Operation Management
An Essay on Business Operation Planning

Introduction

In this paper, several issues on business operation planning will be discussed. Firstly, some general concepts about business operation planning will be discussed. Then, both external and internal factors (including technological and environmental factors) that will affect the business operation plan will be investigated. Next, the importance of good operation plan to the success of a business will be outlined. Lastly, the necessary managerial qualities as well as resources required for effective operation planning will also be presented.

Defining Business Operation Planning

Generally, business operation planning can be define as the act or the process to formulate strategies, techniques and actions to be implemented to effectively conduct business activities, in transforming input resources to products or services to be delivered to the marketplace.

Contents to be Included in a Business Operation Plan

Business operating plan can be a highly complicated plan. In order to produce a viable plan, a holistic approach should be adopted. That means that many issues must be considered in drafting or formulation of a business operation plan. Generally, it is found that operational plan should include these subjects: design of products and service, variety of products and services, location and logistics issues, types of production methods, procurement and purchasing, inventory management and methods to enhance efficiencies and productivity in an operational flow of the firm (Sohal & Keith, 1988). Not only is that, the organization’s operational objectives should also be included. According to Omens (2006), the operational as well as quality objectives and policies should also be reviewed and understood, so that they are aligned with the business or marketplace. In the every challenging business environment, business operations plan should also include topics such as: supply chain management, just-in-time (JIT) processes, quality management and its policies, human resources requirements as well as job designs, and operation management in the strategic context. Besides, some researchers such as Hayes (2006) also argued that continuity and disaster recovery plan should be included, so that the continuity of the business is ensured in case unforeseen circumstances happen.

Problems in Data Collection Process

Data collection process is critical to effective and reliable business operational plan. However, data collection may not be an easy task. There are several issues that managers will face in the process of collecting data for formulation of business operations plan.

As corporations are increasingly required to strive for efficiency and flexibility, the data to be collected must be timely. Outdated data is no longer relevant under the fast moving and dynamics business environment. This creates challenges as manager is now required to obtain the right information from the right people at the right place in the right time. Besides, it is also critical to compile and collected all the information into a terminal to assist the decision making process of operation manager. Although this may be not something very hard to do, as the power and speed of computers are increasing, and data or information management system is becoming more common in marketplace today – but that still means having to spend money to investment on capital expenditures to acquire the relevant infrastructure that can assist managerial decision making process (for formulation of viable operational plan).

In order to be effective, it is critical for the company to collect, track and analyze only those key performance metrics that are relevant to company performance in the long run. According to Chae (2009), ‘less is better’ is true in the context of collecting or tracking key performance metrics. Thus, to collect a lot of data is not viable, as that would overload the managers with unnecessary data, or incur wastages in financial resources, time as well as management efforts to collect complex data (that is probably not useful).

External and Internal Factors Affecting Business Operational Plan

External Factors

There are many factors that will affect the formulation of a business operation plan, and thus must be considered and analyzed in the business operational planning process. According to David (2009), a total of 6 factors should be assessed in understanding the external forces that will affect a business from the external environment. These 6 factors will be discussed in paragraphs below.

Economic forces. The status of the economy will definitely affect the contents in the business operational plan. It is critical for the operational plan to not to over-expanded and yet able to cater for the demand from the marketplace. Besides, the fast changing trends on the economic environment should also be taken into account. Some trends that must be considered include: shorter product life cycle, mass personalization, the focus of economic growth in emerging countries such as BRICs and the gloomy economic outlook in Europe.

Social/ cultural factors. Depending on the location of the business, different social and cultural factors will affect business operations differently. Such issue should not be taken for granted, as cultural factors will affect not only the suppliers and customers for a firm, but also the way how manager should manage the workforce. For example, guanxi is an important and yet influential cultural factor affecting businesses in China (Liu & Roos, 2006). In fact, according to Raiszadeh et. al. (1995), many of these external factors, particularly those that are intangible and constantly changing, can drastically affect business operations if they are not taken care of. For example, the shift of consumer preferences, the rising and empowerment of women, the rising of living standard around the world, are all critical trends that will be monitored by marketing department, and later be feedback to operation department, to be incorporated into both long and short term operational planning.

Political, governmental and legal factors. It is important for managers to understand the rules and regulation guiding the operations of businesses. This is particularly important for firms operating in a highly regulated industry, such as utilities, banking, financial services (e.g., hedge fund), or the airline industry (for example, the needs to install security features to avoid terrorist attack).

Environmental factors. Will be discussed in the next section.

Technological factors. Will be discussed in the next section.

Competitive forces. In this context, the five competitive forces suggested by Porter Five Forces framework may be relevant to be incorporated into an operational plan. Of particular important factors include: information about suppliers (i.e., this is particularly important if firm were to adopt efficient supply chain management), strategic move of competitors (e.g., use of IT infrastructure to reduce costs), and many others.

Internal Factors

Equally important, there are many internal factors that will affect the formulation of a business operation plan. These factors include:

Business visions and missions. The shared vision and mission of any organization is the key factor that will affect the business operation of that organization. In order to plan for effective operation process in a firm, the business missions or goals to be achieved must be understood clearly. The degree of clarity of the business mission will ultimately affect the concreteness and realization of the operation plan or strategy (Lee & Osteryoung, 2004). Ultimately, it is the business directions (expressed ad business vision and missions) that will determine how the business operations plan it to be outlined.

Business strategy. Under the ever competitive business environment, researchers have been urging that business operation functions should be integrated into the strategic planning process (Sohal & Keith, 1988). Thus, any effective and viable business operational plan should be outlined in a consistent and supportive manner towards fulfillment of the organization strategies in the business environment. It is simply too important to align operational plan to the strategies a firm is following in achieving competitive advantage in the marketplace.

Operational capabilities. The firm’s ability to execute the plan will also affect the manner how an operation plan can be drafted (Clark, 1977). It is simply not wise to have a wonderful and fantastic plan, but is not executable due to lacking of operational capabilities in a firm. For this, several examples of operational capabilities include: available of machinery, places, system, infrastructure and input resources necessary for the operation process.

Human resources. Besides, addressing the technical or hardware issues in an organization, the psychological factors should also never be neglected in devising an effective business operation plan (Spicher, 1978). In formulating any operational plan, the human factors must be considered, as if the people resist changes, or not able to perform up to the planned activities or requirement, the operational plan is just a waste of time, as it cannot be translated to real advantages for company. Besides, organizational culture should also be considered, as the plan must be consistent with the prevalent culture in an organization, to avoid conflicts in the future.

Marketing. In the consumer-centric business environment, it is managerial imperative to integrate both the marketing and operational functions in a firm properly (Rhee & Mehra, 2006). This means that input from marketing departments should be incorporated in the operational planning process, and will affect how an operational plan can be formulated from time to time. Overall, both operational and marketing functions should be integrated and supportive of each other, in order to enhance the success chances of a firm in highly competitive business landscape.

Finance. Last but not least, it is important to plan in accordance to the available budget available to the organization.

Impacts of Environmental and Technological Change on Business Operational Planning Process

In the recent decades, both environmental and technological change has been affecting operations of businesses. Due to the significance of these changes as well as the huge impacts towards business operations, the impacts from environmental and technological change to businesses will be discussed in this section.

Impacts of Environmental Change

Due to the global warming issues, public and governments are increasingly aware on the needs to take care of the earth. For this, it is crucial for corporations to take proactive move in preserving green and clean environment through responsible operations. Issues that an operational plan must consider include:

Environmental friendly/ Green movement. It is critical for operational plan to adopt practices and processes that will create minimal pollution to the environment. Waste management is becoming increasingly critical. Some issues that must be address in the plan include: recycling of materials, ways to reduce wastages from production processes, management of toxic waste, eliminate unnecessary usages of materials or energy as well as ways to reduce CO2 emission.

Sustainability. Sustainability is another big issue to be incorporated into an excellent operational plan, as there are many evidences that adoption of sustainability in operations can enhance a firm reputation and attainment of competitive advantages in the marketplace (Cartwright et. al., 2006). Among topics that should be considered by operational plan include: buy only green products in procurement and purchasing activities, reduce unnecessary packaging, application of sustainability and green concepts into product designs and delivery process, adoption of energy conserve practices in daily operation flow, and etc (Hill, 2001).

Impacts of Technological Change

In the past decades, technological change has been affecting the way businesses are conducted around the globe. It can be observed that corporations with superior and efficient operations tend to adopt the new technologies, and leverage on the new applications for lower costs and yet faster response to marketplace. As such, technological change is another factor must be incorporated into operation plan.

Adoption of IT/ IS applications. Today, operation plan must include details on how the business will capitalize or leverage on new technological advancement and platform for more efficient and yet responsive operations.

            From mass production to mass customization and mass personalization. As argued by Kumar (2007), traditional operational approach, which mainly focus on efficiencies may not longer be viable in the new economy. In the new millennium, the rise of information technology and increasingly powerful computer systems have increase the responsiveness of businesses to marketplace. Today, many corporations are switching to a production process that can cope with the demand of mass personalization trend occurring in the market. Effectively, such a trend had caused the manager to adapt and to think seriously on how to enhance company’s responsiveness to marketplace through superior operations. As such, ability to response fast to market changes will be a key criteria or objective affecting the operation planning process.

Importance of Business Operational Planning to Corporations’ Successes

Business operational plan can deliver many advantages to an organization. It is critical to the success of a firm, particularly under the competitive business environment. In the following paragraphs, the importance of proper business operational plan to the successes of a firm will be illustrated.

To ensure that managers had indeed thought about the various scenarios that could face a firm (Kuznetsov & Morozov, 2007). The planning process itself it important, as it engages manager to think deeply about operations, and perform scenario planning for the business. Without such exercise, managers may still engage in fire-fighting mode in handling the complexities arises from the daily tasks, without doing what is the most important task of a manager – i.e., thinking. To draft a plan need managers to think, and to understand what he is actually doing, and what is the best route for the corporations in the future.

It provides people a sense on where they are heading. With a proper plan outlined, people know the details on where they are heading. They will have guideline and direction to be followed. This may energize them to work harder. Without such a plan, they may be unsure of their roles and responsibilities in the organization, and may end up losing motivation to perform or contribute to the organization.

It allows people to get involved in the planning process. By engaging people, both manager and lower level staffs in the planning process, it allows people to participate and get involve in daily management of the operation. Thus, people are empowered, and engaged, and are more likely to be more committed to follow through in the execution process, as these plans are actually out from their own ideas.

It prepares firms for unforeseen circumstances. As mentioned before, recovery or contingency plan should be included in any operational plan. If that is already done, operational plan will allow people to react fast to unforeseen circumstances, and can help people to avoid further damages or losses to the organization.

It reduces operational costs. To reduce cost, it is important to reduce errors made in the operation process. In order to mitigate errors or wastages, it is critical to do the right thing from the first time. A proper operational plan serves such purposes. When it is properly formulated, many errors and wastages (time, money, and efforts) can be avoided. Effectively, a proper plan will lower the business operating costs for an organization.

It ensures quality and ultimately customer satisfactions. Proper planning is always equal to better performance or quality. Quality products or services will translate into high level of customer satisfaction.

            It enhances the reputation of a corporation. When the products or services delivered by a firm are of high quality, the brand name of reputation of that firm can be enhanced.

It enhances profitability and attainment of competitive advantages. As discussed above, proper planning can reduce costs, improve quality, enhance reputation, further improve customers’ satisfaction, and a combination of all these will deliver superior profitability to an organization. In the long run, these can even sharpen competitive advantages enjoyed by a firm in the marketplace.

Managerial Qualities Required for Operational Planning Success

In this section, the relevant managerial qualities for operational planning success are outlined.

Experiences. Manager and staffs involved in the planning process should have adequate experiences. Experiences will provide insights to managers to formulate viable plan.

Managerial skills. As operation plan is a complex work, it is critical for the planner to possess managerial skills, particularly the inter-relations and the linkages between different functional departments in an organization. The planner must understand not only subject related to operational management, human resources management, marketing, finance, IT/ IS applications, ethics, managerial economics; but should also have insights on the psychological impacts of that plan towards people in the organization.

Industry and technical-related knowledge. Industry knowledge is important as an understanding on the critical success factors of operations will surely help a lot during the process of formulation of the plan. Besides, a degree of technical knowledge on the operations in a firm is critical, as the planner will understand what is possible to be done; and viable for implementation purposes. Having deep knowledge in the industry, as well as the technicalities of operation management will surely ensure relevancy of the plan in the future.

Quantitative skills. Data collection, interpretation, manipulation and analysis are important knowledge in operation management. That means the planner should have understanding statistics. In fact, many of the goals will be set in numerical format, and the quality management process will be dependent on Statistical Process Control and other quantitative methods.

Analytical skills/ cognitive competencies. The planners should have the ability to analyze, know the truth, and investigate. On the other hand, the planner should be creative and innovative enough to devise plan and solutions to problems faced by organization.

Resources Required for Operational Planning Success

Without adequate resources, it is unlikely that successes can be achieved for operational planning. This section will outline the required resources for operational planning success.

A team of capable, committed and motivated staffs. To ensure operational planning success, it is utmost important to have capable and committed planners and staffs in the organization. After all, it is human that will make or fail an organization. Human factors will be the key determining factors in delivering truly successful and effective operational plan for a firm.

Financial resources. Nothing much can be done without adequate financial support. Thus, to ensure operational planning success, sufficient budget should be provided to the team responsible in drafting the plan.

Support from senior management and other functional departments. As shown above, operations planning is a complex exercise, and cooperation among different functional departments is critical to the success of any operational plan. Thus, senior management must understand such issue, and proactively facilitating and leading the integration and cooperation between the various departments. Data sharing between the departments is often necessary. Contributions of ideas from other department will also be necessary from time to time, on the operation plan to be executed in the future. Without seamless cooperation, the planed drafted will only work in isolation, and can deliver only limited benefits to organization.

Conclusion

As shown above, to formulate an excellent operational plan is never an easy task. Many factors must be considered. The situations from other department should also be considered, as it is critical that the plan can be fully integrated into the organization. The turbulent and dynamic business environment will also create a lot of new challenges and issues to be aware of by the plan. However, there are many advantages to be reaped from an excellent plan. A proper and viable operation plan will almost definitely means future profitability and efficiency for any organization.

References & Bibliography

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