Production and Operations Management
Production and Operations Management
Operations management is a critical process that transforms input resources in an organizational production subsystem into value-added services or products. Production is the conversion or creation of goods and services from certain raw materials by applying business concepts. Production and operations management principles are simultaneously used in both manufacturing and service firms. Therefore, the primary objective of production and operations management is to produce goods and services acceptable in the current market by using the company’s resources. While production management entails planning, scheduling, controlling, and supervising activities necessary to produce goods that meet customers’ needs efficiently, operations management takes charge of the conversion process daily to ensure smooth operations within the organization. This paper will analyze and apply Walmart Corporation’s production and operations management principles, strategies, and lessons in making a viable decision within the field of Production and Operations Management.
Walmart’s Production and Operations Management Strategies
Walmart Incorporation’s operations management cuts across a couple of approaches, including but not limited to inventory, supply chain, and sales performance. Nevertheless, the company’s success leans towards the effective performance of retail operations more than other determinants. The e-commerce business operations of Walmart leverages ten specific decision areas on operations management. The ten areas are of priority to managers because they are carried out routinely and reflect on the achievement of the business objective. Walmart is a retail company whose approach to operation management aligns well with the business’s mission and vision statement. The retail business management leverages the ten decision areas to develop strategies that strengthen it against successful competitors like Whole Foods Market, Amazon, eBay, Home Depot, Alibaba, Best Buy, Costco, Target, Kroger, and Lowe’s.
Lessons Learnt from Walmart’s 10 Decision areas
- The first lesson is the variables of cost-effectiveness and efficiency of the design of goods and services. The company has strategically characterized its retail products and services. Arnot (2018, p. 19) explains that besides the retail services offered by Walmart, it has brands of goods such as Sam’s Choice and Great Value. Walmart relies on the generic strategy of low selling prices and low costs for intensive growth and competitive advantage against others in the industry. For the company to achieve this, emphasis is put on efficiency maximization of its operations and minimization of production costs. For instance, the firm’s consumer goods, like Great Value products, are designed to favor mass production.
- Quality Management is the second area that Walmart Corporation has significantly invested in, and it employs three tiers of quality standards in operations management. The lowest level entails minimum quality expectations of the most considerable proportion of the buyers. Walmart is keen to satisfy the majority of its brands’ buyers. The middle class is concerned with market average quality for ordinary customers. According to Xie & Cooke (2019, p. 522), the tier applies to specific products and Walmart’s employees’ job performance targets, especially sales personnel. The last and highest tier entails quality levels exceeding market averages in the merchandising business. The highest tier of quality standards is only applicable to marginal outputs, such as Sam’s Choice brand goods. The levels approach ensures that Walmart’s retail business serves the entire market demand satisfactorily.
- The next lesson is the optimization of personnel, space, and equipment via process and capacity design strategic decision areas. To achieve the optimal utilization of the above factors, Walmart focuses on behavioral analysis, continuous monitoring, and forecasting to optimize factors of production. Customers’ and employees’ behavioral analysis offers a basis for the company’s capacity and process design as in the eCommerce and brick-and-mortar stores operations. Walmart’s human resource is ever-changing, and forecasting is the basis for that dynamic capacity design. It also maintains surveillance and continuous monitoring of store capacities as an indicator factor for changing or keeping current capacity designs.
- The fourth lesson is reducing the movement of human resources, inputs and outputs, and commercial statistics by leveraging location strategy. In Walmart’s case, the stores are located near or in consumer population clusters and urban centers. By strategic location of its warehouses makes its good accessible to target customers. As per Helo and Hao (2021, p. 19), Walmart uses internet technology, computing networks, and systems to address the business information aspect of this operations management decision area. The comprehensive set of online information systems supports real-time monitoring and reports that help manage regional market and retail stores operations (Helo & Hao, 2021 p. 13).
- Lesson on layout design enhances sales, and it’s also a marketing strategy. To address this decision area of the operations management, the business should assess the employees’ and shoppers’ behaviors for its e-commerce websites and storage facilities’ layout designs. The corporate standards and consumer behavior analysis are the determinants for stores’ layout design. For instance, Walmart places some goods near the entry and others close to the exit to maximize their purchase. On the other hand, the Placement of goods in certain warehouse areas is based on the movement frequency of goods across the supply chain.
- Lesson to continuously recruit human resources to replace those exiting due to high turnover occasioned by poor remunerations. The cost-effectiveness decision area of the operations management demands that employees get low wages but deliver quality standards and maintain organizational corporate culture and structure. Therefore, Walmart Inc. satisfies the requirements of this decision area of operations management by maintaining a rich human resource despite high turnover.
- Strong bargaining power in supply chain management is another essential decision area. Walmart Corporation has robust bargaining power over vendors. According to Chen and Su (2021, p. 164), its supply chain has integrated and advanced information technology that enhances its bargaining power. For instance, Walmart’s operational costs are minimized by the supply chain management’s information system. When certain merchandise costs are lowered, the retailer knows and makes a collaborative decision to have specific inputs across the procurement procedures. Walmart’s bargaining power is used on suppliers to enforce its demand.
- Application of just-in-time cross-docking and vendor-managed inventory model in the management of inputs. Suppliers get access to Walmart’s information systems because of the vendor-managed inventory model and decide when to provide the merchandise as guided by the inventory levels’ real-time data. This decision area of operations management helps minimize the challenges of stock-outs. Lin (2019, p. 756) says that the just-in-time cross-docking reduces the inventory size by ordering when the few quantities when the stock is almost depleted. The approach of this decision area maximizes the operational performance and efficiency of the retail business.
- Optimized scheduling minimizes losses related to overcapacity. Due to the usage of robust supply chain management’s information systems and vendor-managed inventory model, the schedules are flexible and depend on current trends and seasons. On the other hand, Lin (2019, p. 756) exposed Walmart’s shift usage for scheduling stock procedures and human resources in marketing and sales. When the retailer anticipates a change in demand, it changes personnel schedules and stores to satisfy the customers.
- Maintenance of human resources, facilities, and equipment. According to (Helo & Hao, 2021 p. 10), operations management is enhanced through continuous skill-updating of human resources and devoted workforces to keep equipment and facilities. Training programs ensure that the force is adequately equipped with the necessary skills to guarantee effectiveness and efficiency. Dedicated personnel keeps Walmart’s infrastructures up to regulatory and corporate standards and in the right shape. It also repairs and maintains e-commerce websites and equipment such as computers and cash registers. Efficient and effective maintenance contributes to retailers’ resilience against the industry environment’s threats.
Production management is a function of operations management, and thus, by optimizing the gains from the above lessons learned from Walmart’s retail business, the revenues are maximized. Walmart’s operations management goal is to maximize productivity and minimize costs through increased revenue per sales unit, reduced-order filling duration, and low stock-out rates. Duration of order filling is the total time taken to receive supply requests of the warehouses. At the same time, the stock-out rate is the frequency of certain products missing despite buoyant demand. Walmart’s product managers’ objective is to maximize revenues for sales units and minimize stock-outs and duration of order filling.
Decision within Field of Production and Operations Management
Deciding to revamp a business to the point of featuring and topping the Fortune 500 list is a difficult task, and it requires aggressive management. There is no need to reinvent the will and strategies while they exist from Walmart’s case discussed above. To know whether an organization is headed on the right trajectory, it is appropriate to conduct a diagnostic test to identify various decision areas of concern. The diagnosis test should spin across all the decision areas identified in the Walmart case study. The evaluations below will aid in concluding whether the lessons learned from the Walmart production and operations management decision areas will lead to a successful business:
We are cost-effectively designing goods and services. For instance, the goods like Great Value are produced on a large scale, and hence, it favors mass production at a low cost per unit. Whenever goods are produced in large quantities, the operational cost per unit decline because the principle of economies of scale applies. Therefore, the strategy to design goods and services to lower costs and increase demand is a factor to consider in ensuring business success. Quality management is critical because the decision area helps create an easily sellable brand. Quality products offer a competitive advantage that every business wishes to increase its market share. However, goods should also be designed to favor the lowest tier where the majority of buyers are. As a group, we agree on these decision areas of operation management.
Optimization of personnel, space, and equipment via process and capacity design also helps enrich the business’ profitability through cost-saving. Behavioral analysis of customers, human resources, and processes such as e-commerce helps optimize cost inputs and thus, maximize revenue. Likewise, location strategy consolidates and establishes a reasonably easily accessible location for employees and customers. At the same time, layout design places products at the most convenient position in-store, which improves their purchase. Production and operations are enhanced, hence bolstering efficiency and cost-effectiveness. The group saw the need to leverage the decision areas since they boost productivity and increase sales.
Continuous recruitment and training of employees give assurance of improved output in the production processes. The labor force is a factor you cannot ignore in production because it is an enabler pillar of the input-output conversion. Also, strong bargaining power on supply chain management and technological inventory management helps smooth operations of the company while providing cost-effective alternatives of quality products. Lastly, optimized scheduling is critical for revenue maximization by taking advantage of peak seasons and changing trends in demand. All these decision areas are related to any business’s operational and production management. The discussion group, in one accord, agreed that Walmart’s reliance on all of the above decision areas was significant and contributed to its stellar performance and edging out all competitors to top the Fortune 500 list of best companies in the United States of America.
As companies struggle to overcome the break-even point in production, they majorly focus on operations management. Reliance and investment in the decision areas identified by Walmart made it record the highest revenue among the Fortune 500 companies. Academic literature strongly supports all the ten decision areas, and thus, the group adopted them for seamless production and operations management. Consequently, effective and efficient application of the decision areas results in high productivity and profitability of a business.
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