability of changing operations in some ways. The customers would like change in operations to provide certain requirements like product or service flexibility, volume flexibility, mix flexibility and delivery flexibility (Hill and Hill 2017). Fair Price has added flexibility as one of the significant objectives by continual initiation of new products and services in tandem with the varying tastes of the customers. Gold Formula Milk is one such instance of products sold by Fair Price. This product has been initiated after the organisation has recognised the current natural product trend in demand. Gold Formula Milk is composed of natural products like milk solids and natural milk. By initiating this product, Fair Price has represented its flexible approach by taking into account the customer needs.
Performance Objectives of Operations Management
Moreover, Fair Price has initiated its own product lines under its brand name. The own products of the organisation include snacks, dairy, bakery and frozen foods. Another flexibility approach is to change the presence of various products in amount at considerable times of the year (Hitt, Carnes and Xu 2016). For example, one product is ice-cream, which has minimum stock in winter and the stock is maximised in summer. Fair Price has represented flexibility approach by its method of engaging in expansion programs and mergers. The large diversification of Fair Price assists its customers outside Singapore and as a result, flexibility is provided when it comes to locations. The organisation has adopted this approach for dealing with the technological progress and increasing globalisation.
Cost implies the business operation performance from the economic perspective. If the production cost falls, lower prices would be charged to the customers (Hitt, Xu and Carnes 2016). Fair Price charges higher product costs compared to the competitive grocery stores. However, the organisation has some particular products, which have special discounts, lower prices and loyalty discounts. Moreover, it is involved in rating its performance objectives for ensuring market success. It is noteworthy to cite that cost is the crucial goal for success in the merchandise retail market (Hübner, Holzapfel and Kuhn 2015). The customers of Fair Price might shift over to its competitors, if the product cost does not meet the quality. For dealing with cost-related threat, Fair Price ensures effective costing system for its customers as well as business.
Fair Price operates in a quick changing dynamics of the retail industry and certain strategies are necessary for ensuring the success of the organisations. These strategies could be classified into three important factors, which include the following:
For an organisation like Fair Price, the two order-winning factors that assist the organisation win over the other supermarkets in Singapore include flexibility and cost. Cost is deemed to be the most significant performance objective, since all other objectives have impact on cost (Jacobs and Chase 2017). It has been identified that 60% of the costs of Fair Price are the cost of purchasing services and materials, 15% of the costs include staff costs and the remaining 25% of the costs constitute of facilities and technological costs (Fairprice.com.sg 2018). The organisation uses information technology running a suitable supply chain for minimising cost.
Secondly, in terms of flexibility, Fair Price intends to be better in comparison to its competitors operating in the retail industry of Singapore. Moreover, the organisation possesses the capability of adjusting with the outside changes, which might expect different product aspects (Karlsson 2016). However, flexibility has numerous aspects, which take into account the amount of modifications within a product dispensed by the organisation after any external party has prompted a rise or minimisation in product volume. Flexibility takes into consideration the ways through the products and services are delivered from the end of Fair Price. Moreover, it includes flexible modes of payment, flexible usage of delivery services and others and these types of adjustments or flexibility are affected by rivals and technological progress (Mahadevan 2015).
Quality
The impact of flexibility would be positive on Fair Price, as this strengthens the development of new kinds of products and diversification of product group in line with the changing preferences of the customers. The important performance objective ascertains the mechanism of flow associated with the internal factors (Malhotra et al. 2014). If the operating system is flexible, it assures quick response within the organisation and thus, the overall process efficiency is increased. Flexibility increases the customer dependability with the organisation and as a result, increase in speed delivery is obvious. The flexible operations at Fair Price imply the ability of providing rapid services and save time. This would help in effective operation schedule on disruption of operating plan and occurrence of unanticipated events.
Fair Price has employed fully new technologies that have assisted in revolutionising operations management of the organisation. For instance, the ordering of computer controls form the suppliers to store and distribution design (Maylor et al. 2018). Moreover, computer aided design (CAD) is utilised for planning the stores and the way through which it fits into the organisational environment as well as inside the stores. The motive is to ensure avoiding the wastage of spaces and the products are settled in the right positions. This would enhance the shopping experience of the customers of Fair Price and the customers would not find any stress due to the fact that all products could be found in the same place. This could be adjudged as the market qualifier strategy for Fair Price in the retail sector of Singapore.
Fair Price uses an online application, Price Check, which allows the customers to check if the rivals would have been cheaper and they would provide vouchers, if available. However, this is not fruitful, as all organisations could not cheaper than others (Patel, Guedes and Pearce II 2017). Therefore, if a customer visits one supermarket and purchases different items, particularly the discounted ones, it is obvious that the basket of products would cost lower than the other rivals during that time. In fact, the prices between one supermarket and others are quite identical. Moreover, the customers are not fully aware of this condition, since direct contrast between one supermarket and another might be challenging and highly time-consuming.
In order to measure performance of Fair Price in the retail sector of Singapore, balanced scorecard is deemed to be the most effective measure. As commented by Robinson et al. (2016), balanced scorecard is a performance measure used for identifying and improving different internal business functions and their resulting outside outcomes. The balanced scorecard has four different perspectives, which are analysed in the context of Fair Price as follows:
This perspective considers the financial objectives of a firm, which assists the managers in detecting its financial success such as the ways of creating wealth for the shareholders. In this segment, the strategic priority of Fair Price is to protect as well as strengthen its balance sheet. The reason is that the organisation believes a strong balance sheet would provide it with the ability of improving the shopping trip quality for the customers. For meeting this goal, Fair Price has concentrated on certain areas. Firstly, minimisation of capital expenditure is observed by undertaking greater discipline approach to capital investment and deliver based on prior planning. Along with this, the organisation has raised freehold property ownership by exchanging assets and this has helped in minimising the exposure related to fixed-uplift and index-linked inflation (Smith, Maull and CL Ng 2014). Finally, Fair Price has minimised indebtedness by selling a portion of its property, plant and equipment to an associate.
Speed
According to this perspective, the managers identify the customers as well as market segments where the business unit would compete and the measures of performance of the business unit in such targeted segments. Fair Price is deemed to attract 15,000 customers per week and by introducing the Steering Wheel of balanced scorecard, it has appealed to all market segments rather than concentrating on certain segments (Stevenson 2014). It has always been cheaper for Fair Price to retain its customers in comparison to obtain new ones. The organisation initiated a loyalty club card and this has enabled the organisation in understanding the customers based on which they provide a number of coupons in meeting their needs. There has been positive moderate association between customer loyalty and club card returns.
Fair Price retains its customers via marketing online grocery shopping in the form of convenience to the latter. This enables the shoppers to buy products from their convenient locations and thus, their shopping experience is extended setting new retailing standards. For instance, if any customer has registered for online shopping in Fair Price, regular offers are provided to the individual via messages or mails. This might be in the form of free delivery codes for strengthening individuals to shop with them.
According to this perspective, the managers measure the success of their organisation regarding whether the products or services fulfil the needs of the customers. The product development manager of Fair Price is always exploring new trends in the Singapore supermarkets so that a new line could be incorporated in the organisation. Moreover, the organisation gauges the payback of the new product and revenue from the new product. However, the organisation has issues with its fleets and drivers for which it has started a new project in order to minimise transport cost and system efficiency (Walker et al. 2015).
This perspective takes into account employee learning as well as employee training within the organisation for providing maximum customer satisfaction. Fair Price recruits employees belonging to different backgrounds and they are provided with the opportunity to progress in tandem with the organisational goals. However, the organisation does not emphasise too much on employee training. Certain on-the-job training techniques are used by Fair Price in order to boost the skills of its staffs. These include coaching, shadowing, job rotation and mentoring. It is noteworthy to mention that this type of training might not be fruitful in the long-run, as the experienced staffs might view the same as technique of minimising their work pressure (Xu, Pinedo and Xue 2017).
Conclusion and recommendations:
The above discussion makes it apparent that the operational success of Fair Price has not occurred by chance; however, it is the outcome of effective management. The setup of a clear strategy is critical to the success of Fair Price, which is supported through the commitment to its employees and customers. By introducing the continual replenishment initiative in managing its operations and obtaining knowledge regarding adequate inventory levels of customers imply that the suppliers could conduct better planning of inventory and production for fulfilling the demands of the customers.
Dependability
However, Fair Price could enhance more in terms of supplier relationships by carrying out surveys about their services and feedbacks need to be gathered for further service improvements. Moreover, the information technology department should improve anti-virus and firewall systems in order to shield from virus intervention, as the effects of virus attack would be extremely harmful for the organisation. Finally, the application of advanced information technologies would be beneficial for Fair Price due to its ability of replacing manpower and hence, additional time could be saved. Hence, training on information technology systems need to be provided to the management of Fair Price. For this, the managers would have to take a step forward to motivate the staffs in taking part in the training process for avoiding one such pitfall, as Fair Price does not focus adequately on providing training to its employees. These deficiencies need to be mitigated by applying appropriate strategies for ensuring steady operating performance of the organisation in future.
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